Risk Management As Essential Tool For Achieving Value Construction Essay

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Project is the investment by an organization to achieve an objective within a programmed time that returns added value to the business activity of the organization.

The effective practise of risk management (RM) in the construction industry plays an important role in delivering the successful project in terms of client's prim needs such as cost, time and quality. The dissertation will study the contribution of RM practice in the construction industry in international level, and the level of recognition given to RM as an essential practice for the successful delivery of Construction projects in the UAE

Rationale for the study

The construction Industry in the UAE is a fast growing one during last industry in the past few years and UAE stands on a leading position among other developed countries in the development of Building or Infrastructure work.

Many clients are dissatisfied with the results of individual competitively tendered projects. These contracts have often under performed in terms of time, cost and quality leading to adversarial attitude among all parties. This may directly or indirectly affect the client's specific business objectives. It may be raised out badly drafted contract, incomplete design, complexity of the project, change of scope of work, poor workmanship or management etc. However, finally it leads to exceeding budgetary limits and the clients are force to compromise with time, cost and quality and adversely affect Client needs.

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In the annual year 2007 report of the Ministery of Programme Implementation of India, out of 866 projects each costing over Rs. 20 crore (USD =), performance of Central Sector Projects of the Government of India, as reported in October 2007 (sourse : Times of India, 29th October 2007). As per the annual report of the ministery of

Regarding the construction of Sheikh Zayed Bridge, one of very prestige bridge in Abu Dhabi in the U.AE, It was reported by Jon Muller [2010] that the structural Works began in late 2003 with completion date set for 2006. However the project was later extended to 2009 due to the complexity of construction and finally it was completed in 2011 and opened to traffic in 2011. Accordingly the cost of bridge has been increased to AED 1 billion from the tender amount.

In addition to above, the project was initially awarded to ARCO , a Greek company and later the project was taken over by Six Construct, a Belgium based company from ARCO as the contractor asked additional time for completion in 2010.

The main factors like Time and Cost have increased than agreed and the contractual issues pertaining to withdrawal of contract from existing contractor and given to another contractor

This may be due to following factors:-

The feasibility study for the work may not done properly during the design stage

Complexity of Design

Client's additional requirement during construction

Availability of material on time as the arches are fabricating in Thailand

Value management is a service that maximizes the functional value of a project by managing its development from concept to occupancy through the audit (examination) of tall decisions against a value system determined by the client. (John Kelly, Steven Male & Drummond Graham, 2004).

The Dissertation mainly focus on the VM approach adopted on seven central and local government construction projects in the UK and the present practice in UAE. The case study mainly to analysis key success factors, achievements and lessons learned, issues addressed on the VM approach adopted on above projects in UK and the main constructed projects in the UAE.

Aim

The basic intention of this research is to identify the importance of Risk Management as an essential practice for achieving the client basic needs for the successful delivery of Construction projects in the UAE .

Objectives

Investigate RM has a significant effect on Construction Projects to achieve client's value

To identify the RM practice and its level of recognition on international level for the successful delivery of Construction Projects.

To identify the level of RM practices and the importance given in the UAE Construction.

Hypothesis

Establishing management is an essential practice at the design stage to mitigate Clients' needs

Methodology

Stage 1: Literature review

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A systematic literature review is to be conducted which will cover textbooks, publications, academic notes and published case studies done by others.

Stage 2: Analyzing the facts

Analyzing the published case studies obtained from relevant sources regarding VM practice in the construction industry.

Stage 3: Analyzing the facts obtained through a questionnaire

Analyzing the present trend in Value management in the UAE.

Whether the Clients are interested in Value Management prior to bidding?

How many projects in the UAE achieved client needs through Value Management?

How many projects in the U.AE are conducted Value Management during the Tender stage?

Stage 4: Producing tables with the results

Writing up stage where all the result will be presented in a table format for discussion and interpretation to be made on the research findings.

Proposed Structure of dissertation

Chapter 1- Risk and Risk Management in construction projects

Chapter 2- Risk and Risk Management in construction projects.

Chapter 4- Designing the survey and research methodology.

Chapter 5- Analyzing and evaluating survey evidence.

Chapter 6- Conclusions.

Chapter 7- References.

The VM approach in the construction industry is accepted by many advance countries. The following are the case studies done by Office of Government Commerce ( OGC) with APM Group Ltd and the Institute of Value Management ( OGC ) highlighted the key success factors, achievements and lessons learned through VM approach adopted on seven central and local government construction projects. Out of seven case studies I chosen three to highlight the successful implementation of VM study in the construction project.

Case Study -1

It describe how the Hextable Dance project succeed from being unaffordable to realty through the effective VM approach.

As this project has esthetic impact, because of its innovative design, it was expected exceed the project budge of £2.1m by 20%, that is above ( £420,000) . Accordingly the project team conducted a VM study involving all stakeholders.

The following are the main achievements and benefits obtained from this VM study

S.No

achievement

Benefits

1

Achieved 20% cost saving and consequently cost became within the budget.

The new design met the client requirements in full

2

Disabled access and landscaping

Improved security

3

Participation of stake holders for the development new design

Free from constraint and good for the end-user.

The Major issues faced by the project team prior to VM study

The two earlier schemes had failed and the current proposal exceeded the budget by 20%. Further the nature of finance arrangement was fixed and could be increased, and the project team was unclear as to the precise nature of the client's requirement.

Successful initiatives

For a successful VM study, it is very important to have clear understanding of

What value means to the client and establishing his objective.

As per the existing design the cost of Hextable Dance will likely exceed the budget and hence it was important to review the client brief, the required project benefit and important function of the new building.

The VM team was able to review the project from a functional prospective to identify the remedial measures of constraints of existing design without compromising the client requirements, after obtaining a clear understanding of client's needs. As a part of VM study, the team identified the potential risk factors. This includes difficulty in obtaining, refusal of funding, vandalism to the finished building, late changes to the design and difficult access to the site.

The VM team qualitatively assessed the occurrence of risk and the project team regularly monitored for the successful delivery of the project.

Lessons learned

When defining the value, the involvement of key stake holders in VM study was very important. The building Architect's support during VM process was much effective. Willingness of team to make the design to meet for the client's core requirement.

Case Study -2

It describe how the Hextable Dance project succeed from being unaffordable to realty through the effective VM approach.

Risk management

The aim of risk management is to ensure that risks are identified at project inception, their potential impacts allowed for, and where possible the risks or their impacts minimized.

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Risk management involves several stages:

Risk identification - to determine what the risks are

Assessment of risks to determine the probability of occurance and potential impact or severity.( These first two processes are sometimes referred to collectively as risk analysis)

Responding to risk contain them within acceptable limits( taking countermeasures)

Monitoring, updating and controlling risks

Feed back on how well risk were managed and lessons learned

There should be a risk owner for each risk, who is responsible for taking forward any management action to minimize the probability and impact of the risk

The risk resister is the