Description
Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk, whether the confidence in estimates and decisions seem to increase
Managing risk in construction projects – how to achieve a successful outcome*
Project risk and controls – Slaying the dragon
Scott Jardine
*connectedthinking
PwC
Contents
Background to the dragon Project risk management Project controls
Background
“No construction project is risk free. Risk can be managed, minimised, shared, transferred, or accepted It cannot be ignored."
Risk management - The commercial imperative … Sir Michael Latham 1994
Background
• Project risks include…. • Quality and safety • Cost management • Time management (programme / schedule) • Scope & change management • Procurement & contracts • People management • Information management • External influences
Managing risk in construction projects PricewaterhouseCoopers
Page 4 January 2007
Background
• What happens if it is ignored? • Increased costs • Loss or reduction in profit • Damage to brand / reputation; and at worst • Disposal of the business or insolvency
Managing risk in construction projects PricewaterhouseCoopers
Page 5 January 2007
Project risk management
• How do you manage the risks? • Identification • Assessment / quantification • Reduction • Implementation • Monitoring
Managing risk in construction projects PricewaterhouseCoopers
Page 6 January 2007
Project risk management
PMO
Risk Analysis
Steering Committee
Project Risk
Business & Regulatory Environment Quality & Safety Management Cost Management
Business
Scope & Change Control
HR Management
e PROJECT CAPITAL
Communication and Reporting Procurement & Contracts Issue Management
Time Management (Schedule)
Internal Audit
External Assurance
Regulatory Compliance
Managing risk in construction projects PricewaterhouseCoopers Page 7 January 2007
Project risk management
Business Policies Project Risk Management Approach
•Identification •Assessment /
Culture
quantification •Reduction •Implementation •Monitoring
Resources
Organisation
Tools and Techniques
Managing risk in construction projects PricewaterhouseCoopers Page 8 January 2007
Project controls
• Project controls • Policies and procedures to ensure the efficient coordination, monitoring and management of a project • What do project controls include? • Risks • Communication • Roles and responsibilities… • Are they separate?
Managing risk in construction projects PricewaterhouseCoopers
Page 9 January 2007
Project controls – integral components
Managing risk in construction projects PricewaterhouseCoopers
Page 10 January 2007
Project controls
• Risks change throughout the project lifecycle and the controls need to match • Risk and uncertainty poses opportunities as well as challenges • Cost, time and quality impacts need to be considered together • Can consider them in ‘function’ groups
Managing risk in construction projects PricewaterhouseCoopers Page 11 January 2007
Project Risk Management Life Cycle Matrix
Project controls
1. Business Environment 2. Integration 3. Scope & Change Control 4. Time Management (Schedule) 5. Quality & Inspection 6. Cost Management 7. HR Management 8. Comms. & Reporting 9. Safety, Insurance & Risk 10. Procurement & Contracts 1.1 Program Planning Process 1.2 Program Management Policy
1.0 Planning
2.0 Program
3.0 Design
4.0 Construction
5.0 Testing
6.0 Close-Out
7.0 Ops & Maint
2.1 Project Purpose Funding & Approval
3.1 Business Needs Review
4.1 Executive Oversight & Support
6.1 Continuous Improvement Review
2.2 Project Delivery Method
3.2 Project Integration Review
4.2 Daily Project Management Process
5.2 AE/CM/GC Contract Compliance Review
6.2 Capital Project Review
7.2 Operations Project Planning Process 7.3 Operations Acceptance Process
1.3 Facilities Master Plan/Planning Process 1.4 Facilities Annual Plan (1-3 years)
2.3 Project Requirements Definition 2.4 Project Schedule Requirements
3.3 Building Design
4.3 Change Control Process
6.3 User acceptance Process 6.4 Schedule Completion Check List
3.4 Baseline Project Schedule
4.4 Detailed Schedule Management
1.5 Facilities Design and Specification Standards 1.6 Program Cost Management Guidelines 1.7 Facilities Management Organization 1.8 Program Reporting Requirements 1.9 Safety, Insurance & Risk Mgt Policies 1.10 Contracting Approach & Controls
2.5 Project Concept Design & Themes
3.5 Design Review & Approval
4.5 Quality Assurance Process
5.5 Conduct Inspections & Quality Review
6.5 Close Out Check List
2.6 Project Funding & Capital Budgeting
3.6 Cost & Schedule Forecast
4.6 Cost Control
6.6 Final Payment/ Retention Release
7.6 Operating Budget Process 7.7 Ongoing Requirements/Skills Review 7.8 Final Status & Financial Report
2.7 Project Management Staffing
5.7 Staff Reductions/ Transfers 5.8 Project Quality Performance
6.7 Operations Staff Planning
2.8 Project Reporting Requirements 2.9 Project Safety Program & Insurance Strategy 2.10 AE/CM/GC Selection & Contracting
3.8 Project Status
4.8 Project Cost & Budget Variance
6.8 Project Closeout Performance
3.9 Safety Program Training & Compliance 3.10 Subcontractor Qualification Process
4.9 Risk Tracking & Resolution
5.9 Safety & Risk Mgt Compliance
6.9 OCIP Close-out Review & Report
4.10 Subcontractor Selection/ Contracting
5.10 Contract Compliance Review
6.10 Punch List
7.10 Vendor Qualification/ Selection 7.11 Ongoing Issue Page 12 Management process 2007 January
11. 2.11 Project Issue Managing risk in construction projects 1.11 Issue Issue Management Management Policy Management Planning PricewaterhouseCoopers
3.11 Issue Tracking & Resolution
6.11 Confirm Issue Resolution
Project controls
• Each area of the project is analysed to identify … • Risks • Control procedures • Monitoring controls
Managing risk in construction projects PricewaterhouseCoopers
Page 13 January 2007
Project controls – Daily Project Management Process
• Risks • Lack of knowledge of project tracking • Failure to recognise and develop responses to risk and opportunity • Lack of timely resolution of issues as raised by various stakeholders • Claims • Contract administration • Lack of compliance with project requirements • Unnecessary legal liabilities or loss of entitlement
Managing risk in construction projects PricewaterhouseCoopers Page 14 January 2007
Project controls – Daily Project Management Process
• Control procedures • Project management plan • Risk and opportunity registers • Issues registers • Clear documentation of contract procedures and the like • Regular, documented meetings to consider key risks
Managing risk in construction projects PricewaterhouseCoopers
Page 15 January 2007
Project controls – Daily Project Management Process
• Monitoring controls • Compliance to prescribed policy and procedures • Regular project status meetings to review action list and responsibilities as agreed • Regular formal assurance and expediting reports • Formal up-to-date project management tools incorporating current information/issues and “as built” information
Managing risk in construction projects PricewaterhouseCoopers
Page 16 January 2007
Project controls - Summary
• Project risk management is important to your business as a whole • Project controls provide a framework to manage the project • Project controls cover a full spectrum including, • Risks • Cost and schedule forecasting • Business needs
Managing risk in construction projects PricewaterhouseCoopers Page 17 January 2007
Project controls - Summary
• But are yours comprehensive? • Will it stand up to Internal Audit scrutiny by your business? • Are records suitable for dispute resolution? • Does the process have the knowledge or is it with the staff? • Control the risk and slay the dragon!
Managing risk in construction projects PricewaterhouseCoopers Page 18 January 2007
For further information, please contact: Anthony Morgan Scott Jardine Tel: +44 (0)20 7213 4178 e-mail [email protected] Tel: +44 (0)20 7212 4431 e-mail [email protected]
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2007 PricewaterhouseCoopers LLP. All rights reserved. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
PwC
doc_308459686.pdf
Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk, whether the confidence in estimates and decisions seem to increase
Managing risk in construction projects – how to achieve a successful outcome*
Project risk and controls – Slaying the dragon
Scott Jardine
*connectedthinking
PwC
Contents
Background to the dragon Project risk management Project controls
Background
“No construction project is risk free. Risk can be managed, minimised, shared, transferred, or accepted It cannot be ignored."
Risk management - The commercial imperative … Sir Michael Latham 1994
Background
• Project risks include…. • Quality and safety • Cost management • Time management (programme / schedule) • Scope & change management • Procurement & contracts • People management • Information management • External influences
Managing risk in construction projects PricewaterhouseCoopers
Page 4 January 2007
Background
• What happens if it is ignored? • Increased costs • Loss or reduction in profit • Damage to brand / reputation; and at worst • Disposal of the business or insolvency
Managing risk in construction projects PricewaterhouseCoopers
Page 5 January 2007
Project risk management
• How do you manage the risks? • Identification • Assessment / quantification • Reduction • Implementation • Monitoring
Managing risk in construction projects PricewaterhouseCoopers
Page 6 January 2007
Project risk management
PMO
Risk Analysis
Steering Committee
Project Risk
Business & Regulatory Environment Quality & Safety Management Cost Management
Business
Scope & Change Control
HR Management
e PROJECT CAPITAL
Communication and Reporting Procurement & Contracts Issue Management
Time Management (Schedule)
Internal Audit
External Assurance
Regulatory Compliance
Managing risk in construction projects PricewaterhouseCoopers Page 7 January 2007
Project risk management
Business Policies Project Risk Management Approach
•Identification •Assessment /
Culture
quantification •Reduction •Implementation •Monitoring
Resources
Organisation
Tools and Techniques
Managing risk in construction projects PricewaterhouseCoopers Page 8 January 2007
Project controls
• Project controls • Policies and procedures to ensure the efficient coordination, monitoring and management of a project • What do project controls include? • Risks • Communication • Roles and responsibilities… • Are they separate?
Managing risk in construction projects PricewaterhouseCoopers
Page 9 January 2007
Project controls – integral components
Managing risk in construction projects PricewaterhouseCoopers
Page 10 January 2007
Project controls
• Risks change throughout the project lifecycle and the controls need to match • Risk and uncertainty poses opportunities as well as challenges • Cost, time and quality impacts need to be considered together • Can consider them in ‘function’ groups
Managing risk in construction projects PricewaterhouseCoopers Page 11 January 2007
Project Risk Management Life Cycle Matrix
Project controls
1. Business Environment 2. Integration 3. Scope & Change Control 4. Time Management (Schedule) 5. Quality & Inspection 6. Cost Management 7. HR Management 8. Comms. & Reporting 9. Safety, Insurance & Risk 10. Procurement & Contracts 1.1 Program Planning Process 1.2 Program Management Policy
1.0 Planning
2.0 Program
3.0 Design
4.0 Construction
5.0 Testing
6.0 Close-Out
7.0 Ops & Maint
2.1 Project Purpose Funding & Approval
3.1 Business Needs Review
4.1 Executive Oversight & Support
6.1 Continuous Improvement Review
2.2 Project Delivery Method
3.2 Project Integration Review
4.2 Daily Project Management Process
5.2 AE/CM/GC Contract Compliance Review
6.2 Capital Project Review
7.2 Operations Project Planning Process 7.3 Operations Acceptance Process
1.3 Facilities Master Plan/Planning Process 1.4 Facilities Annual Plan (1-3 years)
2.3 Project Requirements Definition 2.4 Project Schedule Requirements
3.3 Building Design
4.3 Change Control Process
6.3 User acceptance Process 6.4 Schedule Completion Check List
3.4 Baseline Project Schedule
4.4 Detailed Schedule Management
1.5 Facilities Design and Specification Standards 1.6 Program Cost Management Guidelines 1.7 Facilities Management Organization 1.8 Program Reporting Requirements 1.9 Safety, Insurance & Risk Mgt Policies 1.10 Contracting Approach & Controls
2.5 Project Concept Design & Themes
3.5 Design Review & Approval
4.5 Quality Assurance Process
5.5 Conduct Inspections & Quality Review
6.5 Close Out Check List
2.6 Project Funding & Capital Budgeting
3.6 Cost & Schedule Forecast
4.6 Cost Control
6.6 Final Payment/ Retention Release
7.6 Operating Budget Process 7.7 Ongoing Requirements/Skills Review 7.8 Final Status & Financial Report
2.7 Project Management Staffing
5.7 Staff Reductions/ Transfers 5.8 Project Quality Performance
6.7 Operations Staff Planning
2.8 Project Reporting Requirements 2.9 Project Safety Program & Insurance Strategy 2.10 AE/CM/GC Selection & Contracting
3.8 Project Status
4.8 Project Cost & Budget Variance
6.8 Project Closeout Performance
3.9 Safety Program Training & Compliance 3.10 Subcontractor Qualification Process
4.9 Risk Tracking & Resolution
5.9 Safety & Risk Mgt Compliance
6.9 OCIP Close-out Review & Report
4.10 Subcontractor Selection/ Contracting
5.10 Contract Compliance Review
6.10 Punch List
7.10 Vendor Qualification/ Selection 7.11 Ongoing Issue Page 12 Management process 2007 January
11. 2.11 Project Issue Managing risk in construction projects 1.11 Issue Issue Management Management Policy Management Planning PricewaterhouseCoopers
3.11 Issue Tracking & Resolution
6.11 Confirm Issue Resolution
Project controls
• Each area of the project is analysed to identify … • Risks • Control procedures • Monitoring controls
Managing risk in construction projects PricewaterhouseCoopers
Page 13 January 2007
Project controls – Daily Project Management Process
• Risks • Lack of knowledge of project tracking • Failure to recognise and develop responses to risk and opportunity • Lack of timely resolution of issues as raised by various stakeholders • Claims • Contract administration • Lack of compliance with project requirements • Unnecessary legal liabilities or loss of entitlement
Managing risk in construction projects PricewaterhouseCoopers Page 14 January 2007
Project controls – Daily Project Management Process
• Control procedures • Project management plan • Risk and opportunity registers • Issues registers • Clear documentation of contract procedures and the like • Regular, documented meetings to consider key risks
Managing risk in construction projects PricewaterhouseCoopers
Page 15 January 2007
Project controls – Daily Project Management Process
• Monitoring controls • Compliance to prescribed policy and procedures • Regular project status meetings to review action list and responsibilities as agreed • Regular formal assurance and expediting reports • Formal up-to-date project management tools incorporating current information/issues and “as built” information
Managing risk in construction projects PricewaterhouseCoopers
Page 16 January 2007
Project controls - Summary
• Project risk management is important to your business as a whole • Project controls provide a framework to manage the project • Project controls cover a full spectrum including, • Risks • Cost and schedule forecasting • Business needs
Managing risk in construction projects PricewaterhouseCoopers Page 17 January 2007
Project controls - Summary
• But are yours comprehensive? • Will it stand up to Internal Audit scrutiny by your business? • Are records suitable for dispute resolution? • Does the process have the knowledge or is it with the staff? • Control the risk and slay the dragon!
Managing risk in construction projects PricewaterhouseCoopers Page 18 January 2007
For further information, please contact: Anthony Morgan Scott Jardine Tel: +44 (0)20 7213 4178 e-mail [email protected] Tel: +44 (0)20 7212 4431 e-mail [email protected]
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2007 PricewaterhouseCoopers LLP. All rights reserved. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
PwC
doc_308459686.pdf