COMMERCIAL RISK MANAGEMENT FOR THE CONSTRUCTION INDUSTRY

Managing Cost and Value

The Issue

Uncertainty

Risk

Desired Outcom

e

Control

Tender handover

Tender

process

Management

Site manager

Commercial (Q.S.)

Contract

Cost plan

Construction programme

Value plan

Risk [& opps] register

Change schedule

Unplanned

Planned

CVR

Updatedcost plan

Updated value plan

Updated risk [& opps] register

Management

information

Proactive change management

Cost / Value management process

Requiresauthorization

OK?

Cost managementThere is no more

Good cost management means considering cost before it is incurred

Ownership of the cost plan rests solely with the site manager

Any cost increase that is NOT due to customer change is deemed to be unplanned.

Planned cost changes are those due to customer change and considered recoverable under the terms of the contract.

Authorization process for all cost increases.

Value managementPaid for what you do

Managing value effectively is important because:

1. We are in business to make money;

2. Customers need to manage their budgets and understand the impact of change

3. Its key metric for management information

Risk & opportunityKeep it live!

A risk strategy should balance the appetite for for the scheme with your ability to manage the risks and realise potential opportunities.

Managing risks correctly will provide its own rewards

Project risk registers are an essential tool for the site management team

Programme managementDoing it right, on time

A thorough understanding of the contract constraints and requirements concerning methodology and programme is essential.

Communicating the philosophy of the programmme to the site team and establishing who has ownership is paramount.

Measuring actual productivity against programme is essential to maintaining your high standards