Every year, the majority of major construction projects fail to be completed within their original deadlines. And in general, the larger the project, the greater the risk of it suffering significant, costly delays.
There are an enormous number of things that can go wrong with any project - as we analyzed in our article on why construction delays occur so often. But behind every delay is a risk factor that led to it. And while all projects carry risk, minimizing the chances of delays requires early identification of the biggest ones, and careful planning to mitigate the impact of these risks.
Read on for our 6 risk factors that frequently delay construction projects.
Some of the most common and damaging risks to a construction project are to be found in the design phase. These can be separated into two distinct categories - risks that can delay a project in the design stage itself, and design phase risks that can cause delays at a later stage of the project.
In the first category:
- The design process may take longer than accounted for - this is often as a result of new and unexpected barriers to an initial design presenting themselves such as objections from stakeholders or local government, or changes in project scope late in the design phase.
- Late amendments requested by stakeholders - the design stage requires contractors to negotiate often-conflicting demands from a wide range of stakeholders. When these demands arrive late in the process, serious delays can arise.
In the second category:
- Design omissions and mistakes - a study into risk management in the construction industry found the risk of errors in the design process to be the most dangerous of all, with a “high” impact and a “very frequent” likelihood.
- Variation in design - unclear designs have the potential to derail a construction project as they are put into action by teams who do not understand the exact brief required. This can cause huge delays and cost overruns as the designs have to be overhauled at a later stage.
In our article on why construction delays occur so often, we touched on how suboptimal labor scheduling can play a big role. But a huge risk factor related to this issue is the low availability of construction workers - which has been a feature of the last decade and has become especially problematic as a result of the pandemic. The industry lost over a million jobs in the US in the first month of the pandemic alone, and despite a partial recovery since then, there are still over 200,000 unfilled vacancies in construction.
Navigating any labor shortages may mean contractors have to strike a careful balance between taking on workers with limited experience (who will add time to the build process) and offering more competitive pay to highly-skilled workers (which may cause the project to go over budget). In the longer term, the industry is looking to resolve its chronic labor issues by using technology to attract younger talent.
In any case, it’s important to recognize the potential for labor shortages at any given time of the construction process, in order to build this into a project schedule and reduce the chance of having to pay liquidated damages.
While a certain level of change to original plans is inevitable throughout a construction project, when these become continuous or represent a major deviation, they pose a real risk to the pre-agreed project deadline. This is when the scope of a project begins to creep.
Careful management is required to limit or adapt quickly to scope creep. Given that large construction projects will have a huge number of stakeholders, a comprehensive consultation stage at the beginning of the design process will reduce delays down the line. It will be far more costly in terms of time and budget to change designs and achieve sign-off on change orders once the build is under way.
It is also prudent for construction companies to specify that certain types of change orders will result in an extension of a project’s deadline when drawing up the initial contracts.
Even with all the best planning in the world, a construction project is still reliant on a host of subcontractors fulfilling their obligations on schedule. The possibility of subcontractors defaulting on their work is another major risk factor for the prime contractor to contend with - as one break in the chain can cause huge delays and financial losses.
While it’s impossible to insulate yourself against a subcontractor defaulting, there are some strategies which greatly mitigate the risk:
- Screen your subcontractors - known as “prequalification,” a careful review of subcontractors to determine the ones suited to a certain type and size of project before an invitation to tender can be invaluable.
- Protect yourself from the start - ensure any contract signed with a subcontractor includes agreements on deferral or suspension of payment if they are unable to fulfil the work.
- Monitor subcontractors carefully - one of the most important parts of managing a construction project is making sure subcontractors are on track to meet project deadlines. Take note of their staffing levels and materials deliveries, and have a plan ready if anything starts to slide.
Material cost escalation
Sometimes, through no fault of a construction manager, the price of materials that are vital to a project’s completion can suddenly rise mid-project. These cost escalations can be caused by anything from scarcity to geopolitical tension, but they can be extremely damaging to contractors.
As a result of Covid-19, supply chains in the construction industry have suffered badly, leading to material shortages and soaring prices for key inputs. To manage these issues, the best course of action is often to simply suspend building, reassess what can be done with current resources and dynamically change the construction plan to plot the best path ahead.
Of course, any stoppages are a recipe for missed deadlines and overspending. Construction companies need to be prepared. Ensuring an ‘escalation clause’ is in place in the initial contract can protect them against delay-related penalties if prices rise by a certain margin. Meanwhile, technology is helping more innovative contractors to adapt quicker when price rises do strike - learn more about how construction AI is helping companies navigate materials scarcity.
Acts of God
Perhaps the most unpredictable of the risks we’ve covered are acts of God - the unpredictable and random events that can beset any construction project. The most common of these include hostile weather conditions and natural disasters, while the worker shortage as a result of the pandemic has caused havoc over the past 18 months.
And while there is very little that can be done if, for instance, a hurricane strikes to force a project delay, there are ways construction companies can protect themselves in advance. The most obvious of these is including a force majeure clause in the contract for the project - preventing the contractor from paying liabilities if delays are caused for a certain list of reasons. As a result of Covid-19 and the worsening impacts of climate change (i.e. wildfires), companies should be proactive in planning for the worst.
With issues like weather that prevent a project from progressing, companies can also be more proactive here - such as scheduling the most vital work for periods when bad weather is least likely. This should help keep delays to a minimum if an unforeseen event does occur.
How ALICE can help
With such a wide range of risks that can cause delays in construction projects, companies must turn to technology to help them mitigate these risks and plan for more eventualities. ALICE Preconstruction allows contractors to model all major contingencies, meaning lower-risk schedules are built from the very start of a project and companies are equipped with action plans to minimize delays if they materialize.
Meanwhile, for projects that have gone off-track and suffered delays, ALICE Manage is here to assist with project recovery. Manage allows project managers to create new schedules from all available project data, helping get projects back on track and reducing the risk of deadlines being missed. Contact our experts today to learn how ALICE can help you with your construction project recovery.