The reopening of closed construction sites around the world poses challenging decisions for civil engineers and others affected. How to reopen sites? And when? And sometimes whether to restart projects that may need to change? This blog by Roger Allport and Chris Lewin (of the Risk Management group - a joint group of actuaries and civil engineers from both the ICE and the Institute and Faculty of Actuaries) should help you to answer these questions.
- Updated: 27 April 2020
- Author: Roger J Allport BSc MA PhD DIC FICE and Christopher G Lewin FIA FSS FPMI
To assume that construction can be seamlessly resumed would be unrealistic. Projects may have been impacted in fundamental ways that need in-depth understanding. Getting construction restarted will be a project in itself. In some cases, it may be a long time before work can recommence.
There may be deeper strategic challenges to participating organisations, and to the specification of the project under construction. A core problem is that no one knows when and how more normal conditions will return. Will construction companies, JV partners, sub-contractors – even sponsors – survive, and in what state? And will the project as specified have to be revisited in the light of new realities? Account will need to be taken of the contractual arrangements and insurances which are in place and whether they need modification. Government support may be essential.
There are four issues that may require attention:
Do the project’s objectives remain unchanged and do its revised costs and demand/revenue prospects materially affect viability?
Will changes to the project’s specification and timing be necessary?
For some projects, construction companies will need to assess whether their financial strength is sufficient to restart the construction process sooner rather than later. Finance partners may need to be consulted.
Making the right decisions will often be challenging – because a wide range of factors are involved, each of which needs understanding. In the housebuilding sector it may not be possible to complete partially built houses until companies have reassessed their financial strength and market conditions show signs of returning to normal. If the project is the construction of a new hospital, it is no longer required, at least in the form originally proposed, because of new ways of hospital working. An airport project may have to be put on hold until future traffic levels become clearer. The prospects for letting units in new retail centres may have to be re-assessed.
So how should informed decisions be made in a period of great uncertainty and risk?
Proven approaches focus on the analysis and management of risk, and we have participated in the preparation of the Third edition of the Risk Analysis and Management for Projects (RAMP) handbook, which provides such a process. Many of the tools and techniques necessary for risk analysis and management will need to be re-visited for halted projects. These include the business case, risk assessment, risk register, risk analysis, scenario analyses, risk responses, risk sharing, and the management of uncertainty.
When thinking about re-starting construction, it will be necessary to review the stage the construction project reached before the lockdown and establish what risks now exist for remaining stages of the project. These may include:
revised sponsor priorities
a need to cease construction again if movement controls must be reinstated
an inability for the sponsor or contractors and sub-contractors to fulfil their contracts – even if they have managed to avoid bankruptcy, they may still be experiencing resource shortages and financial difficulties
the existence of additional hazards on-site
a necessity for temporary or permanent changes to working practices, resulting from new regulations, shortages of protective equipment for workers or an inability to observe social distancing
a shortage of raw materials or equipment and a lack of knowledge about future supplies
a shortage of key managers and skilled employees for essential tasks
a significant rise in the costs of labour and materials if they become scarce
a need for re-training new employees who are unfamiliar with the risks in the project and the mitigation measures previously decided upon.
The identified new risks should be entered on the risk register and considered holistically, alongside risks previously identified. There may also be some new opportunities for the project which need pinpointing. As much knowledge as possible must be accumulated to reduce uncertainty, for example, about the prospects for obtaining essential materials. The impact which the risks may have on each other needs to be understood; for instance, delays in restarting due to materials shortages could result in labour shortages later if employees have moved on to other sites in the meantime. Scenario analysis can assist, in which alternative future situations are tested. Ways of mitigating the risks will then need to be developed and a risk response plan drawn up.
To conclude, changes in the project specification and the risks of restarting work need to be identified, analysed and managed rigorously. Only by understanding all the major risks and their impacts can a balanced assessment be made to guide decisions reliably. This requires inputs from a range of professional backgrounds. Civil engineers will play a significant part in this reassessment process, and it is timely to start thinking about the issues.
If you need a well-established framework for analysing and managing the risks involved in projects, try the Third edition of Risk Analysis and Management for Projects (RAMP) available in print and digitally. You may also find this Risk Analysis and Management for Projects video helpful.