How to Avoid Regulator Whiplash

by Laura Keating Brannen and Randall Kulhanek

Talk about regulations to almost anyone involved in evaluating, planning or executing a major capital project and you will be met with a mix of sighs, groans, and eye-rolling. That has certainly been the experience of a research team we co-chair for the Construction Industry Institute (CII). The team’s task is to delve deeper into how companies can better identify and respond to the impact of regulations throughout a long project lifecycle. In interviews with more than 40 industry experts, the potential costs and immensity of the challenge posed by regulatory changes was abundantly clear, but we have yet to uncover a silver bullet for dealing with the challenges.

The research team—principal investigators from four universities and twelve corporate representatives—has embarked on a second phase of the research to find out why this is so difficult. We’re asking for your help in adding to our initial ideas.

Here’s what we see so far.

First, the regulatory environment itself is vast, crossing multiple aspects of a business (e.g., environmental, safety, security, financial, etc.) and multiple jurisdictions (e.g., local, state, federal, international). Ensuring compliance across all these dimensions and across all business activities is difficult enough when the rules are static, but regulations continually change. Many participants felt the rules are changing more rapidly, and some of those changes are creating greater impacts than in the past.

The second challenge is timing. Capital projects take years to conceptualize, evaluate, plan and execute, and the resulting facility is usually designed to operate for decades. Regulations can change within months, though the full process usually takes more than a year. Even when a rule is finalized, the increasingly inevitable court battle prolongs the period of uncertainty. Then, political leadership changes and the whole process begins anew. Synching these two timescales requires effective tools, processes and leadership.

The third factor is the organizational structures, processes, tools and people that help companies make business decisions that incorporate the risks associated with regulatory change. Companies have many different approaches and tools for scanning the regulatory horizon, methods for synthesizing and evaluating that information, as well as structures and procedures for weaving the conclusions into project planning and execution. In many instances, the skills, experiences and interpersonal connections of the individuals involved directly shape the outcomes.

Anyone involved in dealing with regulations might dismiss the previous paragraphs as obvious. The fact is, however, this type of research has not been applied to the construction industry, and data on common pinch points that would lead to the development of new solutions remains evasive. At this point, the data is not available to reliably state which problems have the biggest impact. For now, we know the challenge is almost universally vexing, no one has fully cracked the code, and getting it wrong can be extremely costly.

This is not an academic exercise. Under the auspices of the Construction Industry Institute—an organization with a history of developing tools and methods to improve the business results from capital projects—the results of this research will be translated into solutions that could make a difference.

Currently, the research team is collecting industry input through a broad survey and in-depth case studies of recent regulatory changes. The analysis will identify common pressure points while also understanding how those pressures play out in real-life examples. A user-friendly primer outlining the challenges, best practices, common procedures and decision-making methodologies identified through these activities will be released during CII’s annual conference next year. This foundational understanding will also be the stepping stone to future CII research and development into tools or other solutions, available for free to CII member companies or for a nominal fee to non-members.

 Participating companies and organizations will also receive early summaries of the results. Information on how to get involved is available at https://www.construction-institute.org/groups/research-teams/rt-pui-01-survey.

We invite any company or individual interested in learning more to visit the website or contact us.
We started this effort with a lot of questions and we are getting closer to the answers that lead to solutions for some very tough challenges. As we get to better understand the “why” and the “what” of the challenge, we will be able to propose more informed solutions that the industry can actually implement.
 
Laura Keating Brannen, government affairs manager in the Washington Office of Bechtel Global Corporation, and Randall Kulhanek, platform manager for Major Enterprise Projects New Generation Program at DTE Energy, are co-chairing the Construction Industry Institute study.


Date posted: September 18, 2018

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