This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
In total, 54 questionnaires were sent and 43 responses were received, resulting in a response rate of 80%. From the received responses, 36 were completed questionnaires and seven respondents explained the reasons for non participation. A response rate of 100% was for those people who attended the workshop. This shows that the respondents who were aware of the survey objectives were more interested in taking part in the project. The sample composition aggregated according to actors' roles in the project is shown in Figure below
Figure 9: Sample composition
Analysis of gender distribution confirms that the Nigerian construction industry is traditionally male-dominated sector. 34 survey participants are men and two participants are women. The age distribution shows that 89% are over 41 years old. Most of the respondents (92%) have more than ten years experience in construction industry, and 64% have more than 20 years of experience. 44% of survey respondents have a university degree in construction, 53% finished upper secondary school, and only one person has vocational training only. 33% respondents participated in risk management or project management courses within their organizations or during the period of university studies. Despite a relatively high education level and large experience, the majority of the respondents (75%) estimate their knowledge of risk management as fair. The table below summarizes the risk management knowledge within each group of Role in the project
Client Contractor Consultant Total
Table 1: Knowledge of risk management
4.2 Risk management in the different phases of the project
Figure below shows that the majority of the respondents (32) participated in the production phase. For the contractors it is quite natural because they are always involved in the production phase and very seldom in the programme phase. Therefore contractors' participation increases as the project goes forward: one contractor participated in the programme phase and 16 in the production phase. It was quite unexpected that only seven clients participated in the programme phase compared to 14 clients in the production phase. This may be partially explained by the types of the projects. Often there is no programme phase in civil engineering projects. Therefore, most of the respondents from this group answered that they did not participate in that phase. All four consultants participated in the planning phase and two of them followed into the production phase.
Figure 10: Participation in the project phases
When the respondents were asked to estimate the importance of risk management in every phase of the construction project in the Figure 11 below, the estimates were similar in both the client and contractor groups. The production and planning phases were identified as the most important for the management of risks. Then the procurement and programme phases follow. Consultants' estimates differ from those of clients and contractors. Overall, we observe that they underestimate the importance of all phases compared with the other actors. However, the planning and production phases are identified by consultants as the most important. From this distribution we can conclude that many actors link risks to the production phase.
Figure 11: Importance of risk management in the different phases
Figure 12 below illustrates how many actors carried out risk management processes systematically in their projects. The most active group is contractors, where all respondents identified and assessed project risks and 94% performed risk response systematically. In the client group 86% identified risks, 71% assessed them and only 57% systematically responded to project risks. The explanation of low risk response rate may be that the clients let other actors in the value chain deal with identified risks. Consultants are the most passive actors when it comes to project risk management. Among consultants only 33% identified risks and responded systematically, and none assessed project risks.
Scale is between 1 and 4, where 1 is unimportant, 2 - not so important, 3 - fairly important, 4 - very importantw13.jpg
Figure 12: The risk management processes systematically performed in the project
4.2.1 Risk identification process
Risk identification (Figure 13) was mostly performed in the planning and production phases. The earlier risks are identified, the less is the probability that they occur. Despite this only seven respondents answered that risk identification was performed in the programme phase. Most of the clients indicate that risk identification was carried out in the planning phase, whereas contractors mostly identify risks in the production phase.
Figure 13: Risk identification in the different phases
In the programme phase 75% of the respondents answered that risks were identified by the client. In the planning phase 39% responded that risks identification was performed jointly by all actors and 25% responded it was performed by the client and the consultant. In the procurement phase the contractor plays the most important role in risk identification (52%). In the production phase risks were identified by the contractor (39%) or jointly by all actors (39%).
4.2.2 Risk assessment process
Figure 14 below shows that risk assessment has a similar tendency as the risk identification process: the majority of the respondents perform it in the production phase. However, the procurement phase is more important for the risk assessment process than for risk identification and risk response. This is because the risk premium is calculated in the procurement phase and therefore it is important to assess earlier identified risks.
Figure 14: Risk assessment in the different phases
Similarly to the risk identification process, the risk assessment in the programme phase is performed mostly by the client, in the planning phase jointly by all actors or by the client and consultant. However, the contractor's involvement in the risk assessment in the planning phase was higher than in the risk identification. The procurement and production phases do not differ much from the risk identification process: in both phases the contractor plays the most important role.
4.2.3 Risk response process
Risk response (Figure 15) is also associated with the production phase. Both the clients and the contractors mostly manage risks in this phase. This is due to the traditional approach in the construction industry: contractors do not put enough effort into preventing problems and solve them as they appear in the project.
Figure 15: Risk response in the different phases
In the programme phase, similarly to the risk identification and assessment processes, risk response is performed by the client. In the planning phase the client together with the consultant responded to the project risks. In the procurement phase risk response is performed mainly by the contractor. In the production phase the role of the contractor is large and the degree of joint risk management is high.
4.3 Collaboration in managing risk and actors' influence on the risk management process
In the questionnaire we define the term collaboration as joint work in risk management process. Almost all respondents had collaboration in risk management with other actors in the project: 11 clients, 13 contractors and three consultants. Seven respondents (three clients, three contractors and one consultant) answered that no collaboration in risk management existed in the project. Evaluations of collaboration (Table 2) vary from "fairly good" to "very good".
Role in project
Table 2: Evaluation of collaboration in risk management
The degrees of communication of known risks and opportunities between actors in the procurement phase are presented in Table 3 below. Overall evaluations are not high and vary between "little detailed" and "fairly detailed". The contractors answered that the client communicated known risks moderately (2.06). On the contrary, the clients state that their communication of known risks is higher (2.73).
Table 3: Degree of communication of known risks and opportunities between actors in the procurement phase
The figure below presents the respondents judgement of their own and other actors influence on risk management in the project. The results show that the contractor has the largest influence on risk management from the perspective of all actors. It is interesting that even the clients estimate the contractors' influence to be larger than their own. This can be linked to the Figure 9 above, where the actors connect risk management to the production phase. The influence of the consultant is surprisingly low despite the fact that the planning phase is considered to be very important by all actors.
Figure 16: Influence of the actors on the risk management process in the project
The existence of collaboration in risk identification, risk assessment and risk response is shown in Figure 17. Risk identification (RI) is the process where collaboration existed according to most of the actors: 82% of clients, 92% of contractors and 67% of consultants answered that they collaborated identifying the project's risks. During the risk assessment process (RA) both the clients and the contractors collaborated with each other, while only 33% of consultants answered that collaboration existed. The risk response process (RR) has a lower degree of collaboration according to the contractors: 62% of them had collaborated in taking care of risks.
Figure 17: Existence of collaboration in risk management processes
The existence of collaboration in the projects' different phases is presented in the figure 18 below. It shows that in the programme phase there was minimum collaboration in risk management. Only 14% of clients, the most active participants of the programme phase, answered that collaboration existed in the phase. In the planning phase 70% of clients, 75% of contractors and 100% of consultants collaborated in risk management. This result can be linked to the importance of risk management in that phase, which was ranked high by the actors. In the procurement phase the collaboration between the clients and the contractors in risk management existed in half of the projects. In the production phase the collaboration between the actors is the most intensive because many risks appear in this phase and should be eliminated to achieve a good final result.
Figure 18: Existence of collaboration in risk management in the project's phases
DISCUSSION AND CONCLUSION
This chapter finalizes the first part of the thesis by providing answers to the research questions, recommendations to the industry practitioners and directions for further research.
5.1 Answering the research questions
The overall aim of the research was to increase the understanding of risk management in the different procurement options in road Construction project in Nigeria. In order to achieve the aim, three research questions were formulated and treated during this study.
1. In what ways and to what extent are the actors involved in risk management through the different phases of the construction project?
2. What impact does the chosen procurement option have on risk management?
3. What are the main factors that contribute to more effective risk management in the construction projects?
In three sections below the answers to the research questions are presented and discussed.
The content of each research question forms titles of the sections. The discussion is based on the respondents' opinions and the researcher's reflections. Project actors' quotations are used to open the discussion and summarize the important observations within each research question.
5.1.1 Actors' involvement in risk management within the project life cycle
"Risk is a problem". (Client)
It is impossible to study risk management without understanding the perceptions of project actors about risk and the risk management process. Most of the respondents see risk as a negative event that can affect the project and cause problems. Only few persons mentioned opportunity as an opposite side of risk. This confirms the results of a study by Akintoye and McLeod (1997), which show negative perception of risk among industry practitioners. In response to the question of what types of risks the respondents dealt with in the project, the following risks were mentioned (listed in the decreasing order): financial, technical, work environmental, environmental, quality, time. This indicates that the risks connected to design and productions were subject to risk management. Only one respondent mentioned contractual risks and nobody noted organisational risks connected to the relationship between the project actors.
"I have only my experience. It would be good to get more theoretical knowledge". (Consultant)
Most of the respondents have what might be described as a fair understanding or knowledge of risk management. In spite of general awareness of the risk management process, implementing risk management systematically in the project is still limited in practice. Risk identification is the most frequently applied element with checklists and brainstorming as the main techniques. The interviews revealed that formal risk assessment is not performed in the projects. Experience, feelings and intuition are the most commonly used "tools" for risk assessment. Risk response is a less frequently used element because not every identified and assessed risk is subject to risk management. These findings are very similar to several surveys conducted among the construction industry practitioners in the UK, Australia, Nigeria and China (Akintoye and MacLeod 1997, Lyons and Skitmore 2004, Simu 2006, Tang et al. 2007, Uher and Toakley 1999).
"It happens very often that people involved in different phases do not see the overall picture". (Client)
The actors' participation in the project phases can be generally explained by the traditional separation of their roles in the construction process. The client requests, the consultant designs, and the contractor execute and deliver the project. Thus, all contractors participated in the production phases and all consultants participated in the design phase. The participation in the programme phase was very low and resulted in limited risk management activities in this phase. In contrast, the production phase was where most interest and activity were found. These results confirm the findings of two surveys (Lyons and Skitmore 2004, Uher and Toakley 1999), which show a higher degree of risk management in the design and production phases than in the programme phase. However, the majority of respondents feel that risk management should be more important in the early phases for several reasons. First, early risk identification makes the client aware of project risks and facilitates the choice of the optimal procurement option. Moreover, significant savings are possible in the early phases, since changes in the programme phase cost less money than in the production phase. Finally, the client simply cannot proceed with a project without taking into consideration all possible risks.
"Contractors have to deal with most risks; we are forced to be active in risk management". (Contractor)
Within three groups of actors, contractors were the most active in performing risk management. Almost all contractors documented potential project risks and preventive measures. Moreover, contractors had the largest influence on risk management from the perspective of all actors. This finding can be generally explained by risk management being carried out in the production phase. The influence of the consultants was surprisingly low despite the fact that the design phase was considered to be very important by all actors. The respondents were agreed that this is due to the current practice when risk management is not a part of consultants' assignment. The client's role in the project was argued to be very important. The client is seen as the one responsible for project organization and, therefore, for other actors' engagement in risk management. Contractors are able to manage many risks, but they need the dialogue with the client, not the situation when risks just appear in the production phase.
5.1.2 Impact of the procurement options on risk management
"Time and price determine the choice of the procurement option". (Client)
Before proceeding with the project a client has to choose the optimal procurement option. A number of factors influence this choice. The most important and often mentioned factors are time and price. Both clients and contractors said that the client often chooses the design build option when time constraints are very important. Thus, the contractor can start execution when construction drawings are not fully completed. A study by Toolanen (2004) showed similar results: clients choose DB more often when time constraints are critical. Price is another factor influencing the choice. A design-build-bid form gives the client the opportunity to choose the best possible tender for both design and construction. There is an indication that more competent clients choose DBB contracts partly because the cost may be lower, partly because they want to have a higher degree of influence on the project. A client's willingness to bear risk also influences the form of contract. The clients who want to minimize their own risks choose DB contracts due to the single point of responsibility for both design and construction. Some clients mentioned that the contractor's competence is a very important factor when procuring DB projects.
"There is no room for discussion in design-bid-build projects". (Contractor)
According to the general conditions of contract (AB), in design-bid-build projects the contractor receives rigorous instructions from the client and follows them. Thus, there is no dialogue or collaboration between the client and the contractor for the purpose of finding the optimal design solutions. As a result, the actors focus primarily on their own responsibilities and risk management in their own part of the project. On the other hand, with a DBB contract the client has more opportunities to influence the project, and some clients find this reason significant enough to sacrifice early involvement of the contractor. From the contractors' point of view, in DBB projects the quality of documents and drawings is often insufficient with many inaccuracies involved. This brings additional risks to the projects. However, collaboration in risk management between the actors was evaluated higher in DBB than in DB contracts. This can be the case when the client shifts responsibility to the contractor in DB form and does not participate actively in the project.
"The sooner we get the contractor's expertise in the project, the greater is a chance to avoid the problems in production". (Client)
From the perspective of dealing with risks, early involvement of the contractor in design build projects is considered to be the main advantage of this form. Moreover, contractors' risk management is more thorough in the DB contract due to assigned responsibilities for design. Cooperative work of the architects and contractors is argued to result in better technical solutions and help in avoiding many design and technical risks. On the other hand, consultants felt higher pressure in DB contracts in terms of cost; contractors are believed to be more cost aware than clients. Many actors are positive about more fruitful risk management in DB contracts. However, personal commitment of the clients is argued to be the most important factor for securing effective risk management. When the client is an active party, the DB form is claimed to create conditions conducive to better collaboration because the clients and contractors are forced to have a dialogue.
"I have never participated in partnering projects, but I believe that this form is very effective".
Great expectations in partnering arrangements were found among the project actors including those who have no experience of partnering. It was argued that partnering allows the actors to see the project as a whole and influence risk management throughout the construction process. The fact that the contractor is involved in the programme phase makes risk management more effective and easier in terms of better collaboration. The consultant has an opportunity to assess technical solutions together with the client and the contractor, which results in better solutions and fewer risks involved in the production phase. Moreover, the actors deal with indistinctness before signing the contract. However, a successful partnering project requires greater professionalism and open attitudes from all partners. An interesting observation of the contractors is that in partnering projects the actors lose business opportunities and winner feeling in a short-term perspective. However, in a long-term perspective the actors have more stable results of construction activities, neither big profits, nor big losses.
To summarize, different procurement options provide different opportunities for open dialogue and can, therefore, influence project risk management.
5.1.3 Factors that contribute to more effective risk management
"Deviations from the general conditions of contract can be very expensive for us". (Contractor)
Construction contracts form the behaviour of the project actors and, therefore, have a significant impact on the successful completion of the project. The general conditions of contract (AB and ABT) are widely used in the Swedish construction projects and assign responsibilities and liabilities to each contracting party. Most of the respondents were agreed that AB and ABT are well-developed documents that facilitate clear risk allocation between the project's actors. However, the clients often deviate from AB and ABT trying to transfer more risks to the contractor. Deviations make the contract more indistinct for the contractor and may result in conflicts and disputes.
"We have to minimize project risks, every actor will then benefit from it". (Contractor)
A conscious risk allocation is not a single condition for effective risk management. It is important to prevent risks in the project and minimize their consequences. When considering the effect that risk management has on the project's goals in terms of quality and cost, it would be reasonable to expect that it was an open process across all phases of the project. It was already mentioned above that early risk management results in fewer problems during the project execution phase. Open discussions of possible risks in the early phases as well as collaborative management of risks throughout the project life cycle are noted to be important drivers of effective risk management. However, it was found that communication of known risks in the procurement phase does not work. The reason can be that the actors do not want to raise problems that can influence the price. Many respondents were agreed that in current procurement practice the low bid price when signing the contract is more important than a thorough analysis of the potential risks. However, to keep quiet about the known risk to get a lower price is a dangerous solution. Detailed communication of the known risks in early phases means that these risks and eventual high costs can be avoided, and both the client and the contractor would benefit.
"All identified risks are manageable, the problem is unforeseen risks". (Contractor)
It is impossible to identify all potential risks in the project, as some unforeseen risks always appear during the project implementation. The strategy of avoiding risks as far as possible and letting someone else in the value chain manages them is not conducive to safeguarding project objectives. Joint risk management is argued to be the best option for managing unforeseen risks. In practice, the actors often have their own management systems and do not use a common database for risk management documents. When describing their work on project risks, the actors often say 'contractor's risk management" and 'client's risk management'. 'Joint risk management' where all actors participate and perform identification, assessment and response together is a weakness in the current practice. All respondents acknowledged the importance of open dialogue and collaboration to achieve effective risk management. The factors that create the opportunities for open dialogue are summarized below.
Every actor's involvement in dialogue;
Effective communication and information exchange;
Mutual respect for the roles and competence of those involved;
Understanding of benefits of long-terms relationships.
Other factors that were mentioned by the project actors were related to the complexity of the project, management systems and payment mechanisms. It was argued that more complex projects require more attention to the risk management process. As a matter of practice, more advanced tools and better support from risk management consultants are available in large projects. In smaller projects, risk management is seen as an additional time consuming task (Simu 2006). Systems and procedures that are easy to handle are important drivers of more effective risk management. Quite low use of quality management systems was noted in the projects. The actors argued that the complexity of the systems makes them difficult to apply in practice. When the management system becomes a paper product, it does not benefit the project actors. Fair distribution of opportunities through incentive agreements (contracts) was recognized as an efficient instrument for risk management. Incentive agreements stimulate better collaboration for finding the best possible solutions, and, therefore, lead to cost decrease.
5.2 Recommendations to the practitioners
The findings of this research are expected to contribute to a more effective risk management process and, therefore, benefit construction projects' actors. To achieve this objective, this study proposes a set of recommendations to the industry practitioners.
As many actors identified the lack of theoretical knowledge, it would be reasonable to suggest advanced vocational training in risk management for companies' personnel. The training is expected to increase knowledge of the subject and understanding of the importance of risk management for safeguarding project objectives. This recommendation is directed to the companies' management because the administration is responsible for staff development. The lack of further training is especially noted in clients' organizations and among consultants. Construction companies organize in-service courses in risk management more often, but further development is required in order to increase the level of awareness of project risk management.
Regarding actors' involvement in the project phases, the author recommends to ensure all actors' participation throughout the project life cycle. This involvement facilitates better understanding of project goals and better collaboration through intensive information and knowledge exchange between the project actors. Different procurement options imply different degrees of the actors' involvement and different opportunities for collaboration in the project. From the perspective of dealing with risks, the design-bid-build contracts give no space for discussion about technical solutions between the client and the contractor. On the other hand, the client's responsibility for design forces the actors to have a dialogue when problems appear during the project implementation. The design-build contracts offer early involvement of the contractor, but demand an active engagement of the client for ensuring the quality of the final product. There is an indication that the newer organisational forms like partnering, which create opportunities for the actors' involvement in all phases of a construction project can result in a better project performance.
A client is a party that owns the project, and should therefore be an active part of the risk management process and demand active participation from the other actors. In current practice, very limited interest and activity are found in the programme phase. This aspect must be addressed by the project actors as the early phases are commonly recognized to be very important for effective project risk management. Thorough attention to the project risks must be paid in the programme phases in order to safeguard projects' objectives. The architects and design managers should be involved more in risk management because design is a very significant risk source in a construction project. Currently, risk management is not a part of consultants' assignment in traditional contracts. Incentive contracts, where the consultant is involved in profit sharing, create opportunities for consultants' engagement in risk management. Moreover, it is reasonable to expect that consultants have to participate in risk management in the production phase in case there is a need for change or design risks occur.
The general conditions of contract (AB and ABT) formalize risk allocation between the project actors. The deviations from AB and ABT make risk allocation more indistinct and may lead to disputes. Thus, deviations are not recommended if the actors want to keep conscious risk sharing and create a trustful relationship in the project. The procurement phase should play a more important role in risk management. It is of crucial importance to communicate known risks before signing the contract. In this case both the client and the contractor are aware of potential risks and are therefore able to prevent them and potential higher costs. Moreover, open communication of known risks may result in a lower contingency fund, and, in turn, in lower total cost. It is important to note that this recommendation requires a change of current practice when the low contract sum plays the most important role in the tender.
Considering the effects that risk management has on a project's goals in the form of quality and cost, it should be an open and conscious process through all phases of the project. The aim of the paper was to examine the ways and extent to which the actors are involved in risk management through the different phases of the project. For this purpose a questionnaire survey was conducted of clients, contractors and consultants. The overall conclusion is that, according to project actors, risk management is strongly linked to the production phase. Most of risk processes are performed in that phase and contractors tend to be the most active group with a large influence on the risk management process. These findings confirm some results of previously conducted surveys. Despite of the recognized importance of the programme phase, this study showed that this phase does not play an important role in the risk management process.
To conclude, if risks are to be properly managed, it is self-evident that the risk management process must be present, transparent and activated in the whole project life cycle. There are many factors that influence project risk management. This research explored risk management on the example of a road construction projects and contributed to better understanding of risk management in the different procurement options. The main findings, discussed in Section 5.1, are summarized in the model shown in Figure 16. When exploring the factors that affect project risk management, both drivers and obstacles have been found and included in the model. The left part, obstacles, shows weaknesses in current risk management practice. The right part of the model, drivers, presents the success factors that contribute to more effective management of risks in construction projects.