Compliance and risk are well-known quantities in the construction industry. Yet, from commercial to residential, we live in a world that seems to be littered with failed building projects and despairing investors.
While the media focus is usually on the family whose dream of a new home has turned to ashes, or the out-of-pocket sub-contractors, the financial devastation wrought by a collapsed project is felt equally by the supplier of construction materials and services.
The bricks and mortar side of a project don’t come cheap. So, it’s hardly surprising that there’s been an intense refocus by the construction industry on minimising and identifying risk before a project is even accepted.
What is risk?
In his catchily titled article, The Impact of Failure Types in Construction Production Systems on Economic Risk Assessments in the Bidding Phase, Milan Mirkovic says, “Risk management in the pre-project phase is a very specific and insufficiently explored area.” And if the news headlines are to be believed, he’s right.
Mirkovic’s research paper lists the risks factors in the bidding phase from the point of view of the contractor as:
- Failure of the design concept
- Changes of operator-side requirements
- Failure to implement design concept
- Incorrect calculation
- Incorrect scheduling
- Unforeseen soil conditions
- Access to construction site delayed
- Site protection issues
- Responsibility for workplace safety
- Third-party demands
- Requirement of additional compensation
- Claim of prolonged construction time
- Force majeure
- General changes of legal framework
- Changes in taxation
- Running costs
- Repairs after damage
- Maintenance more expensive than expected
- Insurance
- Law changes
- Availability/provision
- Change in technology
- Rising interest rates and inflation
Given the potential for a project to ‘go wrong’ just at the bidding stage, it’s not surprising that construction industry losses have been in the millions, if not billions, over the years. With the low margins and high risks associated with mega-projects, many industry stalwarts have either stopped bidding on large projects or are taking a more proactive approach to minimise potential risk.
While some risk can be laid fair and square at the feet of the project owner, it’s also the responsibility of the supplier to enter their tender with their due diligence done. And when the data needed to coordinate a unified bid for supplying construction materials and services is spread across multiple divisions, the degree of diligence required only grows.
So, getting to the point – how can you use technology to minimise risk?
Only bid on projects you want to win
Whether the project is $50,000 or $500,000,00, meeting compliance requirements at every stage of the sales process is critical. With set-in-stone compliance hurdles throughout the process, poorly planned, high-risk or under-financed projectprojects can be filtered out.
Seek reviews and mandatory approvals at every stage
By stepping a sales bid through pre-identified hoops, and not allowing the tender to progress to the next stage without the requisite divisional, regional, or even board approval (depending on project size), risk is minimised.
These compliance hoops can be budgetary, type of project, the contractor, financial backing, timing, penalty clauses, and any other risk factors that you are wary of.
Abandon paper processes
While you could do this all on paper, or a spreadsheet or 50 – why would you?
Using technology to manage the process offers a seamless, streamlined, and rigorous approach to compliance. Automation of requests for approval, digital signatures, checklists, alerts, one-time entry of data, visibility, collaboration across teams, divisions and even partners, version tracking, access to up-to-the-minute pricing, and accurate profitability calculations all contribute to a risk-averse sales process. Additionally, rework is reduced, as is duplication of data and data entry errors, resulting in significant time and accuracy savings.
Learn when to walk away
And if you are just partway through a bid when it becomes evident that the project won’t meet your minimum compliance requirements, you can withdraw without investing further effort or resources.
Make a bigger plan
By investing in an automated bid system that is an integral and integrated part of your technology ecosystem, you have access to current pricing, and can convert bids to project plans to sales orders and invoices via your ERP and other applications. As a result, the business has complete visibility of the project and the cost and effort milestones.
A bid system doesn’t guarantee success, but what it does do is raise alerts when, based on your parameters, it recognises and flags risks.
So, you can have the opportunity to say thanks, but no thanks.
