by Elizabeth Michaelis
February 28, 2012

Construction risk management is commonly defined as the systematic and analytical process to identify risks, reduce or prevent risks from occurring and mitigate the consequences if risks occur. 

A well-designed risk management plan includes a fully integrated risk management software program. This type of software can help you achieve all of your risk management goals in a relatively easy and cost-effective manner. 

The Heart of Construction Risk Management

Your risk management plan should address these three primary elements: quality assurance, material and product inventory and document retention practices. In the modern construction world, risk management software provides quality assurance. Considering the benefits, this software should be as automatic as having accounting software. Today’s technology and customizable software increases efficiency, improves the quality of construction and creates accurate, organized records.  Each project’s budget should always include effective quality assurance software and hardware that can collect data in a construction environment—both from a performance and safety standpoint. 

Internal Quality Assurance programs

Most construction owners and developers are familiar with third-party quality assurance inspections and feel confident that the benefits outweigh the costs. However, construction business owners should consider implementing internal quality assurance programs even if they outsource this. Research shows that internal quality assurance programs controlled by risk management software can be effective in reducing risk, minimizing claims and maintaining data and documentation. Consider the following factors when evaluating various risk management software programs.

Access to Construction Industry Experts 

Many available off-the-shelf quality assurance programs provide a framework for creating your own internal quality assurance program. Several affordable solutions will provide industry expert content and support.  In fact, for as little as $500, you can have a customized template that provides quality assurance checkpoints specific to your project. These templates consider the building types, property locations and the products and materials to be used in the construction process. The checkpoints can then be matched to the most optimum inspection time within your schedule.  Checkpoints based upon risk will guide and support your resources to focus attention on the highest risk systems and components. It will be easier to implement quality assurance programs that follow your schedule because quality assurance tasks become nothing more than documenting the jobsite daily.  Today’s off-the-shelf programs have become fairly sophisticated, and some quality assurance software providers offer additional field support including monthly photo and data reviews and even periodic site visits. Several programs will also provide technical/expert phone support to answer questions on codes, installation practices and cost-effective solutions. 

Efficient Management of Open Items

Today’s technology makes it easier to communicate and track correction notices. Risk management software will coordinate each checkpoint with the responsible trade, which makes it easy to immediately report anomalies directly to the person responsible for correcting them.  At the end of the inspection, an email notice identifying the anomaly’s location, a description of the unmet standard, additional notes and possibly a photograph will be sent directly to the designated trade representative. These programs will automatically send additional notifications until the open items have been closed. Documentation of corrections may include photos, notes and/or digital signatures. 

Continual Process Improvement 

Effective construction risk management software promotes open communication, knowledge sharing and best practices. The software also provides continual process improvement. All project participants should be integrated into the process—this includes not only direct employees but suppliers, trade contractors, architects, engineers, testing companies and consultants.  Risk management software allows changes to be made in products, materials, trade vendors or inspection standards, which can be immediately communicated to the field. The cycle time data (from the time an open item is reported to the time it is closed) and risk factors (the number and severity of anomalies) to be tracked may be used for a trade contractor evaluation. Customized risk management software allows owners to define and measure compliance metrics. 

Automation of Manual Processes Into Existing Processes

The value of your risk management software increases if you integrate it with core management processes. Many software programs can be modified to automate manual processes and eliminate spreadsheets.  Reports can be created to notify managers or owners at specific project milestones or if established compliance metrics have not been met.  Effective quality assurance software will allow you to easily integrate existing tasks and checkpoints with the software’s recommended tasks and checkpoints, which can expand its focus to include jobsite security, safety, ADA compliance, SWEP and draw inspections, to name a few.  

Material and Product Inventory

Defective products have emerged throughout construction history. Most recently, builders and insurance carriers have spent millions of dollars trying to locate tainted Chinese drywall. Also, appliance and material manufacturers issue product recalls from time to time. Builders spend a lot of money on inspecting properties just to determine if they had been constructed with Chinese drywall.  Risk management software provides an efficient platform for tracking products and materials on a per-unit basis, making it easy to determine if products and materials alleged to be defective or subject to manufacturers’ recalls exist on your project. Information can be tracked by make, model, serial number and country of origin or other relevant information and can be crossed-checked against your purchasing department’s specifications.

Digital Document Retention 

With the downturn in the construction industry, many companies lost their historians to layoffs or workforce reductions. Often, the remaining staff cannot sufficiently maintain organized records. And in some instances, staff members emptied storage facilities as a cost-cutting measure, not realizing the information needed to be maintained. As a result, valuable information has been lost or cannot be located.  Risk management software can eliminate this problem because it includes a digital library that automatically alerts management when required documents have not been deposited within the anticipated time frame. Well-designed software should make it easy and quick to upload, organize and retrieve documents.  Also, digital storage and transmissions are environmentally-friendly and eliminate the need for costly storage facilities. A good software program should make it easy for owners and clients to access software archives during construction. If a post-construction claim occurs, legal counsel will be able to quickly download forms and information directly. 

Value-added Contributions 

Risk management software can provide value-added contributions that successfully establish sustainable competitive advantages for today’s contractors. Software that can promote needed information to multiple stakeholders can reduce costs for various vendors.  Certain software programs on the market promote data to downstream users, which eliminates duplicate efforts and decreases the chances of inconsistent data. 

Reduced Insurance Rates

The ability to demonstrate a formal risk management program controlled with software will give contractors a greater chance of successfully achieving risk management objectives.  Insurance carriers often consider formal risk management programs during the underwriting process. This can help significantly reduce premiums if the insurance carriers believe the program will sustain throughout the construction process, documentation will exist to support and validate the quality of construction and the records will be maintained and accessible.  

A risk management program for any construction company can help minimize rework, improve cycle time and save money.