Minimize Risk with Automated Construction Risk Analysis

Risky Business, the movie that catapulted a young Tom Cruise to fame, was not about construction. But it could have been. From project creation through the boots-on-the-ground phase, construction is rife with risk.  In these challenging times, it’s imperative to minimize risk wherever possible.

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Beyond Control

Some risks can’t be minimized. Such risks are out of the owner’s and contractor’s control and are the cost of doing business.

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Controlling the weather, for example, is impossible. 

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Another example is the state of the economy. There are plenty of people and software programs that can crunch numbers and come up with a budget for a construction project. Everything looks reasonable – on paper. Close tracking can send up red flags if/when budgets go askew. 

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Even when things go smoothly on a project, and the team carefully adheres to the plans, the team can’t control interest rates. In early May, the federal funds rate reached 5.25%, “The Fed’s rate increases since March 2022 have more than doubled mortgage rates, elevated the costs of auto loans, credit card borrowing and business loans and heightened the risk of a recession,” according to the AP. The May increase left the key interest rate at its highest level since 2017. Plus, the Fed indicated they are pausing the interest rates and that there’s a distinct possibility they could rise down the road. The increased is being done to fight inflation which is at 5% down form its peak of 9.1 but still elevated.

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Besides rising interest rates and inflation, the banking sector is wobbling. A recent New York Times article stated, “Our nation’s banking system is at a critical juncture. The recent fragility and collapse of several high-profile banks are most likely not an isolated phenomenon.” A few reasons are given to back this statement up. The main reason is the threat to commercial real estate due to changing work patterns (more at-home work).

No one individual or industry can de-risk these hazards. The best a company can do is proceed cautiously with a calm, analytical approach.

The challenging macroeconomy leaves current construction projects vulnerable. Depending on schedules and construction loans, real costs may rise due to price escalation, interest rates, and inflation. Future projects will be affected, and owners and general contractors should take all measures possible to prepare.

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Minimize controllable risks

Other risks are well-known, and addressing them can dramatically impact the schedule, budget, and safety of a project. It’s imperative to take control, wherever possible, to mitigate known risks, particularly with the current macroeconomic challenges.

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Pre-construction:

Today’s construction projects are increasingly complex. Scopes and trade-specific processes for coordination require high levels of knowledge and attention for successful planning, implementation, and handoff of projects. Each of these wrinkles complicate projects, making them more challenging and riskier.

Getting funding can be difficult in these economic times. This makes budgets even more precious despite the risk that the current economic climate presents.

Human labor is in great demand. Dodge Data & Analytics stated there are “…persistent labor shortages in the industry.” The shortage is a long-term issue and affects some job titles more than others. The shortage means companies need to pay greater attention to worker satisfaction and safety if they hope to retain sufficient staff.

Solutions: Prepare your project to take advantage of technology. This begins in pre-construction, as the earlier you augment your workforce through technology solutions, the better the chance you can keep within budget and schedule constraints. More reliance on technology can also allow staff to better utilize their time.

During Construction:

Schedules are accelerating, and more tasks are being tracked. Larger and more complex projects mean human error can greatly affect the analysis.

Because so many points along the management of a project and so much data require review and adherence, there’s an endless amount of opportunities for mistakes.

Solutions: Minimize these mistakes through better data management, and use technology to automate tasks wherever possible. Among the technologies that can be utilized are BIM and Reality capture data. They have great potential to improve the construction risk analysis process through automation, freeing up valuable human capital for focusing on solving problems and saving time in finding them.

Post Construction/Handoff

When the inevitable repair is needed down the line, the challenge is increased if teams go in blind due to poor records.

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Solutions: Maintain a digital record of your projects’ construction and a deliverable of a digital twin. These are useful for future retrofits and future maintenance.

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The increased value of Automated Risk Analysis

Let’s not just minimize risk. Let’s look at some current challenges as an opportunity.

Yes, there is the potential that the real estate industry will suffer a significant loss in value. Government, construction owners, etc. can use this as motivation to rethink downtowns. Existing office buildings can be retrofitted to address more contemporary post-pandemic ways of using the shared built environment.

The construction industry can begin to rebuild and reconsider the concept of the built environment. Scanning and digital twin technology, along with 3d modeling, will be essential. They can be used to document existing underutilized assets to begin planning processes and studies using cloud-based tools for re-envisioning what could be built in reconstructed downtowns.

Technology can help teams review current processes and workflows. It can identify gaps in labor availability and determine what areas need to be shored up. Having a firm grasp of labor requirements is essential, considering that in 2022 alone, labor costs rose 6.1%.

With persistent shortages, labor costs are likely to continue rising. Adopting practices to automate workflows and processes allows staff to work more efficiently. They have greater reach and work more efficiently. Increased labor efficiency leads to less labor needs and lower labor costs.

Owners and their teams maximize the benefit of automation when they plan early. By turning to software early on, teams can put their project on a path to financial flexibility. In addition, they may benefit from insurance savings since technology can be used to assist in monitoring a construction site.

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Barriers to adopting tech solutions

With everyone interested in de-risking construction projects wherever possible, why isn’t scanning and digital twin technology, along with 3d modeling utilized more broadly?

One barrier to adopting this technology is cost. There’s an upfront fee for these technologies. Some may not recognize the benefits of these technologies, which are designed to offset financial risk through mitigation and elimination of quality and schedule errors, while also reducing human labor costs. The earlier the technology is included in the process (as well as the budget), the more useful it will be in reducing risk.

Some remain leery of using new technology and lack trust in the software. Instead, they fall back on the mantra of “This is the way we do things.” To overcome this reluctance, people should view technology as augmenting rather than replacing human reviews. By adding technology to the process, staff can gain awareness and visibility into a project and adjust to avoid/minimize risks as needed. Staff can also put more time into tasks since some of their burdens have been eliminated.

When owners and contractors become more knowledgeable about emerging technologies, the technology is demystified. This process can be sped up if the new tools are user-friendly and approachable.

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Conclusion

Further integration of the new technologies, including scanning and digital twin technology, along with 3d modeling, will occur as more examples demonstrate that they save time, reduce rework, increase safety, and reduce costs. The benefits are gained starting in the preconstruction phase and continuing through to post-construction.

Until recently, there wasn’t a systematic and accurate way to connect the BIM to the reality of the job site to assist in de-risking our projects. Now AVVIR offers various solutions that do just that. Avvir can help de-risk construction projects that are particularly important in this challenging economic climate. Avvir mitigates risk by automating construction risk analysis and providing value-added insights into the process at every project phase. In these risky times, t’s good to have something you can count on.