Professional Documents
Culture Documents
©ZENGHUA KUANG
Student No. 123859
November 2010
Acknowledgements
This dissertation was written as part of the final semester of the education as
bachelor of architectural technology and construction management.
Many people have contributed to this work. First of all, I want to express my
gratitude to my consultant Ernest, he really gives me great help and conduct
which makes my report orientation and study scope smoothly going. And then,
I would like to say thanks to Renger , my former semester consultant. He also
helps me a lot this time. He lends to me some reference books which are very
helpful to my report.
I want to thank Clæs Knudsen, the site manager too. Thanks for his accepting
my visit during the busy construction period. The visit is a golden experience
for me as a student.
Thank you! All my friends in Denmark, China and all over the world are
acknowledged just for the reason they exist.
ZENGHUA KUANG
26,11,2010
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Abstract
As the most common and typical project types, construction projects have
several characteristics such as specific objects、time limit、financial constraints
and economic requirements, special organizational and legal conditions,
complexity and systematic characteristics, For that each investment project
itself is a complex system. Especially for the construction projects, there are
many risk facets and complicated relations, which will influence it. The
complicated relations include direct, indirect, obvious, implicit or unpredictable,
What's more, the various risk factors will cause different severity of the
consequences. If you do not consider these risk factors, or ignore the major
factors, they all will cause damage because of decision-making errors.
Quality targets, time targets, cost targets are the three objectives of project
management. Especially in the construction project, the time objective is
closely and inseparably related to the cost objective. Therefore, risk
management of construction period is a key part in the risk management of
construction
The overall aim of this study report is to let everyone know what risk
management is, realize the procedure of risk management in construction
project and have a deeper study on the application of risk management in
construction period. The study-involved examples of construction projects what
I have experienced in different places.
The results of this study present the effect of common and major risks on
construction period. Meanwhile, put forward the corresponding
countermeasures
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CONTENTS
ACKNOWLEGEMENTS-------------------------------------------------------------- 3
ABSTRACT--------------------------------------------------------------------------4
CONTENTS------------------------------------------------------------------------- 5
1. INTRODUCTION------------------------------------------------------------------7
1.1 Background------------------------------------------------------------------7
1.1.1 Definition of risk------------------------------------------------------7
1.1.2 Definition of risk management-------------------------------------- 7
1.1.3 Principle of risk management----------------------------------------8
1.1.4 The process of construction projects--------------------------------8
1.2 Problem formulation-------------------------------------------------------- 9
1.3 Aim, Objective and research questions-----------------------------------11
1.4 Delimitation----------------------------------------------------------------12
1.5 Research methodology----------------------------------------------------13
1.6 Structure of study---------------------------------------------------------14
2. THEORETICAL OVERVIEW------------------------------------------------------15
2.1 Project Risk Management--------------------------------------------------15
2.1.1 Risk Environment----------------------------------------------------16
2.1.2 Risk Identification---------------------------------------------------16
2.1.3 Risk Assessment-----------------------------------------------------17
2.1.4 Risk Response Planning---------------------------------------------19
2.1.5 Risk Control----------------------------------------------------------20
2.2 Risks in construction projects---------------------------------------------20
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3. CASE OF STUDY----------------------------------------------------------------23
3.1 Case Ⅰ Public building in Denmark---------------------------------------23
3.2 Case Ⅱ The International project in Vietnam ---------------------------26
REFERENCES-----------------------------------------------------------------------38
APPENDIX--------------------------------------------------------------------------39
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INTRODUCTION
This chapter presented the background to the research area and sets discuss
the problem formulation. The aim, objectives and research questions are
stated and delimitations are described. Finally, the structure of the dissertation
is outlined.
1.1 Background
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the scope of the construction companies’ business concept, they enter this
process in different phases. The viewpoint in this study is that client has to
take charge of the phases of idea, briefing and maintenance. This description
of the construction process is a general one and several different descriptions
can be found in other literatures.
As the most common and typical project types, construction projects have
several characteristics such as specific objects: time restraints, cost restraints,
special organizational and legal conditions, complexity and systematic
characteristics. For that, each investment project, it is a complex system,
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especially for the construction project; there are many risk factors and
complicated relations, which will influence it. The complicated relations include
direct, indirect, obvious, implicit or unpredictable, what is more, the various
Risk factors will cause different severity of the consequences. If you do not
consider these risk factors at all, or ignore the main factors, they will cause
damage because of decision-making errors. Quality targets、time targets、cost
targets are the three major objectives of construction project management.
Especially in the construction project, the time objective is closely and
inseparably related to the cost objective. Therefore, we cannot ignore risk
management of the effect on time objective caused by risks during
construction phase.
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as the reason for postponing time limit for a project in the construction project
contract, are the very point of studying time limit for a certain construction
project. Only by analyzing the influence, can we make a better predication and
control of the schedule and ensure the project complete successfully
The overall aim of this study report is to let everyone know what risk
management is, realize the procedure of risk management in construction
project and have a deeper study on the application of risk management during
construction period, therefore, a better project output and better value for
both clients and constructors.
1. To assess the most major and common risks which cause bad effect on
construction period.
2. To figure out reasonable solutions.
On the basis of the aim and the objectives, research questions have been
formulated.
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1.4 Delimitation
(See figure 3)Considering that, cost and schedule risks frequently serve as
indicators of project status. They are treated somewhat differently from the
others. However, cost and schedule can become a major source of project risk.
Based on the above, I decide to start from schedule, and narrow down the
scope to the risk management in construction period phase which makes my
report more specific. Go through the case of study, different realistic
constructions have been presented and analyzed . last section of the report
lists the most common and major risks during construction period and some
countermeasures referred to these risks.
Literature study and analytical research are my major learning methods, which
play an important role in this report. Analytical research involves analyzing
existing facts and information. Today’s world is based on information
technology and huge amounts of information are available on all kinds of
subjects.
In addition, to speak of, the report is more persuasive and practical based on
the study of real case and visit of site manager. As a student lacking experience
working on building site, the visit definitely has a critical effect on the
conclusion of this report.
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Chapter one is introduction to the background of the research area and sets
discuss the problem formulation. The aim, objectives and research questions
are stated and delimitations can be found. The purpose of this chapter is to
help the reader understand why this report needed to be written.
Chapter two is the theoretical overview and the state the literatures which this
thesis focuses. This chapter gives the theoretical foundation for the thesis and
the aim of this chapter is to ensure the reader that this thesis is at the cutting
edge of the research in the chosen area.
Chapter three is the case of study, the different constructions have been built
in different place. This section tells the background of each project and
describes different type of risks occurred in construction projects.
Chapter five contains the findings and conclusions of the study. This part
points out the main research contributions and thinking about the specific
direction what we can still doing further study in future.
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THEORETICAL OVERVIEW
Chapter two is the theoretical overview and the state the literatures which this
thesis focuses. This chapter gives the theoretical foundation for the thesis and
the aim of this chapter is to ensure the reader that this thesis is at the cutting
edge of the research in the chosen area.
This part focuses on defining and explaining the elements of risk management
and presents the recommended overall structure for implementing risk
management. (The Figure 4) reflects a structure that mirrors the perspective
of the Project Management Institute's PMBOOk (® Guide (2004) within the
organizational environmental context.
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In every project, there is a risk environment. There are risks that must be
faced, and there is a host of different ways to deal with them. Risk
management planning is the effort, organizationally, to draw together the risk
policies, practices, and procedures of the organization into a whole that will
address the nature of risk peculiar to the project.
Perhaps the key failing of project managers in risk identification is the actual
description of risk events. Many project managers attempt to identify risks
simply as "schedule" or "cost." (The schedule in and of itself is not a risk.) A
risk event is something that may happen to the benefit or bad effect of the
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project. Risk events are most effective when they are described clearly and in
depth. A high-quality risk event description will describe the potential
occurrence and how it would influence the project. On a construction project,
the risk that a "wall will collapse, causing a delay" is different from the risk
that a "wall will collapse, killing someone."
The tools and techniques that are applied in risk identification are as varied as
the projects they serve. However, some groups of tool and technique types are
most commonly applied. According to PMl BOOK, they include documentation
reviews, information-gathering techniques, checklists, assumptions analysis,
and diagramming techniques.
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information (Aven, 2003; Grey, 1995). There are also assessments grading
certainty in scales such as rare-almost certain and low-extreme. They share
estimates of probability and consequence and the use of software tools to
manage the data. Scoring techniques (Grey, 1995) are developed checklists
that include the evaluation of both probability and the consequence of a risk
breakdown and those are used to produce risk matrices. This is a common
technique for risk assessment in construction projects that is widely used due
to its simple approach. As with checklists, the disadvantage is that some
aspects are forgotten. The bias that also needs to be considered is that
different evaluations will appear depending on the individuals carrying out the
assessment. Using models or simulation to assess risks is another approach.
Models are simply a breakdown of a complex project into manageable bits and
pieces, often by using mathematics to show how these bits and pieces are
linked together. The disadvantage of any model using figures is that the user
could easily be blinded by exact figures, without having any more precise
information than a more qualitative answer. It is important to remember that,
with models and simulations, the saying “what goes in is what comes out” is
very applicable.
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All risks have causes; sometimes multiple risks within a given project arise
from a common cause. In developing risk responses, the project team should
work to identify any common causes, as those causes may have common risk
responses. Generally, response strategies for threats fall into one of the
following categories:
• Avoidance
• Transference
• Mitigation
• Acceptance
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After risks have been identified, qualified, and quantified, and clear responses
have been developed, those findings must be put into action. Risk monitoring
and control involves implementing the risk plan, which should be an integral
part of the project plan. Two key challenges are associated with monitoring
and control. The first is putting the risk plans into action and ensuring that the
plans are still valid. The second is generating meaningful documentation to
support the process. The final step in the description of the risk management
flow chosen in this thesis involves ensuring the use of the prior steps. It is a
question of making sure that the identified risks, which are regarded as
important, are also controlled in the way that was planned in the response step.
In the control step, it is also possible to identify new risks that emerge and the
continuous process proceeds.
1. Socioeconomic factors
x Environmental protection
x Public safety regulation
x Economic instability
x Exchange rate fluctuation
2. Organizational relationships
x Contractual relations
x Attitudes of participants
x Communication
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3. Technological problems
x Design assumptions
x Site conditions
x Construction procedures
x Construction occupational safety
If each of the problems cited above can cause uncertainty, the combination of
such problems is often regarded by all parties as being out of control and
inherently risky. Thus, the issue of liability has taken on major proportions and
has influenced the practices of engineers and constructors, who in turn have
influenced the actions of the owners.
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CASE OF STUDY
Chapter three is the case of study, the different constructions have been built
in different place. This section tells the background of each project and
describes different type of risks occurred in construction projects.
This realistic project case is new educational building and multi-hall of our
school. This project is under construction. The gross of constructed floor area
is about 7600m2 for educational building and 1600m2 for multi-hall. The
educational building has been started from August.2010 before the schedule of
multi-hall, it has to be finished at July.2011.construction period is nearly 10
months. The multi-hall will be started at May.2011 and finished at
December.2011, and construction period will be nearly 7 months.
As the project client, our school have chosen the total contracting form of
procurement and offer a set of specific detailed brief. CASA A/S will be
responsible for the total co-ordination of the design and the construction. The
bid of price for construction works is approximately 87 million.
In order to get more realistic data, I visited building site of this project, and
had a short talk with him, it was my great honor. Clæs is a senior site manager
from CASA a/s, he has a 20-year experience of site management. He is
responsible for former projects of our school too. His duty of being building site
is to manage the operation of the whole construction phase, especially on
project’s quality, cost and schedule he also takes charge of the communication
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During the meeting with him, my research questions have been mentioned
that How can risk be identified, assessed , control during construction period?
These risks means the risks which have a bad effect on construction?
From the site manager’s aspects, there are four main risks that would affect
the construction period.
1. Safety risk
The first one would be safety risk. According to his opinion, this is the most
important thing that should be paid attention to. Based on plans for safety and
health, all the works should have its own precautions. The site manager has to
make a safe working environment for labors. If any accident happens during
the process, not only the schedule will be delayed but also the other areas will
be affected. Therefore, enough money is supplied to make sure the labor
safety on building site. At the mean time, site manager has to make and
implement a safety and health plan to assure the safety of the working process.
Manually inspections and supervision are also important.
company wisely to avoid short of material and delay on delivery. For site
manager, his responsibility would be contacting supplier and arrange the
material delivery and transfer.
This case study relates to the development of a factory to produce yeast in the
southern part of Vietnam. The client is a joint venture based on a 50:50 share
between a France company and a Vietnamese company. The site area is about
40,000m and the gross of constructed floor area about 6,200m2. The contract
sum for construction works is approximately US$10 million. The client informed
that a few consultants and project management firms were invited to submit
fee proposals. French architects, engineers and project managers were
selected as they came from the same country as the foreign client. Project
Planning and design started in late 2001. Due to some problems within the
joint venture and technical issues with the yeast manufacturing method and
process of operating the factory, construction only started in early 2005 and
was expected to be completed in late 2006. However, the project was only
completed in 2008.
through the above description of the background, it is obvious that the project
lasts two years more than the planned time. there must be several risks during
the construction phase such as political risk, legal Risk, financial and economic
risk, design risk, construction risk, etc, and these risks haven't been well under
control at last, thus, affecting project performance. The following part is the
main analysis of risks in construction phase.
The main construction related risk faced in this project was substandard quality
of materials and workmanship. The client's representative had to ensure that
the factory achieved similar quality as the client's other yeast production
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The project manager recounted that the contractors changed their site
management staff frequently. In response to this risk, the consultants required
that any change of personnel in the main contracting, nominated and domestic
subcontracting firms would need the project manager's approval.
In this project ,the equipment and materials are easily found in Vietnam.
Specialized items however had to be imported. The local main contractor had
to contend with long delivery time, delay in customs clearance and payment of
tax. There was a long lead-time for equipment to arrive from overseas, and
the main contractor overcame this risk by placing orders early. The delay in,
customs clearance is something that foreign firms should be aware of and build
this into their schedule. Import tax is complicated, and the rate depends on
the type of material and equipment, and when the items arrive in Vietnam.
Firms should therefore build in a large contingency sum for paying import tax
on materials and equipment.
Another construction risk faced by the project was unsafe work practices. The
project manager found that most of the contractors did not have safety
management systems in place. To manage this risk, the main contractor was
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required to engage a safety specialist, who must ensure that safe work
practices were adopted, and the working condition on site was safe.
Risks may exist throughout the project lifetime from inception to design,
bidding, construction and commission. From previous cases what we have
uncovered is that the main and critical the risks are occurring during
construction period. Actually, in the whole project process, there are other
risks such as political risk, legal risk, financial and economic risks, design risk,
cultural risk. Bureaucracy, inadequate legal framework, high inflation rate,
those issues are significant factors affecting both clients and contractors’
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When the scale of a project is huge, the construction period is quite long. there
will be lots of uncertain factors facing the whole project. At the beginning of
the construction project, the contractor and the owner have already foreseen
that certain factors causing the implementation of the project will definitely
occur during the implementation process. In order to safeguard each interest,
both sides make some special regulations when signing a contract. After
confirming the following factors, the construction period can be delayed
without paying for any fine to the clients undertaking project as long as the
performing units put forward the apply to units in charge of construction. The
factors include:
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2. Contractors will not be responsible for the damage brought by the work
stoppages because of blackout, short of water supply or gas supply that not
belong to.
3. Force majeure
4. There meet unpredictable obstacle or ancient tombs 、cultural relic、
quicksand which need to be dealt with during the foundation construction.
5. Supplier do not supply the materials in time, the clients do not pay
construction fund on time or any other conditions the client admits.
Then we can avoid direct damage caused by some uncertainties to the project.
In order to make sure that there is no effect on stake, the project manager
cared more about the cost of construction than the construction schedule. So
the study of construction period is still resting on the theory at present and
there is little strict estimate and control on the project period when practicing.
In fact, construction period affects construction expenses directly, delay of the
period lead to change of both direct expenses and indirect expenses and thus
affecting the overall expenses of a project. Therefore, we should evaluate
project construction period reasonably and estimate the construction period
within bounds for that it is quite important for the implementation and
completeness of the whole project.
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For that the construction project itself is a complicated system, there are many
influencing factors and various uncertainties result in different consequences.
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period are quite different. Operational risk is on the top, it is the most
uncertainty during the implementation of a construction project.
The follows are the description of the major uncertain factors influencing the
construction period.
1. The Nature risk. Open air、upper air and the underground are the major
building operation field, so the weather plays an important role on the
construction period and safety. For example, flood、earthquake、rainstorm ect.
3. Equipment failure.
(1) Uncertainty of construction technology: every building is unique and has its
own characteristic. Construction technology needs to be innovated
continuously because of the constant change of the design, and then the
construction technology will meet the risk of “first failure”.
(2) Equipment breakdown.(such as crane, Hydraulic jacks, hydraulic concrete
pumps, welding equipment, demolition devices)
4. Labor productivity.
(1) The quality of construction teams
(2) Mating between labor and equipment: there need many kinds of specialized
type of work cooperating in one project such as carpenter, mason, plumber ,
welder, and so on. Although the enterprises follow the regulations of local
building environment, when they employ workers, scale of project is still so
huge that it need large amounts of teams, therefore, it is hard to say if the job
mating with equipment is reasonable or not.
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5. Materials delay.
(1) Dissatisfactory material quality.
(2) Uncertainty of equipment supply: the major materials used in the
construction are steel、wood、concrete、sands and brick, etc. Although these
construction materials are rich in the domestic market, the big amount of
manufacturers, the different quality of the same material and misuse of
construction companies may affect the construction quality and cause direct
financial loss.
(3) Uncertain price of construction materials: the bid price of the contract in a
construction project includes material prices. The construction period is very
long and if the material prices increase, the income will decrease.
(4) Poor local transportation condition.
6. Soil situation, Geological exploration datum can’t give an overall and exact
explanation of the geology, so soil situation is an indispensable factor.
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to provide a most effective risk control and risk management of the project
period. Moreover, take the following relative measures if necessary:
1. Try to make sure that the project gets up to a high standard on processing
operation and organizational structure, more importantly on the qualifications
of contractor. including the human resource required by the total contractor,
the strong market competiveness, qualified design capacity, complete project
management system, powerful technical support, the ability to purchase
equipments and construction supplies , good communication skill of the
contracts, the ability to face risk, advanced enterprise culture, etc.
2. Raise legal consciousness. We must comply with the law when we sign
contracts, claim indemnity, protect rights, operate, withstand risks, financing
and settle accounts, etc.
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If risks become big threats that the enterprise could hardly bear and control to
the project, we should give up the contract and the project definitely to avoid
greater losses. Moreover, laying down the regulation that certain project
should be prohibited and avoiding the actions which may cause damage are
also good measures to evade risk.
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This report tells us what risks will occur during construction period for that
risks have an effect on the cost and schedule of construction projects. I make
my study and description mainly on the schedule. Then presenting what are
the major and common risks influencing construction period that I choose from
numerous factors. In the end, I got the answers like how to ensure as soon as
possible、 how to make reasonable analysis and how to have a good control of
these risks.
As part of the final semester work, I get down to my report and graduation
project at the same time. Considering the writing time and writing depth , it is
a challenge for me. Nevertheless, I still try my best to search literature and
references and have profound study. I treat a better final report as my pursuit.
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I have learnt a lot what I did not know before through finishing this report,
which enrich my learning experience and broaden my horizon of project
management.
As is known to all, there are still many risks, which need us to solve. Risk
management has a wide usage, for example, we can apply risk management
to the analysis and management of the existing and possible risks from the
design phase to the construction phase.
Based on the report, we can make further analysis and study about the risks,
which affect construction cost for the further study to ensure budget balance of
construction projects, and maximum value of clients such as the study of what
factors may cause cost change except extension of construction time. There is
one of aspects of risk management is worth doing it.
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References
http://civilengineerblog.com/risks-construction-projects/
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Appendices
Appendix A
EXAMPLE OF RISK ASSESSMENT PLANING
Appendix B
EXAMPLE OF RISK ASSESSMENT PLANING 2
Need some winter precautions Winter (1.11.09 to 31.03.10)
Weather (summer/Winter)
Winter (1.11.10 - 15.12.10
Summer (1.04.10. to 01.07.10)
Good access for big trucks NO- Missing some of the tender documents
Transport Is the tender materials okay?
Only 3.5 km from the Motorway Specifications Okay
Our trade (Ground, Soil, concrete Normal technology but more difficult than normal
and mounting element work RESOURCES Is it new technology?
Do we have the manpower/staff
No Other trade
Small risk = Level 1 & 2
Medium risk = Level 3 & 4
High risk = Level 5
→ 1 + 28 + 21 + 24 + 30 = 104
↘ 104 : 34 = 3
→ Risk for the project is 3