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NICMAR

NICMAR INSTITUTE OF CONSTRUCTION MANAGEMENT AND RESEARCH


SCHOOL OF DISTANCE EDUCATION

ASSIGNMENT

NICMAR/CODE OFFICE

1. Course No.

2. Module

3. Course title

4. Candidate Name

5. Reg. No.

6. Date of Dispatch

PGPM 31

Project Risk Management

7. Last Date of receipt :

ASSIGNMENT
For the successful implementation of a project, it is essential is that persons involved in

its implementation be sensitive to the risk involved in the project and formulate the most suitable
structure for the management of such risks. There are certain variables and uncertainties are
common to most of the infrastructure projects. Many risk mitigation techniques are applied to
infrastructure projects. Discuss in details the risk management in construction with special
reference to any project currently in progress with your company.

SYNOPSIS
Introduction
Risk identification in the project
Types of risk
Risk mitigation

Risk assessment in a project


o Scope of the work
o Risk assessment sheet
o Risk control measures
Conclusion

INTRODUCTION
The project of any industry depends upon the following uncertainties
1. Time
2. Money
3.

Manpower and

4.

Resources

It is also a key factor to note that as the project value increases, the risk also increases. But as
project duration decreases, the risk also increases. Thus on the successful running for a project,
optimum duration and optimum utilization of the resources are the most important to be
considered. Thus risk minimization is the most key role for project profit maximization by any
project manager.
In the present assignment, I have tried to assess the risks involved in the project at which I
have involved in my career. I have also explained the risk mitigation techniques undertaken
by us to reduce the risk in the project.

RISK IDENTIFICATION IN THE PROJECT


Risk identification occurs through each of the two phases of project development:
1. Planning
2. Construction
1. Planning phase
In the planning phase risk is been identified from one of the following methods,
1.1 Brainstorming

It is an effective method. Brainstorming can range from a small informal project team.

Effort for simpler projects to a full-blown CEVP workshop and

Effective brainstorming requires a skilled Facilitator, working together with the project
team and specialists who can bring additional expertise.

1.2 Checklists and/or Questionnaires to specialty groups

Checklists/questionnaires are a quick and easy-to-use technique but limited in nature;


they only deal with the items on the list.

Each project is unique; hence a standard list will often not capture the project specific
risks of most concern.

Nonetheless a checklist/questionnaire can spark thinking prior to a more formal


brainstorming process

1.3 Examination of past similar projects


Lessons learned from past projects help us to avoid repeating mistakes; using past
examples requires prudent and objective judgment, since a previous project may be similar but is
nonetheless different because each new project has unique requirements and features, including
uncertainties and risks
1.4 Combination of above methods and/or others
It is quite likely that for most projects a combination of the above methods will be used to
identify risks. The important thing is that once identified the risks are properly documented

2. Construction Phase
Among the most common risks encountered during the construction of a project by a civil
engineering contractor under a standard type of construction contract, are the following:
1. Design errors, quantification errors.
2. Design changes found necessary, or required by the employer.
3. Unforeseen physical conditions or artificial obstructions.
4. Unforeseen price rises in labour, materials or plant.
5. Theft or damage to the works, or materials and equipment on site.
6. Weather conditions, including floods or excessive hot weather.
7. Delay or inability to obtain materials or equipment required.
8. Inability to get the amount or quality of labour required, or labour strikes.
9. Errors in pricing by the contractor.

RISK MITIGATION

The following are the ten ways to mitigate risk in construction projects
1. Ensure the adequacy of project funding
2. Obtain more geotechnical information
3. Conduct constructability reviews
4. Set realistic contract performance times
5. Work & rework cost information
6. Introduced phase pricing
7. Pre-plans for permits, utilities & zoning
8. Pre-defined rates, equations & procedures
9. Use experienced project personnel
10. Use the contracting process as a risk avoidance measure
The above techniques are the most commonly used to prevent the risk in any project.
Ensure the adequacy of project funding
Certainly, all parties have a legitimate concern that there will be sufficient funds to design
and construct the project. Owners also need protection against the risk of running out of money.
such as that provided by a termination-for-convenience clause that expressly limits or precludes
recovery of anticipated but unearned profits.
Furthermore, owners need to understand, in advance, that changes and cost increases are
virtually inevitable. Accordingly, a reasonable contingency should be incorporated into the
budget to deal with inevitable changes and unexpected omissions.
Obtain more geotechnical information
It should go without saying that the more information a contractor has about subsurface
conditions. The more accurate the bid - and less likely will be claims for differing site conditions.
There is a decided trend toward (1) investing a little more money during project planning
and design for the purpose of obtaining more geotechnical information and (2) making all of the
geotechnical information available to contractors.

Some owners and their counsel will argue that this open disclosure will lead to claims if
the geotechnical Information is wrong. This misses the basic point that if the bid was based on
less- than-complete information, that becomes the bargain.
Accordingly, if the actual underground conditions are worse than the geotechnical
information provided. The owner should pay because, if the contractor had been advised of the
more severe conditions, it certainly would have increased its bid.
Conduct constructability reviews
Contractors sometimes complain that the designs they are required to follow are not
constructible or practical. If this is the case, there may be delays and additional costs incurred in
coming up with alternatives. Even if the design is constructible the owner may have to pay more
to get the same results. By having the plans and specifications reviewed for "constructability"
before contractors bid on them, owners have been able to modify the designs and thereby make
construction easier.
Set realistic contract performance times
If the contract performance time is insufficient. either it will cost more to do By having
the plans and specifications reviewed for "constructability " before contractors bid on them,
owners have been able to modify the designs and thereby make construction easier.
Either scenario is disadvantageous to the owner. Owners are avoiding these problems by
obtaining contractor advice and input on setting a realistic time to allow for construction of
a.given project
Work & rework cost information
The owner can require as a contract obligation that the contractor make full disclosure of
its cost estimates for all aspects of the work. i.e . procurement of materials. subcontractors selfperformed work and even overhead and profit. In doing so, the owner and its staff can better
assure themselves that no significant mistakes have been made in pricing .the work and that
allowances and alternatives are reasonable.
Introduced phase pricing
As the design is being developed, each phase of the design can be provided to the
contractor for review, analysis and submission of progressive cost estimates. Obviously
contractors may talk at this intrusion into their pricing domain.

However, in order to win the project, the contractor will be more likely to agree to this
process which in the end will reduce the likelihood for cost-overrun claims.
Pre-plans for permits, utilities & zoning
Given the various regulatory requirements that have to be complied with in the course of
designing and constructing a project, it is obvious that, if these requirements are not known and
considered in advance delays will result.
To avoid this astute owners and their engineers are now beginning to specifically identify
permitting requirements in advance of bidding and signing the contracts
Pre-defined rates, equations & procedures
In order to eliminate many issues from the contract administration phase, smart owners
will specify clear and accurate formulae or methods to predetermine values for disputable items.
Home office overhead rates, although subject to wide variation within the industry, can be preset
and a contract generally accepted manual for determining the equipment rates to be used in,
pricing change orders.
It is equally important for the contract to contain very clear provisions with respect to
how change orders will be processed and what information should be included in a request for
change orders.
The same is true for farceaceount provisions; which would enable the contractor to be
paid on a timely is for disputed work, pending negotiation of a change order modification. Also
give some consideration to including as a unit price. A per diem value for extended project time.
In the event of an owner-caused delay.this value could be included in any cbange order
carrying with it entitlement to an extension of time.
Use experienced project personnel
No matter how enlightened the management and allocation of risk .the project personnel
(i.e.. people) will still have to design. Build and adminiSter the project, Experience counts,
particularly for big projects With a construction boom underway. Design and construction firms
are often maxed out in terms of experienced project managers and superintendents.
Notwithstanding this reality. no design flrm or contractor wants to lose a good job.
Consequently, many projects are being led and managed by inadequately trained and
inexperienced personnel. which inevitably leads to problems. claims. disputes and terminations.

No owner, who has the leverage in a megaproject to do so. should pass up the opportunity to
investigate the credentials and backgrounds of the key parties' personnel and require, as a matter
of contract, that only experienced project managers and superintendents will run the high-profile
project.
Use the contracting process as a risk avoidance measure
The contract documents are an early opportunity to anticipate. define and deal with
potential issues and thereby avoid disputes.
Essentially. the contracting process is a "what if' exercise, whereby the parties attempt to
determine what may go wrong, what issues may arise between the parties, and the best way to
resolve these challenges, in advance, by informed and enlightened risk allocation. This approach
is of course, the American way of doing things, and at least two downsides to a comprehensive
contract are typically a lengthy document and sometimes lengthy negotiations.

SCOPE OF THE PROJECT


Name of the project

Metro Rail Project Proposal

Location

Mumbai, India

Project definition

The Government of India has decided the increase

the infrastructure facility in India, so as to increase economic growth of the nation by


increasing the import & export facility.
Project duration

3765 days

Type of contract

Item rate contract

Project funding

Finance arranged by the Government of India

Design responsibility

Renovation of existing structures needs to be

Price fluctuation

Not allowable

Extension of time

Not permitted

Liquidated damages

2% of the contract value per week of the project

considered

Limit upto 15% of the contract value