Conducting risk analysis before submitting a bid on a new project does more than save your team time, effort, and resources down the line… it can make the difference between winning and losing the project.
When working on a large capital project, project managers need to have a system in place to identify and analyze risks that may affect their ability to complete the project on time and on budget. What some project managers don’t realize is that beginning risk analysis during the bidding and estimating process can put their team at a significant competitive advantage in three ways:
- 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 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 starting margin
- 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, and risk brainstorms to secure team buy-in. 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.
Third is risk management. A team can proactively manage risks in several ways, including avoidance, elimination, reduction, or acceptance. An example of avoiding a risk would be moving a client’s network to a separate server if their server has issues – by switching servers, that risk is avoided. Elimination of a risk is ideal for preventing a blow-up of that risk later. For example, if the bidder knows a retailer will need an additional supply of denim in the near future, purchasing an additional order immediately will eliminate this risk later. Teams can also reduce the probability of a risk from occurring. 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.
So stay ahead of the competition by incorporating risk management into the bid process. 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 earn more projects to bid on down the road.