This chapter covers the research design, population, sample, research instruments, and data analysis techniques. Therefore, this chapter describes the different approaches that were used to gather relevant information for this research. The methodology applied by the study has, hence, been chosen to acquire information and deduce conclusions on consumer perception of PRAM at Mcnicholas Construction (Holdings) Limited. This is because it's postulated that PRAM when well implemented could lead to increased profitability and reduced collateral damages.
3.1 Choice of topic.
The author became interested in risk analysis and management during an industrial placement working at Cyril Sweett. The author was involved in several projects during pre-contract and post-contract dealing with risk management issues. This led to the author researching more in to the subject area into how the industry deals with risk by identifying, analysing and then finally managing it, thus a dissertation on the risk analysis and management has been undertaken.
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Through the author's research, and the abundance of articles focusing on PRAM on resources such as Building magazine (2008), it is well documented that in recent years, intensive research and development has been done in the area of project risk analysis and management and it is widely recognised as one of the most critical procedures and capability areas in the field of construction projects.
This study is based on the assumption that by understanding better both the relationships in a project network and risks related to the network structure; project risk management can be more effective. It has already been recognized that a clear understanding of the risks born by each participant leads to better risk allocation. The objective of the study is to find means of risk management that can be utilized by the network and to make new suggestions on the use of these risk management methods. It is of a particular interest to find the means to manage those risks that are the most effectively managed with the co-operation of several project stakeholders. Initially however, the relationship between the existence of a network and the existence of risks needs to be established.
3.2 Secondary Research
The secondary research will be relevant to establish published view points of risk analysis and management in the UK construction industry. This was conducted at the following professional institution's libraries: RICS, RIBA, ICE, APM and then CIOB
Other educational institutions visited were the British library and the construction research body CIRIA were also visited. The secondary literature search was conducted through the use of available search engines of the Kingston University library system, both Internet based and otherwise. In addition, COPAC (an online library merging many major UK academic and National libraries online), the RICS, RIBA, ICE, and British Libraries along with Kingston University's catalogue of texts were consulted. To ensure verifiable sources, secondary data was extracted from construction journals, books and government reports.
The secondary research aids in the compilation of the literature review in Chapter 2.0, by providing references that make up the main body. It also enable the necessary background reading required which forms the bibliography.
3.3 Primary research method
After careful consideration it was decided that a sample of industry professionals working in a cross section of large and medium scale organization that have experience of risk analysis and management in the UK construction industry would be interviewed. The sample would include major clients, contractors, architects, engineers, quantity surveyors and project managers, which would enable to analyse the attitudes of risk management between different organisations.
The list was carefully drawn up from some of the leading organisations, who operate in the construction industry. The organisations contacted for the purpose of conducting the primary research, are well known, both internally and externally in the construction industry. A list of clients, contractors, architects, engineers, quantity surveyors and project managers consulted during the primary research phase of this dissertation are referred to Appendix A. In order to remain consistent within my primary research, after careful consideration of the various options available for primary research, semi-structured interviews were chosen as the best means of collating the required information for primary research. This was because:
i. Semi-Structured interviews permits the interviewer a great deal of freedom to probe various areas and to raise specific queries during the course of the interview as noted by Naoum, (2007). The Semi-Structured interview also ensures each interview is objectively carried out in similar fashion. This will enable the researcher to not only gain the necessary information for the use of PRAM in the construction industry, but also a consistent comparison of responses.
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ii. Other primary methods were not favored due to:
a. Postal questionnaires having a poor response rate.
b. Structured interviews were not selected as they have a rigid format that can be constraining to the interviewee, and as a result you will not necessarily capture all possible information provided.
c. Telephone interviews may cause the interviewees and respondents to feel rushed; also impersonal probing would prove to be more difficult because the interviewer is unable to observe the respondents face and body language.
Thus it was concludes that semi-structured interviews were the best form of primary research for this dissertation. The sample size will consist of ten one-hour semi structured interviews. The semi-structured interview questionnaire consisted of a mixture of Quantitative and Qualitative questions. Thus the semi-structured interview questionnaire was drafted using both open and closed ended questions.
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.
3.4 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:
1. 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).
The organisations 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. A blank copy of the semi-structure interview questionnaire pro-forma is in Appendix B.
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) - why was PRAM introduced in the UK
The purpose of this objective was to identify, the reasons why the construction industry, adopted risk management approaches. Contractor Organisation interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14 The contractor organisations 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 contractor organisation interviewed). It is interesting to note that one of the contractor organisations 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 contractor organisations 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.
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In addition the Contractor organisations interviewed were asked Q3, which relates to the implementation of risk management within their projects. Both Contractor organisations 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. Client Organisation interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14
Unlike the Contractor organisations interviewed, the Client organisations 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 organisation 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). QS Organisation interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14
However the QS organisation 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).
Mcnicholas Organisation interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14 Furthermore the Mcnicholas organisations 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. Mcnicholas organisation further noted that risk management was increasingly being recognized by professions such as the APM, mainly because risks had been poorly dealt with on all projects. Mcnicholas organisation interviewed further noted that: 'High profile incidents have forced the industry to look at what it does and how it does it'. (Mcnicholas organization interviewed). A PM organisation 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'. (Mcnicholas organization interviewed).
Engineering Organisation interviewed: Analysis of responses Q6, Q3, Q11, Q12, Q13, Q14 Finally, the Engineering organisation interviewed reported that risk management was introduced within the construction industry due to the influences of Government Reports. The Engineering organisation 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' (The Engineering organisation interviewed).
4.2.1 General Responses
However the Mcnicholas, QS, Engineer and Client organisations 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) - Type of project risk analysis and management
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. Contractor Organisation interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 The contractor organisations interviewed appear to be employed by the full range of clientele identified within the questioning; the contractor organisations 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 contractor organisations 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 Contractor organisations interviewed. In terms of actually identifying and managing risk one Contractor organisation interviewed used a bespoke software called the 'Citrix' system on occasions.
The contractor organisations 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 Contractor organisation interviewed).
QS Organisation interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 Similarly to the contractor interviewed, the QS organisations 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 QS organisations interviewed were frequently involved in: (i) Housing, (ii) Offices/Commercial, (iii) Transport, (iv) Public Utilities, (v) Health and Welfare Schemes.
The QS organisations interviewed noted that the risk techniques their organisations frequently used were; (i) Brainstorming, (ii) Probability and (iii) Scenario Analysis. However one of the QS 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 QS organisations interviewed. Mcnicholas interviewed mostly used IT systems for collating data and transferring them in to spread sheets using software's such as Microsoft
Excel. However one QS organisation interviewed noted that: '...they extensively used IT,particularly for infrastructure heavy industries (eg. rail) using a range of software known asARM (Risk Master), Risk and Pertmaster'The QS organisations interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. One QS organisations interviewed stated 'YES' directly, whilst the other QS organisation interviewed had to elaborate on the question.
The QS organisation interviewed that stated 'YES' directly and further explained that they: '...have a dedicated Risk Management Specialist Services' (A QS organisation interviewed). However the other QS organisation 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." Mcnicholas Organisation interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 The Mcnicholas organisation 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 Mcnicholas organisation interviewed were frequently involved in: (i) Housing, (ii) Offices/Commercial, (iii) Transport, (iv) Public Utilities and (v) Harbour/Airport Facilities.
The PM organisations 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 Mcnicholas organisations interviewed. The Mcnicholas organisation interviewed noted that they mostly used bespoke systems for each high value project, however one Mcnicholas organisation interviewed noted that: '... when clients specify a system we often implement it' (A Mcnicholas organization interviewed).
The PM organisations interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. Both Mcnicholas organisations interviewed stated 'YES' directly.
Engineering Organisation interviewed: Analysis of responses Q1, Q2, Q7, Q17, Q5 The Engineering organisation 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 engineering organisation interviewed was frequently involved in: (i) Offices/Commercial, (ii) Transport and (iii) Public Utilities.
The engineering organisation 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 engineering organisations interviewed mostly used IT systems for creating risk registers through spread sheets using software's such as Microsoft Excel.
The engineering organisations interviewed were then asked Q5, which aimed to identify whether risk analysis and management was offered as a 'standalone service'. The engineering organisation interviewed stated 'NO', because they only offered a service internally. Client Organisation 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 organisation interviewed was frequently involved in: (i) Housing and (ii) Private Developments. Whilst the other client organisation 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 client organisations interviewed. The client organisation 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. '...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 Mcnicholas organisation interviewed).
4.4 Analysis in relation to Objective (iv) - Merits and demerits of the type of risk
analysis and management techniques?
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 contractor organisation 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, Mcnicholas's, Client's and one Contractor organisation 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 organisation 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 organisation interviewed noted that: '...most people in a group have struggled with probabilities, therefore interest can easily be lost' (A contractor organisation 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 Mcnicholas organisation interviewed who noted that: '...you can't argue with statistics!' (A project management organization 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 isset up right, in addition it can be very structured and highlights lots of detail' (A client organisation 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 organization 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 organisation interviewed). However according to a contractor organisation 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 Mcnicholas organisation 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, Mcnicholas and Contractor organisation interviewed, highlighted that the main advantage was that it identifies unforeseen risks. A QS organization 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 organisation interviewed).
g. Portfolio theory:
According to a Contractor organisation 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 organisation interviewed notes that the advantage of this technique was that it is good if varied choices exist. Furthermore one client organisation interviewed notes that: '...this technique was suitable when looking atpersonal risk tolerances, income needs and an investment horizon' (A Client organization interviewed).
h. Breakeven analysis:
The client organisations interviewed identified that the main disadvantage of this technique was that it is very basic. Furthermore according to one Mcnicholas organization 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 organisation 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 organisation interviewed)
i. Scenario Analysis:
All participants identified that a main disadvantage identified with this technique was that its time consuming. Furthermore a QS organisation interviewed notes that: 'this technique must be comprehensive otherwise it can be too anecdotal' (A QS organization interviewed). However the main advantage identified by the Contractor was that it can increase engagement by participants. Furthermore the QS, Mcnicholas, and Client organization 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) - Possible improvements and recommendations
that can be made to PRAM in the UK Construction Industry.
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 Organisation interviewed: Analysis of responses Q16
According to the contractor organisations interviewed risk management was an essential part of their organisations; 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. Mcnicholas Organisation interviewed: Analysis of responses Q16 In addition the Mcnicholas organisations interviewed surprisingly argued that if the client doesn't favour risk management, then it would not be implemented within a project. One PM organisation 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 Mcnicholas organization interviewed). Therefore one Mcnicholas organisation 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 Mcnicholas organisation interviewed).
Engineering Organisation interviewed: Analysis of responses Q16 The engineering organisation interviewed also notes that there must be fewer adversities between client, design teams and contractors and more trust. Furthermore the engineer organisation interviewed recommends that: '...the client must know what they want from the project and make key decisions promptly along with having a realistic expectation' (An engineering organisation interviewed). Client Organisation interviewed: Analysis of responses Q16 One of the most surprising improvements/recommendations put forward by the respondents interviewed was from one of the client organisations interviewed. One participant noted that risk management has already undergone massive improvements in the last 20 years.
However one client organisation 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 organisation 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 organisation interviewed). This shows that there is a need to take risk analysis and management more seriously in UK construction projects in the future.
QS Organisation interviewed: Analysis of responses Q16 In addition one QS organisation 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 organization 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 organisation interviewed).
This chapter tents answer the research questions based on the case study with comparison from the theory.
4.5.1 Project location
The project used in this study was located Western Cambridge city, where at the point of the study the project was at the very beginning phase of planning, layout and documentation. In this case the project was estimated to take two years and six months and was started in the month of August 2012, figure 3 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. In this project the project risk management concept was not used but everyone worked hard to learn more about the concept to increase the returns. However because of the time constraints the study could not ascertain whether the project attained the goal of ensuring zero errors.
Figure 4: The actual project structure as provided for during the panning phase
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
4.5.2 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
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 1 below
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
5.1.4 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 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
4.2.3 Are you familiar with the concept of risk management and the Risk Management 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.
4.5.4 How is the risk management applied 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 non 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 need to be applied for a given risk. Very few respondents showed knowledge of the probable response aimed aty 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.
4.5.5 How do risk change 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. 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.
Most actors in the construction industry still perceive risks negatively despite the fact that there has been notable facts that there are two dimensions to it. It was also observed that professionals in the construction industry has been observed to use the techniques prescribed in the literature concerning risk management even though they are aware of it. There is risk management in Mcnicholas Construction Company despite the fact that the process followed is not structured and well coordinated. This is in tandem with the fact that the process of risk management and risk management process knowledge is not well articulated despite the increasing the popularity of risk management concept in the construction industry. In addition to this there is a great willingness in the construction industry for the participants to embrace the risk management process to ensure that there are increased returns for the company. Finally the study has shown that by applying a simple technique it's possible to identify possible risks easily that applying the resource demanding quantitative techniques of risk analysis.
From the study its observed that there is agent need for the government to formulate proper policies that will ensure that the construction companies adapt and adhere to the structured project risk management and analysis program. There is also a need for the companies to train their employers on the risk management program to make them understand the possible risks they face in the company and how to deal with them.