1.1.
BACKGROUND
than any other time. Customers anticipate more, above all, they do not expect
surprises, which makes them prone to embark on litigation once projects fail, these
rules cause the project managers in Nigeria as well as globally to contemplate
additionally on the connection between the latest risks and challenges as well like
the fulfillment of the job that they are handling and compelled them to inquire
What are the risk factors in the construction industry in Nigeria and what is the
importance of each of these factors in terms of the projects success?
identification, analysis and assessment, and that is why this research is important,
where it will showcase risk management as a critical success factor in the
construction industry in Nigeria.
1.6. AIM
This study aims at launching the risk management in construction projects from the
contractors and owners views and describes major risk factors and their impact on
the projects.
Determining key risk factors that can hinder construction operations by going
over the literature and through the contributions that can be made by the
industry experts, i.e. contractors and owners.
Analyzing the seriousness and the distribution of each observed risk factor
based on the views of contractors and owners.
Assessing the intensity as well as the distribution of all observed risk factors
Only contractors who are registered with Alhairi Group will be addressed by
the study due to time constraints.
2 LITERATURE REVIEW
2.1. INTRODUCTION
The Nigerian construction sector is evolving rapidly over the last 20 years;
organizations are confronted with greater risk and uncertainty than ever before.
Investors demand more, above all, they never expect surprises, so are prone to
embark on litigation if things go wrong. Risk management has become a critical
success factor for any project. Risk in construction has become the focus of
attention as a result of time and cost overruns incurred by construction projects.
This chapter reviews the literature that are related to relevance of risk management
in construction projects, with an analysis some techniques and risk response
practices.
The risk event (A) is a sporadic event that is associated with any project decision
(Titarenko, 1997).
Uncertainty is a scenario wherein several prospects are present and which of them
has taken place, or will take place, is unspecified. Looking at all risks are uncertain
definitely not all uncertainty is risky (Flop, 2003). Risks and uncertainties depict
every event in production, services and exchange. They influence every the basic
elements that define planning, implementation, monitoring, adjustment, behavior
and specify choices, and create decisions (Mantoos, 2003). Any definition of risk will
possess a component of subjectivity, based on the nature of the risk as well as what
is used.
Guarantee is present only if one can identify precisely what will occur while the
period that covered by the decision. This is not commonplace in the construction
sector (Flanagan & Norman 1993). Other authors see no distinction between risk
and uncertainty; Education and Learning Wales (2001) defined risk and uncertainty
as follows: Dandon & Flenn, 2002
In certain cases, the risk does not essentially denote the possibility of bad
outcomes. There may be the possibility of good outcomes, and it is essential that a
definition of risk contains some reference to this point.
Authors like Abassan & Orman (1996) differentiated between risk and uncertainty.
Risk has place in calculus of probability, and lends itself to quantitative term.
Uncertainty, by distinction, can be defined a scenario where there are no past data
or earlier record associated with the scenario that is evaluated by the decision
maker. ADB, (2002) stated that in essence, risk is a capacity susceptible to empirical
evaluation, and uncertainty is of a non-quantifiable form. Hence, in a risk scenario
one might point out the possibility of the accomplished value of a factor falling
within depicted limitstypically depicted by the variations around the average of a
probability calculus. However, in circumstances of uncertainty, the variations of a
factor are such that they cannot be depicted by a probability calculus.
The Royal Society (Baleen, 2000) considered risk as the probability that a specific
unfavorable activity happens in a stipulated time-frame, alternatively effects from a
specific problem. The Royal Society furthermore says that due to a probability in the
inclination toward statistical principles risk obeys all the basic laws merging
probabilities. The challenge with statistical theory therefore is; it is merely always a
presumption, or an approximation of what is to take place.
Management issues.
High gearing.
Resistance to change Accounting,
Financial risk.
Legal risks.
Political risks.
Social risks.
Environmental risks.
Communications risks.
Geographical risks.
Geotechnical risks.
Construction risks.
Technological risks.
Operational risks.
Demand/product risks.
Management risks.
ultimate judge, but indoor objectives ought to be to a greater level as against client
demands. Risk management as a collective or centralized process ought to achieve
the following goals (Brimstol, 1995):
Identity issues. Cheng, 2001
Design
Inflation
Exchange rate fluctuations
Funds availability
Tenderers price
Physical
Equipment damage
Theft
Labor injuries
Material damage or theft
Acts of God
Earthquake
Flood
Landslide
Figure 2.1. Risk Categorization List, adapted from (Dandon & Flenn, 2002)
David and Grantt (1997) defined a risk management process made up of nine
stages:
1. Define the fundamental parts of the project;
2. Concentrate on an organize strategy to risk management;
3. Detect where risks may develop;
4. Design the details about risk assumption and relationships;
5. Allocate ownership of risks and responses;
6. Calculate the degree of uncertainty;
before, instead of after, they develop into drawbacks or claims (Dandon & Flenn,
2002).
Techniques and Technology
Organizational
Structure
Figure 2.2. Conceptual Model of Construction Risk Management, (Dandon & Flenn,
2001)
2.5.2. RISK IDENTIFICATION
Behavioral Responses
This is the foremost phase in risk management also it involves garnering every the
possible risks that might develop within the project. It is generally known that of all
the phases of risk management process, risk identification phase carries the
greatest influence on the precision of any risk assessment (David, 1998). To aid risk
identification, risks could also be generally grouped to be manageable and
unmanageable risks (Flanagan and Norman, 1993). Moreover, manageable risks are
those risks which vendor undertakes consciously and whose result is, partially,
within our immediate influence; and unmanageable risks as those risks which we
cannot control (Charles & Renda, 2002). Risk identification involves deciding which
risks tend to influence the project and documenting the traits
of each. Risk identification is not a single activity; it ought to be carried out
consistently all through the project (PMI, 1996). The identification of risks involves
an approach employed to create risks, and tips on what those risks could consider
looking like whilst written down (Jacob, 1998). Risk identification ought to tackle
both in-house and outside risks. In-house risks are issues that the project team can
control, like staff responsibilities and price quotes. Outside risks are issues beyond
the influence or control of the project team, like government measures . In project
perspective, risk identification is also focused on prospects (positive outcomes)
along with threats (negative outcomes) (PMI, 1996). At this point, an extensive
perspective ought to be undertaken to determine with no limitation the risks which
are prone to thwart the project in achieving its cost goal. An inability to identify the
presence of any possibility risks can lead to a catastrophe or foregoing a prospect
for profit as a result of suitable corrective measures (Dandon & Flenn, 2002). While
endeavouring to identify risk, it is quite akin to aiming to plan the entire world. Maps
of the world are generally focused on the position of the map author. The vast
majority of the world is not observable from where you stand. Certain terrain that is
acquainted and apparent to you might not be apparent to everybody. Likewise,
viewing a huge project from the top, with numerous levels of planning, sophisticated
vertical and horizontal connections, and sequencing difficulties, looks like exploring
the world map using a fog. Management's potential to control the final result is
restricted to the things they can observe. The notable temptation will be to
concentration upon what ought to transpire, instead of what might transpire. A
definite opinion of the event is the first equipment, concentrating on the sources of
risk and effect of the event (Abassan & Orman, 1996). While comprehensive
publications of risk can be created, they are usually destined to be deficient thereby
limited. This may result in decision-makers inability to examine the entire scale of
possible risks for a project. Building groups of risk is another way of typifying risks
to ensure this threat could be reduced (Dandon & Flenn, 2002).
2.5.3. RISK ANALYSIS
Risk analysis, a part of the risk management process, focuses on the triggers and
impacts of actions which result into harm. The purpose behind this kind of analysis
is an accurate and purposeful measurement of risk. To the range that this is
achievable, it enables the decision making process to be more precise (Estate
Management Manual, 2002). The significance of risk analysis is that it endeavors to
obtain all viable alternatives and to evaluate the numerous results of any
evaluation. For building projects, customers are predominantly considering the
probably price, but projects do have cost over-runs and, too often, the 'what if'
question is not asked (Abassan & Orman, 1996).
Risk analysis requires analyzing the observed risks. This first entails that the risks
are quantified with regard to their impact on cost, time or revenue. They can be
analyzed by assessing their impact on the financial variables of the project or job.
With regards to risk response, three basic types of response are observed (Estate
Management Manual, 2002):
Risk transfer .
Risk retention .
The application of risk analysis provides an understanding of what goes on when the
project does not carry on in line with plan. Once dynamic minds are used on the
ideal obtainable information in an organized and coordinated approach, there is a
better perspective of the risks than might have been attained by intuition solely
(Abassan & Orman, 1996).
Risk analysis
Quantitative
Risk measurement
Probability
analysis
Objective or subjective
Sensitivity analysis
Single or multiple
Scenario
analysis
Breakdown or
combination
Simulation analysis
Types of distribution
Estimates
Number of simulations
relationships
Qualitative
Direct
judgment
Ranking options
Comparing options
Descriptive options
Linear or nonlinear
analysisSequence
FigureCorrelation
2.3. Risk Analysis
(Abassan & Ovman, 1996)
Single or multiple
Figure (2 .3), illustrated by Flanagan and Norman (1993), demonstrates the
sequence in risk analysis. The conventional method of predicting construction price
or construction timeframe at the design phase of a project is to use the obtainable
information and generate one point ideal estimate. The risk analysis alternative
clearly acknowledges doubt that surrounds the most suitable assessment by
producing a probability distribution depending on professional opinion. Thus , the
knowledge regarding the impacts of doubt upon the project will be enhanced. Risk
analysis ought not be regarded as a stand alone process; all approaches devised
ought not be viewed as cast in stone commandants. Instead, they ought to be
viewed as a portion of all judgements generated routinely to acknowledge project
dynamics (Banta, 2002). Risk analysis entails appraising risks and risk associations
to evaluate the array of potential project results. It is complex by numerous
variables such as, though not restricted to (PMI, 1996):
Prospects and threats can associate in unpredictable ways (e.g., routine gaps
may compel contemplation of fresh strategy that lowers entire project
timeframe).
What is required is a use of risk analysis to aid project managers handle cost that is
easy to utilize, can be used all through the life cycle of a construction project,
represents the inclination of construction experts to utilize risk in linguistic terms,
and employ their expertise Farrel, 2002(Fleen & knochle, 2002).
2.5.3.1.
METHODS OF RISK ANALYSIS
The analysis of risks could be quantitative or qualitative in nature based on the
volume of data obtainable (APM, 2000). Qualitative analysis concentrates on
identification alongside assessment of risk, and quantitative analysis concentrates
on the evaluation of risk (David, 2001). Certainly there could be very little facts
about specific risks that no analysis is achievable. Table (2.1) summarizes the
different methods utilized for risk analysis.
Risk Analysis
Qualitative
Quantitative
I.
Direct judgment
V.
Probability analysis
II.
Ranking options
VI.
Sensitivity analysis
III.
Comparing options
VII.
Scenario analysis
IV.
Simulation
analysis
Table 2.1. Various risk analysis techniques, adapted from (David & Grant, 1996)
A. QUALITATIVE RISK ANALYSIS
Solomon (2000) initiated a definition for the qualitative evaluation of risk requires
the detection of a hierarchy of risks, their range, factors that cause them to happen
and possible dependencies. The hierarchy is dependent on the likelihood of the
incident as well as the effect on the project. In qualitative risk analysis risk
management plays the role of an approach to choosing the attributes of each risk
(Kuismanen et al, 2002). Qualitative risk analysis evaluates the relevance of the
observed risks and produces prioritized lists of these risks for additional analysis or
direct mitigation. The management staff evaluates all observed risk for its likelihood
of happening and its effect on project goals. Occasionally professionals or
operational units evaluate the risks in their specific areas and distribute these
evaluations with the team (Office of project management process improvement,
2003). Elements of risk analysis were conceived by Breeman and Klogan (2001):
I.
Escalation sensitivity
Labor rate uncertainty
Equip & material uncertainty
Estimate completeness
Productivity uncertainty
Area or facility availability
SCHEDULE RISKPersonnel availability
Equipment/material availability
Adverse environmental conditions
COST RISK
TECHNICAL RISK
Rework potential
Design and construction methods maturity
Infrastructure Needs
Technology maturity
Performance requirements severity
Design data availability
Figure 2.4. Qualitative Risk Factor Ranking Criteria, adopted from (Breeman &
Klogan, 2001)
System
Element A
II.
Element B
Element C
Risk Factor
Risk Factor
Total
Low (1)
Low (1)
High (3)
II
Medium
(2)
High (3)
Medium (2)
III
Low (1)
Low (1)
High (3)
Activity
Total
The qualitative risk analysis factor ratings for every project task present a
first-order prioritization of project risks before the use of risk reduction steps.
This basic rating procedure is demonstrated in Figure (2.5).
The more significant, result from carrying out a qualitative risk analysis is the
detection of potential risk-reduction steps addressing the observed risk
factors. Risk reduction suggestions tend to be simple to create when the risk
problem is recognized.
Figure 2.6. Integrated qualitative and quantitative risk analysis, (Breeman & Klogan,
2000)
B. QUANTITATIVE RISK ANALYSIS
Quantitative risk analysis is a method of numerically estimating the chances that a
project would fulfill its cost and time goals. Quantitative analysis relies upon a
concurrent assessment of the impact of all identified and quantified risks. The
outcome is a likelihood distribution of the projects cost and completion date
dependent on the risks in the project (Office of Project Management Process
Risk management
Risk Evaluation
Tolerability decisions
Analysis of options
Risk reduction/control
Decision making
Implementation/monitoring
Figure 2.7. basic relationship between risk analysis, risk assessment and risk
management. (Cheng, 2002).
I.
BASIC STEPS OF QUANTITATIVE RISK ANALYSIS
As stated earlier, the goal of risk analysis is to ascertain how possibly a harmful
occurrence ought to happen and the implications when it does happen. When
quantitative risk analysis ought to be carried out, it is endeavored to illustrate risk in
numerical details. To achieve this, it ought to follow a couple of procedures
(Doeman, 2001):
1. Describe the repercussion; describe the necessary numerical approximation
of risk.
2. Develop a direction; examine of all sequential actions that ought to happen
for the unfavorable event to happen.
3. Create a model - Gather facts; examine each stage on the course as well as
the associated elements for those stages.
4. Approximate the risk; once the model has been created and the facts
gathered the risk can be calculated. Contained in this calculation will be an
examination of the impacts of varying model elements to show prospective
risk management tactics.
5. Carry out a sensitivity and scenario analysis; Carrying out a risk analysis
needs more details than for sensitivity analysis.
II.
METHODS OF QUANTITATIVE RISK ANALYSIS
Any sort of risk analysis method would need an approach. It is advisable to start by
supplying a means of contemplating risk analysis that is relevant to any specific tool
could be utilized.
Probability Analysis is a tool in evaluating issues which lack just one value
approach, Monte Carlo Simulation is the most easily utilized type of
probability analysis.
Sensitivity Analysis is a tool that has been utilized to great degree by the
majority of risk analysts concurrently.
a) SENSITIVITY ANALYSIS
Sensitivity analysis is a deterministic modeling approach that is utilized to
evaluation the effect of an alteration of the valuation on an independent element on
the dependent element. Sensitivity analysis recognizes the purpose where a
particular change in the anticipated value of a price parameter changes a decision.
Sensitivity analysis is conducted by switching the values of independent risk
elements to forecast the monetary requirements of the project (Fishner & Sandrel,
2002). Sensitivity analysis is an engaging procedure which shows you what impacts
alterations in a price will have on the life cycle cost (Abassan & Orman, 1996).
Sensitivity Analysis is the evaluating technique employed for forecast of impact of
alterations of input records on output outcomes of one model (Floe, 1995). It does
not attempt to quantify risk instead to detect elements that are risk sensitive.
Sensitivity analysis helps the analyst to analyze which elements of the project have
the most effect upon the outcomes, hence cutting down the key convenience and
potential to concentrate on specific quotes (Abassan & Orman, 1996). The benefit of
sensitivity analysis is that it can often be carried out to certain degree. Particular
situations of interest can be relatively well explained. Excessive results, such as the
highest or lowest feasible rates, are usually calculated.
The key negative aspect of sensitivity analysis is that the analyst often lacks the
idea how possibly these numerous scenarios are. Most people equate feasible with
likely, which is not the case with sensitivity analysis (Flop, 2003).
Assists ascertain the higher cost risks for risk response planning.
II.6.
PMI (1996) proposed three methods of responding to risk in projects, they are listed
below:
Brute Amos (2002) suggested some steps to be taken in a reaction to residual risks.
Steps include:
Eradicate or prevent the risk element via means like a partial or entire
remodel, a new approach or technique etc.
Stop the project if the risk is unbearable and no other alternative may be
implemented to abate its negative effects.
Baalif et al (2002), Boyega and Funsho (1998), Enshassi and Mayer (2001), and
Education and Learning Whales (2001) argued that there are four distinguished
methods of responding to risks in a construction project, such as, risk avoidance,
risk reduction, risk retention and risk transfer. Those methods are discussed lightly
below.
II.6.1. RISK AVOIDANCE
Risk avoidance is oftentimes called risk elimination. Risk avoidance in construction
is not usually identified to be unrealistic as it may result in projects not going
forward, a contractor not submittinAbassan & Orman, 1996 a bid or the owner not
carrying on with project financing are two instances of completely eliminating the
risks. There are several manners whereby risks can be avoided, e.g. tendering an
extremely high bid; listing conditions on the bid; pre-contract discussions
concerning which party carries specific risks; and not binding on the high risk area
of the contract (Abassan & Orman, 1996).
The assets or action liable for the risk may be shifted, i.e. employ a
subcontractor to focus on an unsafe practice;
The asset or action could be held, but the monetary risk shifted, i.e. by tactics
like insurance and surety.
3 RESEARCH METHODOLOGY
3.1. INTRODUCTION
This chapter discusses the data collection procedure used for this research. This
chapter also offers the details about research strategy, research design, target
population and sample size. It also discusses a couple of the basic challenges
encountered. A comprehensive methodology and resources used are discussed.
new and attractive areas (Kingsley & Frank, 1996). Balim (1996) summarizes the
key benefits of structured interview provided below:
1. The answers can be more accurate.
2. The response rate is comparatively high (approximately 60-70 percent),
particularly if interviewees are approached directly.
3. The answers can be investigated with realizing "Why" the specific answers are
supplied.
Figure (3 .1) depicts the summarized methodology chart.
SS =
Z2 X P X (1 P)
C2
1.962 X 0.5 X (1
0.5)
SS =
= 384
Correction for finite population:
0.052
SS new
=
SS
1+
SS - 1
pop
Where pop is the population = 75 first class contracting companies according to the
PCU records.
SS
384
new
=
1+
384 1
75
= 40.36 ~
40
Risk
management
Evaluationactions
of benefits of applying risk manage
Exploring the factors and
Risk
their
allocation
relative and
importance
significance In
construction
Organization Profile
Questionnaire Design
Case study
ey and data collection by structural interview 75 questionnaire for each category
Results and analysis
Discussions
Figure 3.1. Methodology flow chart
76 questionnaires are to be distributed to staff; all of whom are classified as
Conclusion and recommendations
registered contractors of alheri comstruction company. To carry out a evaluation
between contractors and staff perspectives, the same number of questionnaires will
be distributed to staff that are members of the project management team.
3.8.
RESEARCH LOCATION
The research is carried out in Nigeria which consists of 36 states and the federal
capital territory. The states that where visited during the questionnaire population
were Abuja being the federal capital considered as the fasted growing city if west
Africa with a record number of on-going construction projects, Lagos being the
economic hub of the nation with a considerable number of construction projects and
Kano being the headquarters of Alheri Group and a location for most of their
projects.
3.9.
QUESTIONNAIRE DESIGN
The questionnaire survey was performed to ascertain the opinion of contractors and
owners concerning the risk factors. A four pages questionnaire attached with a
covering letter were delivered to 75 contractors and 75 owner representatives
(owners could be: ministries, municipalities, consultants, and so on)
The letter shows the objectives of the research and informed the participants that
the outcomes of the questionnaire would be employed to enhance the capability of
contractors and owners to identify, analyze and estimate the risk factors effect on
the construction projects.
A close-ended questionnaire was administered for its advantages being easy to ask
and quick to answer, they need no writing by either respondents or interviewer.
The questionnaire was made up of five parts to fulfill the purpose of this research,
given below:
1. The organization profile ( contractor and owner )
2. Risk factors that have been identified by literature, experts and by the
researcher.
3. Risk preventive methods which could be used to avoid risk to take place.
4. Risk mitigation methods that could be used to mitigate risk impact or
likelihood.
5. Risk analysis techniques that could be used to analyze and estimate risk
factors impact.
The questionnaire was prepared in English language (Annex 1). To guarantee getting
complete and meaningful response to the questionnaire an interview was carried
out with each respondent to explain the objective of the study and to get
suggestions towards the questionnaire design, specifically towards pinpointing risk
types and management actions for managing these risks. Some of the
questionnaires were filled throughout the interview. Additionally, their analysis is
self-explanatory GEORGE & BRUMA, 1983Balim (1996).
A draft questionnaire, with 36 risk factors (Annex 3), prepared from literature and
distributed into nine groups by adding two groups to the literature (Fletcher,
2000); political and construction. Content genuineness was carried out by sending
the draft questionnaire with covering letter to six experts to assess the content
genuineness of questionnaire, to check readability, offensiveness of the language
and to add more factors and information if necessary (Annex 3). As a result, good
feedback relating to the shape and the factors were taken into consideration and 12
additional factors were added and 4 were omitted to reflect the nature of
construction industry in Nigeria. These factors were amalgamated with the original
factors and the required modifications have been added to the final questionnaire. A
total of 44 factors were distributed into nine groups. To form the final questionnaire
(Annex 1); which was printed by using two different colors in order to distinguish
between the contractors and owners.
3.9.1. CONSTRUCTION RISK ALLOCATION
There are varieties of risks related to the construction projects. These include
physical, environmental, design, logistics, financial, legal, political, construction and
management risks (Peter & Jones, 1987, cited in Flop, 2003tam, 2001). Table (3.1)
shows various kinds of risk contained in the questionnaire. To obtain input for the
questionnaire design, particularly towards identifying risk types, rather than the
related literature, an interview was carried out with five alhairi staff. Accordingly, all
practitioners have took part in the questionnaire design, hence, the questionnaire
was modified as mentioned before in section 3.9. Some of the literature's risk types
such as floods, earthquakes, wind damages and pollution were not used in this
study because of inapplicability.
3.9.2. SIGNIFICANCE OF RISK AND MEASUREMENT SCALES
The level of
Constructi Rush bidding
effect for each
on
Gaps between the implementation and the specification due
risk type was
to misunderstanding of drawing and specification
captured in
the
Undocumented change orders
questionnaire
Lower work quality in presence of time constraints
under the title
"Significance".
The
questionnaire
was designed
to analyze
practitioners'
observations
and
judgments in
deciding the
relative
relevance of
each risk
type. Though
the level of
effect varies
from project
to project, the
questionnaire
is expected to
elicit a
general
evaluation of
the
importance of
risk. Each
respondent
was expected
to rank each
risk on a scale
from 1 to 10
by looking at
its impact to
project
delays. Scale
1 t10 is
chosen to
attain a
higher level of
suppleness in
selecting
statistical
processes
Design changes
Actual quantities differ from the contract quantities
Defective design (incorrect)
Not coordinated design (structural, mechanical, electrical,
etc.)
Design
Inaccurate quantities
Lack of consistency between bill of quantities, drawing and
specifications
Rush design
Awarding the design to unqualified designers
Environmental factors (floods, earthquakes, etc.)
Environme
nt
Financial
Legal
Logistics
(Alphonsus &
Henry, 1996).
Rank 1 is
assigned to a
risk would
give the
lowest
contributions
to risk effects
while Rank 10
is given to a
risk that
would cause
the highest
contribution.
In the same
time ranks (13) denotes
low
significance
risks, ranks
(4-7) for
medium risks
and (8-10) for
high
risks.Construc
tion Project
Risk
Physical
Political
Contribution rank
Total
weighted
scores
Defective
materials
Inaccurate
quantities
10
2
(2)
0
(0)
3
(9)
1
(4)
8
(4
0)
5
(3
0)
4
(2
8)
4
(3
2)
2
(1
8)
2
(2
0)
183
2
(2)
0
(0)
0
(0)
1
(4)
1
(5)
1
(6)
9
(6
3)
4
(3
2)
7
(6
3)
6
(6
0)
235
Depend on
subjective
judgment to
produce a proper
High
Moderat
e
Lo
w
Very
low
In
applicabl
e
15
(75)
8 (32)
Very
high
program
Produce a proper
schedule by
getting updated
project
information
Refer to previous
and ongoing
similar projects
for accurate
program
Consciously
adjust for bias risk
premium to time
estimation
Plan alternative
methods as
stand-by
Utilize
quantitative risk
analysis
techniques for
accurate time
estimate
Transfer or share
risk to/with other
parties
Table 3.3 Relative effectiveness of preventive methods
3.9.3.2.
MITIGATIVE ACTIONS
Although certain project delay risks can be lowered by using various preventive
actions at early stages, the delay of progress still takes place in many projects in
the construction process. A recent industry survey has shown that over 80% of
projects go beyond their slated time even with the use of software techniques for
project development (Sloken, 1995). When delay arises, contractors can implement
various mitigative actions to reduce the impacts of the delay. Table (3.4) shows the
six mitigative methods being offered to the respondents to measure the
effectiveness for each of the methods. The relative level of effectiveness between
the methods will be quantitatively proven as presented earlier.
Total
weighte
d scores
Increase
manpower and/or
equipment
High
Moderat
e
Lo
w
Very
low
In
applicabl
e
15
(75)
8 (32)
Very
high
Increase the
working hours
Change the
construction
method
Change the
sequence of work
by overlapping
activities
Coordinate closely
with
subcontractors
Close supervision
to subordinates
for minimizing
abortive work
Table 3.4 Relative effectiveness of mitigative methods
3.9.4. RISK ANALYSIS TECHNIQUES
Table (3.5) below depicts the risks analysis methods. Respondents were asked to
ascertain the relative use of those methods. Six methods were added to show the
construction industry experts concerns regarding risk analysis and its strategies,
and to evaluate between contractors usage of these methods and owners. The
same weighing strategy is used to measure the weighted score for each method
shown.
Total
weighte
d scores
Direct judgment
using experience
and personal
skills
High
Moderat
e
Lo
w
Very
low
In
applicabl
e
15
(75)
8 (32)
Very
high
Comparing
analysis
(comparing
similar projects
through similar
conditions)
Probability
analysis (analyze
historical data)
Expert systems
(including
software
packages,
decision support
systems,
computer-based
analysis) methods
Sensitivity
analysis
Simulation
analysis using
simulator
computer
packages
Table 3.5 Relative effectiveness of risk analysis techniques
Content validity
Criterion-related validity
Construct validity
Questionnaire was evaluated by two groups of experts. The first was asked to find
out if the questions agreed with the scope of the items and the degree to which
these items depict the idea of the research problem. The other was asked to find
out that the instrument utilized is accurate statistically and that the questionnaire
was designed well enough to give relations and tests between variables. The two
groups of experts do agree that the questionnaire was valid and appropriate enough
to measure the concept of interest with some amendments, the most crucial are:
Cleaning data
Comparing of mean values for each main group and overall sub-factors
Partial correlation test was carried out to evaluate the mean values of
different groups
effort to ease the accidents costs and other implications by using productive
training and boosting consciousness of safety measures. The greater part of
contractors (97%) agreed on the risks of supplying defect materials and variation in
productivity (71%). Basically, not only did contractors assign them as their
obligations, but a majority of analysts also back this position (Farrel, 2002).
Moreover, contractors of Hong Kong verified this allocation (Baalif et al, 1998).
No
.
Weight
Seriousn
ess (110)
239
7.7
221
7.1
188
6.1
97%
71%
allocation contractor
oc
cu
rre
nc
e
la
bo
ra
nd
of
po
or
va
rie
d
of
ac
ci
de
nt
s
be
ca
us
e
allocation ignored
eq
ui
pm
sa
fe
ty
pr
oc
ed
ur
es
Response Rate %
en
tp
ro
du
ct
iv
ity
60% 42%
39%
40%
19%
13% 18%
20%
3%
allocation owner
allocation shared
allocation insurance
0%
0%
0%
0% 0%0%
0% 0%
Weight
Seriousn
ess (110)
207
6.7
173
5.6
Environmental factors
160
5.2
80%
70%
60%
50%
40%
30%
20%
10%
Allocation Contractor
0%
Allocation Owner
Allocation Shared
Allocation Insurance
D
iffi
cu
lty
we
at
he
rc
on
di
tio
n
to
ac
ce
s
th
e
si
te
Allocation Ignored
Ad
ve
rs
e
(v
er
y
fa
r,
s
Ac
ts
et
tle
m
en
ts
)
of
G
od
Response Rate %
Weight
Seriousn
ess (1-
10)
7
12
246
8.5
243
7.8
255
7.3
211
6.8
Inaccurate quantities
195
6.3
Rush design
192
6.2
Not
coordinated
electrical, etc.)
8
10
9
11
design
(structural,
mechanical,
Large distribution percentages were going for owners that are in a more suitable
opportunity to provide adequate and appropriate drawings on the design and
services. These conclusion complied with outcomes of (Ahmed et al., 1999) and
(Farrel, 2002) who claimed that the owner are able to best manage inadequacies in
specifications and drawings by hiring an efficient consultant and supplying enough
design funds.
de
si
gn
Ru
sh
qu
an
tit
ie
s
In
ac
cu
ra
te
D
ef
ec
tiv
e
de
si
gn
(in
co
rre
ct
)
100%
87%
84%
90%
81%
80%
68%
70%
58%
60%
48%
50%
Response Rate % 40%
32%
29%
26%
30%
19%
19%
13%
20% 13%
10%
10%
Allocation
Contractor Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
0%
0%0%0% 0%
0%0%
0%0%
0%0% 0%
0%0% 0%
0%0%
Risk Factors
(Category 3)
Figure 4.3. Design group factor allocation, contractors perspective
4.2.4. LOGISTICS CATEGORY (CATEGORY 4)
4.2.4.1. SERIOUSNESS
Table (4.4) displays the weights of logistic category elements. Contractors figured
that the risks of unavailability of labor and materials and poor communication
among contractors teams are tremendously important risks. It is apparent that the
stated challenges are severe risks that could be confronted. The risk of contractors
proficiency is a risk that contractors were concerned with, it is difficult for
contracting companies with huge administrative overheads to contest with
companies with lesser administrative overheads. The unavailability of labor and
materials is in some way linked to political cases; if closure occurs, materials will be
prone to rise in prices; reinforcement steel is a great instance. Contractors
concerned about poor communications in their part; this reflects its happening,
contractors ought to take care of this issue by arranging and implementing
management specifications to manage such issues. Undefined scope of work and
inaccurate project program practically get the similar seriousness, they possess
moderate weights which emphasized the misconception of these issues among
contractors. These risks ought to be properly understood. Such understanding may
lessen and handle the work appropriately.
No
.
Weight
Seriousn
ess (110)
13
222
7.2
17
222
7.2
15
201
7.2
14
182
5.9
16
179
5.8
bi
ds
in
Allocation Shared
Allocation Ignored
an
d
ho
m
co
m
th
e
H
ig
h
at
er
ia
ls
be
tw
ee
n
m
un
ic
at
io
n
na
va
ila
bl
e
la
bo
r,
Allocation Insurance
fie
ld
pe
tit
io
n
allocation owner
an
d
Allocation Contractor
eq
ui
pm
en
t
Response Rate %
offi
ce
rs
120%
97%
97%
100%
80%
48%
60%
45% 48%
39% 32%
29%
40%
26%
23%
20%
3%
3%
3%
0%
0%0%0%
0%0%
0%0%
0%0%
0% 0%0%
Po
or
co
m
Lack of capital.
Closure.
Weight
Seriousn
ess (110)
20
279
9.0
19
260
8.4
21
256
8.3
23
243
7.8
18
Inflation
240
7.7
22
232
7.5
Most contractors (81%) allotted the delayed payments risk to the owners. This risk
category is among the often disputed ones. These outcomes are backed up by
(Farrel, 2002). Besides Bellos (cited in Farrel, 2002) claimed that in the law, this
issue often is reported within loss and expense (Bellos, cited in Farrel, 2002).
Contractors respondents were in doubt on who ought to take inflation risk, however
(45%) of the contractor respondents viewed it as a contractors challenge since the
contracts here in Nigeria include clauses to assign such risks onto the contractors.
Even, the pre-bid meeting minutes might as well include such clauses. Contractors
are contemplating this risk category as an oscillating risk category, wherein its
danger rises as inflation rises, and vice versa. Contractors were uncertain
concerning exchange rate fluctuation and monopoly risks. Inflation and exchange
rate fluctuation risks ought to be best distributed between the owner and the
contractor by adding contract clauses that explain the necessary criteria and rules
for sharing. These are risks in which each party can manage more under separate
circumstances and may be outlined in contracts as recommended above.
71%
29%
at
er
ia
ls
un
ex
pe
ct
ed
ra
te
du
e
to
cl
os
ur
e
an
d
ot
he
r
in
g
of
m
0%
Allocation Insurance
Ex
ch
an
ge
an
ag
ed
nm
of
th
e
Allocation Shared
42%
35%
32%
19%
3%
po
lit
ic
al
co
nd
iti
on
s
flo
w
0% 0%0%
ca
sh
co
nt
ra
ct
or
0% 0%0%
in
fla
tio
n
26% 26%
13%
10%
Fin
an
ci
al
fa
ilu
re
D
el
ay
ed
90%
Allocation Owner
pa
ym
en
to
n
Allocation Contractor
co
nt
ra
ct
In
fla
tio
n
100%
81%
90%
80%
70%
60%
50% 45%
35%
40%
30%
19%
13%
20%
8%
Response Rate
10%%
0%
0%
0%0%0%
0%
Allocation Ignored
Weight
Seriousn
ess (110)
26
228
7.4
27
228
7.4
28
222
7.2
25
171
5.5
24
166
5.4
fa
st
he
lp
ar
bi
tr
at
or
s
no
sp
ec
ia
liz
ed
th
e
on
g
am
ph
as
e
co
ns
tr
uc
tio
n
Allocation Ignored
to
pa
rt
ie
s
di
ffi
cu
lty
to
of
th
e
se
tt
le
ge
tp
er
m
it
Response Rate %
co
nt
ra
ct
94%
94%
100%
90%
80%
70%
58%
60%
48%
45%
50%
40%
29%
26%
23%
30%
19%
13%11% 11% 11%
11%
11%
11%
11%
11%
10%11%
10%
20% 13%
6%
6%
6%
10%
0%
du
rin
g
th
e
le
ga
ld
is
pu
te
s
4.2.6.2. DISTRIBUTION
Figure (4.6) demonstrates the distribution of legal category elements based on
contractors respondents. It is apparent that the largest section of contractor
respondents handled legal risks as shared risks. 48% of respondents regarded the
risk of difficulty to get permits a shared risk, alternatively virtually the third of
respondents (29%) disregarded this risk. 58% of respondents handled ambiguity of
work legislations as shared as well . The largest section of respondents (94%) chose
to share legal disputes and delayed resolution with owners. Disputes could arise as
a result of error or misconception by either party. Therefore, these risks ought to be
shared risks.
4.2.7. CONSTRUCTION CATEGORY (CATEGORY 7)
4.2.7.1. SERIOUSNESS
In table (4.7) risks connected to construction were split into two categories based on
weights. The more important category included the risks of undocumented change
orders, lower work quality and misunderstanding drawings and specifications
respectively. Baalif et al. (1998) backed up theses outcomes. Taking into account the
risk of undocumented change orders as a very important risk shows a pattern
wherein contractors are concerned with receiving payment for an alteration of the
job, because the cost effect of altering orders cannot be claimed later. Contractors
bothered with the lesser work quality, and as a result contractors do their best not
to get abortive jobs, to uphold a great reputation and to prevent additional
expenses repeating the abortive jobs. Other relevant risk is the risk of
misunderstanding of drawings and specifications, this risk produces substantial job
setbacks, and therefore contractors demonstrate knowledge about this risk. Design
changes, difference between actual and contract quantities and rush bidding were
in the 4th, 5th and 6th positions with moderate severities, this shows the minimal
focus given by contractors to these problems.
No
.
Weight
Seriousn
ess (110)
31
236
7.6
32
228
7.4
30
225
7.3
33
Design changes
187
6.0
34
169
5.5
29
Rush bidding
152
4.9
80%
68%
70%
68%
65%
68%
68%
60%
42%45%
50%
40%
Allocation Contractors26% Allocation Owners
26%
30%
23%
0%
0%0%
0%0%
6%
0%0%
0%
13%13%
0%
6%
0%
un
do
cu
m
en
te
d
ru
sh
ch
an
ge
Allocation Ignored
13%
6%
ch
an
ge
s
bi
dd
in
g
0%
10%
de
si
gn
10%
3% 6%
or
de
rs
20%
Weight
Seriousn
ess (110)
36
279
9.0
39
Closure
277
8.9
35
Segmentation of Nigeria
258
8.3
38
258
8.3
37
151
4.9
0%
0%
Allocation
3%Insurance
0%
0%
ci
rc
um
0%
un
st
ab
le
ne
w
se
cu
rit
y
go
ve
rn
m
0%
26%
cl
os
ur
e
Allocation Shared
3%
en
ta
ct
s
0%
35%
st
an
ce
s
10%
6% 3%3%
Allocation
Owners
68%
61%
55%
35%
wo
rk
in
g
Allocation Ignored
68%
at
ho
ta
re
as
se
gm
en
ta
tio
n
of
N
ig
er
ia
71%
80%
70%
60%
50%
40%
29%
30%
20%
Allocation
Contractors
10%
Response Rate
%
0%
0%0% 0%
Weight
Seriousn
ess (110)
258
8.3
41
Resource management
226
7.3
40
215
6.9
42
199
6.4
43
Information unavailability
191
6.2
pa
rt
ie
en
tw
ay
s
pl
ex
ity
Response Rate %
80%
70%
60%
50%
40%
30%
20%
10%
0%
in
vo
lv
ed
be
tw
ee
n
an
ag
em
m
un
ic
at
io
n
ch
an
ge
s
in
po
or
co
m
m
bi
gu
ou
s
pl
an
ni
ng
du
e
to
pr
oj
ec
tc
om
Allocation Contractors Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
am
Risk Factors
Weight
Seriousn
ess (110)
20
279
9.0
36
279
9.0
39
Closure
277
8.9
264
8.5
19
260
8.4
35
Segmentation of Nigeria
258
8.3
38
258
8.3
44
258
8.3
21
256
8.3
12
243
7.8
23
243
7.8
18
Inflation
240
7.7
239
7.7
31
236
7.6
22
232
7.5
26
228
7.4
27
228
7.4
32
226
7.4
41
Resource management
225
7.3
225
7.3
30
222
7.3
13
222
7.2
17
222
7.2
28
222
7.2
221
7.1
40
215
6.9
10
211
6.8
207
6.7
15
201
6.5
42
199
6.4
Inaccurate quantities
195
6.3
11
Rush design
192
6.2
43
Information unavailability
191
6.2
188
6.1
33
Design changes
187
6.0
14
182
5.9
16
179
5.8
173
5.6
25
171
5.5
34
169
5.5
24
166
5.4
Environmental factors
160
5.2
29
Rush bidding
152
4.9
37
151
4.9
Risk
High
Financial failure
(most
important
ranked
first)
Low
(least
important
ranked
first)
Rush bidding
Closure
Delayed payment on contract
Environmental factors
Difficulty to get permits
Actual quantities differ from contract quantities
Table 4.11. Most and least important risk categories as perceived by Contractors
4.3.2. DISTRIBUTION
The standard for a risk to be appropriated to a specific category (contractor, owner,
shared, insurance, or ignored), was that it ought to attain a minimum of a (60%)
reaction level. Those that did not to attain such feed-back level in support of any
category were displayed as undecided. Allocation of risk elements used in the
questionnaire, based on the contractors respondents, is shown in Table (4.12).
Contractors have allotted nine risks onto themselves, meaning contractors get
(20%) of the risk elements, they have allotted eight risks onto owners, which means
that (18%) of the risk elements the owner ought to manage, as outlined by the
contractors. The contractors also regarded eleven risks as shared risks, i.e. (25%) of
the risk elements ought to be shared. However, they were not certain about sixteen
risks, which means the contractors were unsuccessful in allocating (37%) of the risk
elements. These outcomes show that contracts clauses employed in Nigeria
neglects the larger part of risk elements.
Allocation
Risk description
Contracto
Owner
Shared
between
bill
of
quantities,
drawings
and
Inflation
Exchange rate fluctuation
Monopolization of materials due to closure and other unexpected
political conditions
Difficulty to get permits
Ambiguity of work legislations
No specialized arbitrators to help settle fast
Lower work quality in presence of time constraints
New government acts or legislations
Weight
Seriousn
ess (110)
258
8.1
201
6.3
165
5.2
af
et
y
ea
su
re
s
eq
ui
pm
en
tp
ro
du
ct
iv
ity
84%
90% 72%
69%
80%
70%
60%
50%
40%
25%
22%
30%
13%
20%
6%
3% Allocation Shared
Allocation Contractor 10%
Allocation3%
Owner
Allocation Insurance
0%
Response Rate %
0%
0%0%
0% 0%0%
la
bo
ra
nd
va
rie
d
of
ac
ci
de
nt
s
du
e
to
po
or
s
Allocation Ignored
oc
cu
rre
nc
e
No
.
Weight
Seriousn
ess (110)
253
7.9
Environmental factors
178
5.6
165
5.2
4.4.2.2. DISTRIBUTION
Figure (4.11) demonstrates the distribution of environmental risks based on owners
point of view. The respondents practically allotted the site accessibility risk as
shared risk (59%). 34% of respondents regarded this risk as contractors problem;
this distribution of respondents has a pattern to assign risks onto contractor
although these risks are uncontrollable risks. Respondents were in doubt about the
risks of Environmental factors and adverse weather conditions, which is
conventional perspective as these risks are uncontrollable. Contractors and owners
ought to share such risks. Farrel, (2002) and Baalif, et al. (1998) backed up these
outcomes.
70%
59%
60%
50%
44%
41%
40%
34%
28%
Allocation contractors
Allocation Owners
30%
16%
13%
0%
si
te
of
G
od
0%
9%
6%
10%
di
ffi
cu
lty
to
ac
ce
s
ac
ts
th
e
Allocation Ignored
0% 0%
6%
we
at
he
rc
on
di
tio
ns
20%
Allocation Shared
Allocation Insurance
25%
19%
ad
ve
rs
e
Response Rate %
Risk Factors
(category 2)
Figure 4.11. Environmental group risks allocations, owners perspective
4.4.3. DESIGN CATEGORY (CATEGORY 3)
4.4.3.1. SERIOUSNESS
Table (4.15) below illustrates weights and scores of design category elements. Along
with contractors, Owners respondents regarded design risks high risks. Owners are
worried with the quality of design. It has to be observed that owners worried about
defective design problems because they could be the catalyst for several conflicts
and unwanted implications. This risk if not handled appropriately it could result in
unwanted implications particularly in construction. These findings are reinforced by
the outcomes of Ahmed, et al (1999), (Preston et al, 2003) and (Flen, 1998). The
illegitimate outcome would be to allot the risk of the rush design as a moderate risk
of the owners. It is a severe issue for owners to possess this perspective.
Weight
Seriousn
ess (110)
296
9.3
Defective design
260
8.1
Inaccurate quantities
246
7.7
No
.
12
10
224
7.0
11
Rush design
211
6.6
205
6.4
Incorrect design
Rush design
Nevertheless, it is noticed from figure (4.12) that the risks of not coordinated
design, inaccurate quantities, lack of consistency between quantities, specifications
and drawings have received (59), (34) and (41%) reactions respectively. They came
below the selected standard (60% responses) for determining its distribution. This is
contrary to Hong Kong owners who allotted the design risk on themselves (Baalif, et
al. 1998). This further justifies the requirement for innovative contract procurement
strategies for example management contracting that are better able to distribute
the risks to the groups that are capable of managing them better.
de
si
gn
ru
sh
qu
an
tit
ie
s
in
ac
cu
ra
te
de
fe
ct
iv
e
de
si
gn
100%
91%
84%
90%
80%
63%
70%
59%
60%
44% Insurance
Allocation Contractor
Allocation
Owner
Allocation
Allocation Shared
50%
41%
41%
Response Rate
%
34%
40%
25%
30%
19% 19%
16%
16%
16%
20%
12%
9%
10%
3%
0%
0%0%
0%0%
0%
0%0% 0%
0%0% 0%
0%0%
Allocation Ignored
Weight
Seriousn
ess (110)
15
213
6.7
13
211
6.6
16
200
6.3
17
187
5.8
14
149
4.7
un
av
ai
la
bl
e
la
bo
rm
Allocation Ignored
in
ac
cu
ra
te
at
er
ia
la
nd
eq
ui
pm
pr
oj
ec
tp
ro
gr
am
en
t
120%
97%
91%
100%
69%
80%
53%
60%
44%
28%
40%
25%
25%
22%
22%
9%
20%
6%
3%
3%
Allocation Contractor
Allocation
Owner
Allocation Shared 3% Allocation
Insurance
0%
Response Rate %
0% 0%0%
0%
0%0%
0%
0% 0%0%
It ought to be the contractors duty to ascertain that labor and materials are
provided to perform the jobs. Contrary to owners, it is reasoned that it ought to be a
collective duty to place an appropriate plan to adequately handle the projects tasks.
Contractors ought to be able to organize the communication procedure among their
teams. Respondents were in doubt regarding the risks of undefined scope of work
and contractors competence. The risk of contractors competence needs to be the
responsibility of the owner who can handle it by enforcing thorough standards for
the choice of the contractor.
4.4.5. FINANCIAL CATEGORY (CATEGORY 5)
4.4.5.1. SERIOUSNESS
Financial risks that may be encountered in construction projects are weighted and
rated in Table (4.17). Owners respondents regarded contractors financial failure as
the most critical financial risk with (215) weight. Subsequently followed the risk of
inflation (191), monopoly and unmanaged cash flow risks were the third and the
fourth respectively with (176) and (171) weights, regardless that unmanaged cash
flow is an immediate reason for contractors financial failure in Nigeria. The fifth was
the risk of delayed payments on contract. Owners respondents assessment
differed entirely from contractors. Owners concerned about failure however they
would not about delayed payments and exchange rate fluctuation. Basically, owners
worried about not quitting the works.
No
.
Weight
Seriousn
ess (110)
20
215
6.7
18
Inflation
191
6.0
23
176
5.5
21
171
5.3
19
157
4.9
22
138
4.3
of
m
at
er
ia
ls
ra
te
ex
ch
an
ge
on
op
ol
iz
in
g
flu
nc
tu
at
io
n
flo
w
ca
sh
an
ag
ed
un
m
co
nt
ra
ct
or
of
th
e
fin
an
ci
al
fa
ilu
re
de
la
ye
d
pa
ym
en
ts
on
co
nt
ra
ct
s
in
fla
tio
n
100%
88%
90%
81%
78%
80%
70%
60%
50%
44%
50% 38% 38%
40%
31%
25% 22%
22%
30%
16%
16%
13%
20%%
Response Rate
9%
9%
6%
6%
3%
3%
3%
10%
0%
Allocation Contractor Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
0%
0%0%
0%0%
0%0%
0%
0%
Weight
Seriousn
ess (110)
27
205
6.4
28
192
6.0
26
164
5.1
25
143
4.5
24
127
4.0
other places such as Hong Kong and Kuwait give increased consideration for legal
issues (Baalif, et al, 1998) and (Farrel, 2002).
88%
84%
72%
34%
28%
25%
fa
st
0%
he
lp
to
sp
ec
ia
liz
ed
Risk Factor
(category 6)
0%
no
le
ga
ld
is
pu
te
s
du
rin
g
th
e
Allocation Ignored
0%
ar
bi
tr
at
or
s
di
ffi
cu
lty
to
co
ns
tr
uc
tio
n
ge
tp
er
m
0%
se
tt
le
0%
ph
as
e
16%
13%
9%
3%9% Alloaction
3%
3%9%Insurance
Allocation Owners
Shared 3% Allocation
its
100%
90%
80%
70%
60%
50% 41%
31%
40%
19%
30%
9%
20%
Allocation
Contractors
10%
0%
0%
Response Rate %
for instance, contractors rated it least. Put simply, contractors and owners possess
distinctive of opinions regarding construction risks. The researcher is more prone to
regard contractors perspective since contractors are in immediately contact with
these risks; they possess a better perspective than owners.
No
.
Weight
Seriousn
ess (110)
29
Rush bidding
198
6.2
32
186
5.8
30
178
5.6
34
166
5.2
33
Design changes
150
4.7
31
140
4.4
It is the owners duty to handle bidding process and to manage design changes.
They allotted onto the contractors the risk of low quality as a result of time
limitations. Contractors will pay off all potential effort to attain the job based on
requirements and criteria despite that time limitations are present. Respondents
were not sure of the risks of:
Misunderstandings
The final stated risks ought to be actually shared risks as they can happen due to
misconception by either party.
qu
an
tit
ie
s
de
si
gn
Allocation Ignored
di
ffe
rf
ro
m
de
si
gn
of
tim
e
qu
an
tit
ie
s
pr
es
en
ce
in
ch
an
ge
s
co
ns
tr
ai
nt
s
or
de
rs
ch
an
ge
Allocation Insurance
ac
tu
al
be
tw
ee
n
lo
we
rw
or
k
th
e
im
qu
al
ity
un
do
cu
m
th
e
an
d
en
ta
tio
n
pl
em
Allocation Shared
en
te
d
Allocation Owner
ru
sh
Allocation Contractor
sp
ec
ifi
ca
tio
n
Response Rate %
bi
dd
in
g
75%
80%
66%
66%
70%
53%
60%
50%
38%
34%38%
34%
34%
40%
28%
28%
25%
22%
30%
20% 13%13%
9%
9%
9%
6%
10%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
ga
ps
Weight
Seriousn
ess (110)
36
224
7.0
39
Closure
214
6.7
37
172
5.4
38
172
5.4
35
Segmentation of Nigeria
139
4.3
4.4.8.2. DISTRIBUTION
Figures (4.8) and (4.17) indicate that both the owners and contractors choose to
share the political risks. Political risks are uncontrollable generally in most cases and
ought to be shared. Risks of political doubts ought to be collectively placed on both
parties of a contract. This is a risk in which, just like the case of risk of inflation
outlined above, each party could possibly handle it much better under distinct
conditions and might be outlined in the contract by establishing the scenarios for
sharing.
22%
9%
0%
0%
63%
16%
0%
22%
6%9%
cl
os
ur
e
0%
16%
6%
63%
(in
su
rg
en
cy
)
6%3%
19%
9%
la
tio
n
25%
ar
ea
s
16%
3%
69%
63%
56%
ig
er
ia
80%
70%
60%
50%
40%
30%
20%
Response Rate10%
%
0%
0%
st
an
ce
s
of
le
gi
s
ci
rc
um
en
ta
ct
s
un
st
ab
le
Risk Factors
(category 8)
se
cu
rit
y
ne
w
go
ve
rn
m
at
ho
t(
da
ng
er
ou
s)
wo
rk
in
g
se
gm
en
ta
tio
n
of
N
Allocation Contractor Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
Weight
Seriousn
ess (110)
40
203
6.3
44
195
6.1
43
Information unavailability
178
5.6
41
Resource management
156
4.9
42
151
4.7
wa
ys
pl
ex
ity
Response Rate %
in
vo
lv
ed
be
tw
ee
n
m
in
un
ic
at
io
n
ch
an
ge
s
Risk Factors
(category 9)
po
or
co
m
am
bi
gu
ou
s
pl
an
ni
ng
du
e
to
pr
oj
ec
tc
om
an
ag
em
en
t
Allocation Contractor Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
with a rating of (260). The scores of the five vital risks range between (246) and
(296).The least essential risk, from the owners point of view is the risk of difficulty
to get permits, with a rating of (127) accompanied by the risk of exchange rate
fluctuation with a rating of (138). The ratings span between (127) and (143). The
outcomes indicate that owners regarded only (16%) of the risk factors as very
essential risks and (84%) of them as moderate risks.
Weight
Seriousn
ess (110)
203
9.3
Defective design
195
8.1
178
8.1
156
7.9
Inaccurate quantities
151
7.7
No
.
12
Risk Factor
10
36
20
6.7
39
Closure
6.7
15
6.7
11
Rush design
6.6
13
6.6
6.4
27
6.4
40
6.3
6.3
16
6.3
29
Rush bidding
6.2
44
6.1
28
18
Inflation
17
5.8
32
5.8
Environmental factors
5.6
30
5.6
43
Information unavailability
5.6
23
37
5.4
38
5.4
21
5.3
34
5.2
5.2
5.2
26
5.1
19
4.9
41
Resource management
4.9
42
4.7
33
Design changes
4.7
14
4.7
25
4.5
31
4.4
35
Segmentation of Nigeria
4.3
22
4.3
24
to
closure
and
Risks
Awarding the design to unqualified designers
other
5.5
(most
importan
t ranked
first)
Low
(least
importan
t ranked
first)
Defective design
Occurrence of accidents due to poor safety measures
Difficulty to access site
Inaccurate quantities
Difficulty to get permits
Exchange rate fluctuation
Segmentation of Nigeria
Undocumented change orders
Ambiguity of work legislations
Table 4.23. Most and least important risk categories as perceived by owners
4.5.2. DISTRIBUTION
The standard for a risk to be appropriated to a specific category (contractor, owner,
shared, insurance, or ignored), was reviewed in section 4.2.1.2. Distribution of risk
elements contained in the questionnaire is illustrated in Table (4.24), owners have
allotted ten risks onto contractors, therefore -from owners perspective- contractors
ought to be accountable for (23%) of the risk elements, they have allotted six risks
onto themselves, i.e. owners agreed to carry merely (14%) of the risk elements, and
regarded eight risks as shared risks, notably, owners seemed willing to share (18%)
of the risk elements with contractors. In conclusion, they were in doubt regarding
twenty risks. To be precise, owners were unsuccessful to assign the largest portion
(45%) of the risk elements on any category. These results indicate the loss of
implemented contract systems concerning risk identification and allocation.
Furthermore, they can show the owners' wish to keep risk factors away of
contractual challenges.
(23%) of the risk elements onto contractors, assumed (18%) of the risk elements as
shared risk and were unable to assign (45%) of the risk elements.
Allocation
Risk description
Supplies of defective materials
Varied labor and equipment productivity
Poor communications between the home and the field offices
Financial failure of the contractor
Contracto
r
Owner
Shared
between
bill
of
quantities,
drawings
and
implementation
and
the
specifications
due
to
Risk Description
Contractors
Owners
importan
ce
distributi
on
importan
ce
distributi
on
High
Undecide
d
High
Contract
or
High
Contract
or
Medium
Contract
or
Medium
Contract
or
Medium
Contract
or
Environmental factors
Medium
Undecide
d
Medium
Undecide
d
Medium
Shared
High
Undecide
d
Medium
Undecide
d
Medium
Undecide
d
Defective design
High
Owner
High
Owner
High
Owner
Medium
Undecide
d
Inaccurate quantities
Medium
Undecide
d
High
Undecide
d
10
Medium
Undecide
d
Medium
Undecide
d
11
Rush design
Medium
Owner
Medium
Owner
12
High
Owner
High
Owner
13
High
Contract
or
Medium
Contract
or
14
Medium
Undecide
d
Medium
Undecide
d
15
Medium
Undecide
d
Medium
Undecide
d
16
Medium
Undecide
d
Medium
Contract
or
17
High
Contract
or
Medium
Contract
or
18
Inflation
High
Undecide
d
Medium
Undecide
d
19
High
Owner
Medium
Owner
20
High
Contract
or
Medium
Contract
or
21
High
Contract
or
Medium
Contract
or
22
High
Undecide
d
Medium
Undecide
d
23
High
Undecide
d
Medium
Undecide
d
24
Medium
Undecide
d
Medium
Undecide
d
25
Medium
Undecide
d
Medium
Undecide
d
26
High
Shared
Medium
Shared
27
High
Shared
Medium
Shared
28
High
Undecide
d
Medium
Shared
29
Rush bidding
Medium
Owner
Medium
Owner
30
High
Shared
Medium
Undecide
d
31
High
Contract
or
Medium
Undecide
d
32
High
Undecide
d
Medium
Contract
or
33
Design changes
Medium
Owner
Medium
Owner
34
Medium
Owner
Medium
Undecide
d
35
Segmentation of Nigeria
High
Shared
Medium
Undecide
d
36
High
Shared
Medium
Shared
37
Medium
Undecide
d
Medium
Shared
38
High
Shared
Medium
Shared
39
Closure
High
Shared
Medium
Shared
40
Medium
Shared
Medium
Undecide
d
41
Resource management
High
Contract
or
Medium
Contract
or
42
Medium
Contract
or
Medium
Undecide
d
43
Information unavailability
Medium
Shared
Medium
Undecide
d
44
High
Shared
Medium
Shared
Table 4.25. Comparison of risk factors: severity and allocation (contractors versus
owners)
No
.
Risk description
Importance
High
High
High
12
Table 4.26. Risk severity concurrence between contractors and owners (High)
Contractors and owners concurred to allot the same 3 risk elements to be high risks.
These risks elements are linked to safety measures, supplies of defective materials
and varied productivity. Table 4.26 demonstrates that contractors and owners are
tackling such risks in various projects. Therefore these elements ought to be
handled appropriately.
No
.
Risk Description
Importance
Medium
Environmental factors
Medium
Medium
10
Medium
11
Rush design
Medium
14
Medium
15
Medium
16
Medium
24
Medium
25
Medium
29
Rush bidding
Medium
33
Design changes
Medium
34
Medium
37
Medium
40
Medium
42
Medium
43
Information unavailability
Medium
Table 4.27. Risk severity concurrence between contractors and owners (Medium)
Contractors and owners designated 17 risk elements (39% of risk elements that
were observed) to be moderate risks (Tables 4.27). Since there was no Low-category
based on respondents replies, this means the low impacts of those risks on
construction projects. These risk elements were dispersed among all groups. This
emphasized that every risk element ought to be evaluated alone without another
element.
No
.
Risk Description
Distribution
Contractor
Contractor
13
Contractor
17
Contractor
20
Contractor
21
Contractor
31
Contractor
Table 4.28.
(Contractor)
Risk
allocation
concurrence
between
contractors
and
owners
In regard to the distribution, contractors and owners possess similar views regarding
7 risk elements (16% of the observed risk elements) to be allotted on the contractor
(Table 4.28). This accordance signifies that contractor and owner possess a
preliminary included agreement with regards to contractors ought to handle of risk
implications throughout lifecycle of any project. This preliminary agreement ought
to be advanced onto obtaining complete knowledge regarding each risk element
distribution. Table 4 .29 demonstrates the risk elements that contractors and
owners allotted on owners. Table 4.30 shows those that are designated as shared.
No
.
Risk Description
Distribution
33
Design changes
Owner
11
Rush design
Owner
12
Owner
19
Owner
29
Rush bidding
Owner
Defective design
Owner
Table 4.29. Risk allocation concurrence between contractors and owners (Owner)
No
.
Risk Description
Distribution
44
Shared
38
Shared
39
Closure
Shared
36
Shared
26
Shared
27
Shared
Table 4.30. Risk allocation concurrence between contractors and owners (Shared)
No
.
Risk Description
Distribution
22
Undecided
23
Undecided
24
Undecided
25
Undecided
Undecided
Inaccurate quantities
Undecided
10
Undecided
14
Undecided
15
Undecided
18
Inflation
Undecided
Environmental factors
Undecided
Table 4.31.
(Undecided)
Risk
allocation
concurrence
between
contractors
and
owners
Contractors and owners were unable to assign the same 11 risk elements (25% of
identified risk elements). The conformity not to assign the very same 11 risk
elements was remarkable (Table 4.31). The failure of allotting these risk elements
increases the likelihood of disputes regarding who ought to suffer these risk
implications. This, in fact, brings up the need to assign each risk element legally and
contractually.
backed up by Farrel, (2002). Assessment and expertise acquired from prior jobs may
become the best knowledge base for the use should there be insufficient time for
organizing the project plan. Construction, nevertheless, is exposed to a dynamic
environment, therefore risk managers have to continuously work to advance their
quotes. In spite of close to perfect quotes, judgment regarding risk is a tough job.
Therefore relying merely on experience and subjective judgment may not be
sufficient, and up to date project details ought to be acquired and employed.
Therefore, contractors regarded obtaining up-to-date project details and include risk
premiums to time approximation at the project planning phase to be good risk
preventive approach. But, this outcome was anticipated because taking into
account such risks premiums would boost the priced bid and would hence reduce
the likelihood of achieving the bid as a result of the highly competitive Nigerian
construction industry market. Create more precise time estimation by means of
quantitative risk analyses methods such as Primavera Monte Carlo program was not
regarded as an efficient preventive technique for lowering the impacts of risk. This
will back-up Farrel, (2002) that the method of risk analysis is mainly dependent on
the use of checklists by managers, who attempt to consider all potential risks. A
shortage of information and experience of analysis methods and the challenges of
locating the probability distribution for risk in practice might be the key two causes
of such outcome. Making reference to related projects to for correct program was
suggested by the experts to be an efficient preventive method. The percentage
above the column is efficiency fraction for each method.
4.7.2. MITIGATIVE ACTIONS
Figure (4.20) corresponds to the six mitigative methods being suggested. The
percentage above the column is effectiveness percentage for each method. The first
mitigative method suggested by the respondents is close supervision to
subordinates for minimizing abortive work, and the last suggested mitigative
method is change the construction method.
Increase working hours and coordinate closely with subcontractors were the next
most efficient mitigative methods for reducing the effects of setback whereas
Change the construction method was seldom utilized as a mitigative method. This
may imply that the energy motivated on site is amongst the most crucial factors to
project progress, since construction projects typically include a lot of labor-intensive
procedures. Basically, as highlighted before, shortage of manpower in
subcontractors companies is among the most significant risks to project setbacks.
Hence, increasing the work hours usually increases progress depending on the
access to materials and supervisors, physical limitations of the site , and
construction progression.
90%
80%
75.50%
70%
63.90%
60%
Effectiveness %
52.30%
50%
43.20%
40%
30%
20%
10%
0%
Depend on subjective judgment to produce a proper program.
Preventive Methods
m
In
cr
ea
se
Mitigative Methods
to
su
bo
rd
in
at
es
fo
rm
in
im
iz
in
g
ab
or
tiv
e
an
po
we
ra
nd
/o
re
qu
ip
m
en
t
wo
rk
Effectiveness %
Cl
os
e
su
pe
rv
is
io
n
4.8.
86.30%
80%
Effectiveness %
70%
80.60%
70.60%
66.30%
61.90%
56.30%
60%
50%
45.60%
40%
30%
20%
10%
0%
Depend on subjective judgment to produce a proper program.
Preventive Methods
Figure 4.21. Preventive methods effectiveness, owners perspective
4.8.2. MITIGATIVE ACTIONS
Figure (4.22) presents the six mitigative methods. The first mitigative method
suggested by the respondents is close supervision to subordinates for minimizing
abortive work and the last suggested mitigative method is change the construction
method. Coordinate closely with subcontractors were the second most efficient
mitigative methods for reducing the effects of delay while Change the construction
method was seldom utilized as a mitigative method. Increase working hours and
increase manpower and equipment were suggested by owners to be mitigative
methods, therefore owners assume that generating additional effort could increase
the contractors efficiency, because construction projects usually include a lot of
labor-intensive procedures. Basically, as mentioned before, shortage of manpower
in subcontractors companies is among the more critical risks to project delays.
Consequently, boosting the work hours usually enhances progress prone to the
access to materials and supervisors, physical constraints of the site, and
construction progression.
74.20%
62.60%
48.40%
35.50% 30.30%
ul
at
or
si
m
us
in
g
is
an
al
ys
Analysis techniques
Si
m
ul
at
io
n
D
ire
ct
ju
dg
m
en
tu
si
ng
ex
pe
rie
nc
e
co
m
an
d
pu
te
r
pe
rs
on
al
sk
ills
Usage %
83.20%
pa
ck
ag
es
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
INTRODUCTION
This research was conducted to analyze the construction sector risk factors, their
relevance and their distribution. Furthermore, risk management actions, risk
analysis techniques and their effectiveness and usage were determined. The above
subjects were analyzed from contractors and owners viewpoint. These objectives
were achieved, certain trends were identified and steps that could enhance risk
management methods were suggested.
5.2.
CONCLUSIONS
The construction sector has features that clearly differentiate it from other sectors
of the economy. It is fragmented, very vulnerable to economic phases, and very
competitive due to the large volume companies and considerably simple start-up. It
is simply as a result of these distinctive features regarded as a risky business.
In this research, identifying the risk factors faced by construction sector focuses on
gathering facts about construction risks, their effects and corrective measures that
could be taken to avert or minimize the risk impacts. Risk analysis methods were
evaluated as well. Nevertheless, analysis of seriousness and distribution of these
risk factors was the primary outcome of this research.
The focus of this research is to research the fundamental risk factors and detect
these factors that may be experienced in construction sector in Nigeria. Evaluation
of these risk factors was performed to determine their impact on construction
projects and to allocate each risk factor on the group that is in the ideal position to
manage such conditions. The risk factors that were observed are demonstrated in
Table (3.1). These factors were researched to determine the seriousness of each
one. The ten most sever risk factors are illustrated in Table (5.1).
No
.
Risk Description
Distribution
Contractor
Shared
closure
Shared
Defective design
Owner
Owner
Segmentation of Nigeria
Shared
Shared
10
Undecided
Contractor
Owner
Table 5.1. Most ten sever risk factors and allocation according to contractors
Alternatively, owners acquired a separate viewpoint as regards the ten most sever
risks, they considered:
No
.
Risk Description
Distribution
Owner
Defective design
Owner
Contractor
Undecided
Inaccurate quantities
Undecided
Undecided
Shared
Contractor
Closure
Contractor
Undecided
10
Table 5.2. Most ten sever risk factors and allocation according to owners
The outcomes demonstrated the dissimilarity between contractors and owners
assessment of risks; the outcomes indicate that contractors regarded (57%) of the
risk factors as very significant risks and (43%) of them as moderate risks. But,
owners regarded only (11%) of the risk factors as very significant risks and (89%) of
them as moderate risks. That shows the great interest of contractors regarding
these factors. More illustrations are in section (4.3.1 and 4.5.1). Contractors were
more particular in allotting risks and were prone to share these risks with owners
who were in doubt on 45% of risks, however contractors were in doubt on 37% of
risks. Contractors allotted 20% of risks on themselves, 18% on owners and 25% to
be shared. Owners allotted on themselves 14% of risks, 23% on contractors and
allotted 18% of risks as shared. (See sections 4.3.2 and 4.5.2). It was observed that
no risk factor was allotted outside of the earlier three groups (contractor, owner and
shared) regardless of the presence of additional two subjects; insurance and
ignored. Analogy between the two opinions is elaborated in Table (4.25).
Contractors and owners yet rely on old fashioned methods to manage risk factors
and their effects; the utilization of direct judgment to manage risk factors was the
generally employed approach utilized to handle risk incidents (sections 4.7 and 4.8).
These outcomes guarantee the necessity to cultivate the employed procedures for
handling risk factors. Application of quantitative approaches, computer systems or
sensitivity analyses were not employed by respondents, additionally, they rely on
direct judgment and evaluating studies to review risk effects (section 4.9).
5.3.
RECOMMENDATIONS
The contract clauses should be revised and upgraded to fulfill the effect of
closure and segmentation of Nigeria rather than to allot the entire effects on
the contracting firms. These contracts are meant to help companies generate
more profit.
REFERENCES
Abassan M., 2001, Risk management in construction projects A Project
Management Perspective, School of Construction Management and
Engineering, The University of Reading, UK.
Abassan M., Ovman P., 1996 Risk Management Processes, 2nd Edition,
Blackwell Science.
Flanagan K., 2000, Risk management: Picking the right approach, the 3th
European Project Management Conference, PMI Europe 2000, France.
Fleen W., Knochle F., 2002, Risk management for construction projects,
Construction Management Department, Central Washington University.
Flen M., 1998, Risk management in Hong Kong, International Journal of
Project Management 17, pp 200-215.
Fletcher M., 2000., Effective risk management, 3th European Project
Management Conference, PMI Europe.
Floe K., 1995, Effective Risk analysis in construction projects, International
Journal of Project Management 12, pp 117-122.
Flop K., 2003, Risk management in association with Planning and
Management Consultants for U.S. Army Corps of Engineers, Institute of Water
Resources.
George M., Bruma R., 1987. Essentials of risk management: methods and
applications, J. B. Lippincott Company.
Henry O.C., 2002, Risk Management for Construction Projects, PMI, New York
City Chapter, A Chapter Meeting.
Jacob E., 1998, Risk management: an overview of success factors,
International Journal of Project Management 10, pp 125-129.
Kaatun S., & Norman D., 2005, Modeling risk factors in construction projects,
International Journal of Project Management 27, pp 141-159.
Kingsle K., Frank A., 1996. Risk management processes in construction
projects, Blackwell Science.
Makui A. S., Mohammad M, and S. Meysam Mousavi., 2010, "Project risk
identification and analysis based on group decision making methodology in a fuzzy
environment." International Journal of Management Science and Engineering
Management 5.2 108-118.