Project Risk Data Driving Better Project Outcomes

Adrian Pellen, Managing Director and Co-Leader 

The construction industry is becoming notorious for having a very high percentage of projects that are over budget, behind schedule and below expected benefit levels.

Could Risk Management Information System (RMIS) platforms help improve construction project outcomes?

In early 2023, Bent Flyvbjerg wrote a seminal book on project failures that went beyond the interests of the construction industry alone and enjoyed mainstream media success. This book is titled How Big Things Get Done. Bent is an academic from Oxford University and one of the leading thinkers in the construction and infrastructure industry. In this latest book on executing large projects, Bent outlines some staggering statistics about the construction sector using a database he has been compiling on the world’s largest projects (largely construction and infrastructure projects, but he does cover projects from other sectors like the IT sector).

From this data, Bent developed his theory on the “Iron Law of Megaprojects,” which states that megaprojects are often 1) over budget, 2) over time and 3) fall below expected benefit levels. Further, he states that this cycle repeats itself over and over again. The data from his 16,000-project database concludes that 8.5% of projects hit the mark on both cost and time. For all three markers, there is a shockingly small percentage — only 0.5% of all projects finish on time, on budget and at/or above expected benefit levels. In other words, 91.5% of all projects in Bent’s database go over budget, over schedule or both. 99.5% of projects go over budget, over schedule, fall short on expected benefit, or some combination of the three. This data is astounding, however, many stakeholders within the construction industry will likely not be surprised by these numbers given the substantial amount of risk associated with not only megaprojects but any construction project. (In his research, Bent Flyvbjerg shares examples of projects as small as kitchen renovations, which resulted in massive cost overruns.)

What the book How Big Things Get Done tells us is that construction projects have many risks, and given these numerous risks, there is a very high likelihood almost every construction project will fall short in one or all of the three primary project success criteria — budget, schedule and expected benefits. The book goes on to outline some of the reasons projects almost always fail to achieve some or all these goals.

In this article, we want to focus our attention on how important it is to identify your organization’s and your project’s biggest risks. How do you identify your biggest risks using the various sources of near-miss incident and claims data? Are you quantitatively determining your top risks or relying on anecdotal evidence from the employees on your projects or employees within your organizations? If you are not utilizing a sound data architecture to arrive at true quantitative evidence of your biggest risks, then how can you expect to improve project outcomes? It is like playing darts in the dark — you will struggle to change poor project outcomes if you don’t start treating your biggest project risks!

You might be surprised to learn that many construction stakeholders and insurance companies serving the construction sector do not have a formal data architecture and data capturing procedure to obtain both project and enterprise-level incident and claims data. Most construction companies, when asked to provide their insurance loss history, refer to their insurance broker, and their insurance broker turns to the construction company’s insurance company, asking them for a loss run.

The insurance company almost always will provide a loss run from the construction company’s annual policies — policies like their owned property policies, their general liability, and other annual policies like contractor professional insurance or annual environmental insurance. These annual policies generally sit in excess of the insurance procured on a project-specific basis. More often than not, annual loss runs do not include up-to-date information on claims where project-specific insurance is in place — either because it was not reported to the annual policies or because the losses were below the annual limits and were not tracked. Given the existing paradigm of how loss information is often tracked, the complete picture may be unclear. The true loss data set is often not provided on the loss runs for annual policies as insurers (and the construction companies) are not capturing incident and claims data at the project level, where multiple policies might apply.

Risk Management Information Systems — A Foundational First Step to Sound Data Architecture

To solve this problem, progressive construction stakeholders are beginning to take this lack of incident and claims data capture into their own hands. To accomplish this, many are turning to a class of technology known as a Risk Management Information System (RMIS).  A RMIS is a software solution construction stakeholders use to aggregate, analyze and manage risk-related data. There are many benefits provided by a quality RMIS beyond just incident and claims data capture, but for this article, we want to focus our energy on how a construction stakeholder can determine which RMIS is best for them and how they can customize their RMIS for the specific needs of a construction stakeholder to quantitatively identify their projects and their organization’s top risks. There is a growing view within the C-suite of progressive construction companies that adopting a construction-tailored RMIS is a foundational first step in developing an overall company-wide data lake that acts as fuel for future digital intelligence delivered by AI.

Construction stakeholders are different from most corporate users of RMIS platforms. They not only have organizational or enterprise risks that manifest and impact their annual policies, but they also have project-specific risks that manifest and impact their project and annual policies (and these projects have different characteristics like location, asset type being built, delivery model and more). Additionally, construction is done through collaboration with many stakeholders beyond their organization, and the work is often done in unique locations and with exposure to outside climate conditions. It is a very different industry from other major industries, such as manufacturing, energy, retail, technology and financial services.

Ideal RMIS Checklist for Construction Contractors

Given the industry differences, the following represent key criteria construction contractors should consider when identifying their ideal RMIS:

• Construction Industry Market Share – Does the RMIS you are considering have a strong level of experience within the construction sector?
• Ease of Use – How easy and intuitive is the system to use given your field staff will be utilizing it to accurately capture near-miss incident and claims information, including the highly valuable root cause of loss data?
• Availability on Any Device – Related to ease of use, can the RMIS be utilized via laptop, tablet and phone? The construction industry utilizes these tools rather than the desktop computer.
• Ability to Add Custom Data Fields – As referenced above, construction is a business of projects, and you need to be able to sort incident and claims data by various project criteria. To do this, you need to ensure your RMIS can not only add customized project-specific fields but also make them standardized (a drop-down pick menu) to ensure data consistency. These custom fields may include the project number, location, asset type (commercial tower, road, bridge, etc.) and project delivery model.
• Ability to Capture, Benchmark and Visualize Data (Clear Dashboard Capabilities) – Can you organize and display the data so as to make better decisions faster. Strong data visualization capabilities and ability to manipulate or sort the data to create further visualization is vital to drive better and faster decisions.
• Capture Not only Claims but Near-Misses and Incidents – Sometimes, claims are not frequent enough to create statistical value so you need to expand the number of data points by expanding the capture to incidents (which may not become claims) and even near-miss events. Can the RMIS accomplish this?
• Bespoke Reporting Capabilities – Can you easily generate reports that will drive construction industry-specific insights, and will these reports also allow for data visualization enhancements to drive the best decisions? For instance, can you create a report to compare your near-miss incidents and claims data using a project delivery model or asset type? Can you answer the question, what are the biggest risks my company will face when building a hospital using a design-build delivery model? Strong bespoke reporting capabilities will allow you to produce reports/dashboards that can answer these types of questions.
• Ability to Easily Transport Data to and from Other Systems (via Application Programming Interface (APIs)) – Can the RMIS easily integrate with other systems data to create a more robust data set from which to drive better decisions?
• Ability to Tag Project Risk Controls and Measure the Risk Control’s Impact on Losses – Can your RMIS allow you to identify projects that are using specific risk controls, and over time identify the “before and after” mitigation of risk caused by specific risk controls?
• Workshops, Peer Group and Educational Events – Does your RMIS provider and broker partners host educational sessions on how to get the most out of your data as a construction stakeholder? Do they create environments for you to network and share ideas with industry peers?
• Cost – Are you getting the value for the costs of the RMIS?

The checklist above represents some of the top criteria any construction stakeholder should consider when seeking to establish a RMIS. Identifying the ideal RMIS for your needs is step one. Step two is customizing and implementing the RMIS. For that, you should harness the power of a trusted, knowledgeable risk advisor with expertise who understands both the RMIS technologies best suited for construction stakeholders and the risk controls that can treat the top risks identified by your new RMIS platform.