Risk Profile in General Contracting - Revision history

Tkokotas at 15:25, 18 December 2018

2018-12-18T15:25:06Z

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			''Developed by Camilla Flataukan''


	This article is going to give an overview of Risk Profiling in General Contracting. General contracting is the most common project coalition in the construction site, and preferred by the EU procurement directives. .<ref name="Managing"> G.M.Winch (2010), Managing Construction Projects, Chapter 5.4.1 ,Second edition, Wiley-Blackwell.</ref>		This article is going to give an overview of Risk Profiling in General Contracting. General contracting is the most common project coalition in the construction site, and preferred by the EU procurement directives. .<ref name="Managing"> G.M.Winch (2010), Managing Construction Projects, Chapter 5.4.1 ,Second edition, Wiley-Blackwell.</ref>
	The general contractor has a contract with a client for the entire execution of the project, and is responsible for the day-to-day overview on the construction site.		The general contractor has a contract with a client for the entire execution of the project, and is responsible for the day-to-day overview on the construction site.

Camilla: /* Annotated Bibliography */

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Annotated Bibliography

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	G.M.Winch (2010), ''Managing Construction Projects'',Second edition, Wiley-Blackwell		G.M.Winch (2010), ''Managing Construction Projects'',Second edition, Wiley-Blackwell
	This book is used as class material at DTU. It a good book, that explains all the aspects of managing a construction project. It is easy to understand, and a polite source to the ocean of management definitions.		This book is used as class material at DTU. It a good book, that explains all the aspects of managing a construction project. It is easy to understand, and a polite source to the ocean of management definitions.

			Fraser J (2010) ''ENTERPRISE RISK MANAGEMENT''. John Wiley & Sons, Hoboken
			The author of this book, John Fraser is the Vice President, Internal Audit & Chief Risk Ofﬁcer of Hydro One Networks Inc in Canada. He had over 30 years of experience with risk management and a past member of the Risk Management and Governance Board of the Canadian Institute of Chartered Accountants. In this book he takes the reader tidy through the definitions and key terms in risk management, and has a especially good section about risk profiling.

			The Orange Book; Management of Risk - Principles and Concepts
			https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220647/orange_book.pdf
			This is a good book or website to visit to get an overview of the risk definitions and concepts. It is a lot of good examples and some very good figures with it. This is the perfect book to start with, if you want to understand the many terms in the risk universe.

	==References==		==References==
	<references/>		<references/>

Camilla: /* Se also */

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Se also

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	*[[Risk Profile in Turnkey Projects]]		*[[Risk Profile in Turnkey Projects]]
	*[[Risk Identification]]		*[[Risk Identification]]

			==Annotated Bibliography==
			G.M.Winch (2010), ''Managing Construction Projects'',Second edition, Wiley-Blackwell
			This book is used as class material at DTU. It a good book, that explains all the aspects of managing a construction project. It is easy to understand, and a polite source to the ocean of management definitions.

	==References==		==References==
	<references/>		<references/>

Camilla: /* Conclusion */

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Conclusion

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	But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Different types of defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.		But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Different types of defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.

	Another aspect of risk the General contractor experiences is delays. These are often caused by off-site, for example that the drawings are late or decision-making. <Ref>R.F.Cushman, J.D.Carter & A. Silverman, Construction Litigation:Representing the Contractor, New York: Wiley, p 382)</ref> Here is it important to point out the delays.		Another aspect of risk the General contractor experiences is delays. These are often caused by off-site, for example that the drawings are late or decision-making. <Ref>R.F.Cushman, J.D.Carter & A. Silverman, Construction Litigation:Representing the Contractor, New York: Wiley, p 382)</ref>Here is it important to point out the delays.

	The general contractor will face a lot of risks, it is therefore important that he and his team are aware of these risk and the companies risk profile. Before starting a new project they should go through their preferences and find out if they are reconciling whit the project and the stakeholders.		The general contractor will face a lot of risks, it is therefore important that he and his team are aware of these risk and the companies risk profile. Before starting a new project they should go through their preferences and find out if they are reconciling whit the project and the stakeholders.

Camilla: /* Conclusion */

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Conclusion

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	For a professional general contractor who know his area, the financial perspective is not the biggest risk. The Owners usually waits with the tenders, until the planning is almost completed and a guarantee is given.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> The contractor often gets a contingency for the normal mistakes in a construction.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> If a lower bid comes in later, the general constructor need to look at the scoop of the work, and maybe narrow it down. Which can give a higher risk.		For a professional general contractor who know his area, the financial perspective is not the biggest risk. The Owners usually waits with the tenders, until the planning is almost completed and a guarantee is given.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> The contractor often gets a contingency for the normal mistakes in a construction.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> If a lower bid comes in later, the general constructor need to look at the scoop of the work, and maybe narrow it down. Which can give a higher risk.

	But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. ~~Late~~ defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.		But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Different types of defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.

			Another aspect of risk the General contractor experiences is delays. These are often caused by off-site, for example that the drawings are late or decision-making. <Ref>R.F.Cushman, J.D.Carter & A. Silverman, Construction Litigation:Representing the Contractor, New York: Wiley, p 382)</ref> Here is it important to point out the delays.
			The general contractor will face a lot of risks, it is therefore important that he and his team are aware of these risk and the companies risk profile. Before starting a new project they should go through their preferences and find out if they are reconciling whit the project and the stakeholders.

	==Se also==		==Se also==

Camilla: /* Conclusion */

2015-09-29T09:31:55Z

Conclusion

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	==Conclusion==		==Conclusion==
	For a professional general contractor who know his area, the financial perspective is not the biggest risk. The Owners usually waits with the tenders, until the planning is almost completed and a guarantee is given.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> The contractor often gets a contingency for the normal mistakes in a construction.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> If a lower bid comes in later, the general constructor need to look at the scoop of the work, and maybe narrow it down. Which can give a higher risk.		For a professional general contractor who know his area, the financial perspective is not the biggest risk. The Owners usually waits with the tenders, until the planning is almost completed and a guarantee is given.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> The contractor often gets a contingency for the normal mistakes in a construction.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> If a lower bid comes in later, the general constructor need to look at the scoop of the work, and maybe narrow it down. Which can give a higher risk.

	But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Late defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.		But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Late defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.

Camilla: /* Conclusion */

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Conclusion

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	==Conclusion==		==Conclusion==
	For a professional general contractor who know his area, the financial perspective is not the biggest risk. The Owners usually waits with the tenders, until the planning is almost completed and a guarantee is given.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> The contractor often gets a contingency for the normal mistakes in a construction.(~~PHP~~) If a lower bid comes in later, the general constructor need to look at the scoop of the work, and maybe narrow it down. Which can give a higher risk.		For a professional general contractor who know his area, the financial perspective is not the biggest risk. The Owners usually waits with the tenders, until the planning is almost completed and a guarantee is given.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> The contractor often gets a contingency for the normal mistakes in a construction.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> If a lower bid comes in later, the general constructor need to look at the scoop of the work, and maybe narrow it down. Which can give a higher risk.
	But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Late defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.		But the significant risk is that the contractor now is the vendor of a product.<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref> It bears the risks of several sub-contractors and operative workers. The work related injuries can for example expand over the insurance cover. Late defects can be discovered after a couple of years. Lack of communication and so on. The general contractor carries a lot of hidden risks the Owner now is free of.


	==Se also==		==Se also==

Camilla: /* The contract */

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The contract

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	These are just some of the questions the general contractor must look at before signing a contract. It is therefore very important that the management team is very clear on the companies risk profile and their risk tolerance.<ref name="Contract">Surety Learn (2014) A Quick Introduction to Construction Risks and Contracting Practices, http://suretylearn.org/ (25.09.2015)</ref>		These are just some of the questions the general contractor must look at before signing a contract. It is therefore very important that the management team is very clear on the companies risk profile and their risk tolerance.<ref name="Contract">Surety Learn (2014) A Quick Introduction to Construction Risks and Contracting Practices, http://suretylearn.org/ (25.09.2015)</ref>
	A way to do this is by interviewing the stakeholder to make sure the risk profile of the different parties are is in the company’s interest.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>)		A way to do this is by interviewing the stakeholder to make sure the risk profile to the different parties are is in the company’s interest.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>)

	===Limitations===		===Limitations===

Camilla: /* The contract */

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The contract

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	*Are any environmental permits necessary?<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref>		*Are any environmental permits necessary?<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref>

	These are just some of the questions the general contractor must look at before signing a contract. It is therefore very important that the management team is very clear on the companies risk profile and their risk tolerance.ref name="Contract">Surety Learn (2014) A Quick Introduction to Construction Risks and Contracting Practices, http://suretylearn.org/ (25.09.2015)</ref>		These are just some of the questions the general contractor must look at before signing a contract. It is therefore very important that the management team is very clear on the companies risk profile and their risk tolerance.<ref name="Contract">Surety Learn (2014) A Quick Introduction to Construction Risks and Contracting Practices, http://suretylearn.org/ (25.09.2015)</ref>
	A way to do this is by interviewing the stakeholder to make sure the risk profile of the different parties are is in the company’s interest.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>)		A way to do this is by interviewing the stakeholder to make sure the risk profile of the different parties are is in the company’s interest.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>)

Camilla: /* The contract */

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The contract

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	The general contractor takes many risk areas from the owner, since the responsibility for the entire execution of the project lays on the contractor. It is therefore important to have a clear risk profile where the risks are clearly identified and assessed. The management team should have a good understanding of the companies risk profile. This is so they can join the strategic work and take risk-informed decisions.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>		The general contractor takes many risk areas from the owner, since the responsibility for the entire execution of the project lays on the contractor. It is therefore important to have a clear risk profile where the risks are clearly identified and assessed. The management team should have a good understanding of the companies risk profile. This is so they can join the strategic work and take risk-informed decisions.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>
	This is an industry with a lot of competition in the tendering phase. It is therefore crucial that the general contractor knows what he is doing.		This is an industry with a lot of competition in the tendering phase. It is therefore crucial that the general contractor knows what he is doing.
	To avoid too many risk threats it is important for the contractor to analyze his risk profile and his capacity to handle risks.ref name="Contract">Surety Learn (2014) A Quick Introduction to Construction Risks and Contracting Practices, http://suretylearn.org/ (25.09.2015)</ref>		To avoid too many risk threats it is important for the contractor to analyze his risk profile and his capacity to handle risks.<ref name="Contract">Surety Learn (2014) A Quick Introduction to Construction Risks and Contracting Practices, http://suretylearn.org/ (25.09.2015)</ref>

	*Do the firm have the right experience for this kind of work?		*Do the firm have the right experience for this kind of work?
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	*Will the potential profit equalize the project risks?<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref>		*Will the potential profit equalize the project risks?<ref name="Stang">STRANG W (2002)THE RISK IN CM “AT-RISK” Available from: https://cmaanet.org/files/risk_in_cm_at_risk.pdf (28.09.2015)</ref>

	*DO the company ~~Having~~ a good understanding of what external events that has happen earlier.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>		*Does the company have a good understanding of what external events that has happen earlier.<ref name="Fraser"> Fraser J (2010) ENTERPRISE RISK MANAGEMENT. John Wiley & Sons, Hoboken</ref>
	*Have the company worked with the client before?		*Have the company worked with the client before?