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1 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
RISK TO PROJECT MANAGEMENT IN CONSTRUCTION INDUSTRIES
TYPE, CAUSES, EFFECTS& MEASURES TO REDUCE / ELIMINATE RISK
BY
Ravi Shankar Dubey (ID: NVYU 131350)
Ph.D. in Project Management
NATIONAL VALLEY UNIVERSITY, New York, USA
Dissertation Supervisor: Dr. Nicholas Davis
2 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Abstract
All human ventures bring in uncertainty and risk. It is agreed that risk is extreme in the business
sector than other sectors. Every entrepreneurial act and a business decisions are associated with
risk. The risk is an occurrence that has a degree of obscurity and can either be positive or
negative. A positive risk is a convenient opportunity, while a negative risk is a threat and hence
inconvenient. The more convenient and less convenient risks imply progressive and negative
outcomes respectively.
However, the Construction Industries (CI) faces random risks which may have adverse
consequences leading to increase cost, time overruns and low-quality work. The factors
leading to such an out-come include planning, design and construction intricacy as well as the
presence of countless interest groups and material resources.
Risk Management ( RM) has various complicated dimensions relating to the CI that go
beyond its direct physical detriment to the financial and cultural processes, and even the way
society functions.
The construction industry is highly risk prone, with complex and dynamic project environments
creating an atmosphere of high uncertainty and risk. The industry is vulnerable to various
technical, socio-political and business risks. Generally, all construction projects are hazardous
by nature due to their configuration, financial, organizational arrangements, and
technology and resource demands.
Hence, RM in construction projects is dynamic rather than stagnant and it is crucial for the
industry to minimize these risks and uncertainties to unearth the impact to determine which part
of the project is having more exposure to risk and less feasible.
RM in Constructions Industries has the task of identifying and measuring of Risks related to
Project Management which is one of the foremost concerns affecting the economies throughout
the world.
3 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
ACKNOWLEDGEMENT
I would like to take opportunity to acknowledge the unwavering support and guidance by my
dissertation supervisor and coordinator Dr. Nicholas Davis. His efforts and constant guidance
have been invaluable.
I would also like to thank Dr. Charles Christopher, Mr. Frank Martin & Mr. David
Anderson for guiding and motivating me to complete my dissertation in its final form. His
expert input and assistance helped me to reshape the form and format of this dissertation.
AIMS & OBJECTIVES :
The aim of this research was to evaluate the various types of Risks that occur in construction
projects and the reasons why Risks occur and the measures that can be implemented to reduce
or eliminate these Risks. The purpose of this research is to reveal why the construction projects,
generally most of the projects, fail or get delayed due to inadequate risk management and what
are the best practices for the recovery.
The objectives were to identify the various types of Risks and examine the reasons for causing
Risk in especially in construction project .The evaluation of the existing methods for Risk
mitigation and demonstration of the ability to prevent Risks up to maximum extents.
The reason responsible for causing Risks are tackled by utilizing the knowledge gained in the
various modules and applying them through a scientifically acceptable research methodology.
We came to know that 16% of Governmental Expenditures in Dubai are meant for
infrastructure growth and development ( Gulf News) . Hence, the construction Projects plays
very significant role in the development of economy and society as well. So, I planned to study
the major risks, its types, causes, effects and remedial actions which are required to achieve
success in Constructions projects.
This PhD is a result of my interaction with construction labourers in their labour
camps, on the streets and in the fields. I was involved with large projects in different fields for
last couple of years starting from my career in Voltas, India ( A Tata Group of Company ) in
the year 1997 to present the organization i.e. aswaaq , Dubai as of today .
4 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
I started preparing for PhD study while working, particularly at a time of recession in Dubai
during year 2008 when one had to “show extra performance” in order to keep ones job, was not
an easy task.
The research involved multi-research methods, starting with the narratives of the construction
labourers. The research methodology was further augmented through a case study approach
with the participant observation method.
The findings were coded according to grounded theory into national cultural dimensions. Re-
confirmation and cross-checking interviews were also conducted to confirm the correctness of
the coding.
While, the qualitative data collected were quantified to give Meaning to the data collection
through triangulation in data analysis
5 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
TABLE OF CONTENTS
1) Title Page …………………………………………………………………………… 1
2) Abstract ………………………………………………………………………………2
3) Acknowledgement ……………………………………………………………………3
4) Aims & Objectives ………………………………………………………… …. 3 & 4
5) Introduction ……………………………………………………………………….….6
6) Type of Risks in Project Management Constructions ……………………… …8-15
7) Source of Risk in Project Management of Constructions Industries ……….…15-18
8) Research Methodology …………………………………………………… … ...18
8.1) Scope of the Research ……………………………………………………19
8.2) Research Design …………………………………………………… …19
8.3) Pre study Phase …………………………………………………… …20
8.4) Main Study Phase……………………………………………….… ….20
8.5) Research Paradigm ………………………………………………… …....20
8.6) Quantitative paradigm …………………………………………… ……20
8.7) Qualitative Paradigm ……………………………………………… ….21
8.8) Mixed Method Paradigm …………………………………………… … 21
8.9) Data Collection …………………………………………………… . . …22
8.10) Literature Review……………………………………………… ….22-25
8.11) Inadequate Early planning …………………………………… …25
8.12 ) Lack of Risk Management system …………………………… … … .25
8.13) Risk of delaying Project ……………………………………… …….26
8.14) Lack of Resources & Labour Productivity …………………… .….27
8.15) Survey questionnaires …………………………………………… …..28
8.16) Interviews ……………………………………………………… …...28
8.17) Findings ……………………………………………………… … . …28
8.18) Advantage of survey questionnaires ………………………… ….29
8.19) Focus Group ………………………………………………… ….…….29
9) Risk Management Process …………………………………………… …… …..31
9.1) Risk Identifications ………………………………………….… … ….31
9.1.1) Tools & Techniques of Risk identifications…………… ……… …..32
9.2) Risk Assessment ……………………………………… ………… … …33
9.3) Risk Analysis ……………………………………………… ……..… ….35
9.3.1) Qualitative Risk Analysis………………………..……… ……… ….36
9.3.2) Quantitative Risk Analysis ……………………………. .……… . .…36
6 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
TABLE OF CONTENTS
9.4) Risk Mitigation ……………………………………………… ………….37
10) A case Based Study of Constructions site in Dubai …………… ……… ….39
11) Results ………………………………………………………… … … …… ..41
12) Discussion …………………………………………………………… …… …43
13) Recommendation …………………………………………………… …… ..44
14) References …………………………………………………………… … …..47
15) Appendix ( supportive documents used for research works) ……… …….49
7 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
1) Introduction
The reasons of my research were to illustrate why the construction projects fail due to
inadequate risk management and what are the best practices for the recovery. I would like to
define pre-signals for the failure of a project like insufficient risk management and the lack of
recovery planning.
I studied the reasons of Risks which were primarily due to an unviable project scope,
inadequate early planning and the absence of Risk Management System. It was also observed
that the contractors contributed Risk to projects due to lack of resources, non -clarity in design
and inefficiency in labour productivity , over ambitious estimate, incorrect task management,
delay in approval and interference in decision making process by the clients.
In fact, “Risk and Actions” are not the same for each project because every Project is unique
and constructions companies work in dynamic sector where many of the more interesting
projects are complex and have reputation to fail in time, cost , scope & quality of works.
The need to manage Risks into constructions industries is related to all professionals, groups &
stakeholders i.e. client, design team, project team, Finance team, Project Management
Team, contractors & sub-contractors.
Ignoring the study of Risk Management will cause to increase the costs of projects, reduce the
profit, and damage the reputation, cost overruns, scope creep, schedule delays and worst
disposal of the businesses or insolvency.
Therefore, the efficient risk analysis, thorough studies, evaluations, timely and correctly actions
at different stages of Projects Management are vital to the successful undertaking and
completion of any construction projects.
The track record of construction industry is very poor in terms of coping with risks, resulting in
the failure of many projects to meet time schedules, targets of budget and sometimes even the
scope of work. As a result, a lot of suffering is inflicted to the clients and contractors of such
projects and also to the general public.
Risk Concept: Risk is inherent and difficult to deal with, and this requires a proper management
framework both of theoretical and practical meanings. Risk management is a formal and orderly process of
systematically identifying, analyzing, and responding to risks throughout the life-cycle of a project to obtain
the optimum degree of risk elimination, mitigation and control.
8 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
In the construction industry, risk is often referred to as the presence of potential or actual threats
or opportunities that influence the objectives of a project during construction, commissioning,
or at time of use of Utilities. Risk is also defined as the exposure to the chance of occurrences of
events adversely or favorably affecting project objectives as a consequence of uncertainty.
2) TYPE OF RISKS IN PROJECT MANAGEMENT IN CONSTRUCTIONS
Specifically, the research has been divided into four areas of Risk Management i.e.
(1) Project Risk Management
(2) Risk management in construction project
(3) Troubled Risk management in construction
(4) How to turnaround a project in success
Generally, the Project Risk Management were deliberately studied into three groups:
−External Risk, Project Risk and Internal Risk.
The External Risks are those risks that are beyond the control of the “project management
team”. The External Risks comprise Political risk; Economic risk; Social risk; & Weather risk.
The followings factors causes the external risks .
1) Contractual relations
2) Landowners unwilling to sell
3) Priorities change on existing program
4) Funding changes for fiscal year
5) Stakeholders request late changes
6) New stakeholders
7) Additional needs requested by stakeholders
8) New information required for permits
9) Inconsistent costs, time, scope, and quality objectives
10)Permits and licences
while, the Project risks consist of Time risk; Cost risk; Work quality Risk; Construction risk;
Technological risk, Contractor Risk & Sub-contractor Risk .
9 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Generally, the Risks cannot be totally avoided, but the choice can be made so that risk is minimized.
We observed that Risk = Probability of an event × Consequence of loss due to that event Per event
Although, Internal risks were studied according to the party who might be the originator of
risk events such as stakeholders, designer, contractors, sub contractors , Project Manager ,
Architects, Consultants & Clients.
The Construction risks are categorized into eight categories:
a) Technical Risks
Technical risks include anything that restricts us from creating the product that customer wants.
This can include uncertainty of resources and availability of materials, inadequate site
investigation, or incomplete design. These risks can commonly occur when there are changes in
project scope and requirements, and if there are design errors or omissions. The details of
technical risks are as under :-
Design process
1. Owner involvement in design
2. Inadequate and incomplete design
3. Change in seismic criteria
10 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
4. Errors in completion of structural / geotechnical / foundation
5. Wrong selection of materials
6. Take off data (traffic demand, water consumption demand, etc.)
7. Need for design exceptions
b) Logistical Risks
There are various logistical risks that need to be addressed before beginning a project. These
risks include the availability of transportation facilities and availability of resources i.e.
equipment and adequate skilled manpower such as spare parts, fuel, and labor. Without
addressing these logistical issues, we may risk huge project delays and losses.
11 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
c) Environmental risks
Environmental risks include natural disasters, weather, and seasonal implications. These risks
are commonly overlooked when people are unfamiliar with local conditions i.e. peak ambient
temperature in Dubai during summer seasons when labour are mandatorily given rest during 1
PM to 4PM .
So, if we are going to be working on a project in a new city, we need to become familiar with
that region’s weather patterns. If we prepare for possible weather risks, we are much more
likely to avoid potential delays and losses.
d) Management related risks
The most common management related risk is uncertainty of human resources . We must have
sufficiently skilled , experienced and qualified staff whose roles and responsibilities are
adequately defined , otherwise ; failing to do so, may lead to disastrous losses.
12 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
The following factors constituted management related Risks : -
Inexperienced staff assigned
Losing critical staff at crucial points of the project
Insufficient time to plan
Unanticipated project manager workload
Not enough time to plan
Priorities change on existing program
Inconsistent cost, time, scope, and quality objectives
Project purpose definition, needs, objectives, costs, deliverables are poorly defined or mis-
understood
No control over staff priorities
Too many projects
Consultant or contractor makes inordinate delays
Estimating and/or scheduling errors
Communication breakdown with project team
Lack of coordination / communication
Inexperienced workforce / inadequate staff / resource availability
E) Financial risks
Inflation, local taxes, fluctuation in foreign exchange and non availability of cash flow are a few
of the possible financial risks which we may face during a construction project. We used to
13 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
observe that our finances are going to look quite different , if we work in a tax-free city versus
a high-tax city.
F) Socio-political Cum Legal Risks
Customs and import restrictions, difficulties in disposing of equipment, safely using of tools
&equipment are a few of the socio-political risks which we may face during a construction
project. We used come across different regulations and codes in different countries which we
must abide by in order to successfully execute the project.
It is the risk of non-compliance with legal or regulatory requirements. Much of the law is
general and will apply to all organizations e.g. employment law, health and safety,
environmental legislation, etc. Others may be industry specific e.g. covering specific transport
services such as railways or airlines.
Some of the legal risks that a construction projects can face are related to lease of property,
ownership of asset, properly handling of tools & equipment and breach of financial
documents. At one of the construction sites, we observed that a crane was incorrectly used for
lifting the labours as reflected in the below picture.
14 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
g) Force majeure risks :-These risks are regarding the events that are outside the control of
any party and cannot be reasonably prevented by the concerned party. These risks generally
arise due to causes extraneous to the project. Natural force majeure events comprise of all
events that can be attributed to natural conditions or acts of god such as earthquakes, floods,
cyclones and typhoons. These risks should be shared equally among the parties.
h) Operating risks : - Some of the risks that may face in a construction project apply during
operations and maintenance (O&M) type services. More specifically, operational risk can be
defined as the risk of loss resulting from inadequate or failed internal processes, people and
systems, or from external events.
15 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
As for example, few Utilities like HVAC system cannot be effectively operated or maintained
to produce the expected cooling capacity, output or efficiency due to inadequate designing or
maintenance works or incorrectly selection of Equipment. Such faulty selection of equipment
also enhances the operational cost.
3) Sources of Risks in Project Management of Construction Industries
1 Incomplete Design
2 Inadequate site investigation
3 Improper project planning and budgeting
4 Inadequate specification
5 Excessive approval procedures in administrative government departments
6 The contractor does not pay worker wages in due time
7 Tight Project Schedule
8 Inappropriate time allocation
9 Insufficient time to prepare bid
10 Unsuitable construction program planning
16 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
11 The worker does not abide by regular work-hours
12 Plans of design are incompatible with execution.
13 Many modifications on designs are made during execution.
14 The designer does not follow up designs and Changes made on them.
15 Inability to execute the project within specified timetable.
16 Necessary technical skills are not available
17 Low productive efficiency of the worker.
18 Some materials do not arrive at the assigned site.
19 Absence of trained & skilled manpower.
20 Difficulties in Selection of right quality of material and equipments
21 Equipment failure at construction site
22 Shortage of labors
23 Shortage of equipment
24 Quality variations by the labours
25 New technologies implemented without imparting appropriate training to staff
26 Changes in material types and specifications during construction
27 Undocumented change orders
28 Labour disputes
29 Designs are changed by the engineers during the progress of project.
30 Actual quantities differ from the contract quantities
31 Defective design (incorrect)
32 Not coordinated design (structural, mechanical, electrical, etc.)
33 Inaccurate quantities
34 Lack of consistency between bill of quantities, drawings and specifications
35 Incorporating Rush design
36 Awarding the design to unqualified designers
37 Breach of contract by project partner
38 Improper verification of contract documents
39 Lack of enforcement of legal judgment
40 Uncertainty and unfairness of court justice
41 Competition from other similar projects
42 Increase of Labour costs
43 Increase of Material price
44 Unfairness in tendering
17 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
45 Unrealistic price variation in material
46 Inadequate forecast about market demand
47 Change of top management
48 No past experience in similar projects
49 Internal management problems
50 Improper project feasibility study
51 Poor relation and disputes with partner
52 Project delay by the management problems
53 Loss due to fluctuation of interest rate
54 Change in bank formalities and lenders
55 Loss due to rises in fuel prices
56 Late payment by clients
57 Cash flow problem
58 Price fluctuation
59 Tax rate increase
60 Foreign currency exchange rate fluctuation
61 Inflation
62 Funding / Payment shortage
63 Cancellation in giving loan
64 The owner lags behind in paying the contractor.
65 Construction prices are low.
66 Competition in pricing projects.
67 Large number of Construction companies
68 Specialists in project financial analysis are notemployed
69 Inexperience when pricing tenders
70 Changes in laws and regulations
71 Changes in laws and regulations
72 Requirement for permit and late approvals
73 Loss incurred due to Corruption and Bribery
74 Natural Disaster (Floods, earth quakes,etc.)
75 Difficulty to access the Site
76 Adverse weather conditions
77 Pollution and Safety rules
78 Problems from near project
18 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
79 Local People non support for project
80 Accidents on workers
81 Unexpectedly falls of the floors
82 Electrical fires occurred
83 Vehicle , equipment & tools crashes on workers .
84 Being struck on the equipment
85 Poor quality of materials procured which causes damage in structure
86 Damage to equipment
87 Labour injuries
88 Wastage of materials by workers
89 Equipment and material got fired or damaged during construction
90 Theft of materials at site
91 Communication breakdown with project team
92) Unreasonable project Scope
93) Inadequate early planning
94) Lack of risk management System
95) Lack of resources & Labor productivity
96) Over-ambitious estimates and incorrect task assessment
97) Lack of task clarity
98) Design delays & Approval of Drawings
99) Owner interference & decision-making process
100) Contractor’s greed to make more money by using poor quality materials.
RESEARCH METHODOLOGY
4.1 Introduction
Research Methodology discusses the research design, selection of participants, data collection
techniques and data analysis methods, and outlines the steps that were taken to ensure the
validity and reliability of the results . The chapter also discusses the challenges that emerged
during the data collection and analysis processes and how they were overcome and the ethical
considerations that had to be addressed before the study took place.
19 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
4.2 Scope of the Research
As empirical data on “risk identification and management” in construction projects indicates
that how they are perceived, measured and controlled.
The methodology adopted in this project are given below:
a) Study of literature related to Risk Analysis and Risk Management capabilities
b) Preparation of Questionnaire.
c) Site visit to major construction project sites.
d) Questionnaire survey and personnel interviews with in-charges and managers and
collection of data from site.
e) Analyzing the Questionnaire
f) Qualitative analysis of data obtained from site and to identify the root cause.
g) Remedial measures to be suggested and the present data to be recorded for future
reference.
h) Conclusions, recommendations and suggestions for future projects.
4.3 Research Design
The research design is the methodological framework that is used to address the research
questions. It’s meant for explanatory, descriptive, experimental, exploratory or
interpretive.
According to Bryman (2012), the selection of a research design depends on the essence of the
research problem. Similarly, the type of questions being asked will influence the choice of
research strategy. Since the research questions formulated for the project were mainly “what”
questions, it was decided to adopt a survey strategy (Crotty, 1998).
The survey technique entails the use of
instruments such as questionnaires or
interviews, which can either be administered
face-to-face, or by mail or telephone
(Creswell, 2009). In our project, we decided to
study and to explore or conduct face to face
interviews at different ongoing construction by
visiting their different sites to collect first hand
information in Dubai . The pictures of few
visited ongoing constructions sites are reflected herewith as reference.
20 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
4.4 Pre-study phase
The aims of the pre-study phase were to define the theoretical framework and formulate
coherent research questions. It consisted of two main steps: the literature review and the
preparation of the survey questionnaire.
4.5 Main study phase
The main study phase was the conducting of the survey. The questionnaires were distributed to
four organizations that routinely undertake projects in Dubai . The purpose of the questionnaire
was to capture the perceptions of a range of participants regarding risk management. These
participants were involved in various project phases, and had different roles and varying
degrees of knowledge about the risk management process.
4.6 Research Paradigms
The research paradigm determines the methods that will be used to frame the research; that is,
to collect and analyze the data. Research paradigms can be quantitative, qualitative or mixed-
method in approach.
4.7 Quantitative paradigm
The quantitative approach focuses on evaluating and measuring numerical data (Cohen et al.,
2011). This is especially useful for comparing present and previous research findings.
Quantitative research methods are employed for the empirical and systematic investigation of
quantitative phenomena or properties (Bryman, 2012). They rely on empirical data and
conclusions are based on statistical analysis. Structured questionnaires, like the one used in this
21 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
study, are a highly effective data collection tool in quantitative research, as they allow the
researcher to target specific research questions.
4.8 Qualitative paradigm
The qualitative approach involves the evaluation and analysis of non-numerical data. It involves
the collection, analysis and interpretation of the subjects’ perspectives or opinions about the
phenomenon under study (Denzin& Lincoln, 2005); in other words, the researcher investigates
the definitions, meanings and characteristics of an activity or an object as observed by the
subject.
The qualitative paradigm employs various methods for collecting and analyzing data such as
focus groups, observation, ethnography, in-depth interviews and open-ended questionnaires
(Denzin& Lincoln, 2005).
The below referred pictured indicates that this construction site is meant for constructions of
Malls and belong to Mohammed Bin Rashid establishment for young Business leaders that is
currently known as aswaaq.
4.9 Mixed-method paradigm
Most researchers find it difficult to choose between quantitative and qualitative research designs
as both have limitations. As a result, researchers often adopt the mixed-method approach and
combine the two paradigms (Crotty, 1998). In this case, quantitative data may be gathered to
reinforce qualitative information gathered from the study participants.
22 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
The survey and focus group methods were most suitable to achieve the objectives of this study
as they were able both to give insight into practices and perceptions within specific construction
companies and to show how concepts are being applied across the industry as a whole.
The focus group study allowed investigation of how professionals in the construction industry
perceive risk management in constructions projects and gave a greater insight into the complex
nature of projects, while the survey questionnaire allowed the collection of hard data.
4.10 Data Collection
4.10.1 Literature review
Risk management in construction projects is a fairly broad subject, so the literature review was
the first step to establish the key concepts. The search information was entered in such a way
that it allowed for recommendations to be made about similar articles, after the most relevant
had been identified.
The aim was to highlight some of the methodologies that have been used to study construction
projects in the Dubai and to compare their methods and findings with those of the present study
in order to assess the reliability of the findings gathered here.
Risks are of various types and researchers have their own parameters to rate and identify them.
Risks have numerous reasons which vary from project to project and the reasons are different
and unique for every project. Efforts to reduce the Risks by mitigation or elimination are
measures which may be applicable in some cases and will depend on the projects being
considered for those measures.
In reality, changes are inherent to nearly all project of substantial size due to the fact that
projects rarely commence after all the designs are completed and approved. It is important that
all the key stakeholders for the project agree as to how the changes to the project would be
handled and by whom.
This is in the interest of the project as beneficial to the owner and the contractor. The
continuous striving for improvement makes it necessary to incorporate changes even though
they may disrupt the works to a certain extent. However the overall result is likely to be better
than the initial after incorporating the changes and the satisfaction of achieving a better final
product makes the changes more acceptable rather than no changes at all.
23 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
The stage at which changes are proposed to be implemented is important as any major changes
proposed when the project is in an advanced stage of progress will complicate the works,
impact the schedule and likely to cause delays to the completion.
The changes will increase the cost of the project as abortive works, modification and changes
will come with a cost. “Changed work complicates a project, invites delays and increases the
project cost- all things that make owners unhappy.”( Molner , 2007).
A detailed literature review for the objectives is done to evaluate the types, reasons of Risks
and the methods for the mitigation and prevention of Risks.
The literature review provided a theoretical basis for the thesis and for the development of the
research questions. The next step was to select participant companies in accordance with the
research objectives; in other words, they had to have undertaken construction projects and be
able to answer our questions.
Lastly in the pre-study phase, the survey questionnaire was prepared. The questionnaire was
structured around themes that had been identified as significant in the literature review.
We also came to know vide several Literature Reviews that there are Top 10 ranked risks in
different fields as delineated below
a).Cost related risks:
Tight project schedule
Design variations
Variations by the client
Unsuitable construction program planning
Occurrence of dispute
Price inflation of construction materials
Excessive approval procedures in administrative government departments
Incomplete approval and other documents
Incomplete or inaccurate cost estimate
Inadequate program scheduling
b)Time related risks:
Tight project schedule
Design variations
24 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Excessive approval procedures in administrative government departments
Variations by the client
Incomplete approval and other documents
Unsuitable construction program planning
Inadequate program scheduling
Bureaucracy of government
High performance or quality expectations
Variations of construction program s
c)Quality related risks:
Tight project schedule
Inadequate program scheduling
Unsuitable construction program planning
Incomplete or inaccurate cost estimate
Low management competency of subcontractors
High performance or quality expectations
Variations of construction programs
Unavailability of sufficient amount of skilled labour
Design variations
Lack of coordination between project participants
d)Environment related risks:
Tight project schedule
Variations of construction programs
Unavailability of sufficient professionals and managers
Excessive approval procedures in administrative government departments
Variations by the client
Inadequate or insufficient site information (soil test and survey report)
Low management competency of subcontractors
High performance or quality expectations
Inadequate program scheduling
Serious noise pollution caused by construction
e)Safety related risks:
Tight project schedule
Low management competency of subcontractors
Unsuitable construction program planning
Variations of construction programs
General safety accident occurrence
25 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
High performance or quality expectations
Design variations
Lack of coordination between project participants
Excessive approval procedures in administrative government departments
Unavailability of sufficient amount of skilled labour
Unavailability of sufficient professionals and managers
5.10.1.a ) Inadequate early planning.
The primary task before the commencement of any project is as the saying goes
“ Plan the work, Work the plan”. It is of utmost importance for any project to commence with
the full planning to ensure the successful execution of works.
According to Thomas et al (2007), “Planning is an essential function of project management.”
But, it is seen that the medium and small sized contracting companies do not take it as a priority
and end up doing a job where there is little planning. If the planning is done from the tender
stage or bidding stage then it will help in reducing the costs, allow realistic schedules and labor
productivity. Limited guidance for contractors is available regarding effective planning as
planning is considered as a macro level function for the owners.
A detailed micro level planning process vide Gantt chart for the contractors is described
herewith vide annexure -1 .It is important to commence the planning by assessing the contract
risks and developa initial summary plan. The next step would be to develop plans for site
layouts and identify the sequence of works to further develop detailed operational programs.
The design and construction strategies need to be reconciled and if required , the initial plan
should be revised and communicated to all and finally enforce the final program.
4.10.1.b) Lack of risk management systems.
The issue of risk management is a complex one as risk management has various
Levels and it is important to understand and attend to all these levels to allow for an effective
risk management system.
According to Weighell (1999), risk management consists of four levels-(a) business strategy,
(b) venture, (c) project and (d) function level.
26 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
The business strategy generally deals with the competition, investment, relationship,
performance and constraints on future strategic steps.
The venture level is responsible for the revenues and operating cost.
The project level deals with risk associated with delays to design, engineering and
construction.
The functional level caters to the supply chain management, plant operations, quality , safety
and asset issues where wearing safety shoes and safety helmet are mandatory for every-one who
works at construction sites as we observed during our research at different project sites.
An important risk taken by contractors is the non availability of accurate sub strata Information
which may be related to provisions, live cables, water pipelines and other services.
Any of the above, if discovered when the project commences will delay the works as the
services will have to be relocated which we noticed at one of the project sites in Dubai i.e.
aswaaq Al Bada . If the services are live then it would be a further time consuming process.
“Remedying site conditions that are materially different from those specified in contract
documents is a common source of delay for contractors.”
27 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
4.10.1.c ) Risk of delaying projects
The study conducted to identify factors that would allow the contractors to handle the delays
due to differing site conditions indicated that 70 percent of the delays occurred due to the
absence of timely and sufficient communication. The absence of trust between the owner and
the contractor caused 20 percent of the delays and the balance delays were due to various
causes. The impact of the delays due to differing site conditions was found to have reduced
following the unstinted follow up by the contractor. The study arrived at a conclusion that a
communication at important levels and with an urgency was required to deal with such delay
causing factors.
Communication is key to maintaining organization in any construction project. If the project
manager isn’t on the same page as the field workers, chaos can be ensured. The e-mail, tablet
mobile and phone allows us to communicate with concerned staff so that everyone stays on the
same wavelength of the facts.
4.10.1.d) Lack of resources & Labor productivity.
The manpower is the most important factor in the successful completion of any
project. An adequate number of persons must be assigned to the engineering and construction
site. In case of projects , where there is a lack of manpower then it also affects the productivity
of the existing workforce as they would be required to undergo long working hours which
would reduce the productivity.
28 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
“poor construction productivity is commonly caused by a lack of resources at the crew level.
Providing proper resources is an important planning issue, requires significant effort, and is
necessary to properly manage a construction project.” ( Pappas et al 2003 ).
Effective management can reduce the delays and save on costs by up to 20% as per the data
available for the United States. Also, research shows that some projects by deploying
“innovative management methods” get better output. These methods merit attention as they
dispel the common perception of achieving better outputs. The innovative management
methods.
and procedure need to be evaluated and documented for the process of improved productivity
through qualitative and quantitative assessments.
4.10.1. e) Survey questionnaire
In addition to collection of secondary data by the literature review, primary data was collected
through a mixed method approach combining the quantitative survey and the qualitative focus
group discussion.
The survey was conducted first, and the findings of the analysis were used to guide the
establishment of the framework for the focus group discussions. Therefore, the study used an
embedded mixed-method design, where the quantitative pre-test data and results are performed
before the qualitative process and interpretation of post data and results (Creswell, 2009).
The questionnaire is a powerful data collection tool that can be used to ask the same questions
to a larger number of people (Atkin, 2006). As it was the primary data gathering instrument in
the study, careful attention was paid to its development and implementation.
4.10.2 ) Interviews: Five interviews were undertaken with personnel from five different
construction companies in Dubai . The interviews were conducted in a semi-structured manner
with a number of questions prepared in advance. The interviewees were free to speak about
risks and opportunities in their projects and the interviews were conducted in a positive
atmosphere.
4.10.2.1 ) Findings: The findings from the interviews give a picture of what site managers in a
few small sized construction projects think about risk management. They have shared both how
they work with uncertainties, risks and opportunities and also indicated what they regard as the
most common risks from their perspective. They gave their view on what is defined as risk and
29 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
uncertainty which we illustrated in the “ Discussion & Recommendation topic” of this
thesis.
The below picture is one of the ongoing construction sites at aswaaq Al-Warqa -2 which is
supposed to be inaugurated in the first quarter of 2018. We met with several staff starting from
project managers , supervisors and labourers who were working at ongoing constructions site
to understand the kind of Risks which they were facing and their remedial measures which they
used to embraced.
4.10.2.2) Advantages and disadvantages of survey questionnaires
The questionnaire is a flexible data gathering tool because it can be administered in a wide
variety of ways, such as mobile , e-mail, or face to face interviews (Bryman, 2012).
There is also the danger that some respondents’ answers may be incomplete or even false.
Adding open-ended questions to the questionnaire allows the researcher to gather at least some
in-depth, subjective data, from which new concepts may emerge. Accordingly, an open-ended
question was included in this study’s questionnaire. The question were generally asked to
respondents to provide general comments on risk management in the construction projects.
4.10.2.3) Focus groups
Focus group is a qualitative research method where selected participants are asked about their
perceptions, beliefs, attitudes and opinion towards a concept (Creswell, 2009). In this case, the
focus group aimed at revealing opinions of experienced project managers towards risk
mitigation .Focus groups complement the survey by being able to reveal a wealth of detailed
information and deep insight of the findings revealed from the survey.
30 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Therefore, after identifying the nature of risks and their probability and impact from the survey
based from the study objectives, the focus group was useful in identifying a practicable
framework for risk mitigation as being provided under topic of discussions of this thesis..
Focus groups usually require small groups of participants, about 6 to 12 people in a group. In
my research , the study included 8 people from both the male and female genders for the focus
group discussion.
The intention of forming the group with this number of participants is that it has to large enough
to generate a rich discussion but not so large that some participants do not participate (Creswell,
2009). Therefore, the in depth views of each key informant were captured with the right
number of participants in the group. Some of the participants in the quantitative survey also
participated in the focus group during visit to current running project sites in Dubai where we
observed lobourers were on works by incorporating full safety norms as reflected in the below
picture.
Since the aim of the research was to solve the practical problem of how construction companies
in the Dubai can apply risk management concepts to avoid the losses that are associated with
uncertainties, it was necessary to find participants who would be able to give the researcher an
insight into current practice in construction industry. Accordingly, participants were sought
from key groups, including clients, contractors, designers, construction managers , clients
representative and private consultants whose group photographs were taken as referred below.
31 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
5) Risk Management Process
The main source of collecting input data for this Research were carried out vide Data
Gathering from the “Literatures Reviews” consisting books, journal, articles and Internet.
Risk Management Process in case of construction industry involves the following stages :
1. Primary stage
Risk Identification
2. Secondary stage
2A) Risk Assessment
2B) Risk Analysis
32 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
3. Tertiary stage
Risk Mitigation
5.1.1) RISK IDENTIFICATION PROCESS: Risks exist from the very outset of a project.
We need to identify what they are, ascertain when they might arise, what effect they may
produce and what measures need to be taken to prevent their occurrence or mitigate their
potential impact.
The identification of risks may be considered as the most important stage in Risk Management,
if only in terms of bringing considerable benefit to all parties in the greater understanding of the
project, irrespective of whether further action is taken or not. When identifying risks, it is
important to appreciate not merely the risk itself but the source, the event that may lead to the
risk materializing and the effect of the risk if it does materialize.
5.1.2) Tools & Technique of Risk Identifications
i) Questionnaire or Checklist
j) Interviews
k) Expert System
l) Delphi techniques
m) Feedback from Similar Projects
n) Brainstorming & workshops
o) Previous Experience
a) Questionnaires or Checklists:-Questionnaires are usually drawn up from a combination of
previous experience and specific project criteria. There are two forms of questionnaire, one is a
very general form with non-specific prompts questions and the other can be detailed as is
required by the particular project. Questionnaires also facilitate consistently presented answers
from different team members which allow less time consuming and more meaningful
comparisons.
b) Interviews:-This is technique that has been used historically by personnel departments and
other consultants to extract information. It has also been used by risk managers to identify
possible risk in a development. The interviews may take place on a one to one basis or on a
many to one basis. The many to one basis should consist of projects members from different
33 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
disciplines so that the subjects raised can be viewed from different perspectives. The problem
with this method is that it is time consuming not only to carry out the interviewing but also
record the risks from where it arrived .
c)Expert system:- A lot of research is being done on artificial intelligence and expert systems.
Specifically, one of the most sophisticated models that can be developed for risk management is
by making use of knowledge-based systems or human-computer cooperative systems. This
system is designed to assist the project managers in achieving more effective control over risks
by providing them with appropriate knowledge, gathered from many project managers and
compiled into a knowledge-base. While doing this, the logical thinking and the intuitive
thinking of the managers is accounted for in the system
d)The Delphi technique:- The Delphe technique attempts to produce objective results from
subjective discussions. It is a systematic, interactive forecasting method which relies on a panel
of independent experts. This method may be applicable to the identification of risks but it is
more suited to attaching likelihood of occurrence and potential impacts of previously identified
risk events. This method basically involves the following sequence of events:
e) Feedback from Similar Projects :-A questionnaire is forwarded to all the appropriate
members of the project team by the appointed risk manager. The members of project teams
gives their objective views in response to the questionnaire and returns them to the risk
manager.
f) Brain storming &Workshops :-The risk manager then collects these results and
redistributes them to have brainstorming & workshop . Each project participant now receives
a different set of views and is requested to reconsider their original answers and resubmit
them to the risk manager.
g) Previous experiences :-These revised results are again collected by the risk manager and
redistributed again in the same manner as above. This iterative process is continued until the
risk manager is satisfied that a consensus of opinion has been reached based on each
individual’s previous experiences.
5.2) . RISK ASSESMENT: Risk assessment is the process of estimating and communicating
workplace safety risk, and deciding whether this risk is acceptable. Conducting a risk
34 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
assessment involves making a value judgment based on the information and any available
evidence within the workplace and industry. This may include numbers of current and past
incidents, severity of injuries from the identified hazard, lost work time from injuries and
number of people involved in incidents. Specific information such as environmental
measurements of hazards, e.g. noise levels, dust levels, and comparisons made between the
workplace measurement and the legally required measurement can also assist in the risk
assessment process.
35 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Akintola S Akintoye and Malcolm J MacLeod (1997) studied the construction industries ‘s
perception of risk associated with its activities and the extent to which the industries uses risk
analysis and management techniques with the help of questionnaire of general contractors and
project managers . “The authors concluded that the risk management is essential to constructions activities
and enhancing profitability. Construction risk is generally perceived as events that influence project objectives
of cost, time and quality. Risk analysis and management in construction depend mainly on intuition,
judgment and experience”. Formal risk analysis and management techniques are rarely used due to a lack of
knowledge and to doubts on the suitability of these techniques for construction industry activities.
Li Bing and Robert L. K. Tiong (1999) : Based on their study categorized the risk
factors and their mitigating measures , the most effective risk mitigating measures
were categorized into eight groups . Those are partner selection, agreement ,
employment , control, subcontracting , engineering contract, good relationship, and
renegotiation .
Shou Qing et.al (2004) identified twenty eight critical risks associated with international
construction project in developing countries and categorized them in three hierarchy levels (
Country, market and Project) of which 22 were evaluated as critical or very much critical based
on 7 degree rating system . The top 11 critical risks are : Approval and Permit, Change in Law,
Justice Reinforcement, Local Partner’s Credit worthiness, Political Instability, Cost Overrun, Corruption,
Inflation and Interest Rates, Government Policies, Government Influence on Disputes and Termination of
JV.
The risks at country level are more critical than that at Market level and the latter are more critical than that in
project levels . It is suggested that when mitigating a specific risk, the measures with higher effectiveness
should be given a higher priority.
2B) RISK ANALYSIS
The process of project risk analysis demands appropriate and efficient techniques. A technique
is a specific procedure designed to perform an activity or to solve a problem under a prescribed
notation and guidelines (Brinkkemper, 1996).
Project risk analysis techniques can be classified into two main categories, namely qualitative
and quantitative techniques (PMI, 2009), with associated sub-categories of semi-quantitative
and simulation techniques. The group of qualitative risk analysis techniques does not operate on
numerical data rather than presenting results in the form of descriptions, recommendations and
ordinal scores (Hubbard and Evans, 2010), where risk assessment is connected with qualitative
36 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
description and determination of qualitative scales for the probability and impact of the
consequences of risk.
Qualitative techniques can be lists of risks, risk rankings, or risk maps. These techniques
prioritize risks for subsequent further analysis or action by assessing and combing their
probability of occurrence and impact. The risk is evaluated in more conceptual terms, such as
high, medium or low, depending on the collected opinions and risk tolerance boundaries in the
organization.
All risks identified will be assessed to identify the range of possible project outcomes.
Qualification will be used to determine which risks are the top risks to pursue and respond
to and which risks can be ignored.
5.3.1) Qualitative Risk Analysis
The probability and impact of occurrence for each identified risk will be assessed by the
project manager, with input from the project team using the following approach:
Probability
High – Greater than <70%> probability of occurrence
Medium – Between <30%> and <70%> probability of occurrence
Low – Below <30%> probability of occurrence
Impact
High – Risk that has the potential to greatly impact project cost, project
schedule or performance
Medium – Risk that has the potential to slightly impact project cost,
project schedule or performance
Low – Risk that has relatively little impact on cost, schedule or
performance
Risks that fall within the RED and YELLOW zones will have risk response planning which
may include both a risk mitigation and a risk contingency plan.
5.3.2) Quantitative Risk Analysis
Analysis of risk events that have been prioritized using the qualitative risk analysis process
and their affect on project activities will be estimated, a numerical rating applied to each risk
based on this analysis, and then documented in this section of the risk management plan.
Imp
act
H
M
L
L M H
Probability
37 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
5.4) RISK MITIGATION :- The uncertainty of a risk event as well as the probability of
occurrence or potential impact should decrease by selecting the appropriate risk mitigation
strategy. Four mitigation strategy categories commonly used are:
a) Risk avoidance or Termination . Risk avoidance may include a
review of the overall project objectives leading to a reappraisal of the
project as a whole. Risk avoidance is often perceived as the ultimate
mitigation strategy in that it implies that the project may be aborted. It
means making a decision not to enter in to new way of working
because of inherent risk this would introduce. This method of
mitigation involves the removal of the cause of the risk and therefore
the risk itself.
b) Risk reduction or Treatment :This method adopts an approach
whereby potential exposure to risks and their impact is alleviated.
Often this is achieved by the managing or designing out of potential
risk. Methods of risks reduction may require some initial investment
that should then reduce the likelihood of the risk occurring. Risk
reduction occurs where the level of risk is unacceptable and
alternative action is available. Typical action to reduce risk could be:
38 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
1. Detailed site investigation will improve the information upon which the estimate has been
prepared.
2.Alternative procurement route- by utilizing an alternative contract strategy risks will be
allocated between project participants in a different way.
3.Changes in design to accommodate the findings of the risk identification process. Designing
& installing HVAC duct system was observed to be carried out to reduce the ineffective cooling
inside the buildings as referred in the below picture.
c) Risk retention or tolerate :This strategyindicate that the project has decided not to change
the project plan and to deal with a risk. Passive tolerance requires no action leaving the project
team to deal with the risks as they occur and high impact risks should undergo rigorous
examination so that that an alternative response can be found.
d) Risk transfer Risk transfer is the technique that plays a far greater role in development
projects and involves the complete or partial transfer of risks among the various parties
involved in the implementation of the project. Risk can be transfer by two ways. First is through
insurance and second is through contract. The distribution of risk between the client and
contractor tends to overshadow effective management strategies and investigations show that
contactors and owners give minimal consideration to risks outside the realm of their own
concerns.
39 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Risk Management in Construction Industry is categorized in four segments as referred under .
7)“A case based study” of different live projects having experienced of different types of Risk
were conducted to have a deeper insight into the Risk .
We studied developing of “car parking area” at one of the site in Dubai, where Contractor i.e.
Nabulus initially quote AED 442775/ for accomplishing the construction & designing works
for developing car parking area.
After six months, the contractor i.e. Nabulus informed that they are unable to get design
approval from RTA , Dubai since there is need to hire Consultant who will have to design storm
water drainage system for car parking area whose drainage outlet to be connected with Dubai
Municipality’s drainage Manhole .
Finally, a Consultant i.e. RTC was hired who developed initial & final concept design and took
several approval from different governmental authorities in Dubai ( Annexture-2 attached).
When RTC reached to Dubai Municipality Office (DM) for having final approval , he came to
know that some of our plot area which were initially allocated is getting overlapped with the
neighbour’s plot area of newly upcoming Petrol Pump.
Ultimately, Consultant made revised claim to client for redesigning the whole plot and Client
finally agreed to pay additional Charges to consultant to get final approval from DM & RTA
to restart the works.
40 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
When consultant received Design approval from RTA as per updated lay-out , the earlier hired
contractors i.e. Nabulus enhanced their pricing from AED 442,775/ to AED 888,630/
(Annexure 3 & 4 attached)
Considering the current scenario , the client was having no choice except to invite new bids to
accomplish the parking development works in order to keep the project cost same.
Client finally hired Atelier a new contractors against AED 440,000/ ( Annexure-5) to
accomplish the car parking works as reflected in the picture below . Thus, we observe that any
kind of delays in projects may subsequently enhances it cost as well.
41 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
On starting the parking development works, Atelier were supposed to remove few trees &
CCTV pole ( picture below) which were not covered in their initial quote . Finally, Atelier
agreed to remove the tree and CCTV ‘s pole without charging any additional amounts to clients
in view of maintaining good professional relations with the clients . So, proper communication
team works and good working relationship with contractors or stakeholders reduces the risk of
incurring higher cost or delaying the projects.
8) RESULTS
Risk is perceived as a negative term, even though in theory It can have two dimensions.
Professionals in the construction industries are using techniques described in the literature
concerning RM, but are not aware of it. Risks are being managed every day in the industry, but
not in such a structured way as the literature describes.
Effective risk management requires commitment as well as the risk conscious behaviour of each
individual. The motivation as well as the interplay of the parties involved in the project in the
end determines the quality of the work and thus the success of the project.
Risk management successfully installed in the project offers the chance to gain a clear
understanding of the goals, duties and contents of the service and the feasibility of the project. It
provides an information basis for the quantitative data, sorted according to size, for the purpose
of supporting decisions, such as e.g. the choice between costs and implementing goods or the
comparison between several possible options.
Risk management can therefore only be implemented and enforced effectively if
communication channels in the enterprise are created, which guarantee the direction of the
information to the places concerned in each case. Through the risk management used, the
42 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
overall risk of the project is broken down into individual risks. For these, corresponding
measures can be taken. Nonetheless, in each project residual risks remain. It remains a strategic
decision whether these risks are to be considered or overlooked.
Risk management assists Project Managers in setting priorities, allocating resources and
implementing actions and processes that reduce the risk of the project not achieving its
objectives. Risk management facilitates better business and project outcomes by providing
insight, knowledge and confidence for better decision-making.
In particular, it supports better decisions about planning and design processes to prevent or
avoid risks and to capture and exploit opportunities. It provides better contingency planning for
dealing with risks and their impacts, it encourages better allocation of resources to risks and
alignment of project budgets to risks, and it facilitates decisions about the best allocation of risk
amongst the partiesinvolved in a project activity. Together, these lead to increased certainty and
a reduction inoverall risk exposure.
What happens if risk management is ignored?
Increased costs
Loss or reduction of profit
Damage to the brand / reputation
In the worst disposal of the business or insolvency.
Therefore, efficient risk analysis is vital to the successful undertaking and completionof any
construction project
This study will provide evidence to show that sufficient use of risk management, in a
construction project will help to ensure that it will succeed.
The management of construction projects requires knowledge of modern management as well
as understanding of the design and the construction process. Construction projects have a
specific set of objectives and constraints such as a required time frame for completion.
On average around 26 percent of construction projects default at one point or another. There are
various possible reasons for such default. The five most common reasons for contractors default
and failure are:
poor project management;
poor leadership;
poor performance;
poor accounting; and
43 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
poor planning.
9).Discussion
The Change is inherent in construction work. The majority of the projects fail to meet
deadlines, cost and quality targets. This is not too surprising considering that there are not
known perfect engineers, anymore than there are perfect designs or that the forces of nature
behave in a perfectly predictable way. Change cannot be eliminated, but by applying the
principles of risk management, engineers are able to improve the effective management of this
change.
Construction companies that manage risk effectively and efficiently enjoy financial savings, and
greater productivity, improved success rates of new projects and better decision making. Risk
management in the construction project management context is a comprehensive and systematic
way of identifying, analyzing and responding to risks to achieve the project objectives
In construction projects, each of the three primary targets of Cost, Time and Performance are
likely to be subject to risk and uncertainty. Many people, in order to make change in the project
with minimum cost, get the project into trouble. The lack of risk management, even an
insufficient risk analysis, can put construction projects in jeopardy.
We observed that the risk Management is the core of project management. Every project is
unlike the earlier one, the problems are distinctive and their solutions are also different. Risk
management will not remove all risks from the projects. Its main objective is to ensure that risks
are managed most effectively.
The formal risk analysis and management techniques are rarely used by construction industry
due to lack of knowledge and expertise. The industry is also unknown about the suitability of
these techniques to construction industry. The control and risk transfer is most useful method in
construction industry. Joint venture widely used as a tool for risk transfer
More than 800 construction workers die and another 137,000 are seriously injured on the job
each year in the United States, according to the Department of Labor (Posted on November 17,
2011 by Jared Wade ) . It’s a tragic number and the worst part is that so many deaths and
injuries are preventable.
Aside from simply being deadly, however, the industry is imperiled by as many risks as any
other industry.
44 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Aon recently documented as much in its report on the state of risk management in construction.
The broker surveyed industry professionals and received at least one encouraging result: overall
preparedness for the threats identified as the top 10 risks has risen from 60% in 2009 to 67% in
2011 which are as listed below
1. Economic slowdown
2. Regulatory/legislative changes
3. Increasing competition
4. Damage to reputation/brand
5. Business interruption
6. Failure to innovate/meet customer needs
7. Failure to attract top talent
8. Commodity price risk
9. Technology failure/system failure
10. Cash flow/liquidity risk
Based on our case study of several projects in constructions Industries, we observed that every
Project are having five chief objectives related to Time, Cost, Quality, Environment & Safety
what we observed during a visit to an on-going constructions sites at Dubai as referred in the
picture below .
10).Recommendation
Many people have a theory that there are no obstacles in a project, only opportunities. Perhaps
the most valuable merit in a troubled project is the chance to learn from it. Unfortunately,
people who have been involved in a disaster prefer to forget it the sooner. This is a terrible
45 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
waste of experience, because the lessons we take , can help us to improve our knowledge and
can easily help us to avoid the next disaster.
Any organization who has been involved in a disaster management should take a list of lessons
learned in the end including the following the causes.
a) What was done well?
b) What was done badly?
c) What could have been done to prevent the disaster?
d) What could have been done to improve the results?
e) How can it be avoided next time?
It is very important to jog our memory that if we want to learn from a disaster, we must avoid
having blame culture inside the organization; otherwise; the identification of root causes for
the problem will not be attainable. The defensive behavior will not help to discover the truth for
the problem.
We understand that there four main guidelines in order to recover a project. These are;
a) Do nothing,
b) Start the project from the beginning,
c) Declare crush,
d) Assess and carry on.
e) Do not lie about
It is important to mention that all these four strategies are not supported by all projects. In some
cases, we must use other methods to approach the phases of the project. We should keep in
mind that just because the project is in trouble does not mean that everything in it goes wrong.
a) Do nothing : Although it is difficult to work, it seems to have been tested in many
projects. It generally happens when people believe that the trouble is not happening or
because they are too bemused to think of anything.
“As in the last week , there were 17 Indian who lost their life when one of 30 years old
building got collapsed in Ghatkoper, Mumbai where one of the flat owner was
removing column of the building at the ground floor without taking governmental
approval and flat’s owners of the upper floor also did nothing” .
If the project disaster is due to an external event, such as weather conditions, then the most
probable is that we cannot do anything. But, the above case ; the flat owner carrying out
renovation works in the building should take approval from Mumbai Municipality before
starting of the renovation works or other flat owner should inform to governmental authority to
46 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
check work permit of the ground floor’s flat owner but on one did anything and few human
life’s got lost.
b) Start the project from the beginning : This means to throw away everything
implemented to date, keeping, of course the lessons learned. It is costly, extravagant and
requires elastic timetable. It is used mainly, on projects which are not on the critical path
for overall delivery.
c) Declare crush : Accepting the disaster in a project is not as dreadful as it sounds. By
accepting the situation, you give the chance to communicate effectively with other people
in the project team and find solutions. The main disadvantage is that it is very easy to
start blaming everyone here. But all disasters are not someone’s fault, and even it is true,
as we have already mentioned, it is not an effective strategy to blame someone, or even
more to punish them. If we do it, then we should lessen the opportunities to build the
organization onto lessons learned.
d) Assess and carry on :- Assess and carry on means that we can identify any event that is
out of control since we cannot carry on in the same way. This is the best approach, and it
is the most used.
Also, it gives the capability to combine the advantages of declaring the crush strategy
with starting the project from the beginning. Getting exact in the right place , the most
important thing for a project is to enter it from the beginning in the right way with a clear
knowledge of its requirements.
The implementation decisions should be taken by people with previous experience and
congruent knowledge. Following this guideline will reduce the number of project
disasters. Generally, Project disaster is a mixture of command and thinking, where we
don’t have clearly and effectively defined the goals and we have put wrong people to
handle it.
e) An ongoing risk monitoring : In order to eliminate the possibility for a troubled project,
It is advice able to develop an ongoing risk management process embedded into an
effective project planning.
Effective project planning, besides of the “normal” activities (stakeholders involvement,
identification of project objectives and goals, and so on) consists more than one activity
i.e. the design for the performance measurements of objectives, the development of
strategies and the remediation approach, in order to implement, monitor, optimize and
shut down remedies.
47 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
The main difference from the traditional project planning is that this design is practiced
throughout the project, and not just in the beginning phases. The new project planning is
iterative process during all the project lifecycle, till the closeout phase.
One of the elements of the new project planning design is the ongoing risk monitoring of
the project. Simply, each step of the project implementation should be documented.
It requires a risk management assessment applied with a contingency plan in order to
accelerate post disaster management. Such plans should be also reviewed and tested
frequently
f) Do Not Lie About : It is a good method, because if we reveals the truth to clients or
stakeholders of the projects before the problem has been fixed, it provides all possible
support from all the corners to mutually address the issues.
Hence , Risk Management is brought on a higher level of importance for the Project and
is being recognized as a common tool for both the Project Team and the Project
Organization. In this way, Risk Management becomes an element of organization
philosophy and strategy.
11)REFERENCES
[1] Anna Klemetti” Risk management in construction project network” Laboratory of industrial
management report 2006/2.
[2] BayuAditya , Bambang” Risk analysis in feasibility study of building construction project”
The Tenth East Asia-Pacific Conference on Structural Engineering and Constructio August 3-5,
2006, Bangkok, Thailand
[3] Building future planning “Risk assessment planning”2000
[4] Debasissarkar,Gautam data” A framework of project risk management for the underground
corridor construction of metro rail” W.P. No. 2011-02-05.
[5]Project Management Institute. Guide to the project management body of
Knowledge (PMBOK® Guide). 4th ed. Newtown Square: Project Management Institute; 2008.
[6] Institution of Civil Engineers and the Actuarial Profession. Risk analysis and
48 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
management for projects (RAMP). 2nd ed. Institution of Civil Engineers and the
Actuarial Profession. London: Thomas Telford Ltd; 2005.
[7] Project Management Institute. Construction extension to the PMBOK® Guide. 3rd
ed.Newtown Square: Project Management Institute; 2007.
[8] KajsaSimu”Risk management in small construction project” Licentiate thesis ISSN:1402-
1757,2006:57 [6] ”Risk management standard”Arimic,alarm,irm 2002.
[9] Barati, S., Mohammadi, S. . (2008)Enhancing Risk Management with an
Risk Identification Approach. © 2008 IEEE.
[10] AACE (2000). International’s Risk Management Dictionary. Association for the
Advancement of Cost Engineering, 42(4), 28-31.
[11]Abu Dhabi Urban Planning Council (2013).Plan Abu Dhabi 2030 urban structure
framework plan.Abu Dhabi: ADUPC.
[12] Adeyemi, I. (2013). Effects of project management on the performance of a construction
firm in Nigeria. American International Journal of Contemporary Research, 3(6), 43-58.
[13] Akintoye, A., Goulding, J. &Zawdie, G. (2012). Construction innovation and process
improvement.Chichester, West Sussex, UK: Wiley-Blackwell.
[14] Aleshin, A. (2001). Risk management of international projects in Russia.International
[15] Ashley, D. B. (1977). Construction Project Risk Sharing Technical Report No.220,
TheConstruction Institute, Department of Civil Engineering. Stanford, CA.
[16] Chapman C.B. and Ward S.C., “Project Risk Management: Process, Techniques and
Insights”, 2nd Edition, Chichester: John Wiley and Sons publication, 2003, pp. 344, ISBN-13:
978-0470853559
[17] Daniel Baloi, “Risk Analysis Techniques in Construction Engineering Projects”, Journal of
Risk analysis and crisis response, 2012,Vol.2, Issue 2, pp.1-9
[18] DaudNasir, Brenda McCabe and Loesie Hartono, “Evaluating Risk in Construction-
Construction Schedule Risk Model”, ASCE Journal of Construction Engineering and
Management, Volume 129, Issue 5, October 2003 , pp. 518-527
[19] Elkingtin P. and Sallman C., 2002. Managing project risks: a case study form the utilities
sector. International Journal of Project Management.Vol. 20, No. 1, pp. 49-57 (v) Lyons T. and
49 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
Skitmore M., 2004. Project risk management in the Queensland engineering construction
industry: a survey. International Journal of Project Management. Vol. 22, pp. 51- 61
[20] Flanagan, R. & Norman, G. (1993). Risk management and construction. Oxford,
[21] England: Blackwell Scientific. Flanagan, R. & Norman, G (1995). Risk management and
construction (3rd ed.). Oxford:
[22] Blackwell Scientific. Flynn, N. (1997). Public sector management, Prentice-Hall, London.
12)Appendix (supporting Pieces /documents used for assessing Risks )
RISK ASSESSMENT FORM
Project
Name
Prepared
By
Date
Pro
blem
Area
or
Activ
ity
Risk
s
Iden
tifie
d-Y
es
/NO
Descrip
t
ion
Pro
ba
bil
ity o
f
Risk
-
Yes /N
O
Imp
act
Inten
sit
y -H
igh
/LO
W
Ex
isting
Mea
sure
s OK
/No
t OK
Mitig
ati
on
Stra
tegy
- OK
/Not
OK
Ad
ditio
na
l
Mea
sure
s OK
/
NO
T
OK
Con
ting
ency
Pla
n-
OK
/
Not O
K
50 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
51 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
52 Ravi-S. Dubey, PhD Student ; Thesis : Risks to Project Management in Construction Industries
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