Quality is the best risk management strategy

06 Apr 2021

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An audience of construction and infrastructure professionals from around the world came together to discuss the key importance of a commitment to quality on construction projects at the latest event in FIDIC’s ongoing webinar series, writes FIDIC communications advisor Andy Walker.

The fifth event in the FIDIC committee webinar series on 6 April 2021, “Developing a commitment to quality in construction projects”, was attended by 409 people and moderated by Nicola Grayson, chair of the FIDIC risk, liability and quality committee. The panellists included Walter Painsi, CEO of Dr Painsi & Partner, Malcolm Hyde from the European Federation of Loss Adjusting Experts, Michael Earp, architects and engineers practice leader at Aon, Martin Hohberg, senior consultant at IUB Engineering and Nora Fung, senior counsel at Arup. They were joined at the event by FIDIC president Bill Howard and chief executive Dr Nelson Ogunshakin.

The webinar was organised to look at quality in the infrastructure life cycle, how it is used as a risk management strategy in construction projects, the key success factors for achieving a quality culture in engineering consultancies, how FIDIC contracts address the issue of quality and how best to achieve embed it on projects.

The first speaker at the webinar, Walter Painsi, CEO of Dr Painsi & Partner, highlighted the importance of quality management principles in achieving engineering design excellence. He spoke about the importance of the ISO9001 quality management standard and its use by consulting engineers on global construction projects. Painsi said that with regard to risk considerations in projects and the adoption of recognised quality management standards, this should lead to lower professional indemnity insurance premiums and a greater understanding of risk and quality across the industry.

Malcolm Hyde from the European Federation of Loss Adjusting Experts said that insurers needed to understand risks on projects in order to insure them adequately. In fact, if they didn’t understand them then they couldn’t insure them, so dialogue was needed around this. “Brokers who engage specialist firms of experts can highlight the precautions that can be taken on projects to mitigate risks,” Hyde said, who also mentioned the importance of “pre-loss risk assessments”. He also highlighted the importance of inspections and taking appropriate and timely action as a result of those.

Michael Earp, architects and engineers practice leader at Aon, said that there were a range of factors and risks affecting the professional indemnity market, not just the number of claims. “The firm market is going to be with us for a little while yet,” he said and not all of the reason for this was down to Covid. Earp also highlighted the importance of contract administration which he said was crucial in defending yourself in the event of any claim. He also talked about the role of project insurance and what would and wouldn’t be covered by policies. Earp said that project insurance needed to be purchased by the integrated party or team to guard against misinterpretation of instructions and to foster more of a team approach.

Martin Hohberg, senior consultant at IUB Engineering, spoke about the ‘VUCA (volatile, uncertain, complex and ambiguous) world’ in which professionals were working and which was impacting on the risk environment affecting construction projects. Not all "residual risks" are consciously accepted, also unknown risks and human error are part of it. “Quality management has two objectives – to ensure that agreed risk mitigation is effective and to detect human error and new risks,” Hohberg said. He also stressed the importance of good project briefing from clients to avoid uncertainties and said that a collaborative approach (also with the selected contractors) was crucial in achieving this following a "whole-life approach" across the project.

Nora Fung, senior counsel at Arup, said that a commitment to quality was a team effort. She highlighted how best business practice was about managing risk through the contract. “Contracts are key. They give clarity to what is expected of you and your client. The key clauses are those relating to scope and the standards by which consulting engineers’ services are managed,” she said. Fung addressed the issue of liability under a contract and also spoke about the danger of a consulting engineer’s PI insurance attracting claims because of the ‘deep pocket’ syndrome where a client pursued those best able to pay, regardless of any fault. “It’s vital to implement good business practice as part of your contract. Make sure the contract is reviewed and contains appropriate limitations. Try to use standard industry forms, eg FIDIC, wherever possible,” she said.

Fung also made the point that the contract should be referred to throughout a project and not merely left in a drawer once the project has begun. The contract should be seen as a living document that guides a professional’s work on a project, she said. Good project management was also essential said Fung, who stressed the key importance of accurate record-keeping. “Records, records and more records, as things can and do change during a project,” she said.

Much of the discussion concentrated on the reason for claims and disputes arising on contracts and “who was to blame?” The importance of a collaborative approach was repeatedly stressed by many attendees, appoint that was amplified by the speakers, all of whom highlighted the key role of dialogue and communication throughout the lifespan of a project. Two opinion polls conducted during the webinar highlighted two key facts - that the reasons for contactinig a PI insurer are 53% due to design errors and 47% for project delays. Also, the largest potential for consultants is seen as 53% in advising the client on construction, operation and maintainance and 43% in improving risk and project management capabilities.

Summing up the webinar, Bill Howard, president of FIDIC, said that a balanced risk approach on projects was essential. He advised attendees to remind clients that the fees paid for engineering services were only 1-2% of the lifecyle costs of a project so it made no sense whatsoever to squeeze consulting engineers' fees as this was a false economy which benefited no one.

The next FIDIC webinar is part of the ongoing Covid 2021 series and entitled, Keeping cashflows flowing in challenging times, which takes place on Tuesday 13 April 2021 at 12 noon CET. Please register your place as soon as possible to secure your place at this free event.

Click here to book your free place at the FIDIC webinar, “Keeping cashflows flowing in challenging times".

Click below to view the webinar recording for Developing a commitment to quality in construction projects

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