technical risk factors in building construction.doc

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Declaration

I hereby declared that this report submission is my own work and to the best of my

knowledge. It does not contain any material previously published or written by any

other person or any material which substantial extent has been accepted for the award

of any degree or diploma of a university or other institution of higher education,

except where referenced are mentioned.

Rathnayake R.M.R.S.B

Department of Building Economics,

Faculty of Architecture,

University of Moratuwa,

Sri Lanka,

April 2009


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Acknowledgement

This research study embraces much dedication and ready assistance received from many

people, who contributed in ample ways to complete this study. Consequently, I take this

opportunity to convey my sincere gratefulness to every one of them.

It is my foremost duty to pay my gratitude to the Department of Building Economics,

University of Moratuwa, and all the academic as well as non academic staff of the department

for the tremendous service rendered. I extend my gratitude to Mr. Indunil Senevirathna, Head

of the Department of Building Economics, for his keen interest, encouragement and the

guidance to the achievement of producing this dissertation.

Furthermore, I am grateful to my supervisor, Mrs. Kanchana Perera, Senior lecturer,

Department of Building Economics, for her outstanding supervision, her guidance,

encouragement, and constructive criticisms significantly contributed towards the successful

completion of this research. I extend my gratefulness to Dr. Sepani Senarathna, the

dissertation coordinator, for her interest and dedication throughout the year. I should express

my appreciation to senior lectures of the Department of Building Economics Prof. R.

Rameezdeen, Mr. Suranga Jayasena, Mrs. Yasangika Sandanayaka and Mr. Sandun Fernando

for their valuable guidance throughout the research process.

I convey my special thanks to Mr. Lalith Rathnayaka (VForm consultants), Mr Thilak

kolonne (VForm consultant),Mr. Elmo Fernando (Havelock city project) Mr. Pieris

(Department of Mathematics, University of Moratuwa) for their special guidance, assistance

and encouragement provided to clarify the problems of this research.

I would like to convey my utmost gratitude to all the professionals of organizations who gave

me a great support in many ways for the success of this research.

Finally I express my heartfelt thanks for my family members, relations, colleagues and my

seniors and juniors for giving me an outstanding company to make this dissertation possible.

Rathnayake R.M.R.S.B.

24th April 2009


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T a b l e o f C o n t e n t

Table of Contents

Acknowledgement ...................................................................................ii

Table of Contents......................................................................................I

List of Figures.........................................................................................II

List of Tables.........................................................................................III

List of Appendix.....................................................................................IV

Abbreviations ..........................................................................................V

Abstract...................................................................................................VI

Chapter 01................................................................................................1

Chapter 02................................................................................................7

Chapter 03..............................................................................................36

Chapter 04..............................................................................................47

Chapter 05..............................................................................................76

References .............................................................................................82

Appendix ................................................................................................89

C o n s t r u c t i o n R i s k : F u r t h e r C o n s i d e r a t i o n o f T e c h n i c a l R i s k I


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L i s t o f F i g u r e s

List of Figures

Figure 3.1: Research Process................................................................37

Figure 3.2: Nested reseach methodology..............................................38

Figure3.3: Research methodology illustration.....................................39

C o n s t r u c t i o n R i s k : F u r t h e r C o n s i d e r a t i o n o f T e c h n i c a l R i s k II


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L i s t o f T a b l e s

List of Tables

Table.2. 1: Risk identification process..................................................19

Table.2. 2: Risk identification................................................................19

C o n s t r u c t i o n R i s k : F u r t h e r C o n s i d e r a t i o n o f T e c h n i c a l R i s k III


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I n t r o d u c t i o n

Chapter 01

1 INTRODUCTION

1.1 BACKGROUND

The concept of risk can be applied to nearly every human decision making action of

where, the consequences are uncertain (Flanagan and Norman 1993). The word of

risk has entered in to the English language in the mid 17 th century, coming from the

French word risqu (Covello and Mumpower 1985 cited Thilakarathne 2007).

Cooper and Chapman (1987 cited Dent 1997, p. 1)define risk as exposure to the

possibility of economic or financial loss or gain physical damage or injury or delay

as a consequence of the uncertainty associated with pursuing a particular course of

action.

Construction industry is one of the most dynamic and challenging industries

(Woodward 1997) and it is subjected to more risk and uncertainty than many otherindustries (Flanagan and Norman 1993). Furthermore, according to Patrick et al.

(2007), Kangari (1995), Uher and Toakley (1999), and Thevendran and Mawdesley

(2004),risk relates to construction industry and obviously it is related to construction

projects.Hence, construction projects consistently expose to various sources of risks

(Poh and Tah 2006). Those risks can effect to productivity, performance, quality, and

budget of a construction project (Kangari 1995). However, risks cannot be eliminated

(Patricket al. 2007), but it can be minimized or transferred from one stakeholder to

other stakeholder in the construction process (Kangari 1995). Thus, formal and

efficient risk management process is needed to manage all types of risks in

construction projects (El-Sayegh 2008).

Consequently, management of risks has turned into a main part of the organizational

activities (Flanagan and Norman 1993). The risk management is a tool which

control risks in construction projects(Hamshayini 2007, p. 1). The main aim of risk

management is to assist all construction project aims (Mills 2001) by mitigating the

risk, transferring the risk to other parties, or sharing the risk among the parties

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I n t r o d u c t i o n

the management of risk is significantly influenced by the uniqueness of the

construction industry of that particular country. As such as, it emphasizes a need of

in depth investigation to the overall consequences and uncertainties in construction

risk management for a variety of project participants in Sri Lankan context.

Besides, according to the empirical study by Kangari (1995) revealed that

management practices are mainly focused on construction risk allocation towards

perception of the typical large contractors and owners. Further, the same study

emphasized the identification of strategies or usage of risk management techniques to

add value to project delivery and improve the effectiveness of the construction

industry throughout of the process of construction.

To handle risks in construction projects appropriately, it is required to assign them

scientifically among parties (El-Sayegh 2007). Thus, scientific assignment of risk

among project parties can be achieved by only if it analytically investigates the

overall consequences and uncertainties in construction risks and risk supervision

(Andi 2006). More importantly, this can only be achieved if all parties do understand

their risk responsibilities properly (Perera 2006).

Identification of sources of risk is vital aspect in risk management process

(Tchankova 2002).Edward and Browen (1998)supported the same argument stating

that for a proper risk management process, it has to first identify source of risks.

Further, the same study classified the sources of risks in to nine categories: financial;

legal; management; market; policy; health; cultural; social and political risks.

However, among all these risks sources/ factors, the technical risk sources/ factors

are not well-represented or not evident in risk management literature (Edwards and

Broun 1998).

According to above mentioned findings and facts, to trounce them and fill the gap,

which had already figured out. Thus, this emphasized a need of research in risk

management area with orientation to identify and analyze possible risk factors

associated with building construction process and further to assess their

consequences and uncertainties towards project parties/stakeholders; specially

towards contractors and owners.



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L i t e r a t u r e R e v i e w o n R i s k M a n a g e m e n t

However, when consider above-mentioned definitions with compare to Nummedal et

al. (1996 cited Ahamad and Azar 2004) definition of risk management such as a

process to control the level of risk and to mitigate its effects and it is a systematic

approach for identifying, evaluating, and responding to risks encountered in a

project. It is convinced that that the risk management is a systematic process to

identify, evaluate and responding to risks encountered in a project. Nummedal et al.

(1996 cited Ahamad and Azar 2004) definition takes for this research as the

definition for the risk management.

The application of systematic risk management in construction projects has long

been recognized as an effective approach to minimizing risk impacts(Flanagan and

Norman 1993) and it will aims to identify and assess risk in order to enable them to

be understood clearly and managed effectively(Hillson 2003).

2.4.2.1 SYSTEMATIC RISK MANAGEMENT PROCEDURE

Systematic approach of risk management will be given assurance to the risk

management process by minimizing the missing of risk factors and there affect.

Basically, a systematic risk management process consist with three steps

Figure 2.3: Risk Management Umbrella


(Source- Dent 1997)


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ExistenceUncertainty

PreliminaryChecklist

Risk Events/

ConsequenceScenarios

RiskMapping

Logical RiskClassification

Scheme

Risk CategorySummary Sheet

Risk Identification ProcessRisk Identification Process


Controllable

Uncontrollable

Types

Severity

The objective of risk identification is to identify all possible risks (Highways agency

2001), categorize risks that could affect the project (Kangari 1995), and document

these risks (Flanagan and Norman 1993), not to eliminate risks from consideration or

to develop solutions for mitigating risks and those functions are carried out during

the risk assessment and risk mitigation steps. Some of the documentation and

materials should use in risk identification as they become available include these.

Risk identification process

Moreover, the degree, to which the identification process will influence the

effectiveness of risk management and its contribution to the overall project

management of any particular project, is dependent on the way the steps of the

process are implemented (Chapman 2001, p. 147).

Furthermore, proper implementation of these steps will ensure better effectiveness of

identification process and it will guide to better understanding of risk. Moreover, the

key factors involved in each step of the risk identification process demonstrate in

following figure and table. There are six steps involved in the risk identification

process. The following sections will discuss each step separately (Al-Bahar 1988

cited Al-Bahar 1990).



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2.7 THE ROLES OF THE PROJECTS DIFFERENT PHASES IN

RISK MANAGEMENT

According to Osipova (2007), construction process is traditionally divided into four

main phases:

Programme (Inception):- client has an idea about the project and analyses

conditions for its execution

Planning: - architects produce construction drawings according to the

clients requirements

Procurement (Tendering):- parties sign the contract.

Production: - contractor executes the job

Since, foreseen all risk at the inception stage is impossible and due to tendency of

identified risk in the programme stage to change during project implementation, joint

and consistent risk management is required throughout all projects (Rahman and

Kumaraswamy 2005). Furthermore, occurrence and effect of construction project

risk in different phases to the project participants difficult to foresee all risk only can

predict to some extend based on the available information in the early stages of the

construction project (Osipova 2007). Moreover, several authors highlighted the

importance of identification of project risk in the early stage of the construction

project life cycle ( Uher and Toakley 1999), (Rahman and Kumaraswamy 2005),

(Flanagan and Norman 1993), (Andi 2006).

Aforementioned facts create the need of developing a risk management framework

within construction project to identify the performance of risk in the construction life

cycle.



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2.6 PROJECT RISK CLASSIFICATION AND TECHNICAL RISK

IDENTIFICATION REGARDING TO SYSTEMATIC RISK

MANAGEMENT

2.6.1 PROJECT RISK CLASSIFICATION

Project risk classification is an important step in risk assessment process, because it

attempts to structure the various risks that may affect a project. There is various

classification of project risk with respect to deferent purposes (Edwards and Browen

1998), (Al-Bahar 1990 cited Ahmed and Azhar 2004), (Wong and Hui 2006), (Stoner

et al. 1997). Specially the construction risk is generally perceived as events that

influence project objectives of cost, time and quality and some of the project risks

can be predictable or foreseen (identifiable) while other may totally unforeseen. Due

to that, also it is very much important to classify project risks (Al-Bahar 1990 cited

Ahmed and Azhar 2004).

According to Edwards and Browen (1998), project risk classifies using the risk

source as the basis; primary classification would be human and natural. Natural risks

occur outside the human agencies, while human risk arise the humanly organizedsystem and this classification is illustrated following figure. Human risks relating to

construction project classifies further as social, political, economic, financial, legal,

managerial, technical, and cultural risks.


(Source- Edwards and Brown 1998)

Risk

Natural Human

PoliticalWeather

systemEconomic

Financial

Legal

Health

Managerial

Technical

Social

Cultural

Geological

system


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R e s e a r c h M e t h o d o l o g y

Chapter 03

3. RESEARCH METHODOLOGY

3.1 INTRODUCTION

Main aim of this chapter is to outline the research methodology for this research and

specially illustrate the research design, which was followed throughout this research.

Initially, it is describing the research Process of this particular research and it

illustrates completely the Process of this research in a systematic manner using

figures.

Further, it is illustrating the research design together with the steps of the research

design and applicability of research design steps also illustrate.

3.2RESEARCH PROCESS

This research carried out mainly to identify the prevailing technical risk factors and

thereafter to analyze the allocation of risk among contraction parties, figure out

consequences of above risk of contracting parties, moreover to identify the

performance of technical risk in construction life cycle. Thus, it was essential to

think off an appropriate research Process, which is competent of identification risk

factors, which is paramount.

Further, by using a proper research process can be minimized the errors that can be

occurred during our research and can be reduced the mistakes done by the researcher.

Research process for this particular research illustrates using following figure,



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Figure 3.1: Research Process


Further

Research

Research Question

Establish Aim & objective

Data Collection

Preliminary Survey

Structured Interview Questioner Survey

Data Analysis

Conclusion & Recommendation

Literature Review

Interviewing Literature Review

Guide to

Sampling and

Factor Selection

Background study

Sample

Collect

ion


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3.3 RESEARCH DESIGN

Research design is complying with three key steps; in sequent, identifying researchphilosophy, identifying research approach, identifying research technique (Kagioglou

et al. 2000 cited Senarathne 2005) Where the selection of research techniques for

data collection and data analysis is based on research approach and the selection of

research approach is based on the research philosophy.

Figure 3.2: Nested reseach methodology

Further, research methodology illustrated by the Saunders et al. (2003) as shown in

the following figure,


(Source- Kagioglou et al. 2000 cited Senarathne 2005)


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Figure3.3: Research methodology illustration

3.3.1 RESEARCH PHILOSOPHY

Research philosophy selection is the initial step of research designing and it is

depend on the way researcher think about to develop the knowledge. Further, it

directs to the researcher to select appropriate research strategy among one offollowings,

Positivism: - are the natural science researchers. In positivism,

working with an observable social actuality and the finished product

of the research can be generalized (Remenyi et al. 1998 cited saunders

et al. 2003)

Interpretivism: - try to discover the details of the situation to

understand the reality or perhaps reality is working behind them

(Remenyi et al. 1998 cited Saunders et al. 2003).

Realism: - believe that the reality is subjective and interior to the

people and it shares the both view of positivism and interpretivism.

By considering the nature of this research problem it is obvious that this piece of

research needs a vigilant observations and identification about the construction

project risk to manage the to overcome problems created by the construction project


(Source- Saunders et al. 2003)


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risk to the construction parties throughout the construction project life cycle. Due to

that reason interpretivism select as the research philosophy for this research.

3.3.2 RESEARCH APPROACH

Appropriate research approach should select to deal with the research question

according with the research philosophy. Research approach approaches are about to

organise research activities, especially including the collection of data from the

population in a way that meet the reach problems aims and objectives. According to

Saunders et al. (2003), research approach can be divided in to two categories,

Deductive:- first develop a theory and hypothesis, and design research

strategy to test the hypothesis and moreover this is owes to positivism,

Inductive:- first collect data and develop a theory as a result of the data

analysis, and moreover this is owes to interpretivism,

When considering circumstance of the this research problem, it is important to

identify the technical risk factors , consequences of them and their performance inthe construction life cycle. Therefore as the research approach to this research

deductive approach is selected.

According to the study of, Kagioglou et al. (2000 cited Senarathne 2008);following

approaches are the most popular and widely used research approaches in the world.

Experiments laboratory, quasi-experiments

Surveys

Case study research

Ethnography

Action research

Grounded theory



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Consequently, very large samples are feasible, making the results statistically

significant even when analyzing multiple variables.

Many questions can be asked about a given topic giving considerable flexibility

to the analysis. There is flexibility at the creation phase in deciding how the questions will be

administered: as face-to-face interviews, by telephone, as group administered

written or oral survey, or by electronic means.

Standardized questions make measurement more precise by enforcing uniform

definitions upon the participants.

Standardization ensures that similar data can be collected from groups then

interpreted comparatively (between-group study).

3.3.3 RESEARCH TECHNIQUE

3.3.3.1 DATA COLLECTION TECHNIQUE

By considering the circumstances of this of this particular research, especially

neediness of the identification and perceptions of construction industry practitioners

about the allocation of technical risk factors among contract parties, questioner

survey selected as the basic technique to collect data. Furthermore, for fill the gap

creating by the questioner survey, semi structured interview was used for thecritically identify the actual scenario.

Preliminary Survey

Preliminary survey carried out to find out, current prevailing condition of the risk in

building construction industry and to identify the significance technical risk factors

relate to building construction industry. Moreover, it was conducted in two ways,

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construction life cycle. Ultimatly, in the forth question relates to the proper allocation

of the risk among construction parties namely cotractor, client and consultant.

The questionnaire survey forms were distributed to construction professionals

associated with the Sri Lankan construction industry. The completed responses

collected personally.

Structured Interviews

With the guidance of the preliminary survey, structure for the structured interview

was prepared and moreover allocation of risk, consequence, and occurrence of that

particular risk factors within the construction lifecycle was try to figure out. This wasconducted together with the questioners and interviewed the construction

practitioners. In most of the cases interviewed Project manager, Project Engineer,

Site Engineers, and specially quantity surveyor to ensure the monitory terms relate to

technical risk.

3.3.3.2 DATA ANALYSIS TECHNIQUE

Collected data from above three methods evaluate systematically to achieve proper

answer to the research question.

For analyze the allocation of risk to the contracting parties, figure out the

consequences of above risk of contracting parties, and identify performance of risk in

construction life cycle from the collected data. Likert Scale was used in questioner

survey.

Likert Scale

Likert scale can be recognized as the technique of measuring the different attitudes

towards a statement by asking the respondent to indicate their preference in a series

of short statement on a given range of responses. It can be analyzed the general



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D a t a A n a l y s i s a n d i n t e r v i e w

a n a l y s i s

Chapter 04

4 DATA ANALYSIS AND INTERVIEW ANALYSIS

4.1 INTRODUCTION

With the aim of upgrading the knowledge in realm of risk management, the research

had first conducted a board literature review in the risk management field with

particular prominence in building construction projects in Sri Lankan perspective.

Prime intention of this chapter is to analysis the degree of risk management aspects

using in technical risk management in construction projects in Sri Lanka. Chapter 2

provided the rigid knowledge of risk management and risk management measures

concerning the technical risk management. Besides, the behavior of the contraction

projects and construction project partys behavior regarding risk management. This

chapter completely based on information collected from construction industry

practitioners through questioner survey and interviews.

Within this chapter consists of the results, after analyzing the data, collected from

questionnaire survey and interview. Moreover, ultimately, discussion carried out with

the intention of approaching the conclusion of this study.



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a n a l y s i s

4.2 PRELIMINARY SURVEY

4.2.1 RISK FACTOR IDENTIFICATION

Various risks were identified in the first stage of this research and they were

illustrated broadly in the chapter 02. This was accomplished mainly through

literature review. Twenty four technical risk factors were identified through the

literature review.

For the fulfillment of aim and objective of the research respondents were asked to

state availability of the listed risk factors which were found out though the literature

review. That was asked to do considering respondents knowledge and experience

about listed technical risk factors. This was done with the intention of removing risk

factors where none of respondent stated as; a particular risk factor could not be seen

in Sri Lankan construction industry. However, according to finding of the

preliminary survey, technical risk identification can be illustrated by following figure

4.1.

According to figure 4.1, all the risk events identified were there in Sri Lankan

construction industry. Based on the survey result, thirty-four respondents out of forty

stated that they have faced to estimation errors considering their experience. Eighty

five percent of the total projects were having estimation errors. Moreover, design

failures/ design variation by client is the second highest technical risk factor. Thirty

three out of forty respondents mentioned that they faced that.

Thirty two out of forty respondents had faced to shortage in skillful workers within

their projects. It means there is an 80% probability of having shortage in skillful

workers for a project. Apart from above mention three technical risk factors,

according to respondents identification there were 6 risk factors having more than

50% probability of occurrence in a particular project.



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a n a l y s i s

Figure 4. 2: Respondents Profile

4.3.1 RSEARCH FINDINGS

4.3.1.1 SIGNIFICANCE OF TECHNICAL RISK FACTORS

Based on the survey results, the relative importance index (RII) was calculated for

each risk based on probability, impact and rating. These risks were then ranked

according to their RII. The results are presented in tables and figures for easy

illustration.

Significance of technical risk was measured considering the project perspectives

independently such as,

Impact to the cost of the project

Impact to the time of the project


SubjectNo of Respondents

Client Contractor Consultant Total

Number of Respondents 11 14 15 40

Less Than 5 Years 1 5 6 12

5-10 Years 1 4 0 5

Above 10 Years 9 5 9 23

Project Scale

less than 500

million1 2 6 9

500-1000

million

5 7 5 17

Above 1000

million5 4 5 14


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a n a l y s i s

Impact to the quality of the project

Reliability of data

Considering the data set gain from the questionnaire survey for the probability,

Cronbach's Alpha was calculated for the data set. The alpha is 0.743. According to

Nunnally and Bernstein (1978), in a reliable data set the alpha should be above 0.7. It

means the data set collected to calculate RII for each risk based on probability is

reliable.

Moreover, considering the data set collected to calculate RII for each risk based on

cost impact, Cronbachs alpha was calculated. The alpha is 0.840. It denoted that the

data set collected through questionnaire to calculate RII for each risk factor based on

cost impact is reliable.

Furthermore, for data sets collected for the time impact and quality impact also

Cronbachs alphas were calculated. Alphas are consequently 0.794 and 0.829.

According to Nunnally (1978), those are reliable data sets.

4.3.1.1.1 SIGNIFICANT TECHNICAL RISK FACTORS CONSIDERING

COST OF THE PROJECT

Cost of the project is one of the most important project perspectives when

considering the budget of the project, which is allocated by the employer, or the

owner of the project. Therefore, it is more important to consider impact to the cost of

the project by the technical risk factors.

Based on the survey, the results are presented in table 4.3. Table 4.4 presents the top

10 technical risks in the Sri Lankan construction industry based on the risk rating

considering impact to the cost of the project. According to risk rating values, most

significant technical risk is estimation errors. The RII is 11.970. Estimation errors are

the key technical risk when considering the cost perspective of the project in Sri



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a n a l y s i s

4.3.1.1.2 SIGNIFICANCE CONSIDERING TIME OF THE PROJECT

Time of the project is one of the most important project perspectives. When

considering time limitation that is given by the owner. That could be due to demand

to the project at market. Therefore, it is more important to consider impact to the

time of the project by the technical risk factors.

Table 4. 5: Significance of Risk Considering Time of the Project



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a n a l y s i s

Based on the survey, the results are presented in table 4.5. Table 4.6 presents the top

10 technical risks in the Sri Lankan construction industry based on the risk rating

considering impact to the time of the project. According to risk rating values, most


No. RISK FACTORS

Impact-

TimeProbability Rating

RII-

(1)

RankRII-

(2)

RankRII-

(3)

Rank

1 Design failures 3.100 7 2.050 20 6.355 15

2 Equipment and system failures 2.675 17 2.150 19 5.751 20

3 New technology failures 2.875 11 2.200 18 6.325 16

4 Estimation errors 2.881 10 3.325 3 9.579 6

5 Accident/ Collision 2.400 22 2.500 12 6.000 19

6 Site Location and access 2.550 21 2.500 12 6.375 14

7Inadequate program scheduling

and tight program scheduling3.825 1 2.975 5 11.379 4

8Design changes / Design

variations by client 3.300 6 3.475 2 11.468 3

9Hazards of environmental

regulations2.825 12 2.525 11 7.133 11

10Incompetence of transportation

facilities2.800 14 2.200 16 6.160 17

11 Increase in site overheads 2.900 9 2.725 8 7.903 8

12 Industrial disputes 3.425 5 2.200 16 7.535 10

13Local firms incompetence and

low credibility2.775 15 2.325 14 6.452 13

14 Materials shortage 3.675 3 3.150 4 11.576 2

15Obsoleteness of building

equipment2.675 17 2.000 22 5.350 22

16Poor quality of procured

accessory facilities2.675 17 2.025 21 5.417 21


materials2.650 20 2.300 15 6.095 18

18Problems due to partners

different practice2.825 12 2.700 9 7.628 9

19 Shortage in accessory facilities 2.225 24 1.975 23 4.394 24

20 Shortage in skillful workers 3.450 4 3.500 1 12.075 1

21Shortage in supply of water, gas,and electricity

2.325 23 1.925 24 4.476 23

22 Subcontractors low credibility 2.750 16 2.550 10 7.013 12

23 Unknown site physical conditions 3.100 7 2.750 7 8.525 7

24Unusual weather and force

majeure3.700 2 2.925 6 10.823 5


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significant technical risk is Shortage in skillful workers. The RII is 12.075. As

illustrated in 4.3.1.1.1, construction industry is not having permanent labour force.

Therefore, shortage in skillful workers might be a key risk to the project significance

considering the time impact of the project.

Table 4.6: Top Ten Ranked Risk Factors Considering Significance Risk

The fourth risk is owners often impose tight construction schedule (RII=11.379) that

might be difficult and impractical to achieve. This might be caused by the

importance of time to market but often is caused by political reasons. Due to difficultand impracticality this will definitely influence time of the project.

Unusual weather and force majeure is ranked fifth (RII=10.823). This is a risk, which

cannot be easily predicted but effect to time of the project is considerably high. Most

importantly estimation errors which ranked 6 th (RII= 9.579) will also be an impact to

the project as described in section 4.2.1.2.1. Unknown site physical condition is

ranked 7th (RII =8.525). This is also impulsive risk at the planning stage and

occurring of this technical risk event will influence time of the project. The eighth

risk event is contractor related. Increasing site overhead is the ranked eighth (RII=

7.903). Problems arising out of partners deferent practice also create impact to time

of the project. It is ranked ninth (RII= 7.628). Tenth risk is the industrial disputes.


No RISK FACTORS RII Rank

a Shortage in skillful workers 12.075 1b Materials shortage 11.576 2

c Design changes / Design variations by client 11.468 3

dInadequate program scheduling and tight

program scheduling11.379 4

e Unusual weather and force majeure 10.823 5

f Estimation errors 9.579 6

g Unknown site physical conditions 8.525 7

h Increase in site overheads 7.903 8

i Problems due to partners different practice 7.628 9

j Industrial disputes 7.535 10


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NO. RISK FACTORSQuality Probability Rating

RII-

(1)Rank

RII-

(2)Rank

RII-

(3)Rank

1 Design failures3.02

52 2.050 20 6.201 10

2 Equipment and system failures2.30

013 2.150 19 4.945 15

3 New technology failures2.32

512 2.200 18 5.115 13

4 Estimation errors2.10

017 3.325 3 6.983 6

5 Accident/ Collision1.52

523 2.500 12 3.813 23

6 Site Location and access1.75

021 2.500 12 4.375 20

7 Inadequate program schedulingand tight program scheduling

2.875

3 2.975 5 8.553 2

8Design changes / Design

variations by client

2.45

09 3.475 2 8.514 3

9Hazards of environmental

regulations

1.55

022 2.525 11 3.914 22

10Incompetence of transportation

facilities

1.52

523 2.200 16 3.355 24

11 Increase in site overheads1.85

020 2.725 8 5.041 14

12 Industrial disputes 2.050 18 2.200 16 4.510 17

13Local firms incompetence and

low credibility

1.92

519 2.325 14 4.476 18

14 Materials shortage2.70

05 3.150 4 8.505 4

15Obsoleteness of building

equipment

2.35

010 2.000 22 4.700 16


accessory facilities

2.72

54 2.025 21 5.518 12

17 Poor quality of procured materials 2.700 5 2.300 15 6.210 9

18Problems due to partnersdifferent practice

2.350 10 2.700 9 6.345 8

19 Shortage in accessory facilities2.25

015 1.975 23 4.444 19

20 Shortage in skillful workers3.65

01 3.500 1

12.77

51

21Shortage in supply of water, gas,

and electricity

2.17

516 1.925 24 4.187 21

22 Subcontractors low credibility2.27

514 2.550 10 5.801 11

23 Unknown site physical conditions 2.475

8 2.750 7 6.806 7

24Unusual weather and force

majeure

2.50

07 2.925 6 7.313 5


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planning stage. That will automatically lead owner to reduce quality to do his job

within his budget. Unknown site physical condition is ranked seventh (RII =6.806).

This is also impulsive risk at the planning stage occurring of this technical risk event

will influence quality of the project. Problems arising out of partners differentpractice also create impact to quality of the project. It is eighth ranked (RII= 6.345).

Poor quality of procured material is the 9 th ranked (RII= 6.201) risk event that could

impact on quality of the output. Tenth risk is the design failures. Failures due to

design will lead to impact on quality of output.

Based on the argument mentioned in section 4.2.1.2.1, multiplying the probability

and impact values might be misleading. This is achieved best by plotting the risk

probability- cost impact matrix (figure 4.5).

Figure 4. 5: Quality Significance of Technical Risk Factors

The matrix shows five of the risks to be high (probability >3 and cost impact>3). It

shows that the majority of the risks are medium (probability 2-3 and Cost impact

>2.5). There are two technical risks that have probability of less than two and risks

with cost impact less than 2.5. These are considered low.

4.3.1.2 PERFORMANCE IN CONSTRUCTION LIFE CYCLE



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The performance in construction project life cycle analysis in figure 4.6 and table 4.9

illustrates the performance in each stage of the construction life cycle simply.

According to figure 4.6, construction stage of the construction life cycle is having

highest performance of technical risk.

Considering data set collected through the questionnaire survey to measure the

magnitude of performance level of risk events in construction life cycle, Cronbachs

alpha was calculated for each data set. The alpha values for data set using for the

analysis of performance of risk events in programming stage is = 0.959, planning

stage is 0.755, tendering stage is 0.777 and for the production stage data set = 0.949.

According to Nunnally and Bernstein (1978) as described in 4.2.1.2, they are reliable

data sets.

A careful look at Figure 4.6 confirms the argument that the highest magnitude or the

performance of technical risk in the construction life cycle is in the construction

stage. When comes to construction stage to the inception or the programming stage,

it is reducing.

Unusual weather and force majeure and shortage in skillful workers are having

highest magnitude at the construction stage (RII= 4.000). Second highest are

unknown site physical conditions and local firms incompetence and low credibility.

That is because such kind of technical risk events are having more probability of

occurrence at that stage. Moreover, third highest is design changes/ design variation

by client. Clients tend to do design changes and variation at this stage as they realize

the actual design requirements only at this stage.

According to table 4.9 and figure 6, it is clear that there are only several risk events

in the tendering stage, which are having high performance. Estimation errors, design

failures, inadequate program scheduling and tight program scheduling, design

changes, / design variations by client are that risk events.

Table 4. 9: Performance of risk events in construction life cycle



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construction contracts as owners can place any risks to the contractor. Contractors

usually respond to these risks by increasing their contingency and markup, which

ultimately increase the contract price to the owner. Interviewed respondents indicatedthat risks are not allocated appropriately in the Sri Lankan construction industry.

The analysis of actual and expected risk allocations based on the questionnaire

survey results are presented in table 4.10 and figure 4.7. The table and figure denote

subjective analysis.

Moreover, considering the data set gained from the questionnaire survey for the

allocation of risk events among contracting parties, Cronbach's Alpha was

calculated for the data set. The alpha values for data sets taken for the analysis

(Annexure 05) are above than the value stated in section 4.3.1.1. Therefore, data

taken for the analysis are reliable.

In accordance with figure 4.7, the majority of the technical risk events allocated to

contractors. This is probably due to the culture and widespread use of traditional

contracts that places most of the risk on the contractor. Allocation of risk among

parties in the event of design failure is too high to the consultant. Even though figure

is showing that, most of the interviewed respondent pointed out that, the risk

allocation to consultant is not properly practiced in Sri Lanka. In the event of

consultant failure, there is no a remedial action. In such kind of situation usage of

personal indemnity assurance is very much low (less than 17%). It is clearly shown

by following figure 8. It is almost zero, where the consultant and client both are Sri

Lankan companies.

Risk allocation to the client is very much low according to findings of interviews. In

practical situation consultant, risk also has to be endured by the client in Sri Lanka.

Because contractor always try to price the risk, but there is a limitation. If he or she

price every risk, in the event of competitive tendering there is a probability of losing

it. Therefore, he may price most important risk events only.



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Figure 4. 7: Risk allocation of technical risk factors

Figure 4. 8: usage of PIA

Most significant risk factor is the Accident/ collision to contractor, where majority ofrespondents are considered that the in the event of accident /collision, risk allocation

to the contractor is considerably high. According to table 4.10, it is high.

According to questionnaire survey findings and interviews findings consultant is the

person, who is having lesser allocation of technical risk.

Based on the questionnaire findings, design changes / design variations by client is

the technical risk having higher allocation to the client (RII= 3.700).



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4.3.1.3.1 PROPER ALLOCATION OF TECHNICAL RISK IN CONTRACT

Proper contractual arrangements determine who is more capable of controlling

various specific risks. Generally, the local construction contracts mainly use

condition of contract to do it. Usage of condition of contract type is shown in figure

4.9. Considering the findings of the structured interviews, ICTAD is the most using

document as the condition of contract for the building projects, but interviewed

respondents pointed out that the usage of the type of document will depend on the

type of the client. Usage of ICTAD is 67% percentage. For the government project

they most of the time use ICTAD. However, for the foreign Clients have to use

FIDIC condition of contract.

Figure 4. 9: Type of condition of contract use in Sri Lankan building construction industry

However, interviewed respondents indicated that, allocation of technical risk

between consultant and client in a contract is very much low in Sri Lanka. In most of

the cases client has to suffer them. Because usage of condition of contract between

consultant and client does not much consider about the risk allocation. In addition,

they have argued that, effective allocation of technical risk among parties is a good

risk mitigation strategy.

4.4 REVIEW OF FINDINGS

Any construction work will be subject to some technical risks, such as changes in

design, equipment failure, shortage in skillful workers, material shortage, accident/

collision, etc. However, through this research it was attempted to forecast typical



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Figure 4.11: Most Significant Risk factors performance in life cycle

Furthermore, figure 11 illustrates the performance of most significant technical risk

factors within the life cycle of construction project in Sri Lankan construction

industry. According to above argument, most significant risk factor is shortage in

skillful workers. It is regularly in the production stage. Moreover, according to figure

12, shortage of skillful workers is risk to contractor than other parties in the

construction industry. However, it is not much affecting to consultant but to some

extent affect to the client.



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C o n c l u s i o n a n d R e c o m m e n d a t i o n

Apart from that there were seventeen other technical risk factors such as design

failures, accident/ collision, site location and access, etc. which were not as severe as

aforesaid factors, but when concerning risk managing approaches, these factors

should also be considered in total risk management strategy.

Based on the interview findings, it was able to figure out usage of type of condition

of contract and usage of PIA in Sri Lankan building construction industry. According

to interviewed respondents, risks were allocated more to the client ultimately.

Because, contractors risk is capable to be priced and consultant risk automatically

comes to client according to Sri Lankan practice.

This study is important as it sheds the light on the risks in a booming Sri Lankan

construction industry. Technical risk identification and assessment is an important

step in project risk management and shows the significance of several risks that are

present in the industry. This study lays the foundation to assists local companies in

negotiating their contracts as to the proper allocation of risks. This study also helps in

decision making regarding risk response planning and control.

Moreover, all of this mentioned critical technical risk factors more relevant to

quantity surveyor than other professionals in the building construction industry. That

is because, client quantity surveyor, consultant quantity surveyor or contractor

quantity surveyor most of the time try to give a monitory value for that particular risk

by predicting them at the initial stage. That would be the most efficient method of

mitigation of risk and minimizing the effect of the risk to the building construction

project. Therefore, the quantity surveyor needs to be more concerned about

especially critical risk factors.

5.2 RECOMMENDATION

Considering all facts above discussed and identified, the cost, time and quality

achievement of the building construction projects are effected by several critical

technical risk factors, which are uncontrollable or unforeseeable by the parties to the



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contract at the initial stage. All those risk factors cannot be eliminated completely

and the best would be to minimize the occurrence and impact to the project

objectives by implementing proper mitigation process from initial stage with proper

coordination among parties. Moreover, using proper condition of contract among

parties can also manage the risk.

Through considering project perspectives, risk mitigation process can be decided

along these lines;

Whenever a project needs to consider more about the time then time

significant technical risk factors has to be taking in to account.

If quality is the most considerable project perspective, then quality significant

risk factors have to be taking in to account.

Where, the project having a limited budget cost. Cost significant technical

risk factors have to be taken into consideration.

Besides, commonly for any type of building construction project most criticaltechnical risk factors have to be taken into consideration.

It will lead to complete the building construction project by achieving all project

goals namely; within the time limit, within the budget limit, and with quality

achievement.

Further, it recommends, improving the knowledge on risk management

techniques and its applications; there should be a proper training or learning of

the risk management field which is important to practitioners in the industry

5.3 FURTHER RESEARCH

The research was carried out within building construction project, and same

research can be done to the civil construction projects.



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The effectiveness of contingency in covering unforeseeable risk involvement in

building projects.

Suitability of risk handling tools in better recovery of risk, in the contractors

perspective.

Proper usage of condition of contact to handle construction risk.



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R e f e r e n c e s

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A p p e n d i x

Appendix

technical risk factors in building construction.doc

Documents