Risk Column: It’s about the design
February 1, 2014 by David Bowcott
Recently our construction and infrastructure team at Aon did some data mining in the area of project delays with a focus around Canadian P3 projects. We’re lucky enough to have leading market share within the Canadian marketplace and that allows us to see trends that even our largest clients cannot. The intent of this study was simple: Discover what the leading causes of project delays within the Canadian P3 market to date are. We took the 121 P3 projects (at the time) that are in progress or have been completed and we isolated any projects that had significant risk events manifest. The events either lead to a delay on the project, or had the potential for leading to a delay. Of interest, there were 15 projects in total that had such an event.
I’m not going to go into the various risks that manifested on these 15 jobs, but rather want to focus attention on the leading risk event that led to delay (or the potential for delay) – and that is design risk. Our study indicated approximately 33 per cent of the 15 projects were delayed (or potentially delayed) by a design risk event. This means design issues were the leading risk event causing delay to Canadian P3 projects over the past several years.
Knowing design risk is likely the top risk you will face in any project (even those with a strong track record of success, like P3s) what is your firm doing to manage this important risk? This message is to both contractors doing design-build work and to owners procuring their design and farming out construction via the design-bid-build model. Whether it’s the contractor or the owner procuring design, the entity responsible for procurement needs to ensure they have top-level best practices for pre-qualifying, procuring and managing design risk during construction and into operations.
The following represent some high-level practices for you to consider when managing design risk on your next project:
1. Pre-qualify design consultants. The following are some key areas that should be addressed via a Design Professionals Prequalification Form:
a. Experience (years in business, areas of expertise, human capital data, project lists, etc.)
b. Financial information on design firm
c. Information on insurance coverage
d. Types of design performed in-house and types subcontracted (if subcontracted what are their prequalification practices)
e. List of preferred design subcontractors
f. Client list
g. Claims, disputes or litigation
h. Software used
i. Information on management and key employees (ideally the team being dedicated to your project)
2. Review proposed design contract:
a. Look for limitations of liability
b. Determine adequacy of contract performance security (parental guarantee, letters of credit, insurance, etc.)
c. Look for insurance requirements
d. Confirm what information you are expected to provide and ensure you can provide it
e. Confirm scope of service is in line
f. Confirm charges for project changes
g. Confirm or insert schedule/timeline
h. Determine what obligations you have to maintain contract compliance
a. Review the design firm’s insurance program (carrier, limits, retentions, exclusions, – ideally the policy – is there any limit erosion on the practice policy?)
b. Review design subcontractor insurances
c. Review any project specific insurance covers (carrier, limits, retentions, exclusions, etc.)
d. If you are a contractor confirm your professional insurance coverage and ensure coverage dovetails with design firm cover and project specific covers
4. Relationship building with design firm
a. Visit the design firms offices and meet key management
b. Meet and get to know the team dedicated to your project
c. Develop relationship with top management of company
5. Quality assurance/quality control
a. Ensure you have strong QA/QC protocols in place to ensure construction is compliant with design and design specifications
6. General questions to ask
a. What issues does the design firm see as important with your project?
b. How does the design firm gather information about your needs, goals, etc.?
c. How do they make decisions and establish priorities?
d. Who are the members of your team? Do they separate relationship and design roles?
e. How busy is the design firm and in particular the team on your project?
The above is by no means an exhaustive list of best practices when procuring design, however, it does have some key areas you should investigate. If design is a major risk on all project delivery models, that means finding the right partner will be vital to the success of your project. Further, once you’ve found that partner, ensure you are comfortable with their risk management practices, contract terms, and on-going design and construction execution practices.
David Bowcott is senior vice-president, national director of large/strategic accounts at AON Reed Stenhouse Inc. Send comments to email@example.com.