Win More Construction and Project Bids with Risk Management

Jan. 31, 2013

Conducting risk analysis before submitting a bid on a new project does more than save your team time, effort, and resources down the line. Risk analysis can make the difference between winning and losing profitable projects.

Conducting risk analysis before submitting a bid on a new project does more than save your team time, effort, and resources down the line. Risk analysis can make the difference between winning and losing profitable projects.

By incorporating risk management into the process early, project managers can deliver more accurate bids, in terms of time and budget estimation, that are more likely to be awarded by the prospective client.

With a system in place to identify and analyze risks that may affect the ability to complete the project on time and on budget, teams will submit a bid with an advantage over their competition: 

  • Accuracy – Owners are more likely to trust a contractor’s timeline if they know that the contractor has carefully analyzed and planned for the risks and opportunities that may affect the project
  • Budget – With a robust risk management program in place, contingency funds for unforeseen risks often shrink, lowering overall project costs and protecting margins
  • Trust – Having a full knowledge of the major issues that may arise during a project helps everyone (project managers, prospective clients, and team members) feel more confident the team will complete the project successfully

The first step in risk management during a bid is risk identification. It is important to identify risks as early in the process as possible, as many will grow into larger problems down the line. Risk identification includes document review, interviews with key project players, sharing of ideas and experiences from similar projects, and risk brainstorms to secure team buy-in.

You might also want to collect opportunities identified during the same process or look at any opportunities resulting from each identified risk. It’s innovative thinking in these areas which might well make the difference to your bid. Within the risk management process, the next two steps come easily once the risks are identified.

Second, the identified risks must be prioritized. Prioritize risks by their impact on the project – how much time, money, and effort does each risk require? It is critical to carefully think through each risk, so that they can be managed (step three) strategically, rather than just haphazardly dealing with the first risk on the list. It is important to consider the low probability, high impact risks which could scupper not just an individual project, but also the profitability of an entire program or destroy an organization’s reputation and shareholder value. Also start to consider how risks are connected.

The third step is the management of the risks. A team can proactively manage risks in several ways, including avoidance, elimination, reduction, transfer or acceptance.  

You need to make sure that the costs of any mitigation activities don’t outweigh the benefits and take a holistic view so that different parts of the business don’t rely on the same resources to remove or mitigate their risks. Risk acceptance is usually reserved for risks that have a low to medium probability of occurring, and have a low impact on work if they do occur.

Stay ahead of the competition by incorporating risk management into the bid process and into successful project delivery. By planning out a project’s timeline, budget, and risks early in the process, a team will have a greater chance of success, and ultimately deliver more profitable projects down the road.

Chris Bell is the Chief Marketing Officer at ERM software provider Active Risk

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