3. RISK SURVEY | 3
Introduction 4
Executive Summary 5
Scope Changes by Owner 5
Design Errors and Omissions 6
Unforeseen Site Conditions 6
Quality of Design Team 6
Quality of Construction Manager/General Contractor 6
Long Lead Procurement 6
Advice 6
Breakdown of Projects 7
Breakdown by Sector 8
Scope Changes by Owner 8
Design Errors and Omissions 9
Unforeseen Site Conditions 9
Long Lead Procurement 10
Payment Delays 10
Contact Information 11
CONTENTS
4. 4 | gardinertheobald
Gardiner Theobald is an independent global
consultancy offering a range of services to the
construction and property industry including
project and cost management. Founded in 1835
in London, we have more than 1000 staff working
across the world with expertise in many sectors.
Our blue chip client portfolio includes occupiers,
developers, contractors, financial institutions and
local and central governments across the world.
Gardiner Theobald Inc has been delivering projects of all
types throughout North America for the last 22 years. We
have offices located in New York City, Los Angeles and Miami.
With 122 full time staff in the United States offices, we have a
deep rooted history which provides a level of professionalism
and a culture of client service.
INTRODUCTION
5. RISK SURVEY | 5
EXECUTIVE SUMMARY
In early 2015, we conducted a company wide survey with our professional staff to capture a snapshot of the risks our projects face.
The survey asked each staff member to identify which risks had occurred on their recent projects that had caused a significant
impact to the project’s cost and/or schedule.
EXECUTIVE SUMMARY
Risks to projects come in all forms. Some risks can be transferred to the contractor at the time of award. Other risks are
transferable by buying insurance, such as injury or fire insurance. However, even with risk transfer, large parts of the project are
still at risk. When looking at the risks that have occurred on projects that Gardiner Theobald Inc. has been involved with, a
clear pattern emerges as to where the risks come from.
Scope Changes by Owner
The survey shows a staggering 70% of the projects listed Scope Changes by the Owner as a risk that caused significant impact
to the project. When the project’s owner initiates scope changes after the project’s budget and schedule has been baselined, it
invariably would cause an impact to the project. The impact is exasperated after the construction contract has been awarded,
since any changes that occur during construction will not have been bought by the contractor. Unless the project owner has
sufficient management contingencies (for time and cost) in place for this risk, this will have a negative impact to the project.
Scope changes by owner
Design errors and omissions
Unforeseen conditions (geotechnical, environmental, underground...)
Quality of design team
Inspection risks (building department, fire department inspections)
Design team’s review time for RFIs, submittals, etc.
Delays in payment to contractors/consultants
Right of way/real estate agreements
Quality of construction manager/general contractor
Severe weather
Permitting risks (DOB, DOT, etc)
Funding (approval/obtaining)
Third party impacts
Long lead items/delivery
Delays caused by utilities
Market conditions
Quality of contractors/Sub - contractors
Government regulations and approvals
Constructual risks
Labor issues and strikes
Other
RISKS THAT OCCUR ON PROJECTS
0.0% 10.0% 40.0%20.0% 50.0% 70.0%30.0% 60.0% 80.0%
6. 6 | gardinertheobald
EXECUTIVE SUMMARY
Design Errors and Omissions
According to the survey, design errors and omissions is the
second most likely risk to occur on a project. This risk captures
errors to the design, which results in change orders by the
contractors. As a risk that occurs on 55% of projects, this is a
significant risk that can be reduced if the design documents are
better defined through additional QA/QC (Quality Assurance/
Quality Control). Design consultants are required to provide
professional liability insurance to cover for their mistakes,
although in practice, it is not a comprehensive deterrent to this
risk. Recent technological improvements available, such as
BIM (Building Information Modelling), offers project designs
to have a higher level of confidence in the reduction of errors.
While the upfront costs for using BIM might be a concern
to the project owner, the risks of design errors found during
construction could be even more costly.
Unforeseen Site Conditions
Approximately 40% of projects had unforeseen site conditions
as a realized risk. This risk includes site conditions that differ
from what was budgeted and planned for, including hazmat,
soil conditions and elements hidden in walls and ceilings.
While not all unforeseen conditions can be identified before
construction begins, projects should conduct the required
number of surveys. In addition, the project should carry
sufficient levels of contingencies, particularly since it is easy to
be optimistic at project inception when no risks have occurred
yet.
Quality of Design Team
Related to design errors and omissions, the quality of the
design team was identified as a risk that occurred on 38%
of the projects. This risk includes design errors, quality of
design, response time from design team to correct mistakes,
etc. Potential causes of this risk include accepting low bids
from design consultants, which results in inadequate staffing
required to support the project. Better oversight of the design
team, adherence to contract terms and stronger contracts are
possible mitigation actions.
Quality of Construction Manager/General Contractor
Poor quality of the construction management team (including
Construction Management and General Contractors) occurred
on 35% of the responders’ projects. Often due to performance
falling below expectations. Projects should be careful of the
selection of its CM/GC contractors, including due diligence and
contract terms. The type of contract used should be in line with
the risks associated with the project to offer the adequate level
of risk transference. Staffing levels and adherence to contract
terms need to be strictly monitored.
Long Lead Procurement
Long lead items that arrive later than planned occurred on
28% of the projects. Specialized materials and architectural
designs that are not readily available can result in optimistic
schedules being at risk. The selection of materials with proper
due diligence can reduce this risk. Proper tracking of materials
against the baseline schedule with alternatives as backup can
also avoid lengthy delays.
ADVICE
Risks are inherently unknown. However, based on the survey
responses, it’s clear that projects should be mindful of the most
likely risks that could occur and take the proper measures to
mitigate them. Mitigation should include the following actions:
• Understand the level of risk specific to the project. Not all
risks are transferable and adequate levels of cost and time
contingencies should be determined.
• Contract terms should be understood clearly. Projects
need to be mindful of what risks have and have not
been transferred to the design team and construction
management team/contractors. Monitoring and enforcing
of contract terms must be maintained throughout the project
life cycle.
• Optimism bias often occurs at project inception. Proper
due diligence of the risks is required to avoid issues that are
inherent in all construction projects.
7. RISK SURVEY | 7
BREAKDOWN OF PROJECTS
We are currently managing projects with a combined total value in excess of $8 Billion, ranging from
landscaping and master planning, luxury hospitality to high-end residential, and from commercial
developments to civic buildings and museums. Projects in this survey include a varied mix of sector
types. The largest category is office fit-out with 43% of responses. Other large sector categories
include government projects at 13%, residential projects at 10% and hotel projects at 11%.
Office fit-out projects included in this survey are typically for large corporate clients, ranging from
10,000 sf to 550,000 sf. Government projects vary from large office buildings to entire building
campuses. The residential projects are mostly large multi-tenant buildings such as condominiums.
Hotel projects are typically high-end multi-story buildings in major cities.
Other sectors in the survey include building infrastructure, retail, mixed-use, restaurant, art, education
and media studios.
BREAKDOWN OF PROJECTS
Others
24.35%
Residential
9.6%
Hotel
11.0%
Government
12.5%
Office
42.6%
8. 8 | gardinertheobald
BREAKDOWN BY SECTOR
BREAKDOWN BY SECTOR
The following section analyzes the top risks by sector type. The sectors compared include office fit-out,
government, hotels and residential projects.
SCOPE CHANGES BY OWNER
The chart shows that, regardless of the sector, all projects have a high risk of scope changes by owner
sometime during the project.
Government projects are especially susceptible to this risk due to multiple stakeholders and end users,
making consensus on the final design of the project more difficult. There are also political risks within
government projects that could change scope requirements, particularly with large projects that span
five to ten years.
Office fit-out projects also encounter changing requirement needs as the project progresses due to
changes with business needs, head counts and office politics.
Hotel projects included in this survey are typically unique one-off designs, such as boutique and luxury
hotels. Standardized chain hotels would not have such a high risk as the design scope would follow
standard design requirements.
0.0% 10.0% 40.0%20.0% 50.0% 70.0%30.0% 60.0% 80.0%
OFFICE
GOVERNMENT
HOTEL
RESIDENTIAL
SURVEY AVERAGE
Scope changes by owner
9. RISK SURVEY | 9
BREAKDOWN BY SECTOR
Design errors and omissions are significant risks on all projects, especially within the government and
hotel sectors.
Government projects in this survey are large complex projects. They often include all components
of construction, such as building core and shell, fit-out, complicated MEP and IT infrastructure. As
such, there is a higher likelihood risks would occur if there is insufficient QA/QC on the design before
construction begins.
Residential projects in this survey include many conversion projects. These typically encounter issues
with unforeseen site conditions, such as hazmat, utilities and structural deficiencies.
DESIGN ERRORS AND OMISSIONS
0.0% 10.0% 40.0%20.0% 50.0% 70.0%30.0% 60.0% 80.0%
OFFICE
GOVERNMENT
HOTEL
RESIDENTIAL
SURVEY AVERAGE
UNFORESEEN SITE CONDITIONS
0.0% 10.0% 40.0%20.0% 50.0% 70.0%30.0% 60.0% 80.0%
OFFICE
GOVERNMENT
HOTEL
RESIDENTIAL
SURVEY AVERAGE
Unforeseen site conditions
Design errors and omissions
10. 10 | gardinertheobald
BREAKDOWN BY SECTOR
Payment delays
Long lead procurement
Long lead procurement is a significant risk on office fit-out and residential projects. These two
types of sectors often include specialized finishes, which take a long time to design, approve and
procure. These projects also have a shorter project duration, compared to government projects, so the
procurement time is more sensitive to the overall schedule.
Government projects often result in schedule impacts caused by delays to payment. Payment
procedures with government agencies are complicated and take longer than commercial projects,
resulting in extended periods to review and approve payment, as well as change orders. This results
in pressure on the contractors and consultants to perform as it impacts their cash flow. The project
itself could suffer if the contractors reduce their resources when they are unable to be paid in a timely
manner.
LONG LEAD PROCUREMENT
0.0% 10.0% 40.0%20.0% 50.0% 70.0%30.0% 60.0% 80.0%
OFFICE
GOVERNMENT
HOTEL
RESIDENTIAL
SURVEY AVERAGE
PAYMENT DELAYS
0.0% 10.0% 40.0%20.0% 50.0% 70.0%30.0% 60.0% 80.0%
OFFICE
GOVERNMENT
HOTEL
RESIDENTIAL
SURVEY AVERAGE
11. RISK SURVEY | 11
CONTACT INFORMATION
FOR FURTHER INFORMATION, PLEASE CONTACT:
Eric Ho, PMI-RMP
Senior Risk Manager
T: (212) 661-6624
E: e.ho@gardinerusa.com
535 Fifth Avenue, 3rd Floor
New York, NY 10017
www.gardiner.com
@gt_llp
