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The blank copies of the semi-structured interviews carried out on the following professional groups are referred within the appendix B: The two conducted with clients; two conducted project managers; two conducted contractors; three conducted project quantity surveyors and then one conducted Engineers.
In order to ensure objectivity the semi structured interviews were carried out in meeting rooms away from any external influences. Interviewees were also reminded that confidentiality was ensured. Furthermore a pilot study was engaged prior to the actual interviews in order to ensure that the questions were not bias or misleading.
3.5 Statistical analysis
Monte Carlo technique was used in risk analysis. Risk occurrence probability was determine using SPSS software and enumeration of the responses on the determined probabilities on cost, time and quality determined by Monte Carlo risk analysis technique.
3.6 Limitations and Constraints
Due to the constraint of time placed upon this dissertation, the limitations and constraints led to a few number of semi-structured one hour interviews (minimum 10, maximum 20) rather than a larger sample of studies. During his experience within the Construction Industry, the author felt very fortunate to have industry contacts and this facilitated the data gathering, however problems did arise because of the implications of the recession. Thus were many interviewees that were reluctant to participate with the study.
Another limitation the author faced was restricting the study within the UK Construction industry. Therefore the research data was only limited to construction reports focusing strictly on the UK Construction Industry. In addition other problem faced as a result of a limited study was finding construction statistics that could be used in the secondary research, which was difficult to identify, as there are limited report on risk management in UK Construction.
It is recognised by the author that the number of the responses received is not enough to be statistically representative. Even so, the results do reflect the thoughts of the parties questioned, and general inferences are able to be drawn from this. The study will gather primary data from a selective sample population which would provide concentrated result as opposed to a non-selective population that would provide varying results, this can further seen in chapter.
The reader is referred to Appendix A which sets out the organizations interview for the semi structured interview:
The semi-structured interviews were carried out with organisations (10 No.) across the supply chain within the construction industry. The following results were obtained from quantity surveyors (3nr), project managers (2nr), engineers (1nr) and contractors (2nr). 2. The interviews were also carried out with client firms (2No.). 3. A further interview was carried out with a senior Quantity Surveying lecturer of Kingston University (This interviewee also works for a major UK Contracting Organisation). Stonehurst Estates Limited and Mcnicholas Construction limited industries participated in the study
The organisations actors were interviewed so as to ascertain their general perspective on risk analysis and management, within the UK construction industry. The questions utilised within each of the semi-structured interviews were selected to facilitate satisfying the main objectives of this dissertation. The analysis also facilities further discussion, representing the findings, which will be dealt with within Chapter 5.0. Leading on to the conclusion and recommendations for further research, which will be dealt with in chapter 6.0
4.2 Analysis in relation to Objective (i) and (ii)
The purpose of this objective was to identify, the reasons why the construction industry, adopted risk management approaches. Contractors interviewed for both Stonehurst Estates Limited and Mcnicholas Construction limited: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14 The contractor interviewed report that risk management was introduced within their organisations as a means to protect their profit margins. One contractor organization interviewed believed that: '...a formal procedure of risk management was needed to be introduced mainly because the work we are involved in has extremely small profit margins' (A contractors interviewed). It is interesting to note that one of the contractors interviewed identified that risk management was also introduced as a decision making tool as part of the construction process. However, from looking at the responses given it appears that the contractors interviewed believed that risk management was needed in order to ensure that all risks were identified within a project and precise allowances were applied especially for engineering works, so that the contracting firms did not suffer.
In addition the Contractors interviewed were asked Q3, which relates to the implementation of risk management within their projects. Both Contractors interviewed noted that projects below £1M had basic generic risk management, whilst projects over £1M often had a bespoke risk management system in place. The contractor organisations interviewed noted that where risk management was used an average of 60%- 80% of their projects were delivered within time, cost and quality parameters set. Clients for both Stonehurst Estates Limited and Mcnicholas Construction limited industries interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14
Unlike the Contractors interviewed, the Clients interviewed report that risk management was introduced within the UK construction industry due to four main factors. These were; poor governance, loss events, changes in legislation and surprisingly corruption. One client from Stonehurst Estates interviewed further notes that: '...project teams were finding it difficult to deal with changes during the project phases, therefore a system for identifying risks and managing them was needed' (A client organisation interviewed). Quantity survayors interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14
However the Quantity surveyors organization interviewed notes that in order to increase the chances of project reaching within time, cost and quality, a simple but robust and cost effective structured forward looking process of risk management was needed. One QS organization interviewed further notes that: '...risk management was introduced as a way of increasing the understanding of risk and uncertainty in order to improve the operational decision making processes within construction projects and organizations' (A QS organisation interviewed).
Project managers interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14 Furthermore the Project managers interviewed report that risk management was introduced within their profession due to increased quantity of project risks; therefore a risk management system was needed to be set-up in order for this data to be collected, analyzed and reported. One PM organisation further noted that risk management was increasingly being recognized by professions such as the A project managers, mainly because risks had been poorly dealt with on all projects. One Project managers interviewed further noted that: 'High profile incidents have forced the industry to look at what it does and how it does it'. (A Project managers organization interviewed). A Project managers interviewed also highlighted that: '...traditional method of identifying and dealing with risks was reactive rather than a pro-active risk process and that information was often out of date by the time it was reported upon'. (Project managers organization interviewed).
Engineer interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14. Finally, the Engineers interviewed reported that risk management was introduced within the construction industry due to the influences of Government Reports. The Engineer interviewed further noted that: '...due to a combination of drivers, risk management was introduced into the UK construction industry in order to ensure good business practice, and also assist in decisions making' (Engineer interviewed).
However the project managers, quantity survayors, Engineers and Clients interviewed noted that they only implemented risk management when needed and were reluctant in giving a specific percentage on the number of project, delivered within time, cost and quality parameters.
4.3 Analysis in relation to Objective (iii)
The intention of this objective was to establish at which point the use of risk techniques becomes more widespread (or not); as Client awareness increases; as the choice of risk management computer software increases; and as the cost of it, in real terms, decreases. Contractors interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 The Contractors interviewed appear to be employed by the full range of clientele identified within the questioning; the Contractors interviewed identified the four most prevalent types of clientele being: (i) Building & civil engineering, (ii) Central Provisional government bodies, (iii) Financial institutions and (iv) Public utilities/corporation. Furthermore upon reviewing the quantitative results to Q2, the contractors interviewed were frequently involved in: (i) Housing, (ii) Offices/Commercial, (iii) Transport, and (iv) Public Utilities.
The Contractors interviewed noted that the risk techniques they frequently used within these projects were; (i) Brainstorming (ii) Probability (iii) Simulation (Monte Carlo), (iv) Sensitivity analysis and (v) Bespoke software. In relation to question 17, IT systems were extensively used for risk management by the Contractors interviewed. In terms of actually identifying and managing risk one Contractors interviewed used a bespoke software called the 'Citrix' system on occasions.
The Contractors interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. Unsurprisingly, both contractor organisations interviewed stated 'NO'. One contractor organization interviewed further explained that: "Risk & opportunity management is integrated; process embedding throughout the tendering and operation process." (A Contractors interviewed).
Quantity surveyors interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 Similarly to the contractor interviewed, the Quantity surveyors interviewed appear to be employed by the full range of clientele identified within the questioning; however the four most prevalent types of clientele being: (i) Property developers, (ii) Commercial/Industrial companies, (iii) Financial institutions and (iv) Public utilities/corporation. Furthermore upon reviewing the quantitative results to Q2, the Quantity surveyors interviewed were frequently involved in: (i) Housing, (ii) Offices/Commercial, (iii) Transport, (iv) Public Utilities, (v) Health and Welfare Schemes.
The Quantity surveyors interviewed noted that the risk techniques their organisations frequently used were; (i) Brainstorming, (ii) Probability and (iii) Scenario Analysis. However one of the Quantity surveyors organisation interviewed stated that they only frequently used brainstorming, whilst other risk techniques were infrequently used. In relation to question 17, IT systems were frequently used for risk management by the Quantity surveyors interviewed. The Quantity surveyors interviewed mostly used IT systems for collating data and transferring them in to spread sheets using software's such as Microsoft Excel.
However one Quantity surveyors interviewed noted that: '...they extensively used IT, particularly for infrastructure heavy industries (eg. rail) using a range of software known as ARM (Risk Master), Risk and Pertmaster' The Quantity surveyors interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. One Quantity surveyor interviewed stated 'YES' directly, whilst the other Quantity surveyors interviewed had to elaborate on the question.
The Quantity surveyor interviewed that stated 'YES' directly and further explained that they: '...have a dedicated Risk Management Specialist Services' (A QS organisation interviewed). However the other Quantity surveyor interviewed noted that: "...the QS division doesn't offer Risk Consultancy as a 'stand alone' service, but our Facilities Management Consultancy often advise on Risk Management into many projects, mainly where procurement /outsourcing is concerned."Project managers interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 The Project managers interviewed appear to be employed by the full range of clientele identified within the questioning; however the four most prevalent types of clientele being: (i) Property developers, (ii) Commercial/Industrial companies, (iii) Financial institutions and (iv) Public utilities/corporation. Furthermore upon reviewing the results to Q2, the Project managers organisations interviewed were frequently involved in: (i) Housing, (ii) Offices/Commercial, (iii) Transport, (iv) Public Utilities and (v) Harbour/Airport Facilities.
The Project managers interviewed noted that the risk techniques their organisation frequently used were (i) Brainstorming, (ii) Probability, (iii) Simulation, (iv) Decision tree analysis, (iv) Sensitivity analysis and (iv) Bespoke Software. In relation to question 17, IT systems were extensively used for risk management by the Project managers interviewed. The Project manager interviewed noted that they mostly used bespoke systems for each high value project, however one Project managers interviewed noted that: '... when clients specify a system we often implement it' (A Project manager interviewed).
The Project managers interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. Both Project manager interviewed stated 'YES' directly.
Engineers interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 The Engineers interviewed appear to be employed by the full range of clientele identified within the questioning; however the three most prevalent types of clientele worked for were: (i) Commercial/Industrial companies, (iii) Financial institutions and (iv) Public utilities/corporation. Furthermore upon reviewing the quantitative results to Q2, the Engineers interviewed was frequently involved in: (i) Offices/Commercial, (ii) Transport and (iii) Public Utilities.
The Engineers interviewed noted that the risk techniques their organization frequently used were; (i) Brainstorming, (ii) Probability and (iii) Scenario Analysis. In relation to question 17, IT systems were frequently used for risk management by the Engineering organisations interviewed. The Engineers interviewed mostly used IT systems for creating risk registers through spread sheets using software's such as Microsoft Excel.
The Engineers interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. The Engineers interviewed stated 'NO', because they only offered a service internally. Clients interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 Q1 did not relate to both clients. Upon reviewing the quantitative results to Q2, one client for every interviewed was frequently involved in: (i) Housing and (ii) Private Developments. Whilst the other client interviewed was frequently involved in: (i) Harbour and Airport facilities.
In relation to question 17, IT systems were extensively used for risk management by the clients interviewed. The clients interviewed noted that they mostly used bespoke systems and generic software for each of their projects, such as Magic and ARM.
In addition all the respondents interviewed, including the clients, considered risk registers as the most important application within the risk management process. According to the project managers' interviewed:
'...the risk register forms a 'Data Base' for recording risk issues encountered on projects, and everyone in the supply chain had access to the same register and therefore everyone was aware of the risks outlined within it' (A PM interviewed).
4.4 Analysis in relation to Objective (iv)
General Responses: Analysis of responses Q8b, Q19 The aim of this objective was to identify the respondents' views on the merits and demerits of the different techniques applied to risk management:
The main disadvantage identified by all participants with this technique was that it was time consuming and unscientific (based on opinions). A contractor interviewed mentioned that this technique was in-effective: '...if you don't have the right people in the room in terms of experience and background' (A contractors interviewed).
However all the participants considered the main advantages of this technique as being easily understandable, knowledge based and that it also generates a useful range of outputs.
Only the QS's, PM's, Client's and one Contractor interviewed managed to answer this question. The disadvantage identified was that the concept of this technique is a bit difficult to appreciate (to start with) and also it is time consuming. However the advantage identified by all participants interviewed was that it makes people work as a group with a common aim / objective. A QS interviewed further noted that: '...an ad-hoc use of this technique, can provide new stimulus as part of a brainstorming exercise' (A QS interviewed).
All the participants identified that the disadvantage of this technique is that it is 'risky' if the information used is unreliable. Furthermore a contractor interviewed noted that: '...most people in a group have struggled with probabilities, therefore interest can easily be lost' (A contractor interviewed). However the main advantage identified was that it creates a better understanding of the chances of a risk occurring.
There was also a sense of support though, from one of the PM interviewed who noted that: '...you can't argue with statistics!' (A project management interviewed).
d. Decision Tree Analysis:
All participants identified that the decision tree technique can result in poor results if set up wrongly (some branches missing etc). However one client organisation interviewed identified that an advantage for this technique was that: '...it provides a good logic if it is set up right, in addition it can be very structured and highlights lots of detail' (A client interviewed).
e. Sensitivity analysis:
The disadvantage identified by most of the participants was that this technique can be easily misinterpreted under certain circumstances. In addition a client interviewed further highlighted that: '...this technique can be very complex and scenarios must be defined very carefully and clear, or else the results would be inefficient' (A client interviewed). However according to a contractor interviewed the advantage of this technique is that it enables the present team to track changes as the scenario of risks occurring can be adjusted.
According to a PM interviewed the disadvantage with this technique is that its time consuming. Furthermore since most simulation techniques involve computers, a contractor interviewed noted that it's very scientific rather than based on human influence. However the Client, PM and Contractors interviewed, highlighted that the main advantage was that it identifies unforeseen risks. A QS interviewed further notes that: 'this technique is useful for graphically demonstrating the range of outcomes given a particular set of assumptions; a powerful tool for indicating and exploring/ understanding the impact of uncertainty on project objectives' (A QS interviewed).
g. Portfolio theory:
According to a Contractor interviewed the main disadvantage identified for this technique was that the concept is a bit difficult to adapt unless you are dealing with varied choices. However the Contractor interviewed notes that the advantage of this technique was that it is good if varied choices exist. Furthermore one client interviewed notes that: '...this technique was suitable when looking atpersonal risk tolerances, income needs and an investment horizon' (A Client interviewed).
h. Breakeven analysis:
The client interviewed identified that the main disadvantage of this technique was that it is very basic. Furthermore according to one PM interviewed this technique can be 'simplistic' in its concept. However the contractors' interviewed noted that the main advantage of this technique was that most groups find this easy to participate in. Furthermore one QS interviewed noted that: 'The main advantage of break-even analysis is that it points out the relationship between cost, production volume and returns'. (A QS interviewed)
i. Scenario Analysis:
All participants identified that a main disadvantage identified with this technique was that its time consuming. Furthermore a QS interviewed notes that: 'this technique must be comprehensive otherwise it can be too anecdotal' (A QS interviewed). However the main advantage identified by the Contractor was that it can increase engagement by participants. Furthermore the QS, PM, and Client interviewed note that this technique is useful where great uncertainty is present.
The interviewer then asked the participant's Q19, the pros and cons of IT. It was evident that most of the participants identified poor computer literacy as a common problem within the construction industry.
4.5 Analysis in relation to Objective (v)
This section aims to identify the view points of each respondents interviewed on the improvements and recommendations of risk analysis and management within the UK construction industry. Contractor interviewed: Analysis of responses Q16
According to the Contractor interviewed risk management was an essential part of their; however they specifically note that improvements are needed to be made on the client's side in-terms of educating the design team of the benefits of embedding a risk management culture into their project systems. PM interviewed: Analysis of responses Q16 In addition the PM interviewed surprisingly argued that if the client doesn't favour risk management, then it would not be implemented within a project. One PM interviewed further explains that: '...if you shift unsuitable risks onto parties they will just overprice to cover where they are uncertain instead of producing a calculated (realistic) price based on a 'quantified' risk instead of raw uncertainty' (A PM organization interviewed). Therefore one PM interviewed recommends that: '...it is important to educate client staff to understand the benefits of risk management from inception of a project through to completion' (A PM interviewed).
Engineersinterviewed: Analysis of responses Q16 the engineers interviewed also notes that there must be fewer adversities between client, design teams and contractors and more trust. Furthermore the engineers interviewed recommend that: '...the client must know what they want from the project and make key decisions promptly along with having a realistic expectation' (An engineer's interviewed). Client interviewed: Analysis of responses Q16 One of the most surprising improvements/recommendations put forward by the respondents interviewed was from one of the clients interviewed. One participant noted that risk management has already undergone massive improvements in the last 20 years.
However one clients interviewed noted that currently a significant problem is that proper risk analysis and management is often not implemented at present from a senior management level. A client interviewed stated that: '...those who are supposed to fund the risk management system are not taking it seriously; therefore it is not seen as a priority' (A client interviewed). This shows that there is a need to take risk analysis and management more seriously in UK construction projects in the future.
QS interviewed: Analysis of responses Q16 In addition one QS interviewed believed that: 'In many environments the focus on risk management is progressing the industry forward in a positive direction to understand and communicate uncertainty and places reward for the implementation.' (A QS interviewed).
However the QS interviewed argues that there are numerous examples of poor application of risk management either in a format that does not go far enough (leaving risks occurring and opportunities missed where they could have been avoided/exploited) or goes too far (where the application of a risk management process consumes resources and falls short of its objectives). A QS interviewed further notes that: '...the risk management approach often fails when the trade-off against the appetite for risk is poorly understood, or only understood for a dominant stakeholder' (A QS organisation interviewed).
Therefore one QS organisation interviewed recommends that: "...improvements are to be made by having greater recognition of the trades offs and having a simple approach that aims to improve the competence of teams and individuals." (A QS interviewed).
The aim for this chapter is to identify, compare and contrast the findings from the secondary
research (Chapter 2.0) and the primary research (Chapter 4.0).
5.2 Findings to Objective (i) and (ii)
The primary research highlights that the main reason for the introduction of PRAM into the UK Construction industry, was mainly because projects were failing to be delivered within the time, cost and quality parameters set by client teams. Similarly the literature review further notes that the significance of a growing dissatisfaction of project being poorly delivered during the 1970's led to the UK Construction industry finding solutions to manage risks better through adopted PRAM techniques from other industries (Dallas, 2006).
Another main criteria based on the primary research was the significance of the Latham report (Latham, 1994), 'Rethinking Construction' (DETR, 1998.) and the Turnbull report (Turnbull, 1999) as one of the main constituents for the introduction of PRAM. This again was similarly outlined in the literature review which, described The Latham report (Latham, 1994), 'Rethinking Construction' (DETR, 1998.) and Turnbull Report (Turnbull, 1999) as a framework for radical improvement and modernisation' within the UK construction industry (Wood, 2005). However interestingly it can also be noted from the literature review, which is not noted in the primary research, that The Latham report (Latham, 1994) and 'Rethinking Construction (DETR, 1998.), were mainly focused on introducing statutory adjudication for insurance risks
(ICAS, 2004), whilst the Turnbull report (Turnbull, 1999) was focused in raising the profile of internal risk management within organisations, which has played a significant role in introducing PRAM within the UK Construction Industry. Furthermore based on chapter 4.0, a main emphasis for the introduction of PRAM was that in order to increase the chances of project success, a simple but robust and cost effective structured process of risk management was needed to be introduced within the UK Construction industry. Interestingly the literature review also brings this to light via the work of Godfrey et al. (1996) in which he describes that the early risk management process, involved risks remaining implicit and managed by judgment through individual intuition.
Therefore there was a need to introduce a modern systematic risk management approach that enabled risks to be explicit and managed easily. However interestingly it can also be note that the secondary research also places emphasis on risk management guides, which are not noted in the primary research, such as the PRAM (1997) Guide and the RAMP (1998) Guide, which were significant in the introduction of a systematic risk management process.
Finally, it has become apparent from the primary research that according to the contractors interviewed, it was important that they had every possible procedure in place in order ensure that their small profit margins were protected when undertaking a project, therefore PRAM was essential to them. This cannot be said by the client project teams interviewed, who considered PRAM as an optional system. Surprisingly this was not brought to light via the secondary research, which alternatively notes that changes in clients' attitudes and the economic situation, by the end of the twentieth century, led to a demand for better project delivery especially the need for PRAM (Dallas, 2006).
5.3 Findings to Objective (iii)
It has become apparent from the Literature review and the Primary research that there are a range of techniques used when analysing and managing risks within projects. The literature review highlights that the risk management process consists of three systematic stages, which are: (i) Risk Identification, (ii) Risk Management and, (iii) Risk response. The literature review also outlines the importance of each stage, and states that the success of later risk management phases will be a result of the risk identification phase (Chapman, 1997). Similarly the primary research also goes on to note that it is important that the all risks associated with the project are identified during the risk identification stage, or else the whole PRAM process will be flawed, thus having a detrimental impact on the project.
Another main criteria based on the secondary research was the description of each technique involved in the PRAM process. The secondary research further notes that empirical studies of risk management practice show that brainstorming was the most common techniques used in the PRAM process (Akintoye & Macleod, 1997). This again was similarly outlined in the primary research, in which it was identified that the brainstorming technique was frequently used due to its simplicity. However the primary research also noted that techniques such as Portfolio theory and Breakeven analysis were infrequently used, because they were very limited in their application.
Chapter 2.0 also outlines that each risk techniques was adopted within the UK construction industry, in order to identify and manage the different types of risks it faced. Similarly the primary research, also noted that every project was unique and had different risks associated with it. Therefore it was identified that each type of organisation had a selected list of risk techniques that they used for the types of projects they were involved in.
Another main criteria based on the primary research is the use of risk registers as important applications within the PRAM process, as it forms a 'Data Base' for recording risk issues encountered on projects. This again was similarly outlined in the literature review which notes that, risk registers are also considered as important applications because they contain the information on the project risks that the project team identifies when estimating and adjusting the activity durations for risks (Burke, 2003).
Finally, it has become apparent from the literature review and the Primary research that IT systems are becoming important applications when undertaking PRAM in the UK Construction industry. The Primary research identified spreadsheets as the most common IT application used in the PRAM process, especially when creating risk registers. Furthermore the Contractor, PM and Client organisation interviewed, had also noted that be-spoke IT risk management systems (APM, @Risk, Magic etc), were regularly used for high value projects (ranging from 1M+) depending on the client requirements.
Alternatively the literature review also goes on to note that specific computer risk management software such as the Monte Carlo Simulation, is a popular PRAM technique used by risk practitioners, and it identifies and presents the results in an 'S' curve model which makes it easier to understand and also more efficient (Smith et al (2005).
5.4 Findings to Objective (iv)
Based on the primary research, it was identified that one of the main advantage of the brainstorming method was that it was an easily understandable technique and it is also knowledge based. This is further supported by the literature review, as it describes that the brainstorming technique is simple but effective. However the secondary research also highlights that this technique enables participants to think creatively in a group setting without feeling subdued or being criticized by others.
In terms of demerits of brainstorming the primary research finds time as a main disadvantage, and identifies that there is a tendency that participants may spend too on individual risks. Similarly the literature review notes that the brainstorming technique can be a disadvantage, when the protocol that is needed in processing and ordering all the ideas, can become a very time-consuming and difficult process (Lester, 2007).
Based on the primary research, it was identified that one of the main advantage of the Probability technique was that, it created a better understanding of the chances of risk occurring, within a project. This is further supported by the literature review, in which a study by Rodger & Petch (1999) identify that the probability technique provides greater information about the outcome of the calculations, and also sets a range of impact for each risk identified.
In terms of demerits of the probability technique, the primary research focuses on the accuracy of the information used to identify and assess risks. Interestingly the literature review also similarly points out that some of the information provided and may be a guesstimate rather than reality, therefore probabilities may not reflect true belief (Timothy et al., 2002). The literature review also highlights that another disadvantage is that the probability technique is a measure of uncertainty and is subjective, which means that it varies from one person to another (Henrion & Small, 1992), however this was not brought to light by the primary research.
Based on the primary research, it was identified that one of the main advantage of Decision tree analysis is that it is a useful tool to help structure initial ideas about the cause and effect and the potential range of outcomes of a particular risk. Unsurprisingly the literature review also notes that the decision tree analysis enables results to be presented in structured format and furthermore it forces consideration of the probability of each outcome (Schneider & Honeyman, 2006). The secondary research further acknowledges that the simplicity of the decision framework is the primary merit, making it convenient to compare the effect of different variables on each decision (Raiffa, 1968).
In terms of demerits of decision tree analysis, the literature review notes that the probabilities assigned to each decision are not always accurate as they could be assumptions (Edwards et al, 2007). The secondary research also highlights that the final result of an analysis is only as reliable as the information used to create it (Norman & Flanagan, 1993). However the primary research further notes that the decision tree technique can result in poor results if set up wrongly, where some branches may not be assigned to the structure.
Another technique identified within the literature review and primary research is sensitivity analysis. Based on the literature review the advantage of using this technique is that it can provide a range of possible outcomes for risk and it can also be used as an aid in identifying the importance of uncertainties in the model for the purpose of prioritizing additional data collection or research (Frey & Patil, 2001). However in contrast based on the responses within the primary research it was noted that a merit of this technique is that it enables the project team to track and adapt changes as soon as the scenario changes.
In terms of demerits of sensitivity analysis the primary research finds that complexity is a major issue, in which scenarios of risks must be clearly define or else the final results would be inaccurate. In contrast the literature review notes that the primary drawback is that the technique does not take into account the probability of change in the factors or variables. Finally the literature review notes that the advantage of using simulation techniques is that by means of random numbers, it provides a powerful yet simple method of incorporating probabilistic data (Williams, 2003). The primary research further notes, that the simulation technique is a powerful tool for indicating and understanding the impact of uncertainty on project objectives.
In terms of the demerits, the literature review notes that there is a high use of computing power, time and resources spent to complete the simulation activity. In contrast even though the primary research notes that computers are used for this technique, it highlights that the results can be very scientific, because human influence is limited.
5.5 Findings to Objective (v)
Based on the literature review, although PRAM has been seen as a method to combat the adversarial nature within the UK construction industry, it can no way be seen as a finished product to successful construction.
The literature review also goes on to note that one of the most important improvements to be made to PRAM, starts with ensuring that those coming into the industry and those already in the industry have a sufficient amount of knowledge of the PRAM process and its benefits. This is similarly highlighted within the primary research, where one of the recommendations was to educate project teams to understand the benefits of risk management from inception of a project through to completion. Furthermore this could either be done through formal in the form of postgraduate training and/or informal education and training in the form of in house seminars.
Another area for improvement highlighted from the secondary research relates to the 'embedding of a risk management culture within the organisational framework', which describes that companies and organisations need to ensure that PRAM is an essential part of their business operations. Similarly the primary research criticises the current attitude of PRAM within the industry by noting that those who are supposed to fund the risk management system are not taking it seriously; therefore it is not seen as a priority. Thus the primary research recommends that in order to progress the industry forward, senior management must ensure the PRAM is part of their culture.
Interestingly the primary analysis also highlights that there must be a coherent expectation from the client, who must ensure that the project objectives and guidelines are realistic, therefore risks during the projects lifecycle will be easier to identify and more manageable. Alternatively this is not highlighted within the primary research and in contrast the improvements tend not to focus on the client's decision making. But however the inadequate levels of resources within construction projects, can lead to a lack of information that can result in disastrous implications from poor decisions, thus project teams must be better equipped in terms of information and quality of project staff.
A final improvement highlighted from the primary research was that improvements were to be made in the industry by having greater recognition of the trades offs and having a simple approach that aims to improve communication and also the appetite of the individuals involved on a cost effective basis. Although not mention within the literature review, this is a fair perspective, because project teams and organisation need to start gaining recognition for embedding risk management within their work ethics.
This chapter tents answer the research questions based on the case study with comparison from the theory.
5.6.1 Project location
The projects used in this study are located at London city, where at the point of the study the project were at the very beginning phase of planning, layout and documentation. Figure 4 provides the actual project structure as provided for during the panning phase. This project according to the management team was envisioned to have zero errors and everyone in the investment worked to decrease the errors to zero.
Figure 4: The actual project structure as provided for during the panning phaseUser team
Project steering committee
The project life cycle adapted in this project was as described by Bennet (2003), briefly this model divided the life cycle into six probable phases and the time plan for this case study project was worked together with that provided theoretically as shown in figure 4 below. This kind of combination ensured that participants in different phases had their data collected in this case study. This was supported by Smith et al., (2006) where the actual schedule of the project was in agreement with the project lifecycle.
The summary of the project research is provided for in figure 5 below as obtained from the literature. This figure provides the four major steps required in the project risk management process, also on the right is the follow up procedure that clarifies the techniques applied in management of risks and the arrows show how the necessary steps in the risk management were performed. In addition to this, Project risk management process was examined by the questionnaires in which a hand full of respondents showed familiarity with the concept with good knowledge on the basic elements. The remaining respondents could not describe the project risk management process they could not provide precisely what it entailed systematically.
Figure 5: The four major steps required in the project risk management process
Monte Carlo simulation
Fault tree analysis
Event tree analysis
Risk probability& impact assessment
Probability/impact risk rating matrix
Risk urgency assessment
5.6.2 Identification of risks
Projects previously carried out by the respondents were observed as the major source of likely risks by the respondents. Some of the respondents observed that another possible way of identifying potential risks was through analyzing future consequences that are in the initial stages of the project.
Most respondents mentioned a more structured way of risk analysis with checklists and manuals being the most used documentation form of risk management at the organization level. In addition to that discussions and also experience being mentioned as the possible problem gathering tools. However observation and learning were being considered by many respondents as other methods of risk identification.
It was also noticed that the technique used in the risk identification in this construction company were different depending on the respondent, this was thought to be as a result of the huge magnitude of the project with different actors working at different phases.
5.6.3 Probability of risk occurrence
The respondents also differed on the way risks are managed in the project, however there was a general agreement that there company has not embraced a structured risk management system. Using the technique adapted from PMI (2004) book was used in the evaluation of the probability of risk occurrence, cost, quality and impact on time with the results presented in the table 3 below. While table 4 shows the impact of the probable risks in table 3 on cost, time and quality.
Table 3: Shows the probability of risk occurrence
Risk of not completing the work on time
Table 4: Shows the impact on the above risk on the cost and quality of the work
Risk of not completing the work on time
Insignificant cost increase
<8% increase in cost
10-20 cost increase
20-40% cost increase
>40% cost increase
Insignificant time increase
<4% increase in time
5-10% increase in time
15-20% increase in time
>18% increase in time
Quality degradation insignificant
Only demanding applications are affected
Reduction in quality requires sponsor approval
Sponsor does not approve reduction in quality
Project item is effectively useless
5.6.4 Response to risks
As note earlier most of the respondents observed that risk response in this company is dealt with in an unstructured way. When the respondent to provide a probable action needed in response to a risk, divergent views were recorded as shown in the table 5 below.
Table 5: Shows the summary of the divergent views of the respondents on risk
TYPE OF RISK
Identifying business opportunity
Misunderstand the client
Frequent discussion with the client
Detailed discussion with the client
Choosing delivery system
Choosing contract type
Planning and design phase
Establishing project objectives and drawing up of project briefs
Lack of cooperation between actors in the project (3)
Facilitate cooperation by organizing project team meeting
Shortage in resources (2)
Making adjustments in a number of resources used in order to fit in the schedule
Cheap, not efficient solutions which can be more expensive over time (1)
Being active in the project
Problem with design (2)
Experts are involved in transferring risks
Users do not take decisions necessary for work progress (3)
Ensure decisions are made in time
Preparing contract documents
Inability to achieve good final results (2)
Potential risks are highlighted in workshops or meetings
Gap of knowledge (2)
Being active in the process and take action for any problem which may occur
Contractor selection phase
Setting tender conditions
Not finding the right contractor (1)
Ensure that the contractor has the required knowledge and resources to perform the task
Contractor decision to bid
Not finding the right contractor (2)
Check out the companies
Not finding the right contractor (1)
Well bidding requirements
Contractor mobilization phase
Preparation for construction phase
Not finding the right contractor (2)
Well prepared bidding requirement
Project operation phase
Monitor and control
Contractor without enough knowledge to carry out the task (3)
Well prepared procurement
Involve specialist from the field
Loosing project control (2)
Using quality systems and self control
Documentation and management
Delay in construction schedule (1)
Participate in the process and take control when the problem occurs
Delay in construction schedule (2)
Transfer risk to the project team
Project termination and closeout
4.5.5 Identification of risks
Identification of risk as was observed in this study could be through being at different levels. These include individuals, groups during project discussions, or as an organization. Table 6 shows the preference of different levels in risk identification. Figure 8 provides the summary on a pie chart
Table 6: Shows the different risk identification levels in an organization as determined in this study
As an individual
As an organization
As a project
5.6.5 Procurement as a source of risk
Procurement processes have been identified as a source of risks if they are not done in a proper procedural way. This because if an unqualified contractor wins the tender that becomes a major disaster for the project. According to this study, most respondents consider negotiated tendering as the most vulnerable method. This is supported by smith et al., (2006) which established that when negotiated firms are more prone to negligence as open tendering or selective tendering as seen in the table 8 below by the number of respondents who prefer the different methods. The table 8 below shows the tendering procedures and the opinions of the respondents on the likelihood on being vulnerable to risks.
Table 8: shows the different tendering procedures and corresponding respondents who believe it's more prone to risks.
two stage selective tendering
Serial or continous
5.6.6 Familiarity with the concept of PRAM Process
Risk management is said to be a progressive way of managing risks and many other threats in ones daily activities. This is very important especially in an industry like the construction industry where there are so many uncertainties. In theory when all the risk management processes are followed to the later success is achieved. For those who have been students of construction. The investigation of the concept in practice majority of the respondents does not understand the meaning of risk management. From the study most of the employees at the Mcnicholas Construction (Holdings) Limited do not understand the term "risk". The results from the interviews showed that most interviewees considered the term risk as undesired event, problem or problem or threat that makes it difficult to achieve the objectives of the project. On that note Klemetti (2006) reported that respondent considered risk as a concept that is negative. On the other hand Webb, (2003) observed that risks can both be negative and positive depending on the effect it has on the project, which was in contradiction to the respondents who indicated that risk s can only be of negative impact. This has made most companies involved in the construction to apply the risk management only to a given extent. I addition to this institutions in the construction industry have been observed to work in unstructured way when it comes to risk management (Lyons & Skitmore, 2004).
It was also observed from the study that most of the respondents are not familiar the risk management concept and the methods applied in the risk management process. This was in agreement with what was found out by Klenetti (2006) where it was established that most interviewees are not aware of the risk management process and the related theoretical models. However the results from this project showed that actions taken against potential risks were considered as risk management even when the actors were not aware of it. There are those respondents who observed that there is need to evaluate risk from the economic point of view with and intention of choosing the right investment. This is not considered to be same as decision tree analysis in cases where analysis of risks is done to ensure that the right way of working is chosen.
Concerning the way risks are managed at Mcnicholas Construction (Holdings) Limited, critical risks are selected and handled immediately helping to do away with smaller risks hence the focus in put on the most threatening ones. Typically this is a way of analyzing risks in quantitative method referred to as Risk Agency Analysis. This revealed that actors in this industry take care of risks in the day to day operations even though they are not aware of that it's a risk management process. There was also a positive sentiment that the respondents were willing to implement if only they were they happen to get more information about risk management process that will provide the necessary guidance. This finding gave a reflection of the findings of Lyons & Skitmore (2004) who established that lack of information was among the impediments to the implementation of the risk management concept in most construction industry.
However contrary to this, studies by Klemetti (2006) shows differentiation on how risks management is done by individual and the team. Organizations and individuals have resorted to the checklists and other manuals as groups use discussions as the most viable technique to identification of risk and problems. It was therefore reported that group discussions and meetings as the most probable way of identifying and management of risks. This correlated with the finding of this study where most respondents eluded that they were more comfortable with the risk management at the group discussion and meetings since every group in an organization is exposed to different risk factors.
5.6.7 Application of risk management in real life situation
To address this question there was need to subdivide the process into different sections namely identification assessment and response.
From the study, some respondents indicated that the past experiences and discussions was the most benchmark used in identifying likely risks. This was in tandem with the finding of Lyons & Skitmore (2004) that indicated that case based approach and discussions as the best tool for risk determination. This was a confirmation since no time during the project was reserved for risk management concepts, the respondents in fact showed that likely risks was managed once he occurred. This in effect showed that members of the project were not involved in the structured risk identification they therefore believed that they were more efficient while working n the real project instead of identifying ad managing problems. This in essence meant that project risks are identified mostly through experience.
The study also found out that discussions and interviews were the most used method of risk identification; this together with brain storming and previous experience was the most advocated for where the ultimate goal was to identify likely threat to the project. During meetings, all participants all the team members that participated in the initial project implementation were present. During such meetings there free discussions on how to identify the likely problems. Theoretically this is consistent with the theory that shoed the need for every stakeholder to contribute to the in planning for risk identification and management at the very initial stages of the project implementations (Westland, 2006). This was also consistent with Lyons & Skitmore, (2004) which indicated that project planning and implementations are the two main phases where the risk management is most likely applied. On how risks are managed by teams and individuals, the results of this study showed that organizations and individuals most often used the checklists and other relevant manuals while groups apply discussions to identify risks and other problems. This results were supported by the fact that finding that found group discussions and meetings as the most reliable way of identifying and managing risks.
This phase of risk management process there was need to draw the difference between what the theory says and how the Mcnicholas Construction limited applies the concept. Generally it has been observed with great concern that not many practitioners in the construction industry working with residential projects work with structured risk identification and management process. In that regard, intuition, experience and judgment are the three common ways of identifying and analyzing risks while Monte Carlo or risk impact assessment are applied to a very minimal extend (Lyons & Skitmore, 2004).
The reasons given for evading the use of structured method is according to this study is the fact that there is great limitation in terms of resources. One respondent observed that this was attributed to small profit margins accrued from the residential projects which eventually lead to prevention of major changes especially when it comes new solution implementation. This was seen to be in resonance with the previous study carried out by Lyons & Skitmore (2006) which underscored lack of time as the major setback in the in the implementation of risk management. This notwithstanding, the industry has not been embracing changed leaving only a handful of the company in this sector to implement the project risk management process.
The qualitative approach has been determined to be the commonly used risk analysis technique since it's the easiest only involving probability and impact assessment. This is because it was discovered that the quantitative techniques are quite expensive requiring skilled personnel and technical equipment that can only be afforded by large investment companies (Lyons & Skitmore, 2004). It's based on this fundamental fact that respondents from Mcnicholas Construction limited observed that only qualitative method have been witnessed in the company in risk assessment and analysis.
Even though the data collected revealed that none of the respondents had proper know how in the possible risk management techniques, this project did include impact and probability methods and applied in form of online survey to underscore how the assessment could work in practice. On this note, the results showed that risk which bear the greatest impact on the project implementation was identified, hence cheap solutions were observed to be the biggest threat especially impacting on time. Also not finding the right contractor especially during tendering stage posses the biggest challenge on both cost and quality (Zou et al., 2006).
This study also unraveled the fact that the respondents have scanty knowledge of the response that needs to be applied for a given risk. Very few respondents showed knowledge of the probable response aimed at mitigating a potential risk. Based on the study, risk mitigation was the most preferred response in addition to most respondents also agrees that most risks are manageable and hence reduction is the best intervention plan. This was supported by the Lyons & Skitmore (2004) study which provided that reduction of risks was among the actions chosen for risk management.
5.6.11 Change of risks during the project implementation life cycle
The study showed that the role of persons participating in the project change in the course of project implementation phases. This was noted also by Smith et al., (2006) where it was observed that parties involved in the implementation change phases, in the investigated project managed by Mcnicholas Construction limited though some participants were present in the entire project phases. On that note it was observed that most identified risks at the previous phases were higher than the later ones.
The risks identifies by the respondents were seen to be different depending on the implementation phase. At the initial stages the risks were seen to be quite broad, including the risk of the contractor misunderstanding the client's requirements, inability to pick the right consultant or even finishing being below the expectation of the client. There was also an indication that the further in the project life cycle the emergence of a given range of risk which results from extensive planning and designing. During the lengthy phase of the project implementation, only very characteristic risks including construction schedule, or moisture were established and assessed. This was in line with the study Carried out by Smith et al., (2006) which indicated that risk nature changes progressively as the project is implemented. It is also observed that the risk at play is associated with the activity being implemented at a given phase.
6.0 CONCLUSION AND RECOMMENDATION
6.1 Adequate use of PRAM in UK
In theory PRAM should be adequately used within the UK construction industry and it is most certainly an important application in projects, mainly because it ensures that project teams will be better prepared when risks occur. However, the extent to which PRAM is adequately used within the UK construction industry will depend on a variety of factors, primarily because PRAM is fundamentally about contributing to successful project outcomes, in terms of time, cost and quality parameters measured upon practical completion of the construction stage.
Therefore despite the various Government reports and guides, which are available for the successful application of PRAM, it is the responsibility of project teams both from the client and contractor's side to ensure that PRAM is applied and the process is systematically followed. However it is important to highlight that the PRAM process consists of a range of technique suitable for the different types of risks the construction industry faces. Thus there could be a case where due to a lack of education or experience, the incorrect use of PRAM techniques can be very detrimental to a project if not applied for the right risks or scenario.
Also it has become evident from research that it