ConstructionPro Week, Volume: Construction Advisor Today - Issue: 5 - 05/27/2009

Project Governance: A Best Practices Primer In Risk Assessment

One bad project can bring down a company,” said Harold Dorbin, senior vice president of Marsh’s Construction Consulting Practice, at last week’s Project Management Institute College of Scheduling (PMICOS) conference.  This explains why Marsh, a construction insurer, is so big on risk assessment and analysis. The company has developed formal procedures and metrics to help contractors and owners develop risk management programs, as well as assist Marsh in its own review and contract oversight.

What is Project Governance?
Project Governance is the measured capacity of executive management to have a positive influence on the outcome of a project.  Good Project Governance provides predictability in how management's project adjustments will affect the outcome of each project management process. Project governance begins in  It starts by asking some simple questions:


What are the methods of locating new work?
How do businesses locate new work?
How are potential projects selected for bidding or RFP response?


Next on the governance checklist, Marsh looks at theapproval and bid submission process:


How detailed and thorough are the estimates?
Are estimate structures consistent and do they go through quality assurance checks?
Is there an estimate review to identify high-risk items?
Are high-risk jobs identified as such and treated accordingly?

Most importantly is project execution:

How is the job managed?
How is performance measured, reported and analyzed?
What are the project management processes for identifying and dealing with adverse situations that arise on the job?
What are the cost and schedule contingencies?


Putting the Program in Place
“It’s not enough to just have the risk management procedures in place,”  Dorbin said. “[Businesses] must implement and follow their own programs.”  Contractors need to establish and follow the methods they put in place.Those that do are the ones that succeed. Dorbin provided a checklist of industry best practices for risk assessment in project governance:

__Formalized bid/no bid procedure 
__Standardized evaluation of jobs, estimates and bids
__High risk bids defined
__Document constraints
__Level 3 detail schedule prepared prior to bid submittal
__Critical path analysis, better yet – schedule risk analysis
__Earned value implemented during project execution
__Validate T&Cs (Terms and Conditions)


Note: that three items on this list are schedule related. Scheduling is key to successful projects. A thoroughly developed and actively used schedule becomes the navigational map for project construction. It tracks performance and provides a means to adjust course as needed. Dorbin listed several key elements to look for whenassessing schedule risks:

__Realistic duration for activities
__Sufficient time for overall completion
__Overtime requirements to maintain schedule
__Expediting expenses anticipated for equipment orders
__Shop load of potential suppliers
__Engineering capacity to design and fabrication


Contractors with formalized procedures for job acquisition, bidding, project start-up and execution are the ones most likely to achieve successful outcomes, have a higher level of cooperation from their insurers, and enjoy lower bonding rates – a triple win by anyone’s standard.




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