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Worth the Risk?

by Charles W. Lockhart, (M.ASCE), Sr. Vice Pres.; Golder Associates, Inc., Redmond, WA,
William J. Roberds, Principal; Golder Associates, Inc., Redmond, WA,


Serial Information: Civil Engineering—ASCE, 1996, Vol. 66, Issue 4, Pg. 62-64


Document Type: Feature article

Abstract:

The construction process is fraught with uncertainties, but integrated, proactive risk assessment and risk management methods can help owners, engineers and contractors make better, informed decisions. The key to most capital projects is the ability to assess cost and expected return for various options, recognizing their risks, such as potential schedule delays. This is particularly true in the case of constructed facilities, where all projects have built-in decision processes that involve varying risk/reward scenarios. Owners and contractors have typically used contingency amounts to protect themselves against inherent project risks; however, a standard contingency may be inadequate to protect against the risks associated with today's construction challenges, or so large as to be noncompetitive. Consequently, to be competitive and still survive, construction management professionals need to accurately quantify risks to assess the real likelihood and magnitude of potential cost and schedule overruns for a given strategy, and to devise a strategy that cost-effectively manages such risks.

Subject Headings: Risk management | Project management | Construction costs | Scheduling | Owners | Contracts and subcontracts | Construction methods

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