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Projects can fail for a number of reasons and the risks are always high. All project, program, and portfolio are subject to risk, whether positive or negative risks. The aim is to decrease negative risks and enhance positive risks.
Managing risks is one of the most important tasks for the construction industry as it directly affects project outcomes. Unfortunately, many organizations do not realize that there is a need to include risk management as a key element to success in business. Hence, some organizations delegate the risk management tasks leaving to someone to needs to plan, identify, assess, develop response plans, and control risks or do just part/ parts of the risk processes. It is not integrated into their project management philosophy.
Project risk management has been intensively discussed in recent years. Projects are becoming shared efforts of multiple parties construction industry is a good example of an area, where the project outcome is delivered in an extremely complex actor network. This paper discuss & identified the common and specific risks that may occur in the infrastructure projects & specially in the water treatment plant projects in Egypt & then we make initial assessment to these risks through a questionnaire was designed using the matrix method & then we make analyzing of the responses of this questionnaire.
This paper is focused only on the qualitative assessment of the risks. We use the matrix method for the assessment of these risks.
Responses to the questionnaire were then collected and analyzed. The analysis included ranking the risks in terms of degree of occurrence (probability) (v.high, high, med, low, very low)& the level of influences (impact) (v.high, high, med, low, very low) as the following matrices:
A general water supply system is composed of water sources, raw water transmission pipes, water treatment plants, and water distribution networks. However, these components and subsystems give the greatest opportunities for both natural and human-related influences because most of them are spatially diverse and accessible. With respect to this, researchers have identified the potential vulnerable areas during the process of delivering water from the sources to the customers as (see Figure 1): (1) water sources (e.g., river, reservoir, and wells); (2) water treatment plant that removes impurities and harmful agents and makes water suitable for domestic consumption and other uses which consists of: Screen, Mixing tank, Flocculation basin, Settling tank, Sand filter, Disinfection (3) water distribution pipelines that deliver clean water on demand to homes, commercial establishments, and industries which consists of: pipes, pumps, junctions/nodes, fitting (4) storages (tanks & water towers); and (5) other facilities (transmission pipes, channels, pumps, valves, etc.).These vulnerable points are the focus of risk assessment.
Figure 1 Elements and vulnerable points in a general water supply system
Factors affecting used Consider the following factors affecting use ashore:
* Water uses (domestic, industrial, fire protection)
* Peak demands (all uses).
* Other essential demands.
* Missions of the activity.
* Climatic effects.
Water treatment plant
Water treatment plant is the most important facility in a water supply system to remove contaminants in raw water, disinfect treated water, and produce drinkable water to consumers. However, hazards may be introduced during the process of treatment, or hazardous circumstances may allow contaminants to pass through treatment in significant concentrations.
Constituents of drinkable water can be introduced through the treatment process, including chemical additives used in the treatment process or products in contact with water. Furthermore, suboptimal filtration following filter backwashing can lead to the introduction of pathogens into the distribution system. Three attributes are crucial to water users:
* There must be adequate quantities of water on demand.
* It must be delivered at sufficient pressure.
* It must be safe to use.
In our paper we will focus on the Water treatment plant in the water supply system which considers an important part in the water supply system. We will discuss the risks may occur in the projects & we will make an initial assessment to these risks but at the beginning we will give overview of risk management in the construction projects specially the infrastructure projects which owned by the government, & we will discuss the risks from the view of contractor.
A questionnaire was designed for assessment for all possible risks that may occur in the water treatment plant projects in EGYPT which some of these risks are general risks that may happen in all infrastructure projects and some are specific risks for the water treatment plant projects through the construction & operation phase as discussed previous in the stage of risks identification & then forward to some of managers in. This paper is focused only on the qualitative assessment of the risks. We use the matrix method for the assessment of these risks.
Responses to the questionnaire were then collected and analyzed. The analysis included ranking the risks in terms of degree of occurrence (probability) (v. high, high, med, low, very low) & the level of influences (impact) (v. high, high, med, low, very low) as the following matrices:
1- Identification of risks
Categories of risks for infrastructure and service delivery projects:
Political risks are the first category of risks identified. It contains all the risks of government actions that may endanger a project.
1-1 Political support risks:
Host government support is essential for any infrastructure projects (ex: government support for the owner disputes on land)
1-2 Taxation risks:
Taxation risks mat raises of tax rate, or applied new tax tariffs, which, may lead to decrease the promoter profit and unbalanced project cash flow.
1-3 Import/export restrictions risk:
The import and export restriction risk covers the legislation changes, which arrange the import of the equipment.
1-4 Failure to obtain approvals.
Failure to obtain approval risk occurs when the central or local government authority does not approve the project-related issues in time or even cancels the ones already approved. Obtaining approvals for a project from complex web of government agencies and departments, from municipal to provincial to central government levels, can be extremely time-consuming process, delaying entire projects and hurting their financial viability.
The risk that the financiers will not provide or continue to provide funding to the project
2-1 Delayed Payment by the government:
Payments on time are considered extremely important by the contractors maintain the cash flow and eliminate financial difficulties . Delayed payment will influence the financial situation of the contractor, especially if the due payment is substantial and or delayed for along time.
2-2 Changes in law & regulation:
Local authorities and government have specific codes and regulations that might be changed or revised from time to time. These regulations must be adhered to by contactors. But this has low probability to occurrence in our project because it is owned by the government.
2-3 Inflation risks:
This risk category mainly depends on the economic conditions of the country. As the inflation increases this risk becomes more important.
2-4 Interest rate changes.
2-5 Devaluation risks.
2-6 Financial failure:
Financial failure of any party (contractor or owner) wills significant impact the projects schedule and consequently the budget. This is more likely happen in big projects where the owner (government) might not have sufficient fund for the project or the contractor bids low on the project.
3- Development risks:
Development risks describes the risk of the bidding procedures, which are very important part of the project, the bid evaluation criteria must be clearly defined and the bids must be evaluated in a public and objective manner,& the chances for success are predictable.
The competitive bidding systems usually lead to terms and conditions more favorable to the national interest. An orderly and transparent bidding procedure should also win public support for that project which can solve the problems that face the contractor such as land owner disputes.
3-1 Bidding risks:
The bidding process in Egypt includes the following risks, which can face the contactor:
- contractor spend high cost for the preparation of the feasibility studies, investigation, design, planning and estimation of the project to be able to tender.
- Contractor warred about the risks of their innovative proposals being put out to competitive tender without gaining exclusivity or preferential treatment from other competitors.
3-2 Planning delay:
The planning delay risks refer to the delay of the tender evaluation by the government officials whom responsible to do such task.
3-3 Approval risks:
Delays in approval risk appear when the central of local government authority does not approve the project-related issues in time. Obtaining approvals for a project from complex web of government agencies and departments, from municipal to provincial to central government levels, can be extremely time-consuming process, delaying entire projects and hurting their financial viability.
3-4 Force majeure risk:
Force majeure risk is the risk that a specified event entirely outside the control of either party will occur and will result in a delay or default by the contractor in the performance of its contractual obligations. for example cyclone, earthquake, outbreak of war.
Site risk is the risk that the project land will be unavailable or unable to be used at the required time because of Land owner disputes that the site will generate unanticipated liabilities, with the result that the service delivery and revenues are adversely affected.
4-1 Site access:
This risk category refers to the right of way and access to the project site. This an important category especially if the project is in a remote or undeveloped area or where access is limited to small trucks where large construction tools like big trucks and loaders cannot get into the project site. Also, this important when the project is located in a very congested area or access to other facilities and public areas need to be blocked or detoured in some stages of the project.
4-2 Statutory approvals.
4-3 Environmental issues
4-4 differing site condition:
This is a clear risk category and could happen in most of construction projects. For instance the soil conditions changes and the contractor might face or hard soil during excavation instead of soft soil as the top layer at the site showed or as the tender document may have indicated. Another example is underground buried utility piping, power cables and high water table area. These types of differing site conditions occur mostly in renovation and /or expansion of existing projects where new construction interface with the existing structures. These differing site conditions will require extra efforts and may necessitate special equipment and tools for excavation and/or de-watering.
4-5 Suitability of the site and any existing infrastructure:
Means existing of any underground infrastructures (e.g. sewage pipes)
5- Construction risks:
Construction risks are the identified risk category which contains the risks faced the project during the construction phase which can be highly affect on the project cost and in turn the investment needs to complete the project. It can be endanger to the feasibility of the project.
5-1 Delay risks:
Delay risk means delay in the construction time schedule which, can be occur due to poor project management applied or due to bad cost estimation, which lead to financial failure.
5-2 Cost overrun risks:
Cost overrun risk occur when construction costs exceed original estimates, either due to inflation, non realistic cost estimation, excessive design changes or lack of risk management framework.
5-3 Re performance risk:
Re performance risk is occurred due to reconstruct or maintains the bad work done by unqualified contractor.
5-4 Completion risk:
Completion risk refers to the non-completion of the project due to effect of force majeure or unforeseen soil conditions.
5-5 Variation risks:
A change in work is an important risk category in the construction projects. It could be change in work procedures, methodology o change of plans and scope of work. These changes might lead to change orders demolitions and re-working and must be considered in the assessments of risks because they affect the project budget, schedule, safety and quality.
Normally changes in work result because of insufficient planning at the project definition stage or because of lack of clear scope and drawing detail or simply because the owner s desire to make changes to the project.
5-6 Loss or damage to work:
Loss or damage to work risks rises by the unforeseen soil conditions or breakdown of equipment, which are common occurrences on any construction site, especially for large civil engineering projects. Usually, these will have repercussion on cost and time but the effects are usually surmountable with today s technology.
5-7 Force majeure risk:
Force majeure risk is the risk that a specified event entirely outside the control of either party will occur and will result in a delay or default by the contractor in the performance of its contractual obligations during the construction period. For example, earthquake, outbreak of war.
5-8 Mistakes in installation of pipes.
5-9 Mistakes in installation valves of pipes.
5-10 The permeability of the reservoir during a test.
5-11 Labor & equipment availability:
This risk category is mainly related to the availability of some of the resources namely, labor, material and equipment. Certain jobs may require specific skilled expertise and /or special material and equipment that might not available or scarce in the local market and take a long time to procure. For example a skilled a qualified welder or special lifting and fitting of some heavy structure that may require crane capacity or piece of equipment that is not available in the local market may force the contractor to hire a certain skilled labor and import the special piece of the equipment or change the construction method to suit. This is more likely to happen in complex major projects or projects involving some degree of high technological complexity like water treatment plant project.
5-12 Labor & equipment productivity:
Like the previous risk category, certain jobs involving the productivity of labors and equipment might be affected because of the complexity of jobs or the nature of the work. if this not routine, then the labor and/or the equipment operator need to go through a learning curve. Another example that might affect labor and equipment productivity is the morale of the labor and the use of defective tools and equipment.
5-13 defective material:
Material is essential resource for construction projects and there is need for quality control and quality assurance to eliminate material replacement and re-work. this risk category becomes more important for lump sum contracts if the specifications were not well defined.
5-14 labor disputes:
This is more likely to happen in large companies where the work forces are multinationals who come from different countries with different background or where the relationships between management and workforce are tense. Usually any labor dispute is either resolved internally or by the local authorities and police.
5-15 Safety & accident:
Safety and accidents in construction projects can not overlooked, especially when the projects involves deep excavation or high elevation construction. The risk category is inherited in the construction industry but can be minimized by following safety rules and the use of safety equipment such as goggles, safety hats and shoes.
5-16 Coordination with sub. Contractor:
Coordination with sub-contractors and material suppliers is an important task especially in a multi-player environment like big construction projects. Beside it could be risky if not kept smooth, in a timely manner and continuous. Miss-coordination between subcontractors and material suppliers (especially for long lead items) will lead to schedule and budget overruns.
5-17 Quality of work:
Quality of work would reflect the reputation of the contractor and might either rank him on the top of contractors or force him out of the market. Generally, owners (government) strive to get a quality end product by their project and contractors try their best to deliver quality projects. However; poor workmanship that leads to demolition and rework will negatively impact the project budget and schedule. Also, interior quality of work will reflect the bad reputation of the contractor.
Good quality and assurance programs will helps reduce the negative effects of this category.
6- Operation risks:
Operation risk describes the category of risks faced the project during the guarantee period of the facilities, which starts after project completion & continued for one year such as equipment breakdown or the discovery of defects in the work which may hinder the revenue generating capability.
6-1 Technical risks:
The breakdown of equipment or failures of any part of the project which are common occurrences on any project, Usually, these will have repercussions on cost and time but effects are usually surmountable with today s technology.
6-2 Corruption risk:
It the risk of occurrence of failure or breakdown in any part of the water treatment plant, e.g.(breakdown of the pipes, or failure of tanks in the system) during the guarantee period of the project.
6-4 Force majeure risk:
Force majeure is the risk that a specified event entirely outside the control of either party will occur and will result in a delay or default by the contractor in the performance of its contractual obligations during the operation period. For example cyclone, earthquake, outbreak of war.
Water treatment plant
Water treatment plant is the most important facility in a water supply system to remove Contaminants in raw water, disinfect treated water, and produce drinkable water to consumers.
However, hazards may be introduced during the process of treatment, or hazardous circumstances
May allow contaminants to pass through treatment in significant concentrations. Constituents of drinkable water can be introduced through the treatment process, including chemical additives used in the treatment process or products in contact with water. Furthermore, suboptimal filtration following filter backwashing can lead to the introduction of pathogens into the distribution system. Meanwhile extreme natural hazards, willful human attacks, or interdependency failures (e.g., power failures) can all introduce risks in water treatment process.
Based on the results & analysis of the risks discussed in the previous, the following conclusions were reached:
From the analysis of the six risk categories depended on the questionnaire received from five managers in the Arab company, our conclusions were as follow:
* The most critical risks in the political risks were the: import & export restriction & failure to obtain approval,& the lowest critical risks were: taxation risks.
* The most critical risks in the financial risks were the: devaluation risks & payment failure. & the lowest critical risks: inflation risks.
* The most critical risks in the development risks were the: bidding risks & & the lowest critical risks: force majeure risks.
* The most critical risks in the site risks were the: differing site condition risks & & the lowest critical risks: site access risks.
* The most critical risks in the construction risks were the cost overrun risks & coordination between the subcontractor & the lowest critical risks: force majeure & some risks discussed in the matrix.
* The most critical risks in the operation risks were the force majeure risks& the lowest critical risks: technical risks.
* At all the most critical risks category in the construction risks category.
1. Risk management of the BOT projects in Egypt. by Ibrahim Ahmed Ibrahim Hara Faculty of engineering at Cairo University.
2. http://www.google.com.eg/search?hl=ar&q=2ech10_risk&btnG=%D8%A8%D8%AD%D8%AB+Google%E2%80%8F&meta=&aq=f& oq=
4. Hierarchical Risk Assessment of Water
Submitted for the Degree of
Doctor of Philosophy from
5. ASSESSMENT OF RISK MANAGEMENT PERCEPTION AND PRACTICES OF CONSTRUCTION CONTRACTOR IN SAUDI ARABIA.BY ALI ABDULLAH AL SALMAN.