The challenges presented by today’s economic reality — cost uncertainty, supply chain disruption, increasing demand for service and quality, safety concerns, environmental impact — require tools that go above and beyond traditional program planning and project management.
Risk and value engineering (VE) workshops are problem-solving mechanisms that help both contractors and owners address their most difficult challenges. Conducting a program or project cost-risk workshop — particularly during the preliminary planning or bid phase — provides an opportunity to gain a better understanding of project cost and schedule impacts. But like many things, what you get out of the process depends on what you put in.
VE and Cost and Schedule Risk Analysis (CSRA) workshops, which can range from a day to a week depending on project or program complexity, are beneficial not just for the owner or agency in charge, but for all parties involved in a project, including contractors. These formal processes break down silos and allow everyone to get on the same page. This is particularly true on alternative delivery projects such as progressive design-build or construction manager at-risk, where early contractor involvement is a key feature of project delivery.
Contractors benefit from their involvement in this process by gaining an understanding of contractual risk exposure, thereby allowing more reasonably priced project bids. Contractors may also use these tools to implement their own risk mitigation strategies or VE concepts, resulting in more competitive bids to separate themselves from the competition and increase the chance of winning the project.
Based on our experience facilitating hundreds of VE and risk workshops across North America, we identified three suggestions for getting the most value:
- Invite a diverse group of subject matter experts to the table
- Obtain and evaluate baseline project inputs ahead of time, including project drivers and design, cost, and schedule assumptions
- Embrace the team’s shared goal with a problem-solving attitude Invitations to the Table
Success begins with having the right people represented, including design teams, representatives from the owner, independent subject matter experts, and the contractor. When contractors join risk workshops, it’s illuminating to hear their perspective on key issues, such as easements or laydown needs.
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| Star Equipment LTD |
A workshop also provides an opportunity to contemplate the impact of market conditions on a project’s cost and schedule, for which contractors can provide valuable insight. For example, a region with multiple major projects may have a shortage of skilled labor that requires more on-the-job training or higher premiums to keep skilled personnel.
It’s important to have contractors at the table so they may share their experience and capabilities relative to their construction approach, as well as overall cost and schedule to deliver the project. As they are responsible for delivering the project, they are a reliable source of additional information related to market conditions, labor availability, equipment availability, and how they view and price project risk.
Work Before the Workshop
To improve the usefulness of workshops, it’s also helpful to gather input from project teams and participants ahead of time. This way, facilitators know what key issues to focus on.
Mitigation strategies may be more easily identified and documented if risks are identified beforehand. For example, for a recent state department of transportation progressive design-build project, the team documented risks before the workshop and were able to spend more time identifying risk mitigation strategies, including early work and procurement packages to avoid delays. Efficient and effective coordination between each interest group was critical to establishing response actions and assigning prioritized follow-up tasks to risk owners.
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Bringing the Right Attitude
Risk assessment and value engineering workshops are also most effective when participants unite under a shared vision and commit to a collaborative, solution-oriented approach.
Embracing this mindset sets the foundation for a successful project. A problem-solving attitude transforms the workshop into a collaborative exercise where risks are seen as shared challenges rather than individual failures. For example, instead of debating who is responsible for utility delays, the group can explore strategies such as expedited utility coordination or phased construction approaches to mitigate impacts.
This solutions-focused approach and emphasis on building consensus also bears fruit when the news is positive. During the construction of Missouri’s Kansas City Streetcar — a construction manager at-risk project — updated risk assessments and corresponding contingency forecasts determined that risk exposure had evolved since the beginning of the project. More contingency funds had been allocated than were needed.
As a result, the funds were redirected to add scope back into the project. The input and strong consensus of all stakeholders was critical to discovering that extra funds were in fact available, and helped determine exactly what elements could be added back to the project to enhance value.
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The latest infrastructure report card from the American Society of Civil Engineers estimated that the U.S. had more than $2.3 trillion in transportation project needs through 2025, but was nearly $1.2 trillion short of funding those projects.
Finding better methods to stretch funding dollars and complete projects faster and more efficiently will always be important to better meet community needs and preserve public confidence. In addition to these perennial funding challenges, political change and its attendant atmosphere of uncertainty has made managing risks even more relevant.
With proactive risk management, projects are more likely to finish on time and under budget, improving outcomes and enhancing public confidence. Project owners benefit further by improved management of expectations from stakeholders, including managers, elected officials, and the public. Industry relationships are also improved because partners understand that their owner is focused on equitable risk sharing throughout the project life cycle.
Completing cost-risk assessments early in the project life cycle helps owners better understand their own project and potential outcomes much earlier in project development. Contractor involvement in workshops provides valuable perspective and furthers that understanding. This type of cost-risk assessment is valuable at any point in a project and is also beneficial as an ongoing effort.
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| Star Equipment LTD |
In short: Investing in a cost-risk assessment process pays off, leading to cost and schedule savings that greatly outweigh the investment. Achieving the most value begins with gathering the right participants, who show up ready to engage and with a shared understanding of the goal the workshop seeks to achieve.
Everybody on a project is a risk manager, whether they know it or not, weighing and evaluating risks in their sphere of responsibility. A robust risk management process helps filter all those decisions in the same direction, coordinating efforts to deliver more cost and schedule savings that improve project outcomes.
Photos courtesy of HDR.Rachel Bernhard, P.E., CVS, is HDR’s Director of Value Engineering and Project Risk Management. Trent Eakin is Senior Value Engineering Risk Lead for HDR.
