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If general contracting firms could see the future, they would be much more profitable companies. Precognition would help them plan around supply chain issues and bid to win jobs and still maximize profit.

While knowing the future is impossible, predicting it isn’t. General contractors (GCs) can use lessons learned on past projects to assess their risk exposure and proactively respond to it. When they capture their risk mitigation plans and make them actionable, they help projects avoid delays, extra costs, relationship challenges and more. 

A successful risk management strategy is an actionable one.

Most people with experience in the construction industry can share a story or two about a project that didn’t go as planned. They likely take the lesson learned there and apply it to future work, helping them to avoid repeating the same mistake.

That’s just one person, though. Real value for GCs comes when they can apply this type of learning to their company as a whole, then give teams a way to act on it. 

This becomes particularly valuable in the field of risk mitigation. For contracting firms, minimizing risk exposure is a meaningful goal that protects their teams, projects and bottom line. 

Some GCs approach this by doing what they can to shift risk from their firm to other stakeholders — namely, specialty contractors. That moves risk prevention power out of the company’s hands, though, potentially exposing the project in ways the GC can no longer protect against. 

Instead, GCs can stay in a firm position to support optimal project outcomes by to manage the unique risks of every project. An action plan is a document that identifies a goal, then breaks down steps to move toward achieving that goal. 

Identifying potential problems early gives teams more resources — most notably, more time — to solve for them. It helps them plan pivots if they end up being required.

In an era of supply chain and labor shortages, tariffs and shortening project timelines, this dedicated, early-stage approach to risk management gives everyone the luxury of more schedule and flexibility. It also makes it easier for GCs to avoid putting their people in a position to fail. 

How to build a risk mitigation action plan

To create an action plan to manage risk on the individual project at hand, the GC’s team can move through four steps.

1. Look back on past similar projects.

If the firm has handled past projects in a similar vein (e.g., other horizontal construction projects or other builds in the same geographic area), refer to the data collected on them.

Were there issues with the authorities having jurisdiction (AHJs) or specific specialty contractors? Did inclement weather create delays? Asking team members who were involved on those projects can help to illuminate risks. 

2. Make a risk register.

The lessons learned from past projects serve as the foundation for the project-specific risk register.

Additionally, the GC should evaluate other financial, operational, supply chain, contractual (scope-based) and safety risks that could come into play on this project. Looping in legal and trade partners helps the GC create a more thorough risk register.

Then, they can prioritize actions by organizing the register, putting the risks that would be most detrimental to the project and those that are most likely to occur at the top. 

3. Attach actionable steps to each risk.

For each item on the register, lay out steps for mitigating that risk and managing it if it does occur. The GC should establish a dispute resolution plan for disagreements with specialty contractors, for example. They should also develop action plan items to minimize safety risks.

Higher-risk items that are more likely to occur warrant the most attention here. Lower-risk and less likely items can get a looser plan of action.

4. Distribute the plan.

The action plan’s benefits are limited if it stays in only a few hands. Distribute it to all involved team members so they can be aware of the risks at play — and strategies for mitigating them. 

The first few times the GC makes a risk mitigation action plan, the undertaking will be a big lift. Eventually, though, the firm should reach a point where it can templatize the action plan. Teams can look over past risk registers to see which risks should be pulled over to the project at hand, for example. 

Once the risk mitigation action plan template has been internally developed, it should help the firm identify, analyze and proactively defend against a wide range of risks. 

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Using action plans to mitigate specific risks

To demonstrate how risk mitigation action plans can support GCs and their projects, let’s look at how they could apply to a few specific exposures.

Unforeseen Conditions

On nearly any project, there’s debate about what should have been known before groundbreak. Whether that’s site conditions or weather patterns for the area, GCs benefit from knowing as much as possible upfront. 

To defend against unknown subsurface conditions, for example, the GC might identify a thorough site survey as one of its action plan items. 

Weather’s also a big one here. The GC should absolutely evaluate the risk introduced by potential inclement conditions. Ideally, they the implement both contractual safeguard (e.g., days added to the schedule in the event of rain or snow) along with actionable steps teams can take to keep the project on rails in the event of poor weather. 

Depending on the jurisdiction of the project, the GC may also want to have action plan items to manage risks around unforeseen conditions like environmental hazards and archeological discoveries.

Change orders

Change orders pose a notable risk to GC’s schedule and budget. As a result, the GC should add an entire change order-focused category to its risk register. One part of that category focuses on avoiding errors and omissions that would result in change orders for which the firm is financially responsible.

Another section should focus on managing risk around owner-requested changes, from slow approval from design to scope creep/gaps with trade partners. That might mean establishing action plans around prompt engagement upon receiving requests for information (RFIs) and enforceable deadlines for attaching costs to change orders. 

Here, past project data can be a big help. Flagging high-impact change orders on similar projects helps teams evaluate where they’re most likely to be exposed. 

Out-of-sequence work

Since the responsibility for sequencing work falls squarely on the GC’s shoulders, this is a category where they need to take a proactive approach to mitigating risk. Risks here include rework, cost overruns, bad relationships with the owner and specialty contractors and more. 

To minimize those exposures, the GC should establish clear action plans that teams can execute when trade partners encounter a detail that isn’t buildable. Over time, the GC may implement goals to further minimize risks. Some firms even aim to have no RFIs in the field, for example, which dramatically reduces the risk of out-of-sequence work. 

Appropriate staffing should also be a part of the GC’s action plan to minimize the risk of out-of-sequence work. Overworked employees are much more likely to miss key details. 

Subcontractor Default

Working with specialty contractors is a necessity for any GC that doesn’t fully self-perform work, but it also introduces a myriad of risks. That includes the possibility that a subcontractor will default before it can fulfill its contractual obligation on a project. 

As it creates the risk register, the GC should evaluate which contractors are most likely to default. Asking the trade partner about their other projects in the pipeline and calling references should raise red flags where appropriate. 

Then, the firm should assess how hard it would be to backfill that function. Finding a new drywall contractor will likely be relatively easy, for example, while replacing a glazing specialist would introduce significant challenges. Developing a subcontractor default action plan helps the project stay on rails even if a key partner falls through. 

As part of the action plan, the GC also needs to identify any exposure related to permits. If the subcontractor will pull the permits but poses a risk of default, for example, the team should develop a plan to work with the AHJ to transfer the permit promptly to backfill subcontractors. 

Collaborating around action plans to minimize risk

The GC gets a better idea of all risks involved and more support in managing them when it works closely with other stakeholders. It should strive to have open lines of communication with the owner, design team (if they’re external), and trade partners. 

It might even benefit the GC to hold risk mitigation charrettes early in the process, bringing stakeholders together to proactively identify and manage project risks. 

Moving forward, arming team members with the action plan helps them respond more quickly and accurately as issues arise. The plan acts as a roadmap to guide the GC away from pitfalls and toward project success. 

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