QUT Research Week 2005

Conference Proceedings
Edited by A. C. Sidwell 45 July 2005, Brisbane, Australia

COBRA the Construction Research Conference of the RICS Foundation AUBEA the Australasian Universities' Building Educators Association Conference 3rd CIB Student Chapters International Symposium CIB W89 Building Education and Research CIB TG53 Postgraduate Research Training in Building and Construction

A COLLABORATION OF:

Australasian Universities Building Educators Association

The Queensland University of Technology Research Week International Conference

4-8 July 2005 Brisbane, Australia

Conference Proceedings

Editor: A. C. Sidwell July 2005

Published by: Queensland University of Technology Australia

ISBN 1-74107-101-1

SOURCES OF RISKS IN CONSTRUCTION PROJECT DEVELOPMENT: AN EXPLORATORY STUDY

J.I.C Mbachu *1and K. Vinasithamby2
1

Institute of Technology & Engineering (Wellington Campus), College of Sciences, Massey University, PO Box 756, Wellington, New Zealand 2 School of Construction Economics & Management, University of the Witwatersrand, PO Box 20, Wits 2050, Johannesburg, South Africa

ABSTRACT
Determining which risks are likely to affect a project and documenting the characteristics of each, constitute a fundamental step in project risk management processes. By identifying and prioritising potential risk sources at the outset of a project development, pitfalls could be avoided thereby eliminating or minimising the consequences of adverse events. This paper presents the results of preliminary investigations aimed at identifying and categorising risk elements in construction project development, and exploring strategies for eliminating or minimising the identified risk sources. The exploratory survey method was used, which involved semi-structured interviews with a convenience sample of 35 consultants and contractors operating in the civil, environmental, mining, oil and gas sectors in Western Australia. The qualitative data obtained from the interviews were subjected to content analyses. Results show that sources of risks in construction project development could be broadly categorised into controllable (mainly due to acts or omissions of internal stakeholders client, consultants, main- and sub-contractors, and suppliers) and uncontrollable sources (arising from socio-cultural, macro and micro economic and global dynamics, legislative/statutory/political controls, force majeure and environmental constraints). Potential risk elements under each source are identified and prioritised in relation to their levels of significance. Effective strategies for efficient risk response development are also identified and prioritised.

Keywords: construction project development, risk identification, risk response development, risk management, risk sources.

INTRODUCTION
The development of a construction project is fraught with enormous risks (Ghosh and Jintanapakanont, 2004; Matthews, 2003; Mbachu, 2003). This is due to the uniqueness of every project, the uncertainties introduced by the project stakeholders, statutory or regulatory protocols and other intrinsic and extrinsic constraints. Risks in the construction project development could constrain the achievement of the key project objectives time, cost and quality targets. Inability to achieve set project objectives has far-reaching implications to all stakeholders in the project. To the client, it could mean added costs over and above those originally agreed upon, and
*1 J.I.Mbachu@massey.ac.nz (author for correspondence) 2 kannanvathani@gmail.com

Mbachu and Vinasithamby

less returns on investment. To the end-user, the increased costs or poor quality are passed on as higher prices, rental cost, prohibitive running and maintenance costs, etc. To the professionals, it could result in the loss of confidence reposed in them by clients. To the contractor, it could mean loss of profit through penalties for noncompletion, and negative word of mouth that could jeopardise his chances of getting further jobs, if found to be at fault. To the construction industry, the prevailing inability to achieve set project objectives due to risks could lead to a perpetuation of the bad reputation of time and cost overruns (Raftery, 1994), inability to procure project finance or procuring at higher costs due to added risks, clients disinvestments from the industry to other less risky investment sectors such as shares, bond or foreign investment (Mbachu, 2003). While harping on the consequences of risks, Cormican (1985) observes that the construction industry (UK) is always at the top of the bankruptcy league and the most risky of all sectors. This unhealthy development underpins the prevailing abandonment of projects and undermines the viability and sustainability of the construction industry. Risk identification constitutes a fundamental step in the project risk management process PMI (2000). It involves determining which risks are likely to affect the project and documenting the characteristics of each. This paper a report of the exploratory phase of an on-going study - aims to contribute to the risk identification process by exploring the nature and sources of risks in construction project development and ways of eliminating or minimising risk exposure. Project risk in context In a generic sense, risk is defined by the Concise Oxford dictionary as exposure to chance of injury or loss. A holistic understanding of risk in the project management context requires three perspectives on the concept of risk: Apriori (before-the-event) definition of project risk draws on Levin et al. (1982) probabilistic perspective. In this context risk is essentially the chance that what is expected may not be realized; it precludes the resultant injury or loss to be incurred if the actual differs remarkably from the expected. In the posteriori (after-the-event) definition, risk is assessed as the actual loss or injury suffered as a result of not meeting expected targets or objectives due to some controllable or uncontrollable circumstances. This definition is also one-sided; it precludes the complementary criterion of probability of occurrence. Both Chapman and Ward (2004) and Turner (1993) capture succinctly the apriori and posteriori perspectives of risk. The former define it as, the possibility of adverse departures from expectations (p.620). A holistic definition is offered by Turner (1993) in his definition of risk management as the process by which the likelihood of risk occurring or its impact on the project is reduced. Both definitions embody the probability of occurrence and the consequence of the departure from expectations. However, the PMI (2000) defines a risk event rather than risk as an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective (p.127). Though Chapman and Ward (2004) challenge PMIs definition of risk or risk event on the grounds of its incompatibility with their concept of risk efficiency perspective on risk management, this study adopts the PMI definition, since, as Chapman and Ward (2004) point out, it reflects and reinforces the common practice focus on risk events in

Sources of risks in construction project development: an exploratory study

project risk management. Further, the apriori perspective on project risk emphasizes preventive rather than costly remedial approach. Sources of risks in construction project development The PMI defines sources of risk as categories of possible risk events that may affect the project for better or worse. This connotation is adopted in this paper. Several studies have been undertaken to identify and classify risks in the construction project development process. Matthews (2003) identifies sources of construction project risks to include inaccurate project financial records and reports, excessive requirements and scope management issues, overcharges and costly practices, excessive change orders, project funding not aligned with project plans, government compliance issues, insufficient staffing and processes to deliver projects, project communication breakdowns and claims and disputes, among others. Turner (2005) categorises risks on projects into business and insurable risks. The former is mainly due to the uncertainties of estimates. Insurable risks on the other hand are due to the occurrence of an unplanned event, which could affect the project unfavourably. Drawing on the findings of several studies in the past, Ghosh and Jintanapakanont (2004) identified 59 risk factors in construction projects. Factor analysis on these constructs yielded 9 broad categories of risks in the context of an underground rail project. In order of influence, these are delay, financial and economic, subcontractors, contractual and legal, design, force majeure, safety and social, physical and operational risks. Baloi and Price (2003) drawing on the works of Ashley and Bonner (1987), Jahren and Ashe (1990), and Akinci and Fisher (1998) categorise risk factors affecting cost performance into organisation specific, global and acts of God. The organisation specific risks are internal risks related to the organisations resources and management including labour skills and availability, material delivery and quality, equipment reliability and availability, and managerial efficiency. Global risks are those that transcend the boundaries of the contracting organisation yet having large impact on it. These include estimator related, design related, level of competition, fraudulent practices, construction related, economic related and political related. The acts of God represent risks with rare chance of occurrence but could have huge negative impacts on projects if they occur. These include events such as heavy floods, landslide and earthquake. Ghosh and Jintanapakanonts categorisations of project risk and those of other researchers as gleaned from the relevant literature to date do not easily provide for proper risk allocation in line with the principal areas of roles and responsibilities in the project development process. Li (2003) and Li, et al. (2004) categorisations constitute the closest attempt to the structure envisaged in this study. Li (2003) and Li, et al. (2004) place risks in the private finance initiative (PFI) projects into macro, meso and micro levels. Macro level risks are associated with political and legal conditions, economic, social and weather conditions. The risks at

Mbachu and Vinasithamby

the meso level are internal to the project and represent the implementation problems arising from project demand or usage, location, design and construction, and technology. On the other hand, micro level risks exist in stakeholder relationships in the procurement process. Such risks include organisation and co-ordination problems, inadequate experience, communication and lack of commitment. Bennett (1985) identifies four principal roles and responsibilities in the project development process: the client system, design, management and construction. These constitute the internal/ controllable sources of project risks. The external/ uncontrollable sources include the statutory/ regulatory protocols, economic and globalisation dynamic, unforeseen circumstances and socio-cultural issues (Nkado and Mbachu, 2002). This study adopts this categorisation as a conceptual framework for the research design, since it enables the various controllable risk sources to be properly allocated to the key areas of responsibilities in the project development process so that those responsible could take appropriate measures to eliminate or minimize the risks being fully aware of the implications. Adequate contingency plans could be devised to cater for the uncontrollable risk sources in line with their relative levels of influence.

METHODOLOGY The exploratory survey method was used, which involved semi-structured interviews with a convenience sample of 35 clients, consultants and contractors involved in the civil, environmental, mining, oil and gas sectors in Western Australia. In all, the interviewees comprised 30 clients, contractors, design, cost and construction project management consultants (six each), and five subcontractors. The qualitative data obtained from the interviews were subjected to content analyses with a view to establishing the frequencies of mentions of each factor within a subset. The factors mentioned or alluded to, as significant risk elements within each subset by more than 50% of the interviewees will be incorporated into the questionnaire to be used for quantitative data gathering at the second stage of the study. At the second stage, respondents drawn through stratified random sampling from the various sampling frames of clients, consultants and contractors will rate the levels of influence of the identified risk elements. Multi-attribute methods (Chang and Ive, 2002; Nkado and Mbachu, 2002) and correlation tests will be used to analyse the quantitative data.

RESULTS

Sources of risks in the construction project development process From the preliminary investigations carried out, sources of risks in the construction project development process could be more meaningfully segregated into two major groups: Internal sources include risk elements, which fall within the control of clients, consultants and contractors. External sources, on the other hand, include risk elements which are not within the control of key stakeholders. Figure 1 highlights the subcategories of the internal and external risk sources as confirmed during the pilot interviews.

Sources of risks in construction project development: an exploratory study

Sources of construction project risks

Internal (controllable) sources: Client system Consultants o Design o Cost management o Construction project management Contractors and subcontractors Suppliers

External (uncontrollable) sources: Economic and globalisation dynamics Unforeseen circumstances Government/ statutory/ political controls Environmental constraints Health and safety issues outside the control of the project team Socio-cultural issues

Figure 1: Sources of risks in the construction project development The interviewees perceptions of the constructs underlying each sub-category were explored. Content analyses were used to establish the frequencies of mentions of each risk factor with a view to establishing the significant factors (i.e. those mentioned or alluded to by more than half of the interviewees as being significant). Table 1 in the Appendix presents the results of the content analyses for the controllable risk sources; while Table 2 presents the results for uncontrollable risk sources.

Risks originating from the client system Eight risk elements were established as being significant under this sub-category (Table 1); the most frequently mentioned being frequent and late changes at critical stages of the design and construction processes. Interviewees perceived that these changes result in scope modifications and variations. Baloi and Price (2003), and Kaming et al. (1997) also found that change orders could contribute significantly to cost and time overruns. It is surprising that insufficient funding or delayed payments, though perceived to be significant, were not the most frequently mentioned risk factors attributed to the client system, considering their impact on the contractors cash flows. Risks originating from main contractors and subcontractors Eleven risk factors were established to be significant under this category. Ineffective leadership and inadequate supervision were the most frequently mentioned risk factors attributed to the main- and sub-contractors. Interviewees believed that these inadequacies are responsible for poor quality of work, re-work and associated losses. These findings agree with those of Ghosh and Jintanapakanont (2004) who also observed that the complexity in coordinating subcontractors (in large underground rail

Mbachu and Vinasithamby

projects) is a source of potential risks, because delay in one area could cause delays in other areas. Risks originating from the suppliers Under this category, the most frequently mentioned is the delay in the supply of equipment, materials and components. However, it is suspected that the overwhelming perceptions of the contractors and subcontractors on this issue could be as a result of attribution theory. Attribution theory suggests that the individual might blame external circumstances for his/her own inadequacies, but blame the failings of others on personal inadequacies (Atkinson, 1998). Risks originating from consultants Incomplete design information and delay in supplying information required by contractors on site were the most frequently cited risk elements by the interviewees. However, this contrasts with the findings of Chan and Kumaraswamy (1996) who recorded low rankings for slow information flow and delays in design information as contributors to delays in building projects.

Uncontrollable risk sources Table 2 shows that the uncontrollable risk sources as identified in the study could be further broken down into five sub-groups: economic and globalisation dynamics, unforeseen circumstances/ force majeure, government/statutory/political controls, environmental constraints, and health and safety issues which fall outside the control of the project team. Though socio-cultural issues were not perceived as significant source of project risks in the Western Australian context, they were included for confirmation/ disconfirmation in the questionnaire survey. It is evident that the economic regulations and international markets earned low frequencies of mentions because they could be included in the economic and globalisation dynamics. Under the uncontrollable risk sources as shown in Table 2, economic and globalisation dynamics featured as the sources of risks which were most frequently mentioned or alluded to by the interviewees. The risk elements in this group include foreign exchange fluctuations, inflation, rising oil prices and the global economic trends. Perhaps this justifies the submissions of Baloi and Price (2003) that, construction organisations efficiency and effectiveness largely depend upon how managers scan the external project environment, identify the critical factors and accordingly adapt their organisations (p. 264).

Strategies for eliminating or minimising the identified risks The exploratory survey also focused on eliciting strategies for eliminating or minimising the identified risks sources and elements. Interviewees responses on this were analysed and presented in Table 3. Due to the need to conserve space, only the effective strategies (i.e. those having more than 50% frequencies of mentions) were highlighted in the table. The most frequently mentioned strategy for eliminating or

Sources of risks in construction project development: an exploratory study

minimising the identified risk sources include proper articulation of client needs and requirements during the brief, clear and definite scope definition, and zero or minimal changes especially at critical stages of the project implementation process. This suggests that the bulk of the responsibilities for risk elimination or minimisation is perceived to rest with the client system. This lends credence to the assertions of Rowlinson (1999) that clients role in the procurement system is strategic: the client body sets the objectives and the construction industry turns those objectives into reality. As such, the strategic decisions made at the very outset of a project are the most crucial to a successful outcome (p.33).

CONCLUSIONS
This paper has explored the sources of, and strategies for minimising, risks in the construction project development process. Results show that risks in this context could be broadly categorised into internal and external sources. The internal sources or risks, which fall under the control of clients, consultants and contractors, include those risk elements emanating from their acts or omissions in the project development process. The most frequently mentioned risk elements under the client sources include frequent and late changes at critical stages of the design and construction process, which mainly result in scope modifications and variations. Poor leadership and inadequate supervisions on the part of contractors and subcontractors are the most frequently cited risk elements which could result in poor quality, low productivity, re-work and losses. The most frequently mentioned risk elements attributed to the suppliers are the delays in the supply of equipment, materials and components. For the consultants, incomplete design information and delay in supplying information required by contractors on site are the most frequently cited risk elements. External risk sources, which are not within the control of clients and the project team could be segregated into economic and globalisation dynamics, unforeseen circumstances/ force majeure, government/statutory/political controls, health and safety risk elements (which fall outside the control of the project team), and sociocultural issues. In planning the risk response development for a project as detailed in the Project Management Body of Knowledge (PMI, 2000), it is recommended that risk avoidance (involving the elimination of a specific threat by eliminating the cause) should be applied to the controllable risk sources; while risk acceptance through adequate contingency plan should be applied to the uncontrollable risk sources. Mitigation involving a reduction of the probability of occurrence could be applied to some elements of the controllable risk sources through such means as proper supervision. On the other hand, mitigation through the procurement of insurance policies could be applied to some elements of the uncontrollable risk sources that are insurable. Further studies on the subject will include a quantitative survey of the representative samples of the target frames delineated for the study. Expected outcome of the study will include the ranking of the risk elements within each subset with a view to determining the levels of influence and frequencies of occurrence of the identified risk

Mbachu and Vinasithamby

elements. The outcome is expected to provide a framework for effective risk management along the lines of the key areas and responsibilities of parties actively involved in the project development process.

REFERENCES
Akinci, B. and Fisher, M. (1998) Factors affecting contractors risk of cost ovrerburden. Journal of Management in Engineering, 14(1), pp. 67-75 Ashley, D. and Bonner, J. (1987) Political risks in international construction. Journal of Construction Engineering and Management, 113(3), pp. 447-467 Atkinson, A. (1998) Human error in the management of building projects. Construction Management and Economics, 16, pp. 339-349 Baloi, D. and Price, A.D.F (2003) Modelling global risk factors affecting construction cost performance. International Journal of Project Management, 21, pp. 261269. Bennett, J. (1985) Construction Project Management. Butterworths, London Chan, D.W.M and Kumaraswamy, M.M. (1996) An evaluation of construction time performance in the building industry. Building and Environment, 31(6), pp. 569-578 Chang, C. and Ive, G. (2002) Rethinking the multi-attribute utility approach based procurement route selection technique. Construction Management & Economics, 20 (3), 275-284 Chapman, C. and Ward, S. (2004) Why risk efficiency is a key aspect of best practice projects. International Journal of Project Management, 22(8), pp. 619 - 632 Cormican, D. (1985) Construction management: Planning and finance. Construction Press, UK. Ghosh, S. and Jintanapakanont, J. (2004) Identifying and assessing the critical risk factors in an underground rail project in Thailand: a factor analysis approach. International Journal of Project Management, 22(8), pp. 633-643 Jahren, C. and Ashe, A. (1990) Predictors of cost overrun rates. Journal of Construction Engineering and Management, 116(3), pp. 698-713 Levin, R., Kirkpatrick, C. and Rubin, D. (1982) Quantitative Approaches to Management, 5th Edition. McGraw-Hill. Li, B. (2003) Risk management of public/ private partnership projects. Un-published PhD Thesis. School of the Built and Natural Environment, Glasgow Caledonian University, Glasgow, Scotland. Li, B., Akintoye, A., Edwards, P.J. and Hardcastle, C. (2004) Risk allocation preferences in PPP/PFI construction projects in the UK. Proceedings of the International Construction and Building Research (C0BRA) Conference, 7-8 September. Royal Institution of Chartered Surveyors (RICS), Leeds, UK. Matthews, C. (2003) Managing construction risk The case for independent project assessment. Re: Business (February). Pricewaterhousecoopers International Limited . Retrieved on 19 March 2005 from: http://www.pwcglobal.com/extweb/newcolth.nsf/docid/519B786FB8B0B1C385 256CBD00577549 Mbachu, J.I.C (2003) A critical study of client needs and satisfaction. Unpublished PhD Thesis. Faculty of Economic and Building Sciences, University of Port Elizabeth, South Africa.

Sources of risks in construction project development: an exploratory study

Nkado, R. N. and Mbachu, J I C (2002) Factors Constraining Successful Building Project Implementation in South African Building Industry: Construction Project Managers Perspectives. Proceedings of the 1st International Conference of the CIB W107, Stellenbosch, 11th 13th November, pp359-368. Nkado, R. N. and Mbachu, J. (2001) Modelling Client Needs and Satisfaction in the Built Environment, Proceedings of the ARCOM Conference. Salford, UK, (5th 7th September). PMI (Project Management Institute) (2000) A Guide to the Project Management Body of Knowledge (PMBOK). PMI, Upper Darby, PA. Raftery, J. (1994) Risk analysis in project management. E & FN Spon, London. Rowlinson, S. (1999) A Definition of Procurement Systems. In: S.M. Rowlinson and P. McDermott (eds.) Procurement Systems: A Guide to Best Practice in Construction. E &FN Spon, London, pp.27 - 53. Turner, J.R (2005) The role of pilot studies in reducing risks on projects and programmes. International Journal of Project Management, 23(1), Elsevier Science Direct, pp. 1-6. Turner, J.R. (1993) The handbook of project based management: improving the processes for achieving strategic objectives, 1st edition. McGraw-Hill, England.

Mbachu and Vinasithamby

APPENDIX
Table 1: Internal/ controllable sources of risks in construction project development
*FOM: Frequency of mention: Number of interviewees (out of a total of 35) mentioning or alluding to the risk element as being significant Internal sources of risks Of client origin: Frequent and late changes at critical stages of the design and construction processes resulting in scope modifications and variations Unrealistic expectations: require the project to be constructed too quickly and defects-free, yet at minimal costs Inability to comprehensively articulate own and users' needs and requirements, resulting in poorly defined scope of work Delay in decision making, often due to conflicts in multi-stakeholders' interests or bureaucratic processes Strong inclination to 'lowest tender', resulting in contractor's tendency to frivolous practices and claims to recover losses Insufficient funding / delayed payments resulting in contractor's cash flow problems or insolvency Failure to commission, or give sufficient time for, proper engineering and economic feasibility studies prior to design development Undue interference with contractors' works progress Gap in project management role and responsibilities, resulting in poor project communication and interface management Poor project relation; "Them" and "Us" attitude: not willing to work together with the contractor towards the common goal. Of main- and sub-contractors' origins Ineffective leadership and inadequate supervision and control of own and subcontractors' labour force resulting in poor quality of work, low productivity, rework and losses Poor financial management of the project resulting in cashflow problems and insolvency Poor employer relationship management; inability to management proactively changes made by the employer. Poor planning and inefficient scope management Inefficient wastage management; poor project cost control Under pricing, resulting in excessive claims, rivalry and losses Inability to cohere with the project team for effective synergic relationships; adversarial relations with the other stakeholders, especially contractor-subcontractor disputes. Negligence, poor management of occupational health, safety and the environment, resulting in disruptive and costly accidents and penalties Over extending (accumulating too much jobs beyond capacity level), resulting in conflicting priorities and lack of focus Lack of adequate resources (financial, personnel and equipment) for efficient execution of the contract. 30 86 *FOM No % 33 27 26 25 25 24 20 20 15 5 94 77 74 71 71 69 57 57 43 14

A 1 2 3 4 5 6 7 8 9 10

Significant factors: FOM > 50%

B 1

2 Significant factors: FOM > 50% 3 4 5 6 7

27 27 26 25 24 23

77 77 74 71 69 66

8 9 10

21 19 18

60 54 51

Sources of risks in construction project development: an exploratory study

Table 1: Internal sources of risks (continued)

FOM Internal sources of risk 11 12 13 14 Of main- and sub-contractors origins (continued): Poor management and contract administration; poor management of labour / industrial relations Inadequate contract documentation; poor communication system Poor inventory management, late ordering of materials and components, poor storage practices Inadequate knowledge of the site conditions and environs (soils, environment, weather, local people culture and habits etc..); lack of experience in current job. Of suppliers' origins Delays in the supply of equipment, materials and components Inability to fulfil supply obligations as and when needed Insistence on upfront payments; unwillingness to deliver to some remote sites Supply of substandard or defective materials / components Uncooperative attitudes resulting in disruptive disputes and litigations Misinterpretation of material specifications Of consultants' origin Incomplete design information; delay in supplying information required by contractors Design errors and frequent changes resulting in variations, claims and cost escalations Not taking into consideration in the designs, construction methods familiar to the contractor; complex designs and shapes presenting 'buildability' / 'constructability' problems Lack of understanding of client's brief; designs not adequately addressing client priority needs resulting in frequent changes Poor scope definition and management Inability to conduct thorough investigations prior to designs and planning; erroneous assumptions Poor coordination Inability to resolve technical issues promptly. Unclear roles & responsibility Inability to provide follow-up services: e.g. User satisfaction and defects surveys beyond defects liability period and leveraging the lessons learnt in future jobs as per "learning organisation" Pursuing too many jobs at the same time beyond capacity levels; conflicting interests Poor information documentation Lack of experience on current job Unprofessional conducts; incorrect / unreliable advice No 18 16 15 10 % 51 46 43 29

Significant

C 1 2 3 4 5 6 D 1

32 26 25 20 15 5

91 74 71 57 43 14

32 27 26

91 77 74

Significant factors: FOM > 50%

2 3

4 5 6 7 8 9 10

24 22 22 21 19 18 17

69 63 63 60 54 51 49

11 12 13 14

16 15 14 14

46 43 40 40

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Table 2: External/ uncontrollable sources of risks in construction project development

*FOM: Frequency of mention: Number of interviewees (out of a total of 35) mentioning or alluding to a particular strategy as being effective *FOM External sources of risks No % Macro- and micro-economic & globalisation dynamics: foreign exchange 34 97 fluctuations, inflation, interest rates, oil prices, global economic trends, etc Force majeure/ unforeseen circumstances: inclement weather, underground conditions, etc Government/ statutory/ political controls: delays by local authorities (granting permits, undertakings, etc); too prescriptive and overbearing enforcement of statutes by local authorities; taxation; rates; changes in government legislations and policies; politics; etc Environmental constraints: geological / topographic limitations; weather, working space limitations, etc Health and safety issues outside the control of the project team: site accidents, epidemics, HIV/Aids, etc Economic regulations: Import duties & import restrictions Socio-cultural issues: labour unrest / industrial actions, acts of terrorism, vandalism, etc International market: rapidly shifting markets for products/minerals/consumption of oil & gas, leading to economic obsolescence before end of project. 30 28 86 80

Significant factors: FOM>50%

1 2 3

4 5 6 7 8

25 25 17 14 10

71 71 49 40 29

Table 3: Strategies for eliminating or minimising the identified project risks

*FOM: Frequency of mention: Number of interviewees (out of a total of 35) mentioning or alluding to the risk element as being significant Strategies for eliminating or minimising the identified project risks Client needs and requirements should be well articulated during brief; scope definition should be clear and definite, and should not change frequently, especially at critical stages of the project implementation process Install efficient communication network ensuring free flow of needed information and notices amongst all stakeholders Adopt efficient contract and procurement strategies that ensure win-win outcomes for all. E.g. partnering and project integration systems work well for all projects; adopt a fair and workable contract to protect all parties Detail risk management plan ( workshop with all the stakeholders); risk analysis for each project through risk management programme embedded in the project management and control processes; scan the economic environment to track potential risk sources; build in reasonable contingencies; transfer risks to parties who can best manage them, with ample rewards Do not start design & construction until scope is well defined and documented Quality planning through all phases Avoid contract staff with limited company loyalty. Build strong project team Adopt a proactive approach to disagreement / dispute resolutions. *FOM No % 35 10 0 29 83

2 Effective strategies: FOM > 50%

28

80

28

80

5 6 7 8

27 26 25 24

77 74 71 69

Sources of risks in construction project development: an exploratory study

Table 3: Strategies for eliminating or minimising project risks (continued)

9 In case of force majeure, client and contractor need to look at the possibility of project acceleration with compensation to complete on time. Reasonable contingencies should be in place in terms of float in the schedule or the use of more efficient equipment to complete the project on time Decision making should be prompt and methodical; stick to decisions Implement a workable project evaluation and review procedures; apply effective project control principles Set up mile stones; make an allowance for time overrun in form of ample floats / buffer times in activity durations A proactive safety management plan should be in place to avoid site accidents. Keep records of challenges, innovative approaches and lessons learnt from current project to inform decisions and strategic management of future projects; avoid doing the same things / mistakes again and again in the projects Adequate incentives for employees to beat the budget; meeting the budget not well enough. 23 66

10 11 12 13 14

20 20 20 19 19

57 57 57 54 54

15

18

51