How to Mitigate Risk in the Preconstruction Phase

Risk is concerning factor for every contractor, as it makes otherwise clear plans unpredictable and can affect every aspect of a project, often significantly impacting profits if something goes awry. The good news is that a lot of financial risk can be avoided in the preconstruction phase with a rock-solid process and effective tools. Here’s how.

What Do We Mean When We Say Preconstruction?

Preconstruction in this instance includes any activity before a project is awarded, so it encompasses steps taken by the general contractor to solicit bids as well as subcontractors preparing estimates and bidding on the project.

The preconstruction phase is the foundation on which the rest of the job will be built, so there’s significant pressure and incentive to get this part of the project right. A poorly conducted preconstruction phase will lead to a multitude of problems down the line.

Challenges with Mitigating Construction Risk

Because there are so many stakeholders involved in construction projects and each role depends on the others for success, risk is a major area of concern. Anticipating the issues that might come up and planning for construction risk management is essential on both sides of the bidding process.  

3 Common Construction Risks General Contractors Face in the Preconstruction Phase

When committing to a project, GCs need to consider:

  1. Soliciting and receiving enough subcontractor bids to cover the required work. If a bidding phase ends with no subs interested in certain parts of the project, it can’t go forward until someone is found to perform that trade’s section of the work, potentially extending the preconstruction phase and cutting into scheduling and planning, putting the entire job behind from the start.
  2. Inviting the right type of vendors for the job. GCs need to cast a wide net when it comes to prequalifying subcontractors so they have the right ones to choose from for each bid. They need to know basic information about each firm on their bid list, such as how long they’ve been in business, their accident rate, type of insurance they carry, if they’re woman- or minority-owned, and other factors. This way they can be sure to invite only the top subs who meet any owner or government requirements, without which they might not be qualified to handle the project.
  3. Selecting the right subcontractors for each part of the project. Once enough bids are in from the right type of vendor, it’s important that GCs make an informed decision on which sub will be the best choice for their subset of the work. They need to have a solid grasp on approximately how much the job will cost for each trade and which type of materials will be best suited for it, so they can evaluate the bids that come in from subs. Without this knowledge, they could select a sub who is overcharging for the project or who also does not have a good understanding of what the job will require.

3 Common Construction Risks Subcontractors Face in the Preconstruction Phase

On the other side of the project, when preparing to bid on a job, subcontractors must focus on:

  1. Working on the most current project documentation available at all times. Projects and plans evolve and change frequently, and subcontractors must be constantly vigilant that they’re working from the latest version of plans – otherwise they can create an estimate on outdated information, causing them to either lose the job or lose profits due to unforeseen costs.
  2. Creating an accurate and thorough estimate. Risks related to inaccurate measurements and human error constantly cost contractors jobs and profits. If takeoffs are only ballpark figures, estimates can’t be trusted to be on target, and without clarity around non-measured costs, contractors run the risk of underpricing jobs.
  3. Delivering the bid proposal on time. Without the right tools and bandwidth, the takeoff and estimating process can be time-consuming, and there is the risk of putting in effort only to miss the bid deadline and not even be considered for the job.

Additional Fallout from Poor Preconstruction Processes

Without a solid preconstruction workflow in place, once the project is moving forward, additional risks crop up, such as problems with planning and scheduling or rework during construction.

Bids that underestimate required labor or material availability can cause scheduling problems if a properly sized crew is not accessible at the times they’ll be needed. On the other hand, if a bid is submitted with a specific type of supplies, but those materials are backordered or otherwise unattainable due to a disrupted supply chain, the field crew could end up with no work to do at the planned time.

Bidding from outdated documents risks significant rework onsite as well. Say an early version of the blueprints indicated an interior wall where a newer version has none. If a crew is working from old documents, they might spend time building the wall, only to then discover they have to demo it, costing time and dollars.

As you can see, several construction risk factors are rooted in preconstruction, so it’s important to address them before work begins.

Typical Risk Management Strategies to Consider

Risks can be reduced by making sure teams can collaborate with each other and project management teams with:

  –  A single source of truth for plans, docs, and specs

  –  Access to information wherever it’s needed

  –  Instantaneous, real-time updates

How Preconstruction Software Aids in Risk Mitigation

While software can’t solve all construction problems, it can alleviate several challenges. On the GC side, a bid management solution like Procore, Pantera, SmartBid, PlanHub, or PipelineSuite can make the task of finding and prequalifying subcontractors based on project needs much simpler. GCs can use tools like this to solicit bids as well as to perform bid leveling – comparing bids against each other to choose the best option.

GCs can also use a takeoff and estimating tool to perform their own measurements on project both before and after bids are submitted, so they have a good understanding of what a reasonable bid might look like and so they can quickly check subcontractors’ work when evaluating proposals.

Accessibility is key for processes like this, so integrations between preconstruction software that allows for bids to be solicited by GCs, takeoffs and estimates performed by the sub, and proposals submitted easily back to the GC can make a big impact on both sides of the bid.

Preconstruction Risk Mitigation for Subcontractors

Much of the risk inherent in preconstruction for subs comes from a cumbersome workflow and can be alleviated by adopting a platform that allows for all of the major steps to be completed in one place. Let’s look at each of the 3 components discussed earlier.

The need for up-to-date documentation: Document management is an essential part of successfully handling a project from preconstruction through completion. A tool that offers cloud storage must be a high priority, so that everyone working on a document can be confident they’re using the most current version and that changes are being made in real-time. Having a single place to keep all project documents helps all stakeholders stay on the same page and reduces time spent searching for information.

The importance of accuracy: Both accurate measurements and accurate estimates are crucial to winning bids and making profits. Small margins of error might not seem like much, but they can add up: a takeoff tool without a smooth arc functionality, for example, might miscalculate materials for curved items by as much as 15%. For one rounded instance, that isn’t much, but if you’re constantly mismeasuring by 15%, that adds up quickly.

Not only must takeoffs be extremely accurate, but translating those into thorough estimates is equally important. A tool that reduces human error by attaching items and assemblies to takeoffs and pulling those numbers into an estimating capability will get you ahead of the curve. One that will then allow you to manipulate indirect costs like overhead, sales tax, equipment costs, labor, and more to reach your desired profit margin will take you to an even higher level of sophistication in your bids.

Timeliness of bid submission: The best bid can’t win if it’s not submitted on time. Preconstruction software can eliminate the time-consuming parts of takeoff, estimating, and proposal generation so subcontractors can focus their time and energy on getting the numbers right. A tool that offers features like auto count, automatic hyperlinking and naming of plan pages, and search will take a lot of the labor out of takeoffs.

A platform that allows for detailed estimate creation directly from takeoffs removes the extra step of exporting or rekeying data, and one that also can generate professional proposals from a final estimate removes yet another step from the process, making a smoother, quicker workflow so that more bids can be submitted in less time.

Reduce Your Risk, Improve Your Process

While not all construction risk is eliminated with a clearer workflow, evaluating and improving the way you handle preconstruction is a major way to cut down on risk associated with bidding. For subcontractors in particular, one investment that often pays for itself after just a couple of jobs won is a best-in-class preconstruction platform like STACK.

If you’re looking for ways to mitigate risk and improve your overall process, create a free account now and see for yourself the difference STACK can make to your work.

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