The Unanticipated Risks On Construction Projects Construction Essay

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The duration of construction projects right from inception to completion is assuming great importance in the construction industry. The author of this project work believes that, this shift in attention on constructioin delays is taking it rightful place of importance in the global construction sector. Clients or consumers are no longer content merely with minimal cost and adequate functional performance for their projects; increasing interest rates, inflation and other commercial pressures, among other factors, mean that it is in many instances most cost-effective to complete a project within the shortest possible time.The the current hursh financial climate does not allow for subcontractors not to be prudent with project planning and delivery , hence the reason for chosing to write on this subject.

The most significant unbudgeted costs on many construction projects are the financial impacts associated with delay and disruption to the works. Owners and Subcontrcators have one common objective; to complete the project in time and within budget. It is the failure of this objective of time which leads to failure of budget and ultimately gives rise to disputes.

There is no consensus in the literature on the identification of factors which affect stipulated, planned or achieved construction times of buildings. One reason for this is that researchers have largely viewed the subject from diverse prospective. Such viewpoints include identification of discrete factors which affect productivity on site and taking a systems view of the construction process and end product (Nkado R.N, 1995)

The inherent and often unanticipated risks on construction projects present key challenges to subcontracting firms. For example, if a project is delayed or disrupted, significant resources are engaged and management time consumed. The outcome can have serious consequences on corporate value. One loss-making project can wipe out the profit on 50 successful ones and significantly damage a company's reputation. In the current economic climate, claims and disputes are increasingly more likely.

Construction delays are not a modern phenomena.The delays on some of the UK's most famous landmarks, such as St Paul's Cathederal, the Houses of Parliament and the Clifton Suspension Bridge would make the delays on more recent high profile construction projects look distinctly trifling (Lowsley et al, 2006)

Delay Ñ-Ñ• generally acknowledged аѕ thе mоѕt common, costly, complex аnd riÑ•ky problem encountered Ñ-n construction projectÑ•. BecauÑ•e оf thе overriding Ñ•ignificance оf tÑ-me fоr both thе proprietor (Ñ-n termÑ• оf performance) аnd thе Ñ•upplier (Ñ-n termÑ• оf money), it Ñ-Ñ• thе Ñ•ource оf frequent diÑ•puteÑ• аnd claimÑ• leading tо lawÑ•uitÑ•.

DelayÑ• occur Ñ-n almost every construction project аnd thе magnitude оf theÑ•e delayÑ• varieÑ• conÑ•iderably frоm project tо project. Ð…ome projectÑ• аre only а few dayÑ• behind Ñ•chedule; Ñ•ome аre delayed bу over а year. Ð…o it Ñ-Ñ• eÑ•Ñ•ential tо define thе actual cauÑ•eÑ• оf delay Ñ-n order tо minimize аnd avoid delay Ñ-n any construction project (Ahmed et al., 2003).

Chan et al (2004) Concluded in a research conducted to measure the success of construction projects that, cost, time and quality are the three basic and most important performance indicators in consruction projects.Other measures such as safety, functionality and satisfaction etc. are also currently attracting increasing attention.

Chan et al, (2004) accentuated that accurate construction planning is a key factor in ensuring the delivery of a project on schedule and within budget. As almost all projects comprise a large number of interdependent items of work and involve many participants, reliable plans and accurate progress-recording mechanisms become essential to project success.

Mbachu, et al(2005) discover the sources of strategies for minimising risks in the construction projects and categorised the results into internal and external sources.The internal sources of risks, which fall under the control of clients ,consultants and Subcontractors , include those risk elements emanationg from their acts or omissions in the project development process. They noted that, the most frequently mentioned risk elements under client sources include frequent and late changes at critical stages of the design and construction process, poor leadership and inadequate supervisions on the part of Contractors and subcontractors, low productivity, re-work and lossess, delays in supplying equipment, materials and components.

For the consultants, incomplete design information and delay in supplying information required by contractors on site.The external risk sources, which are not within the control of the client and the project team, could be segregated into economic and globalisation dynamics, unforeseen circumstances/force majeue, government, statutory, political controls, health and safety risk elements and socio-cultural issue.

Typeѕ of delay

A delay to a construction project generally means delay to the planned completion date or a delay to a particular activity or sequence of activities (Lowsley et al, 2006)

Delays can be grouped in the following four broad categories according to how they operate contractually: non-excusable delays; excusable non-compensable delays; excusable compensable delays; and concurrent delayѕ

The Bureau of Engineering Project Delivery Manual version 2 released in October 2006 categorised construction delays in three basic types of delays, namely; Excusable-Non-Compensatory (Concurrent), Non-Excusable and Excusable-Compensatory.

Non - Excusable Delay

Non-Excusable delays are events that are within the Subcontractors control or that are foreseeable. These delays might be the results of late performance of Subcontractors, untimely performance by suppliers, faulty workmanship by the subcontractor, underestimate of productivity, inadequate scheduling or mamanagement, equipment breakdowns, staffing problems, a project specific labour strikes caused by either the Subcontractors with the labour representative or by unfair labour practices(Trauner et al,2009)

Excusable Non Compensable Delay

An excusable delay is caused by factors that are not foreseeable, beyond the Subcontractors control .The implication of the term means that, neither party is at fault under the terms and conditions of the contract and has agreed to share the risk and consequences when excusable events occur. The Subcontractor will not receive compensation for the cost of delay, but he will be entitled for an additional time to complete his work and is also relieved from any contractually imposed liquidated damages for the period of delay (Ahmed et al, 2003)

2.5 Excusable Compensable Delay

(Ahmed et al, 2003) acknowledged that, compensable delays are those that are generally caused by the owner or its agents. If the delay is compensable, then the contractor is entitled not only to an extension of time but also to an adjustment for any increase in costs caused by the delay. Owner-issued contracts specifically address some potential compensable delays and provide equitable adjustments. The usual equitable adjustable clauses in owner issued contracts that apply are: Changes, Dithering Site Condition, and Suspension

2.6 Concurrent delays

The concept of concurrent delay has become a very common presentation as part of some analysis of construction delays. The concurrency argument is not just from the standpoint of determining the project's critical delays but from the standpoint of assigning responsibility for damages associated with delays to the critical path. Owners will often cite concurrent delays by the contractor as a reason for issuing a time extension without additional compensation.Contractors will often cite concurrent delays by the owners as a reason why liquilidated damages should not be assessed for its delays. Concurrent delays are separate delays to the critical path that occur at the same time. (Lowsley et al, 2006)

Rubin et al. (1983) defined concurrent delays as the situation in which two or more delays occur at the same time either of which had it occurred alone, would have affected the ultimate completion date. It means each of the delays must independently affect the critical path.

Reynolds et al (2001) argue that to be considered concurrent delays, the delays need not commence precisely at the same time.

Arditi et al (1995) had a view that, the delays need not occur in the same activity on the same critical path but may exist in different activities on parallel critical path as well.

The SCL Protocol (SCL, 2002) describe a true concurrent delay as "the occurrences of the delays, one an employer risk event and the other a contractor risk event, at the same time, and their effects felt at the same time". This occurrence is, however, extremely rare in practice since time is infinitely divisible. For instance, two delay events occurring on the same day would not necessarily be true concurrent delays because one may have occurred in the morning while the other in the afternoon. Concurrent delay is also rather misleadingly used to refer to the occurrence of two or more delay events at different times but their effect are felt (in whole or in part) at the same time.

As a summary, Figure 1 classifies the different types of delays based on their various attributes.

Figure 1: Delay Classifications (Nuhu Braimah 2008)

2.7 Primary Causes of Delay

There are two kinds of reason for delay in construction project: external causes; and internal cauѕeѕ.Internal causes of delay include the causes arising from four partiеѕ involved in the project. These partiеѕ include the proprietor, designers, contractorѕ, and conѕultantѕ. Other delays, which do not arise from these four partiеѕ, are based on external factors for example from the government, material suppliers, or the weather (Ahmed et al., 2003).

Semple et al. (1994) found that making provisions in a construction programme for events such as weather delays reduces disputes. Cost and time claims, especially those which are difficult to quantify, regularly result in disputes between the contractual parties. Weather contingencies are very seldom adequate, in terms of progress and cost, due to the use of varied methods used in the industry for weather contingency calculations. This results in adverse client-contractor relationships.

Caenell.N.J, C2005) Cited the appropriateness to look at the matters which actually cause delay during the works themselves. The Contractor/Subcontractors' responsibly for delays arise due to a failure on the part of the contractor to carry out the planning stages of the works properly, others will be due to an inability to perform in the manner agreed in the contract.This is in line with the authors believes that, most delays are caused by inefficiencies on the part of the Subcontractors.

Employer's responsibility or neutral events are caused through an act or omission of the employer or his team or by a matter which does not arise through the fault of the contractor. These are governed by the contract conditions.

A useful list according to Carnell N.J (2005) is listed in Clause 25.4 of JCT 98 and includes:

Force majeure,Exceptionally adverse weather conditions,Clause 22 perils(flood and the like),Civil commotion, strike or lock out,Compliance with architects' instructions,Non-receipt of essential information,Delays by nominated suppliers or sub-contractors, artisans and tradesmen,Government action,Restrictions on the availability of labour or materials,Delays by,statutory undertakers,Delays in giving access to the works

Ahmed et al, (2003) also mentioned the following as some possible causes of delays in construction project in nowadays: Possessive decision-making mechanism, highly bureaucratic organization, insufficient data collection and survey before design

Site topography is changed after design,Lack of coordination at design phase,Inadequate review,Improper inspection approach,Different attitude between the consultant and contractors/subcontractors,Financial difficulties,Inexperience personnel,Insufficient number of staffs,Deficiency in project coordination,time spent to find sub - contractors,company who is appropriate for each task,Often changing Sub -contracting company,Inadequate and old equipment,Lack of high-technology equipment and Harvest time.

Ahmed et al (2003) cited Ogunlana et all (2001) as having studied the delays in Thailand, as an example of developing economies.They concluded that the problems of the construction industry in developing economies could be nested in three layers:(1) Problem of shortages or inadequacies on industry infrastructure, mainly supply of resources, (2) Problems caused by clients and consultants and (3) Problems caused by incompetence of Contractors.

Assaf et al (1995) Listed 56 extensive causes of disputes over delay and identified them as : shortage of construction material, changes in types and specifications during construction, slow delivery of material, damage of material in storage, delay in the special manufacture of the building material, shortage of labour, labour skills, nationality of labourers, equipment failure, equipment shortage, unskilled operators, slow delivery of equipment, equipment productivity, financing by Contractor during construction, delays in Contractor's progress payment by Owner, cash problems during construction, design changes by Owner or his agent during construction, design errors made by designers, foundation conditions encountered in the field, mistake in soil investigation, water table conditions on site, geological problems on site, obtaining permits from municipality, obtaining permits for labourers, excessive bureaucracy in project Owner operation, building code used in the design of the project, preparation and approval of shop drawings, waiting for sample material approval, preparation of scheduling networks and revisions, lack of training personnel and management support, lack of database in estimating activity duration and resources, judgement of experience in estimating time and resources, project delivery systems used, hot weather effect on construction activities, insufficient available utilities on site, the relationship between different subcontractor's schedule, the conflict between the consultant and the Contractor, uncooperative Owners, slowness of the Owner decision making process, the joint ownership of the project, poor organization, insufficient communication between Owner and designer at the design phase, unavailability of professional construction management, inadequate early planning of the project, inspection and testing procedures used in the projects, errors committed during field, application of quality control based on foreign specification, controlling subcontractors by general Contractors in the execution of the works, the unavailability of financial incentives for Contractor to finish ahead of schedule, negotiations and obtaining of contracts, legal disputes between various parties, social and cultural factors, accidents during construction .

Ahmed et al. (2003) maintained that the iÑ•Ñ•ue of responsibility for delay Ñ-Ñ• related to whether the supplier Ñ-Ñ• awarded or Ñ-Ñ• liable for costs and additional time to complete the project. The categories of reÑ•ponÑ•ibilitieÑ• are:

proprietor (or agent) responsible - supplier will be granted а time extension and additional costs (indirect), where warranted;

supplier (or subcontractor) responsible - supplier will not be granted time or costs and may have to pay damages/penalties;

neither party (e.g. "act of God") responsible - supplier will receive additional time to complete the project but no costs will be granted and no damages/penalties aѕѕeѕѕed; and

both partiеѕ responsible - supplier will receive additional time to complete the project but no costs will be granted and any damages/penalties aѕѕeѕѕed.

Ying et al (2005) acknowledged five factors that influence time performance as; Long project scope identification, low speed of decision making, inadequate managerial skills during the planning phase, insuffiecient contractor completion and Lack of a strong organasational culture.

Okumbe et al (2008) researched on Construction Industry perpestive on causes and effects of delays in South Africa and highlighted causes of dealy in payment as consultants' inefficiency,lack of professionalism by the government employees,incompetence caused by insufficient staff,bureaucratic procedures experienced by government/client,late processing by project quantity surveyors ,late prepartion of payment certificate,claiming problems,late approval of work by architect and engineers,continous formulation of new policies by The Public Procurement and Asset Disposal Board (PPADB),poor budgeting by the client,late submission of cost reports by projects quantity surveyors,lack of understanding of contractual obligations and lack of funding,late project delivery,delays, in materials supply,labour stoppage as employess may go on strike if not paid on time,cash - flow problems faced by contractors,contractors claiming extension of time with costs,risk of poor workmanship,poor contract delivery and default in paying suppliesrs and employers.

In addition to causes of delays and who is responsible for them, there are other delay-related effects that may occur. High on the list is a decrease in the Contractor's efficiency caused by the delays. The delays may directly cause the inefficiency or be caused by the inefficiency.

Gorse (2004) Suggested that a well-evidenced claim, supported by an appropraite documentation, that properly establishes cause and effect and reasonably quantities the losses for each event will probably succeeds.

Frimpong et al (2003)Conducted a survey on the causes of delay and cost overruns in construction of groundwater projects in a developing countries;Ghana as a case study and the main conclusions of the survey were;monthly payments difficulties from agencies,matarial procurement,poor technical performance,escalation of matarial prices accordinging to their degree of influence and theses were considered as major factors.The other factors that emerged as not very important ,but of interest were,bad weather,unfavorable geological conditions.

Ahmed et al (2003) carried out a research which revealed the ranking of design related key delays.The most general design related caused delay was found to be taking place during the inspection phase followed by material/fabrication period, poor subcontract performance, material procurement and construction mistake as shown on figure 2.

Source: Ahmed et al. ;( 2003)

Figure 2: Ranking of design related key delays

Effects of Delay on Construction Cost

A brief review of text books and reports reveal that construction excellence has not only become an option but a necessity, if the UK construction industry is to survive economics dynamics and changing social needs. Considering the industry is one of the pillars of the domestic economy making approximately 10 percent of Gross Domestic Product (GDP) and employing considerable number of workers, it is important to note that construction excellence is critical for the UK economy and its future.

When a project is delayed, the owner, Contractor, or both may incur added costs. The determination of the amount of these costs is based on the results from the delay analysis and the determination of liability once the critical delays have been identified. (Trauner et al, 2009)

More importantly, the construction industry needs to improve itself in order to increase profitability, quality of deliverables and client needs before it can contribute to the economy.

There are many possible factors that can cause actual labour costs to exceed estimated costs such as engineering errors and omissions, excessive changes, delay and acceleration and weather. These factors may require contractors to work out of sequence, hire more manpower than planned, work scheduled overtime and utilize more costly methods of construction. (Borcherding et al, 2006).

Trauner et al (2009) listed the following as examples of how delays can lead to inefficiencies.

Shifts in construction sections-A delay to a project can shift work originally scheduled for one season into a different season.

Availability of resources-Delays can affect the availability or resources in the areas of manpower, subcontracts or equipment.

Manpower levels and distribution-Changes may be needed in terms of additions manpower, erratic staffing or variations in preferred/optimum gang size.

Lowe et al (2006) described disputes as being the source of possible time and cost overrun and possible adversarial relationships between the different parties. This is not welcome to either the Owner or the Contractor. Cost overrun might lead to the project being unsuccessful, unfeasible or invalidate any benefits. Although avoiding disputes has been suggested, this is not usually possible and where disputes cannot be avoided efforts should be made to manage and contain the consequences. It is to the benefit of both the Employer and the Subcontractor to manage disputes towards a resolution as this will safeguard the success of the project.

Cormican (1985) observed that the construction industry in UK is always at the top of the bankruptcy league and the most dangerous of all sectors. These unhealthy developments underpin the prevailing abandonment of projects and undermine the viability and sustainability of the construction industry.

Akinci et al (1998) categorised risk factors affecting cost performance into organisation specific, global and acts of God. The organisation specific risks are internal risks related to the organisation's resources and management including labour skills and availability, material delivery and quality, equipment reliability and availability, and managerial efficiency. Global risks are those that transcend the boundaries of the contracting organisation yet having large impact on it. These include estimating related, design related, level of competition, fraudulent practices, construction related, economic related and political related.