Risk Management is the lesser-known side of large construction projects, yet it can be critical to a project’s success. Capital expenditure projects depend on being on budget, on time, with no safety issues, and of high quality. Licensing, permitting, bonds, insurance, and insurance carriers are essential parts of managing risk.
Historically, construction projects have faced risks on numerous fronts, including cost, time, disputes and litigation, safety and occupational health challenges, and intense competition.
Risk Management in construction is designed to identify, plan, monitor and control those measures needed to mitigate risk associated with construction. To do this, it is necessary to identify the hazard, assess the extent of the risk, provide measures to control, mitigate or eliminate the risk and manage any residual risks.
Haskell’s Risk Management department is the liaison between insurance carriers and the company’s surety companies – brokers and carriers that guarantee Haskell’s performance and payment obligations to the project owners. The department also provides value engineering to its clients by helping them reduce the cost of insurance, performance bonds, warranties, fixed-price contracts, and guarantees, known as risk transfer, at the lowest reasonable yet coverage adequate cost.
“Risk Management is everyone’s responsibility at Haskell,” said Jeff Caudill, Director of Risk Management. Caudill has been with Haskell for a brief time, but he has been a 20-year risk management professional. “We are all, on a day-by-day basis, assessing risk, analyzing it and considering how best to move forward.”
Haskell has a strong relationship with its sureties and brokers based on its history, the diversity of projects it has managed, and the company’s financial stability, which ensures its ability to pursue larger projects. The strength of those relationships, in turn, enables Haskell to offer a risk program that offers project owners assurance that their investment will be safe. Taken together, these relationships with insurance companies provide project owners and Haskell, assurance that their investment will be safe.
“Haskell goes beyond just building the box to crafting and putting equipment in the box and providing process engineering,” Caudill said. “We work proactively to help the client determine risk and obtain financing to protect against that risk.”
“Every decision related to a project is viewed from a risk and safety aspect including exposure to reputational risks and financial risks’, Caudill said. As a result, Haskell has obtained surety bonds for a wide range of large, complex projects.
Haskell works with its subcontractors to meet insurance requirements and uses a subcontractor default insurance program to protect itself and, by extension, project owners in the event a subcontractor defaults on a project. It also utilizes a vendor management system that serves as a report card for every subcontractor with which it has worked. The result is a strong delivery system that helps Haskell’s project teams analyze which subcontractors to use in each project. The database evaluates subcontractors on safety, practice, success in maintaining a schedule, history in paying their own subcontractors, and financial stability.
“Our Risk Management program ensures that we will do what we’ve committed to our client to do,” said McMillan. “It ensures our clients that we will get a project completed on time, on budget, and in the safest way possible manner.”
Haskell is part of the American Contractors Insurance Group (ACIG), a small, 40-member captive insurance program of peer companies that insures members against risks, helps prevent accidents and fatalities, and provides general risk management services. The group works to educate all members of industry best practices.
The Risk Management department’s involvement in Haskell’s recent work with an international beverage company exemplifies its contribution to projects. In the project’s earliest stages, during negotiations between Haskell and the owner, the department was called in to compare insurance requirements in the contract and other risks related to insurance risk transfer. Various options were considered, including a contractor-controlled insurance program (CCIP) versus project-specific or stand-alone policies. Bonding issues for Haskell, and its subcontractors were studied, and the department implemented a project-specific schedule of Insurance that provided contractual terms /requirements with the most cost-effective and broadest coverage impact for the project and client.
The Risk Management Department also reviewed the client’s wrap-up liability insurance policy to identify any gaps in coverage that might result in loss of protection for work done on the project. Owner Controlled Insurance Programs (OCIPs), or wrap-ups, are mainly general liability insurance-focused policies designed to cover jobsite risks and completed operation exposures of the owner, contractors and subcontractors. Finally, the department provided value engineering options by helping reduce the insurance costs for the client while maintaining the same level of risk protection.
To ensure smooth and successful project delivery, the Risk Management department can create a schedule of insurance specific to the project that can be included in the subcontractor solicitation process. Risk Management has also assisted international subs in the pre-qualification process and the International Suppliers Network (ISN) process.
Such is the foundation of Risk Management on which the delivery of a large and successful CapEx project is built.