the energy roundtable managing risk on large capital construction projects by dale r. kern p.e....
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Copyright © 2006 Deloitte Development LLC. All rights reserved.2 Isn’t Deloitte an Accounting Firm? Professional services Firm Over 1000 Construction Industry Clients Construction Advisory Services Involved in Thousands of Projects DeloitteTRANSCRIPT
The Energy Roundtable
Managing Risk on LargeCapital Construction Projects
ByDale R. Kern P.E.Deloitte Financial Advisory Services LLPCalgary, September 26, 2006
Copyright © 2006 Deloitte Development LLC. All rights reserved. 2
Agenda• Isn’t Deloitte an Accounting Firm?• Construction is a Risky Business• Case Example• Third Party Participation to Mitigate Risk
Copyright © 2006 Deloitte Development LLC. All rights reserved. 3
Isn’t Deloitte an Accounting Firm?• Professional services Firm• Over 1000 Construction Industry Clients• Construction Advisory Services• Involved in Thousands of Projects
Deloitte
Copyright © 2006 Deloitte Development LLC. All rights reserved. 4
Capital Construction Projects are a Risky Business• Labour Availability• Availability of Skilled Professionals • Escalation• Contract Disputes• Weather• Accidents• Global Market Place• Etc.
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Global Market Risks• Foreign Governments• Culture and Communications• Labour Uncertainties• Transportation• Quality • Contracting/Legal
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Global Case Example
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Global Case Example• Design Not Understood• Initial Fabricator Did Not Honor Agreement• New Fabricator Selected, Steel Moved• Unforeseen Shipping Consequences• Quality Control Problems
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Doesn’t My EPC Contract Mitigate My Risks?
OwnerContractor
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FORMAL RISK ASSESSMENTS• Identify Risks• Quantify Potential Impacts• Determine Probability of Occurring• Decide on Mitigation
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Third Party Participation, One Way to Reduce Risks• No Other Role In The Project• Construction Industry Background• Background in Your Business• Willing to Stand Up to Project Team
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Activities for Third Party Participation• Formal Risk Reviews• Schedule Reviews• Budget Reviews• Monte Carlo Analysis
100%
75%
50%
Percent Likelihood
Completion Date
25%
Jan Feb Mar
Apr May Jun
The Probability of the Project being Completed
by April 1st is 75%
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Why Third Party Reviews Work• Independence From Project Team• Keeps Everyone True to the Task• Can Ask Dumb Questions• Different Point of View• From Our Experience, It Works!
