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:
- 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.
- 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.
- 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:
- 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.
- 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.
- 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.