Commercially managing design risk: key issues

As I have said in previous articles, the design phase of the construction phase is where the project is won or lost. It is so hard, and often impossible, to recover time and cost lost during the design phase, so, while those spreadsheets and cost reports might be your safe haven, I hold a view that you can make the biggest difference by getting in the middle of the design process.

Here's why.

Design Interfaces: Quality Control

In the design phase of a construction process, there will be numerous points where design is handed off from one party to another (e.g. client to contractor, designer to specialist, etc).

What checks do you have in place to ensure the design you received is at the agreed standard? What do you do to identify any non-compliance issues and push back on the other party to do what they agreed to do?

In reality, the design process can end up being very dynamic, so putting strict protocols in place is not always easy, especially if you have obligations to mitigate the impact of delay. If you hold up the design process until you have what you need, you might find that you have inadvertently placed yourself in breach of those obligations!

This is a difficult period of the construction process to commercially control, and if there are issues, you will win the day with good-quality contemporaneous documents that factually record what happened, when, and why.

Stakeholder Changes

It happens all the time. You agree to a design and build contract with a defined set of requirements to be delivered in return for an agreed lump sum price. In theory, you should take the design, complete it, build it, get paid, and go on to the next one.

In reality, though, there will be a design review type process that allows the client and its stakeholders (e.g. building users) to review the design documents you prepare. You would think the requirements of the users should be reflected in the contract, but they aren’t, and the design review process is used to finalise the finer details and, often, change and improve the requirements.

This change happens by the back door, and when you seek recovery, the client cries “design development” and points to some wording that stitches you up for changes you have no control over, knowing that you have no allowance in your price for those changes.

As a commercial manager, you need to tightly control this process. It might mean being the bringer of doom in the design review meetings, pushing scope out quicker than it is added in, but someone needs to do it, and that will often fall to you.

Contract Notices

It is a common feature of contracts that a party must notify the other of an event to preserve its time and cost entitlements.

Now if you think about that in the context of stakeholders making changes, you have to wonder about the fairness of those clauses. Someone knowingly makes a change, but because you didn’t tell them in the way the contract prescribes, you have no entitlement to a variation?

As head scratching as that is, if you have signed up to clauses like that, then you must comply. This is challenging because often the changes are occurring in a dynamic design process where they might not be easy to identify or track. There are times where a change seems insignificant on the face of it but its implication on other systems makes it significant.

You might not even know the full extent of this until the changes manifest in your cost to date and you unpick the reasons for the cost increase.

The quality of the commercial controls you put in place to detect and notify these issues will be critical to your financial success; relying on the engineering team to tell you a change has occurred isn’t enough.

As a commercial person, you need to be inside the design, understand what is going on, what is changing, and give leadership and direction to the project team relative to your risk allocation and/or allowances.

It's hard but not doing it, and suffering the financial impact, is much harder.

Final reflections

I sometimes wonder whether there is enough desire among quantity surveyors to get in the middle of the design process and make a difference. Is that because having our heads stuck in spreadsheets is where we like to be? Is it because there just isn’t the passion to understand how things are designed and engineered? Or is it because it has become so complex that keeping pace at the level required is no longer possible for one commercial person?

Whatever the issue, the skills and tools of a quantity surveyor need to develop to cope with the world as it now is.

This article brings this mini-series to an end, and I hope it has given you some things to think about and opened up thoughts on how you can keep improving what you do.

We will launch a new mini-series next week, so keep an eye out for that and, in the meantime, enjoy the rest of your week!

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