What is Value Engineering? 

Value engineering is defined by The General Services Administration as:

“An organised effort directed at analysing designed building features, systems, equipment and material selections with the purpose of achieving essential functions at the lowest life cycle cost consistent with required performance, quality, reliability and safety”. 

Value engineering takes place in the design phase of building development to consider alternative design solutions which will “optimize the expected cost/worth ratio of a project at completion”. 

How is value engineering calculated?

Value is calculated as a ratio of function to cost. This means you can add value to a project by reducing costs or improving functionality – ideally both at the same time. Value engineering should never compromise the quality of a project, only save time and money where possible.

A risk assessment is essentially an examination and plan regarding the associated health & safety risks with a construction project. A risk assessment must do the following: 

• Identify the risks of a project which can be removed
• Review the risks and hazards which can be avoided
• Set up controls and processes to manage and mitigate the risks
• Monitor the effectiveness of these measures

 

For more in-depth information about what a risk assessment is, please see our recent blog post ‘What is a risk assessment in construction?’.

Under Regulation 3 of the MHSWR (Management of Health & Safety at Work Regulations 1999) employees are required to undertake a suitable and sufficient assessment of risks to health & safety of both employees at work as well as contractors, temporary workers and potential visitors to the site. 

 

What types of risk assessment are there? 

Baseline Risk Assessment – Establishing a benchmark of potential hazards on a construction project.

Issues-Based Risk Assessment – This identifies risks associated with a particular activity or task, usually using the risks identified in the baseline risk assessment. This is a good option when new equipment or issues are highlighted. 

Continuous Risk Assessment – This is a regularly conducted risk assessment carried out by the construction team involving hazard awareness to keep employees alert of the risks involved.

 

Here are the following steps on how to conduct a risk assessment for a construction project:

1. Identify potential risks 

This requires analysis of every aspect of the construction works where you may want to consider: 

• The site location – It’s position to roads, schools, railways etc
• Site security – Locks, screening and access points
• Buildings – Temporary buildings & storage containers
• Equipment – Use of plant, power tools, working with heat, scaffolding and correct PPE
• Materials used – Storage of hazardous substances (COSHH) 
• Working environment – Working at height, in depth, confined spaces, noise, dust and trip hazards
• Deliveries – Vehicles access and manual handling

 

From these points, you should create a list of all the sources of hazards present and this should be reviewed and updated regularly. 

As well as this, you can identify potential risks by looking back to accident & health records to ensure that you do not make the same mistakes. It is also worth considering long-term hazards which may be present.

2. Identify who or what will be affected by the risks

The risks should be categorised based on who they may affect. This includes employees, subcontractors, delivery drivers, architects, surveyors, construction professionals, clients, visitors, neighbours and the general public.

3. Assess the risks identified

Risks should then be categorised by their severity. This includes how likely the hazard is to cause harm and the extent of how bad the harm could be. Risks should also be analysed under different circumstances including different weather conditions, emergencies and power outages. 

You should review any information available about your construction site such as operator manuals for equipment and tools, safety data sheets, inspection reports, test results, accident reports and studies from reputable third parties.

 

Risks should be evaluated and prioritised using a chart or risk assessment matrix. This won’t only help you categorise the risks but also enable you to calculate risks quickly. 

Legal definitions

A construction dispute is defined as: “A difference or dispute of whatever nature between the Concessionaire and the Contractor arising under, out of or in connection with the Construction Contract”.

Also defined in more depth as: “(i) Any dispute that may arise between the Borrower and any Construction Dispute Party as result of the termination of any such relevant Construction Agreement or (ii) Any dispute with respect to, or any additional work required to be undertaken by Sinoma or any other party as a result of, any settlement with any Construction Dispute Party”.

 

What causes a construction dispute to occur? 

There are a variety of factors which lead to a construction dispute usually around the uncertainty of the project, contractual issues or the behaviour of each party. 

 

Uncertainty of the project 

This is defined by Galbraith (1973) as “The difference between the amount of information required to do the task and the amount of information available”. 

This can be a fault of both parties depending on the complexity of the project and requirements of the construction team. The team may be incapable of completing the project or the concessionaire may not have provided adequate planning information. 

This is a common construction dispute as it is very difficult to plan every detail of a project before work begins. Even initial drawings will almost certainly be changed and both parties will have to work to solve problems as they occur to avoid a dispute. 

 

Contractual issues

Contracts issued for standard projects usually contain clearly prescribed risks and obligations of each party. However, the more complex and long-term a project is, the more likely there are to be contractual issues. 

One of the most common contractual issues to occur is actually down to each parties perception of the contract. For example, when amended terms or bespoke contracts are used for long-term projects or where the contract is continually evolving and being refined to address issues with the project as they occur. 

 

The behaviour of each party

It is fairly commonplace for parties to disagree with some elements of a contract when work is taking place as both parties aim to gain as much as they can from the other. As well as this, as previously stated each party can have a different perception of the facts outlined in the contract. 

Unrealistic expectations or unreasonable requests can lead either party to act poorly, potentially leading to a dispute.

 

What construction issues can cause a dispute to arise? 

• Different goals – The larger the project the more complex it can be, with the main contractor involved, subcontractors and the hiring party. Each party will have their own goals and desired outcomes which may not always align, causing disputes.

• Time and money – This is usually raised by the contractor for reimbursement of loss/expenses under a construction contract due to delay or disruption to the works.

• Uncoordinated work – For a larger complex project, usually a number of specialist trades will be required to complete some part of it. This may be caused by ineffective management or planning leading to conflict during the project installation, which can be time-consuming to resolve. 

• Delays – This is a common cause for a dispute as delays can be caused by both parties and who should bear the responsibility. Under FIDIC (International Federation of Consulting Engineers) a contractor is required to give prompt notice of aunty delays which may occur. 

Delay damages can be claimed where, for example, the contractor does not achieve the completion date agreed.

• Site conditions – Both parties can be responsible for assessing site conditions as this can impede the progress of the project. For example, if the site details have been incorrectly supplied by accident and the contractor has relied upon these, the employer may be liable for the consequences. 

• Quality of the work – Disputes may arise over the quality of the work carried out and whether it is in accordance with the specifications of the project. This can be due to the workmanship itself or the quality of the materials used if, for example, they must comply with regional standards. 

This is often an issue with the contract itself where the employer’s requirements have not been properly outlined.

• Acceleration – This is defined as “The process of moving a project towards completion at a faster pace than originally anticipated”. This may occur if the project is required to meet strict deadlines or key opening dates. 

Acceleration can lead to increased costs but are likely to be less than the commercial risk a developer may face if they miss these key dates. As this decision is usually made quickly, the circumstances are often not properly analysed leading to disputes as contractors will have incurred extra costs which the developer may then refuse to pay.

 

How are construction disputes resolved? 

Construction disputes can be resolved in court or by ADR (Alternate dispute resolutions) such as negotiation, adjudication, mediation or expert determination. To read more about ADR methods in the construction industry take a look at our blog outlining the pros and cons of each method.

 

 

 

 

 

 

 

 

 

 

 

A risk assessment is essentially an examination and plan regarding the associated health & safety risks with a construction project. A risk assessment must do the following: 

• Identify the risks of a project which can be removed
• Review the risks and hazards which can be avoided
• Set up controls and processes to manage and mitigate the risks
• Monitor the effectiveness of these measures

 

For a construction project a risk assessment will likely include: The construction works, temporary works and to the operation, maintenance, cleaning, alteration and demolition of a completed project. As well as relating to risks associated with the surrounding areas.

 

Risk assessments are hugely important in the construction industry due to the amount of risks present when working on a construction site. The Management of Health & Safety at Work Regulations (1999) ensure employers are required to carry out sufficient risk assessments regarding the health & safety of their employees as well as third parties.

 

The Construction (Design and Management) Regulations (2015) also require clients to make suitable arrangements for project management, which must ensure that the work can be carried out without risk to the health & safety of anyone who is affected by the project. 

Why is a risk assessment important?

1. To raise awareness of the risks and hazards associated with a project – Increased awareness can ensure that employers and their employees are better prepared and sufficiently equipped for the potential hazards they may face each day. This awareness enables a safer working environment, not only for the employees but also any third parties.

2. Eliminate unnecessary risks – Risk assessments can lead to: 

• Identification of safer alternative options
• Restricted access to hazardous sites
• Correct use of PPE (Personal Protective Equipment) 
• Redesign of processes to make them safer
  
  3. Enhanced communication with employees – This is hugely important for any project going ahead as employees can ensure they are best protected against potential risks which reduces accidents & injuries on site.

   

  4. Ensures compliance with Health & Safety regulations – Companies with over 5 employees are required by law to carry out a risk assessment and share this with their workers. This will ensure your company is protected & not liable for any damages. 

Why is a risk assessment still important for ongoing maintenance of a project?

Risk assessment is always going to be important for a construction project, especially when it comes to maintenance and repairs of the building. The benefits of a risk assessment for ongoing maintenance include: 

• Encouraged communication between employees – Your workers are one of your best resources for detecting potential risks and hazards on site. Encouraging open communication can ensure that nothing is missed when it comes to safety. 
• Choosing appropriate controls – Ongoing risk assessment will ensure that you are consistently developing controls to ensure you continue to minimise risks. 
• Plans for non-routine operations – Having ongoing risk assessment for day-to-day activity & maintenance is useful to apply to any unusual work taking place, for example, creating a unique risk assessment for what to do when faced with bad weather or a fire.

 

What else can you do?

If a risk assessment is not required, you can carry out a RAMS (Risk Assessment Method Statement). These are usually created after a formal risk assessment, however they are not required by law. RAMS will contain details of the identified hazards as well as step-by-step guides for workers showing them how to work around the hazard. 

 

Does my business need to use RAMS? 

RAMS is always useful as they improve the health & safety of your business operations. They are especially useful in the construction industry as there are a huge number of risks faced on a daily basis. 

 

RAMS are also beneficial to demonstrate safer work practices, enhancing the standards of your company. 

 

The benefits of RAMS include: 

• Enhanced decision making – These statements will add to a risk assessment by showing how a task should be carried out safely rather than just identifying the risk. 
• Less misunderstandings – Method statements create a clear and formal process for carrying out a task. These are better than verbal or informal instructions as the message stays consistent. 
• Improved processes – Creating a step-by-step guide will not only improve health & safety, but also create improved processes and enhanced productivity of workers.
• Reduced risk of fines or penalties – As RAMS help you improve workplace health & safety and enhance your compliance with risk management legislation.
• Safeguard your business reputation – Ensuring a safe working environment will help create a good business reputation as a brand who cares about the safety of their workers.

 

At AJH Consultancy we have a variety of services to deliver risk analysis and risk management systems before commencing on a project. 

 

We can ensure that our clients can minimise the number and size of disputes in a contract, ensuring that all parties to a contract fully understand their risks and obligations. Get in touch with our team before starting your next construction project.

 

 

There are a large number of risks involved when undertaking a construction project due to the heavy equipment, hazardous materials, accidents and contracts. Construction workers usually have to work from a large height using dangerous tools and carrying out dangerous tasks. 

 

Effective risk management is essential for the safety and planning of a construction project. Implementing a risk management strategy can ensure you mitigate common risks and protect your business from financial loss, as well ensuring the safety of your employees. 

 

Construction risk management involves evaluating and implementing processes and procedures to reduce the impact of risks in construction projects. This will usually involve thorough planning and analysis to create a risk management plan and will be carried out by the project manager or an appointed risk manager.

 

What risks are involved in construction?

 

1. Health & Safety – first and foremost managing the risks of health and safety is a daily priority for construction workers. 
2. Financial risks – Many factors can affect a business’s finances such as cash flow shortages, late payments from clients or increased costs of materials. 
3. Environmental risk – The nature of construction work means that projects often produce large amounts of waste and noise pollution. Environmental risk management should consider the impacts of the construction work including on the environment, on the local community and to the landscape. 
4. Quality management – Construction work must be completed to a high standard to ensure that it meets the required standards and doesn’t cause reputational damage or future cost for repairs. 
5. Information and data protection – Risks such as data breaches, unlawful collection of data or non-compliance with GDPR should be considered. 
6. Legal risks – such as following regulations, codes and contracts to avoid disputes with your client or the law.

 

Risk management is designed to plan, monitor and control these potential risks and create measures to prevent exposure to these risks. 

 

This requires a project manager to identify the hazard, assess the extent of the risks, provide measures to control the risks identified and manage any residual risks which may occur as a result of something else going wrong. 

 

Project Manager provides a list of steps contributing to the risk management process which are as follows: 

Identification 

This involves making an extensive list of all the possible issues which could arise by undertaking research, talking to your team and exploring historical data about similar projects. This list of potential risks should always be open for edits and updates. 

 

This will include:

• Identifying the hazards
• Identifying who or what may be harmed
• Evaluate the risks arising from the hazard
• Determine the control measures required
• Evaluate the remaining risks
• Record the findings of the risk assessment 
• Make contingency plans for residual risks
• Review and revise your plan

 

You should also consider losses which could be caused as a result of these risks including accidents to workers or general public, loss of skills, damage to property, loss of time, money or reputation/future business. 

 

Assessment 

As all risks have a different level of severity, you should have a code to assess the level of each risk. One way to do this is to use a risk assessment matrix to help you calculate project risk quickly and effectively. 

 

To create your own risk assessment matrix you will need to identify the scope of the project and identify each area with the potential risks (using the risks set out at the start of this article). 

 

Risk assessments for health & safety are a statutory requirement, however it would be useful to consider all the risks you could face with your project and categorise these to ensure you have covered all bases and set your project up for success. 

 

Mitigation

This is where contingency plans will be made using the risk assessment which will reduce the likelihood and impact of the risks identified. The top risks which have the greatest impact should be given an owner who is responsible for identifying the risk if it occurs and resolving it. 

 

Everyone on your team should know and understand what role they plan in keeping the site safe, ensuring risk is mitigated at every step. 

 

Some mitigation strategies include: 

• Risk avoidance – For example choosing not to undertake a certain activity or practice to avoid any threat posed by the risk
• Risk acceptance – Accepting the risk for a period of time to prioritise more serious risks
• Risk transfer – Allocates the risks between different parties depending on their abilities to prevent or protect others from the risks
• Risk monitoring – Watching projects for changes in the impact of identified risks

 

Monitoring 

This is an ongoing step of the risk management process which involves various members of your team identifying risks when they arise. This also involves monitoring your mitigation plan and constantly updating your risk assessment in line with this. 

 

You should call on all members of your team or other departments to empower everyone to be able to respond effectively to risks. 

 

This can be implemented with a risk register which tracks risks on a project. These should be created at the start of your project and updated as new risks are identified. As well as this you can regularly undertake risk audits, status and safety meetings or risk reassessments. 

 

Reporting

Your risk management plan should be analysed and shared with all members of your crew and other important stakeholders. 

 

Risk reporting should provide an easy way to regularly update risks and provide the right information to the right stakeholder. Risk reporting enhances the quality of your organisations decision-making and strengthens the overall vision of a project. 

 

There are a variety of reports you can use including: 

• Principal risk report – Providing an overview of principal and emerging risks.
• Deep dive report – Providing a detailed assessment of the nature and management of potential risks.
• Risk radar – This report will highlight and summarise emerging risks and is used to monitor risks with a high likelihood or high impact/threat.
• Risk moderation – Used to provide senior leaders with rationale to support changes to a proposed risk assessment. 

 

GOV.uk provide an extensive PDF with a guide to good practice for risk assessment.

 

Constructive risk management involves a lot of tracking and should use project management software to provide up to date insights into the progress of your project. As well as this, an appointed project manager will help your team to stay on track and mitigate the possibilities of risk. 

Alternative Dispute Resolution (ADR) refers to any method of resolving disputes without litigation. ADR provides a confidential and alternative method to resolve disputes avoiding going to court. Many construction companies and employers find ADR useful and effective to resolve challenging issues in construction projects.

 

ADR is commonly used in the construction industry due to disputes arising during the construction process. The most common causes of construction disputes include the following: 

 

• Errors in claim submission
• Different site conditions
• Conflict over construction delay
• Poor administration 
• Poor construction quality 
• Conflict over non-payment of claims

 

There are variety of methods of ADR including Adjudication, Mediation, Arbitration and Expert Determination all of which are faster and more cost effective than traditional court proceedings. 

1. Adjudication 

This involves an independent third party considering the claims of both sides of an argument and making a decision. The adjudicator would usually be an expert in the subject matter and can act individually.  

 

Adjudication in construction is a formal and fast effective way to resolve a dispute. Adjudicators are usually experienced constructions professionals or Chartered Quantity Surveyors who understand all aspects of construction projects including the measurement and validation of construction work and time. 

 

The construction adjudication process usually takes between 28-56 days and can be used for any construction disputes even up to the value of millions of pounds.

 

Pros	Cons
Cheaper than suing Quicker to reach a decision You have control over who will be appointed allowing you to choose an industry expert More flexible than court proceedings Decisions are binding	Although cheaper than using courts, it is not cost free as you still have to pay a legal adviser to prepare witness evidence and submissions to make a case Drains valuable time from your managers May not be suitable for some claim if they are highly complex or of a high value

2. Mediation

Mediation is an established process used in the construction industry to resolve disagreements, using an impartial third-party mediator to help parties find a mutually acceptable decision. 

 

Mediation is typically used for lower value disputes or where there is a desire to preserve the relationship between parties. This allows you to dispute the disagreement without prejudice and come to a fair agreement between both parties rather than to have a decision imposed onto you. 

 

Mediation focuses on what both parties need, looking less at the rights of each party and more about what they actually want to achieve. 

 

Effective mediation requires a mutual commitment from the involved parties to reach a mutually beneficial decision. Mediation can be instigated by: 

 

• A mediation clause – which contracts have in place to state that mediation must take place before taking a dispute to court
• An agreement to mediate – Parties agree to use mediation using a referral letter
• Court recommendation – If your dispute has gone to court they can recommend or order that both parties use mediation to settle their dispute

 

Pros	Cons
Very fast, taking an average of 1-2 days The mediator will be independently appointed and will not advise or provide judgement The parties themselves arrive at a final solution  Allows both parties to hear the opposing view in a non-confrontational environment	It is not compulsory  The mediation agreement cannot be guaranteed Can be challenging if either party withholds information Unwillingness from either party to cooperate can result in a waste of time and money

3. Arbitration 

Arbitration is essentially a lawsuit without the involvement of courts. Arbitration appoints a neutral third party who is empowered to decide the outcome of the dispute. This can be one person or a panel of 3 arbitrators (tribunal). 

 

If arbitration is the decided method of conflict resolution, both parties will agree to be bound and comply with the arbitrator’s decision. 

 

This will involve submitting a demand for arbitration, letting the appointed arbitrator to collect evidence and hear arguments from both parties. They then issue an award (decision) which can be confirmed at the time or later vacated by the court if one party petitions. Once confirmed it will be awarded as the final judgement of the dispute. 

 

Pros

Cons

Parties work together peacefully to structure the resolution, avoiding the issue escalating any further.  Faster and more cost-effective than court proceedings Can be scheduled around the availability of the parties The process is private and confidential Binding arbitration offers limited opportunities for appeal

Questionable fairness – if arbitration is mandatory by contract, then parties will not have the flexibility to choose the arbitrator.  Can be unbalanced in favour of large employers when challenged by someone who does not understand the process No jury could lead to unfairness and bias Finality – no appeals Can be more expensive Is unpredictable as it does not follow formal rules of a courtroom trial

4. Expert determination 

Expert witness reports can aid in the understanding of a construction dispute and develop a good strategy to resolve the issue fairly. 

 

An expert can be a single joint expert, party expert or shadow expert. The duty of an expert is to assist and provide guidance to a court to provide essential expert knowledge of a particular construction issue, deciding on the technical matters involved in a dispute and providing evidence from their experience in the field to help reach a decision. 

 

Pros	Cons
Cheaper than arbitration Faster to reach a decision than other methods of ADR  Less likely to damage commercial relationships Confidential  Shorter timescales  Power to carry out investigations  Suited to technical disputes which require an expert opinion	No statutory backup if things do go wrong Limited grounds for an appeal unless the decision has been made under fraud or dishonesty

 

When embarking on any construction project it is essential to weigh up the risks involved and value created from the outcome of the project. This blog post will define risk and value management for you and explain the importance of these tasks when taking on a construction project.

What is risk management?

Constructing excellence define risk management as “a process to help you identify issues that could have a significant negative impact on your business, then evaluate and minimise the potential effects of those risks”. When taking on risk there must also be some level of value added to the business to make the risk worth taking. 

Risk management includes activities used to identify and control all risks related to the project you are carrying out. For this to be successful in construction projects you must:

• Identify and assess the risks in terms of impact and probability 
• Create procedures to actively manage and monitor risks throughout a project
• Update risk information throughout the project
• Allocate responsibility for managing each risk with the best team to do so.

Managing risk is an ongoing process for any construction project and should be taken seriously as risks can continue to change as the project progresses. Risk management plans should be in place to aid your team to deal quickly and efficiently with risks if they arise.

What are the benefits of risk management?

1. Reduce uncertainty on your construction projects
2. Enable better decision-making from team members and ensure that strategic decisions are well thought out
3. Better briefing for your construction team
4. Better work planning, enhancing productivity
5. Clear accountability from risk managers and assigned team members
6. Clear focus on larger risks and critical problems
7. Better partnering as risk management helps provide partners of the project with common purpose

What are the risks of poor risk management?

• Income or benefits from a project are not as good as expected
• Poor advice leads to inappropriate planning and activities
• Delayed completion due to inefficient planning
• Unforeseen costs 
• Higher running costs resulting from defective construction 
• Accidents and injuries to the team
• Coordination problems 
• Poor guidance for operatives
• Poorly trained workforce
• Poor documentation of records

• Income or benefits from a project are not as good as expected
• Poor advice leads to inappropriate planning and activities
• Delayed completion due to inefficient planning
• Unforeseen costs 
• Higher running costs resulting from defective construction 
• Accidents and injuries to the team
• Coordination problems 
• Poor guidance for operatives
• Poorly trained workforce
• Poor documentation of records

How can I ensure a good risk management arrangement?

• Ensure risks are clean and unambiguous 
• Project should achieve the best value for money
• Represent a fair balance between risk and control 
• Do not create conflicts of interest in those required to give independent advice to the client

What is value management?

Value is defined by Alliance Contracting as creating the most benefit to the client which proves that the project is worth doing and can be quantified in business terms (financially, creating a better working environment or improving client experiences). 

Value management or value engineering is defined by building.co.uk as “a conscious and explicit set of disciplined procedures designed to seek out optimum value for both initial and long-term investment and has been widely used in the construction industry for many years”. 

The 3 main stages of value management are:

1. Planning: 

A team will review the proposed project, perform a functional analysis, uncover what the client sees as value and then define the key criteria and objectives for the project to add as much value as possible.

2. Design: 

This activity requires a value engineering workshop which is around 40 hours used to bring the design team and client together to review all proposed solutions, estimate the cost and propose implementation of the project. 

3. Methodology and approach:

These are the steps of the value engineering workshop which include:

1. The information phase
2. Speculation/creative phase
3. Evaluation and analysis phase
4. Development phase
5. Presentation phase

What are the benefits of value engineering?

Value management enables stakeholders of a project to properly define and achieve their needs for the project through a facilitated workshop, encouraging teamwork and by the end, all parties are satisfied with the project going ahead. The purpose of value management is to ensure that a project can function effectively and provide value for money rather than just focusing on reducing costs.

Other benefits include:

• Helping to determine the best design option for your client
• Understanding business needs 
• Enhanced flexibility to solve problems
• Reduce and save the overall project’s life cycle cost
• Identify problems and find solutions for them
• Improve the overall quality of the project
• Saves time and resources

What are the challenges associated with value management?

Some challenges you may face when endearing on a value management workshop may include: 

• Maintaining the project schedule – As value engineering may cause changes to the project, these should not slow down the completion schedule.
• Maintain product quality – Although this is an easy way to save money, quality should not be compromised for any construction project.
• Getting all team members on board – The risks and values should be presented in an easy-to-understand and logical manner to ensure the whole team understands the aims of the project and get on board with the client’s aims.
• Project margins – Ensuring the project creates maximum benefit for the client.

A report from NAO highlights that inadequate use and understanding of risk and value management is a major barrier to improving construction projects. 

Risk and value management should be carried out hand in hand to ensure that you can deliver the most value for the least risk for your client’s project. At AJH Construction we ensure our clients benefit from our first-hand experience and knowledge of the technical, commercial and legal challenges facing the construction industry today. Get in touch with us today to start discussing your next big project.