Using Artificial Intelligence in Risk Management

One of the challenges that the construction industry has is a lack of coordinated data sharing.  Some agencies have started to collect large amounts of data, but it tends to be project specific, not particularly accessible and not organized in a way that it can be easily analyzed to develop usable information. 

Data mining could be particularly valuable for risk management and improving the quality of design and planning contracts.  If an agency had multiple years of change order data from its construction contracts it may be possible through data mining to extract information as to the types and severity of changes.  This information could be studied to identify reoccurring problem areas.  For example, if it was determined that large and consistent geotechnical related change orders occurred, it might point toward changing the design and planning process to require more geotechnical investigation. 

This same data mining could help categorize changes so that the severity and probability of various types of changes could be better understood, allow for better contingency forecasting, and promote better planning for how to handle individual changes.  For example, knowing that weather related changes occur on a certain percentage of a certain type of project and have a certain average impact would provide a better foundation for predicting the impact of these changes on individual projects and encourage more effective contract language and decision making for dealing with these impacts.

If such data is available, and before analysis starts, it needs to be reviewed to see if individual change descriptions accurately explain the reason for the change (for example, is there a bias against stating that there was a “design error” or the owner “changed criteria”) and whether the data is sufficiently detailed to extract usable keywords and phrases.  This exercise would also help contract administrators better coordinate with management to identify key data that should be tracked in the future and promote consistent change order language.

Is Dispute Resolution a Part of Risk Management

“Isn’t Risk Management what you do prior to a problem occurring and Dispute Resolution what happens after the problem has occurred?”

I often talk of construction dispute resolution and risk management as if they are the same thing.  If risk management is the identification, management and monitoring of each risk, that implies that a process has been established to determine how each risk will be handled.  This would include establishing who is best able to handle the risk, an approach to dealing with the risk, and subsequent monitoring to see whether those decisions are appropriate. 

If we define dispute resolution more broadly as implementing systems to deal with and reduce the impact of issues as they are identified – are the two that much different?  Some dispute resolution processes encourage consistent third-party involvement with a project from initiation to completion.  For example, Dispute Resolution Boards (DRBs) are often required to meet regularly throughout the course of a project so that they are familiar with progress and potential issues and, because of this familiarity, are able to quickly understand and deal with issues as they develop.

Many construction risks are not discrete, stand-alone occurrences, but are hard to separate from normal productive activities and often have related residual issues.  There is usually a period of time where consensus on the extent of the issue and appropriate resolution can be initiated prior to there being a significant impact if systems are in place to allow this to happen.  This process does not even have to be non-contentious – as long as there is alignment of purpose, agreements can be reached for many different and divergent reasons.

If dispute resolution is included as a part of a project’s issues escalation process, it would go a long way to meet the desired objective of avoiding or expeditiously resolving issues that could impact a project’s success.  This requires looking at ADR as not the last resort before litigation or what to do when everything else has failed, but rather as an integral part and an important element of the risk management process.