It’s been a while since we discussed the very important issue of risk mitigation as it pertains to control system projects, so let’s review our previous post and provide some updates.
We all recognize that major automation and control systems projects have inherent risks and associated consequences. The degree of risk and the negative nature of the consequences have to be weighed by owners and SIs alike to determine which strategy to pursue of the four discussed in our first post;
- Risk Acceptance
- Risk Avoidance
- Risk Transference
- Risk Limitation
Selecting an Integrator
Generally speaking, you will find the best strategy to be working with an SI that can help you with risk limitation, though in some cases, you may find integrators willing to accept some degree of risk transference, depending on the circumstances. However, since SIs typically have a high degree of risk on their shoulders already, transference is usually a strategy unlikely to be available.
Often, the characteristics you will need to look for in the SI you choose for your project will be part of the risk limitation strategy. We won’t try to repeat those characteristics here, but one of the goals of CSIA certification is to help identify the SIs that have such characteristics in the way they perform their business.
Project Structure and Delivery
Another factor that can come into play is the project structure itself. Choosing between a fixed fee structure or a cost-plus structure can alter where the bulk of some risks reside. A rarity, but one I’m personally familiar with, involved a construction contractor that would put a portion of its fee in a cost-plus project into an escrow account. At the project’s completion, the owner was able to determine how much of that escrowed fee the contractor would get based on the owner’s assessment of the contractor’s performance. Genuinely a shared risk approach.
What is less often considered a factor, but can loom just as large, is the use of a design-build project delivery approach to mitigate risks. With a single entity handling both engineering and construction, the risks of schedule slippages are greatly reduced. Also, the single point of responsibility for project performance can eliminate the type of conflicts that sometimes arise between engineer and contractor at project handoff points.
Owners need to understand what risks exist in their project and realistically assess the consequences of those risks in order to select appropriate strategies to minimize their exposure. And they need to work with integrators who share that understanding of risks and can help address the issue of mitigation.