Pass risk down supply chain at your peril, consultants warn

Senior consultants have criticised the attitudes of clients and contractors to project risk management.

Sandy MacKay, senior consultant with the Building Performance Group, said: “Clients and principle contractors believe that as long as they subcontract the work, they subcontract the risk. This is not true, as shown by multiple court cases where sub-contractors and contractors have been found not to be liable.”

He added that while a client might believe it has transferred all project risk to a contractor, this is not the case: “The building is critical to their business, so if it doesn’t get built on time, it will be the client’s business that goes to the wall.”

Poor risk management was resulting in badly constructed buildings and a failure to meet the needs of clients, added MacKay.

He said a key barrier to better risk management was “widespread misapprehension regarding risk”.

MacKay is working with Constructing Excellence in the Built Environment on a guide, which will aim to improve the understanding of risk and suggest ways of managing risk in a collaborative way. The guide will also unpack risk management jargon. It is out later this month and is aimed at construction companies across the spectrum.

Roy Evans, senior consultant at Gleeds and another member of the working group set up by Constructing Excellence to look at risk, said: “Project risk tends to get passed down the chain from client to contractor to sub-contractors. But you can’t have Joe Bloggs the plumber, one man in his van, taking on £1m worth of risk.”

You can’t have one man in his van taking on £1m worth of risk

Roy Evans, senior consultant, Gleeds

The solution that will be advocated in the new guide is to pass risk onto the best party to manage it, he said. “The risk bearer needs to be able to absorb the financial impact when it occurs.

If there is a huge financial impact, at a higher level, they can take it, but a bit of this can be passed down to the lower level. This will help to incentivise the small contractors.”

The guide will also say that small sub-contractors should be involved in managing risk on a project at the earliest possible design stage.

The working group was set up a year ago by Built Environment (before it merged with Constructing Excellence) and contains a core of ten people from leading construction firms, plus a number of correspondent members based in the North of the UK.

The group’s next focus will be to look at the impact of insurance on risk.