How do architects minimize their project risks

Risks in building cost planning

A basic problem is that the financial framework conditions can change significantly from the time of the investment decision before the actual start of the project and the process-related reduction of cost risks due to the updating of the planning and the stored costs. Initial design ideas with rough cost estimates based on the usable area (NF), the gross floor space (GFA) or the gross room volume (BRI) have no relation to the building elements as the actual cause of costs.

If you look at the currently valid version of DIN 276-1, since its amendment in 2006 under 3.3.9, the following stipulations for dealing with cost risks can be found here: "In cost determinations, foreseeable cost risks should be named according to their type, scope and probability of occurrence become. Suitable measures for reducing, avoiding, passing on and controlling cost risks should be shown. ”DIN 276-1: 2008-12

Basically, this deep anchoring of risk analysis, assessment and control within all cost determination levels of DIN 276 is the right approach to increasing the financial security of every construction project. The increased requirements for compliance with budgets and cost limits represent a significant improvement for the client in terms of consumer protection. However, one must ask the legitimate question of how these specifications are to be implemented in planning practice. Planning offices are simply overwhelmed when they have to evaluate foreseeable risks comprehensively according to type, cost impact and probability of occurrence. Due to the individuality of each construction project (form, quality, location, framework conditions, planning and construction participants) there are hardly any possibilities for statistical recording of individual risks and their causes. As a result, this sensible requirement of DIN 276 is largely not applied. At the beginning of the project, an active discussion between professional clients such as housing associations and the commissioned planners is required to define the criteria and procedures for risk assessment and tracking.

Sustainable risk management

It is clear that an exclusive transfer of risks to third parties (construction companies, planners, insurance companies) is usually not feasible under general terms and conditions and therefore cannot be the goal of sustainable risk management. Imposing a comprehensive risk management with liability consequences contractually on planners usually leads to an exaggerated illustration of the "worst-case" scenario of all possible project risks, which projects would usually prevent rather than safeguard. In the case of specified qualities and quantities of a new construction project, which result from the updating and further development of the draft approved by the building authorities through to the implementation planning, the construction costs can be planned in detail and therefore named relatively precisely. A basic requirement here is the component or trade-related representation of the individual cost drivers with stored costs and dimensions, e.g. m2 Screed, m2 Tiles, m2 Carpet etc.

Since a cost calculation is always a prediction of future offer prices, there are cost risks from general market risks and economic fluctuations, which can cause the prices of building materials, building products or construction services to change significantly. Further cost risks also arise from the modification of already concluded construction contracts, as this usually results in partial remuneration for the commissioned but not performed services in the event of changes or adjustments. The bankruptcy of participating companies or planning offices will also result in additional costs. The quantities of services to be performed usually only vary within certain fluctuation ranges. Subsequent changes or late determination of the qualities can have a far greater impact on costs. The transparent communication of the underlying qualities between client and architect is of great importance here. Another significant risk area arises when there is a high deadline pressure due to the parallelism of planning and execution, when the constructive-technical execution planning is not yet complete. For example, the lack of dimensioning and planning of technical supply routes can result in immense costs and entail costly adjustment work in new buildings, as in building existing ones.

When building in an existing building, the aforementioned risk areas expand to include the problems that arise from the existing building fabric itself.

These include, for example:

 statics no longer guaranteed

 building technology that is no longer usable

 Contamination with harmful substances

 Building physical problems (thermal insulation, moisture damage)

 fire protection

 No compatibility with new functions (escape routes, staircase geometries, load requirements, lighting, etc.)

 Elimination of grandfathering

 Missing or inconsistent planning material

 Generally too large dimensional tolerances.

In the case of existing projects, it is important to limit at least essential risks that could cause a project to fail as well as possible before the client's final investment decision. Care costs (experts, examinations) must be weighed against possible damage costs. Even with extensive and costly preliminary investigations, risks in existing buildings can only be limited to a limited extent. Previous interventions in the existing structure (changes to the supporting structure in a ceiling, closed cavities, etc.), which were not recognizable on site and in the existing planning documents, can be examined on a random basis, but only excluded with certainty during the construction project.

Risks in the course of the project

Due to the planning inaccuracy, there are generally high risks at the start of the project. In the case of new buildings, these are steadily reduced in the planning and construction process. In the existing structure, many risks can only be finally clarified in the demolition or shell construction phase, as this is where the interventions are first made and only then can a statement be made about the condition of the remaining components to be processed (see Figure 1 ). As an example, the load-bearing capacity of the plastered surfaces in an existing property can be estimated by taking samples at typical points before removing the wallpaper - the actual amount of plaster that is no longer load-bearing can only be identified in the course of the construction work, when the wallpaper is completely removed.

Total cost forecast through constant cost updates

It is essential to continuously update the costs and the risks still to be taken into account so that the decreasing risk volume can be evaluated in relation to the possible control interventions in the process. The respective cost level of the overall project should therefore be known at every point in time. A cost tracking in the construction process is shown schematically in graphic 2. The current cost status of a project can be composed of final order sums, partial invoices, approved supplements as well as budgets for services that have not yet been awarded. Furthermore, forecast changes in costs can also be listed. Changes in costs can be expected or already approved supplements or, for example, excess or insufficient quantities of the billed service items. This means that a relatively realistic total cost forecast can be mapped over the entire execution period.

Risk budgets and modular cost planning

Changes in costs can put the project's success at risk, especially with a very limited overall budget. When planning the financing, the building owner should always take appropriate risk budgets into account. Depending on the likelihood of occurrence, the individual risk budgets should best be shown by trade in order to facilitate follow-up in the construction process. In any case, a qualified risk assessment should be carried out for an overall recording of the overall risk budget. The damage costs can result from the probability of occurrence of the respective individual risks, which, however, are then further summarized to form an overall risk budget based on the “value at risk” method.

Client and planner should jointly identify modules that could serve as a buffer for unforeseen and significant changes in costs. As a rule, these are the finishing qualities of allocation units that are only allocated later in the construction process (e.g. floor coverings of all kinds, outdoor facilities, etc.). By changing surface requirements (Q2 to Q4) or materials (different types of stone), slight cost increases can be compensated for (see Table 1). The basic prerequisite is always the consent of the client, the cost relevance of the selected components and of course that the service has not yet been awarded.

If significant changes in costs are expected or have already been determined, control measures must be taken. One of the main core competencies of risk management can be clearly seen here in the property planner or architect. By implementing a risk management system in the planning process, he can propose technical or creative solutions to compensate for risks that arise. These proposed solutions should of course be congruent with modular cost planning.

In any case, it can be stated that if there is a lack of clarification regarding the cost risks, if there are cost changes, there will be mistrust of the planner. Only the transparent and technically well-founded discussion between the client and the contractor about possible project risks can be expedient and create trust. The mere listing of foreseeable risks will generate a corresponding awareness of the problem on the part of the client or builder and it also makes it clear that every construction cost plan includes natural fluctuations. However, the planners and architects should in advance, as shown, distance themselves from pure pessimism by providing problem solutions and alternative options for action in cost control, as this would also create mistrust. In the context of the position as administrator of the client, architects and planners will have to do this in the future in DIN 276 integrate the required risk management into the construction cost planning or construction planning in order to exclude possible liability risks.

For success, it is essential that the planner has the appropriate skills and experience in cost planning and risk management, as his professional evaluation of individual issues is crucial for targeted project processing and in the event of errors, serious cost consequences can sometimes be difficult for the client to recognize. Since the property planner can incur considerable workloads when this topic is dealt with thoroughly, the content of cost and risk management should be coordinated at the start of the project and explicitly regulated in terms of service and remuneration.

Prof. Dr.-Ing. Architect Bert Bielefeld, Dipl.-Ing. M.Sc. Architect Roland Schneider, University of Siegen, 57068 Siegen

Due to the individuality of each construction project (form, quality, location, framework conditions, planning and construction participants) there are hardly any possibilities for statistical recording of individual risks and their causes.

In the case of existing projects, it is important to limit at least essential risks that could cause a project to fail as well as possible before the client's final investment decision.