Construction claims and disputes have always been risks that owners seek to mitigate. Unfortunately, in today’s economic and political environment, the risks seem bigger than ever.
James Gallagher, principal at Resolution Management Consultants Inc., says, “2023 is going to be highly challenging for the construction industry as it is shaping up to be a vortex year, where past, present and future factors can all combine to instigate disputes. Continuing uncertainties this year, especially from the big four of labor, pricing, supply, and inflation has the ability to negatively affect timelines and budgets, leading to an increased number of disputes and litigation.”
According to Construction Dive, supply chain delays, price increases on materials, and project funding shortfalls are likely to lead to claim and payment disputes.
To plan for and mitigate these risks, particularly for the energy industry, which quite literally powers the world and requires reliability and assurance, owners must up their risk game by using integrated systems, data insights, and purpose-built risk mitigation technology.
Increased accuracy in estimating leads to more higher quality bids, which in turn reduce costly, time consuming and risky scope changes. Next, accurately budgeting those projects by not only leveraging relevant historical data, but also enabling planners to access and take advantage of current actual project cash flow data in real time, reduces budget-related delays and claims.
Using integrated planning and project execution systems ensure planners have access to the most up-to-date cash flow actuals to improve the accuracy of their budgeting, helping organizations not only select the best projects, but also allocate funds efficiently to make the most of their capital budget.
Once a project has been selected and kicked off, consistent portfolio-wide financial and control systems provide the visibility owners need to highlight red flags and be able to take corrective action before their projects are negatively impacted. This access to project data helps prevent disputes and claims.
Having a clear record of communication and workflows in a single system across contracts, changes, and potential claims which owners and contractors can access, helps keep parties on the same page, reduce the reduce the risk of claims and prevents the confusion of changes/claims being handled in multiple channels.
As an owner, contracts are the most powerful vehicle to mitigate risk, but at the end of the day, the owner has the greatest vested interest in the success of their projects. Selecting and specifying the project construction systems used on your projects can have a great impact on your risk of claims. Ensuring there is a complete project record and that you as an owner, own your own project data is essential.
Owner involvement has been identified as a key project success factor. Having the right tools yourselves and ensuring your project delivery teams are using the best tools to provide you with the information you need when you need it, decrease your risk. See the scenarios which show you the impacts to cost and schedule of proposed changes, access reporting when you need it, not three to four weeks after a change has impacted your project schedule.
Traditional downfalls of risk management solutions is that they have been siloed. First, as standalone solutions, the identified risks are not directly tied to the schedule, so the true impact is not immediately obvious, and contingency is not released in a timely manner once a risk window closes. Second, risk management has traditionally been the domain of a risk manager, rather than all relevant team members being able to identify and capture risks, thus dramatically increasing the number of risks identified. And third, many risk management solutions are project specific instead of being portfolio-wide.
Having a portfolio-wide solution enables organizations to learn project to project and proactively identify and plan for risks they learned about from previous projects. This insight helps prevent disputes and claims.
The Oracle Smart Construction Platform combines our industry-trusted applications with a common data environment and an ecosystem of partners to help owners and delivery teams work together and continuously improve performance. The platform connects teams and data, synchronizes work, and empowers individuals to make informed, proactive decisions. Power performance with proven Oracle Construction and Engineering solutions for scheduling, portfolio management, construction project management, project controls, construction payment management, and more.
Geoff Roberts is director of energy industry strategy for Oracle Construction and Engineering.