Projects often face many risks that can stop or slow down an entire process. The client, prime and subcontractors experience challenges that make them vulnerable to other risks mainly due to lack of proper assessment with set strategies. From financial concepts for owners to extensive performance review, prime contractors have a variety of simple options to address such probable risks in project management. This discussion focuses on the risks between the owner, ABC Construction and the sub-contractors and appropriate mitigation measures.
In this case, the main concern to subcontractors is operational risk. Subcontractors are likely to experience loan term risks aimed at meeting core operations and extension costs (Dandage et al. 156). Subcontractors on the low bid basis might be forced to delay the production line to fulfill the lender requirements. The 30 days’ review of each payment request will potentially disrupt the chain of the supply of materials. The second risk relates to scope; there is a high possibility of uncontrolled development procedures of the project scope (Farok and Jose 15). This risk might occur as a result of lapses in the main scope of the project.
Subcontractors may avoid contract terms to manage additional requirements. They might incorporate undocumented assumptions and expectations as asserted by the owner; for example, the exclusion of construction costs, such as the hard rocks, building permits, architecture, and sales tax. The last risk pertains to project planning; subcontractors may lack adequate skills and competencies for project planning. For example, the owner may fail to include the ABC Construction in the low bid as part of the contract or accept the requirements as it is; as a result, some subcontractors can skip requirements validation. The project manager might be forced to halt other activities of the scope management and deliver on the best effort basis.
If the owner refuses to include ABC Construction bid as a contract document, disputes resulting in legal risks. Such disagreements will involve ABC Construction, subcontractors and the owner of the company. The dispute will be as a result of failure to meet counterparty contractual obligation. For example, exclusion of activities, such as hard dig and sales tax in the initial contract price might result in quality risk.
In essence of solving the hard dig exclusion with the owner, I intend to Introduce new contractual terms through negotiations. The contract should contain additional costs for hard dig and architecture (Bi et al. 29). The uncertain contractual language should be addressed to prevent claims against ABC Construction by the subcontractor as a result of the contract’s insufficient provision.
To mitigate disputes and legal risks, the new contract should propose ownership responsibilities and obligations based on the ABC Construction. Besides, the contract should introduce alternative conditions that oblige subcontractors to indemnify ABC Construction and the owner for failures and quality performance to the same degree as the prime contractor is responsible for them. The terms are critical for the hard dig process as they enhance reciprocity and helps to keep the owner, ABC Construction, and the subcontractors accountable. Additionally, I can include dispute resolution and contingency clauses that address management issues with subcontractors to make the new contract secure and strong.
I would also recommend the introduction of insurance obligations to prevent unforeseen circumstances. The hard dig exclusion might result in delays for long durations in the event of unplanned incidents. As the project manager, there is a need to avoid excessive costs and enhance accountability against insurance claims. The insurance requirements are critical in project management as they help to prevent delays.
The successful implementation of this project is vulnerable to many risks. Therefore, as the project manager, it is critical to assess and identify potential risks and develop preventive and mitigative measures. These measures will not only help to avoid delays but also prevent secondary risks from occurring.
Bi, Hua-ling, et al. “Schedule Risk Management of Its Outsourcing Project Using Negotiation Mechanism.” Proceedings of the 23rd International Conference on Industrial Engineering and Engineering Management 2016. Atlantis Press, Paris, 2017.
Dandage, Rahul V., et al. “Analysis of Interactions Among Barriers in Project Risk Management.” Journal of Industrial Engineering International, vol.14, no.1, 2018, pp. 153-169.
Farok, G. M. G., and Jose A. Garcia. “Scope Creep Monitors Level of Satisfaction, Cost Of Business and Slippery Slope Relationships Among Stakeholders, Project Manager, Sponsor, and PMO To Execute Project Completion Report.” Journal of International Association of Advanced Technology and Science (JIAATS), vol. 2, no. 2, 2016, pp. 15-23.