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International Journal of Project Management 26 (2008) 431438

www.elsevier.com/locate/ijproman

Risk assessment and allocation in the UAE construction industry

Sameh Monir El-Sayegh

Civil Engineering Department, American University of Sharjah, P.O. Box 26666, Sharjah, United Arab Emirates
Received 24 January 2007; received in revised form 11 July 2007; accepted 12 July 2007

Abstract
This study identies and assesses the signicant risks in the UAE construction industry and addresses their proper allocation. Data
were collected through a questionnaire distributed to construction experts. The study reveals that economic risks such as ination and
sudden changes in prices, shortage in material and labor supply are signicant. Other signicant risks include owner risks such as unrealistic construction schedule, improper intervention and changes in design. Political, social and cultural risks are found to be insignicant. Local and international experts are in agreement as to the ranking of construction risks in the UAE. More risks are allocated to
contractors or shared between contractors and owners with only two risks allocated directly to the owners.
2007 Elsevier Ltd and IPMA. All rights reserved.
Keywords: Risk management; Risk assessment; International construction; UAE construction industry

1. Introduction
The construction business, like any other business, is
risky. However, construction projects are perceived to have
more inherent risks due to the involvement of many
contracting parties such as owners, designers, contractors,
subcontractors, suppliers, etc. Construction projects are
unique and built only once. They also involve a temporary
project team that is assembled from dierent companies,
countries, cultures, etc. Moreover, the size and complexity
of construction projects are increasing which adds to the
risks. This is in addition to the economic, political, social
and cultural conditions where the project is to be undertaken. Project risk can be dened as an uncertain event
or condition that, if it occurs, has a positive or negative
eect on at least one project objective, such as time, cost,
scope, or quality [1]. Risks are related to rewards. Some
risks should be accepted as long as they are in line with
the rewards. Risks are threats to project success [2]. Failure
to adequately deal with risks has been shown to cause cost
and time overruns in construction projects [3,4]. Trying to
*

Tel.: +971 6 5152941; fax: +971 6 5152979.

E-mail address: selsayegh@aus.edu

0263-7863/$30.00 2007 Elsevier Ltd and IPMA. All rights reserved.

doi:10.1016/j.ijproman.2007.07.004

eliminate all risks in construction projects is impossible.

Thus, there is a need for a formal risk management process
to manage all types of risks. Risk management is a formal
and orderly process of systematically identifying, analyzing
and responding to risks throughout the lifecycle of a
project to obtain the optimum degree of risk elimination,
mitigation and/or control [5]. To be successful, the organization should be committed to addressing the management
of risk proactively and consistently throughout the project
[1].
One of the major steps in project risk management is to
identify and assess the potential risks in the project. Every
project contains some degree of risk; and yet, most project
managers are ill prepared when it comes to identifying or
adequately addressing potential risks [6]. Trying to identify
all the risks is time-consuming and counter productive.
Attempts to consider every risk are doomed to failure [3].
The trick is to identify the most critical risks and control
them [7]. Thus it is important to determine the most significant risks in the construction industry. There are a number
of researches on construction risks in several countries such
as Indonesia [3], USA [8], Kuwait [9], Hong Kong [10],
China [11], India [12], and Taiwan [13]. However, no such
study had been performed in the United Arab Emirates

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S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

(UAE). Construction risks dier among dierent countries

as the economic, political, social and cultural conditions
are dierent. The management of risk is greatly inuenced
by the uniqueness of the construction industry in a specic
country [3].
The UAE construction industry is unique. The UAE is
witnessing an unprecedented boom in construction activity
at all levels with the governments goal of diversifying its
income away from oil dependence to tourism, commercial
and industrial activities. There are a lot of new mega projects that are underway and others in the pipeline. The
number, size and complexity of new construction projects
has created an extra burden on construction participants
and resulted in lots of risks. Therefore, it is important to
identify and assess the signicant risks in the UAE construction industry in order to help local companies and
international companies who do or plan to work in the
UAE to pay attention to these signicant risks. Risk identication and allocation are inuential factors in risk handling decisions [13].
The main objective of this paper is to identify and assess
the signicant risks in the UAE construction industry
based on their risk rating (impact and probability). The
paper also compares the perspectives of local and international companies working in the UAE. Moreover, this
research addresses the proper allocation of risks to the
appropriate contracting party.
2. Research methodology
The rst step was to identify risks in construction projects. This was done primarily through literature review.
A comprehensive list of 42 risks was developed based
on previous studies in Indonesia [3], USA [8], Kuwait
[9], Hong Kong [10], and China [11]. A questionnaire
was then structured to get the perceptions of construction
experts in the UAE. The questionnaire consisted of two
sections. The rst section was intended to gather information about the respondents prole. The second section
was intended to get the perception on the rating of each
risk. Each risk had three questions. The rst question
relates to the probability of the risk event occurring on
construction projects. The respondents were asked to
choose between very low, low, moderate, high and very
high. The second question refers to the impact on project
objectives once the risk event occurs. The third question
relates to the proper allocation of the risk to the owner,
contractor or shared.
The questionnaire survey forms were distributed to construction professionals associated with the UAE construction industry. The completed responses were collected
either personally, or received through regular postal mails,
e-mails, and faxes. Out of 200 distributed questionnaires,
70 were returned (or collected). Sixty ve out of 70 questionnaires were complete and used in the analysis. Table
1 summarizes the respondents prole. Eighty percent of
the respondents had more than 10 years of experience.

Table 1
Respondents prole
Category

Respondents
Number

Years of experience
>20 years
1020 years
510 years
<5 years

33
19
5
8

50.77
29.23
07.69
12.31

Role
Owner
Designer
Contractor
Construction Manager

13
10
30
12

20.00
15.38
46.15
18.46

Position
Executives
Project Managers
Department Heads
Architect/Engineers

17
23
12
13

26.15
35.38
18.46
20.00

Average project sizea

<50 (Million AED)
50100 (Million AED)
100500 (Million AED)
>500 (Million AED)

6
10
31
18

09.23
15.38
47.69
27.69

US$ = 3.67 AED (2006 currency).

Forty three respondents work in local companies while

22 work in international companies.
The relative importance index (RII) for each risk was
calculated using Eq. (1). An RII was calculated for the
probability, impact and rating. The risk rating is calculated
by multiplying the probability and impact for each
risk. The risk rating can be used to prioritize risks for
further quantitative assessment or response planning.
The specic combinations of probability and impact lead
to a risk being rated as high, moderate, or low
importance [1]
P5
i1 W i X i
Relative importance index; RII P
1
5
i1 X i
where
Wi
Xi
i

weight assigned to ith response; Wi = 1, 2, 3, 4 and

5 for i = 1, 2, 3, 4 and 5, respectively
frequency of the ith response
response category index = 1, 2, 3, 4 and 5 for very
low, low, moderate, high and very high, respectively

To study the strength of relationship between two sets of

ranking, the Spearman rank correlation coecient was
determined using Eq. (2) [14]. The Spearman rank correlation coecient has been widely used by many researchers
for the statistical analysis, particularly when the rank is
used for the data analysis. The spearmans rank correlation
coecient is a nonparametric measure of correlation
between two series using the ranks rather than the actual
values [14]

S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

P
6 d2
rs 1  3
N  N

433

The higher the value of rs (approaching 1) indicates a

strong association between the two sets of ranking [15].

under the control of the project management team. External risks are those risks that are beyond the control of the
project management team. Other researchers divided projects risks into internal and external [11,13,16]. Aleshin
[16] stated that internal risks are initiated inside the project while external risks originate due to the project environment. Internal risks are then divided according to
the party who might be the originator of risk events such
as owner, designer, contractor, etc. External risks are those
initiated at the macro level [16].

3. Risk identication

3.1. Internal risks

Various risks were identied in the rst stage. This was

accomplished mainly through literature review. The Risk
Breakdown Structure (RBS) is then developed to organize
the dierent categories of risks (Fig. 1). To improve the risk
identication process, risks can be categorized according to
the source of risks. The Risk Breakdown Structure (RBS)
shows the risk groups, risk categories and risk events at
the lowest level. Project risks are divided into two groups,
according to their source, into internal and external. Internal risks are those that are project related and usually fall

The owners category includes owners delayed payments to contractors. Payments from owners are the main
source of revenue for construction contractors. When owners delay payments to contractors, a nancial hardship is
placed on the contractors. Owners often impose tight construction schedules that might be dicult and impractical
to achieve. Owners often improperly intervene in the construction phase. Owners may require lots of design
changes. This may result from poor scope of work denition or simply owners might change their mind during

where
rs
d
N

Spearman rank correlation coecient

dierence in ranking
number of variables (risks) = 42

Project Risks

Internal Risks

Owners

Designers

External Risks

Contractors

SubContractors

Suppliers

Social &
Cultural

Political

Economic

Natural

Delayed
Payments to
Contractors

Defective
Design

Construction
Accidents

Poor
Performance

Material
Quality
Problems

War Threats

Criminal Acts

Inflation

Unexpected
Inclement
Weather

Unreasonably
Imposed Tight
Schedule

Deficiency in
Drawings

Poor Quality

Breach of
Contract

Delay of
Material
Supply

Labor Strikes

Substance
Abuse

Currency
Fluctuation

Unforeseen
Site Conditions

Changes in
Laws

Conflicts due
to Differences
in Culture

Shortage in
Material
Availability

Improper
Intervention

Changes in
Design

Low
Productivity

Change of
Design

Documents not
Technical
Issued on
Problems
Time

Lack of Scope
Definition

Contractors
Incompetence

Delays in
Obtaining Site
Access

Lack or
Departure of
Qualified Staff

Corruption &
Bribes

Shortage in
Manpower
Availability

Delays in
Approvals

Shortage in
Equipment
Availability

Others

Delays in
resolving
contractual
issues
Delays in
Resolving
Litigation
Unfairness in
Tendering

Local
Protectionism
Difficulty in
Claiming
Insurance

Breach of
Contract
Sudden
Bankruptcy

Fig. 1. Risk Breakdown Structure.

434

S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

the construction phase. Excessive changes by owners can

be very dangerous and might jeopardize project objectives.
Owners tend to rush projects for obvious time and money
reasons. This results in poor denition of the scope of work
which may aect project objectives. In some cases, owners
rush into awarding contracts without securing the right of
way to the contractors. This results in delays. Also, owners
do not solve disputes in a timely manner which results in
litigation. Owners may suddenly bankrupt. Although this
is not a major risk, there are cases where owners cancel
projects or breach their contracts due to bankruptcy.
As for the designers category, there is a risk of defective
design. The design might not be complete, may include lots
of mistakes or may be not constructable. Designers maybe
rushed to complete the design phase by owners to start
construction early and achieve the time to market objectives. Another risk is the deciencies in drawings and specications. This risk relates to the quality of drawings and
specications produced by the design professional.
Changes made by the design professional during the construction phase are another risk. This is done by designers
to improve their design or x any deciency. There is also a
risk of delays in issuing construction drawings or other
documents that contractors need for the construction
activities.
As for the contractors category, there is a risk of accidents during construction which may have negative impact
on all other project objectives such as cost overruns, delays,
loss of productivity and loss of morale. Other risks relate to
construction quality and productivity of labor and equipment. Unpredicted technical problems in construction are
another risk. This might occur because of the uniqueness
of the project or the unfamiliarity of the contractor with
this type of projects. Another risk relates to the contractors
competence in achieving project objectives and the degree
to which the contractor is employing construction management techniques for cost, time and quality control. Lack or
departure of qualied sta is another risk. Qualied sta is
hard to hire and retain. Use of subcontractors in the UAE
construction industry is increasing. Subcontracting oers
many advantages to the contractor and to the project as
a whole. However, subcontracting is risky. Subcontractor
poor performance refers to the risk of low quality, delayed
completion, unsafe practice by subcontractors. Another
risk relates to subcontractor breach of contract (including
sudden bankruptcy) and disputes with the general contractor. Material suppliers risks include delay of material supply by suppliers and quality problems with supplier
material.
3.2. External risks
The political risk category includes war threats and
political instability. Labor strikes and disputes can disrupt
construction activity and may aect project objectives negatively. Another risk includes changes in law and regulations by the UAE government that aects construction

activity. An example in recent years was passing a law that

stops construction work during the summer (July and
August) between 1 and 3 pm. This change has aected
ongoing projects. Another risk includes corruption and
bribes in the supervisory units for construction projects.
There is also a risk of delays in obtaining permits and
approvals from the concerned government entities. The
social and cultural risk category includes criminal acts, substance abuse and conicts due to dierence in culture and
traditions.
The economic risk category includes ination and sudden changes in prices. This relates to the risk of price
increases during the construction phase. Another risk
relates to the risk of uctuating exchange rates that aect
the protability of the project. Shortage in supply and
availability of resources such as material labor and equipment are also economic risks. The natural risk category
includes unexpected inclement weather and unforeseen site
conditions. Other risks include the risk of delays in resolving contractual issues during the construction phase including change order negotiations. The source of this risk
involves many participants. Also, there is the risk of delays
in resolving contractual issues after the completion of the
construction phase. Other risks include unfairness in tendering during the pre-construction phase and local protectionism which includes favoring local companies. The last
risk relates to the diculty in claiming insurance compensation from insurance companies.
4. Risk signicance
Based on the survey results, the relative importance
index (RII) was calculated for each risk based on probability, impact and rating. These risks were then ranked
according to their RII. The results are presented in Table
2. Table 3 presents the top 10 risks in the UAE construction industry based on risk rating. According to risk rating
values, the most signicant risk is ination and sudden
changes in prices. The RII is 15.48 (scales 125). Ination
is a key risk in the UAE. The latest gures showed ination
as high as 10% for 2006 [17] while other sources report an
estimated 13.8% in 2006 [18]. Also, most construction professionals did not forget what happened in 2005 when
material prices sky-rocketed causing bankruptcy for some
contractors and delays in major projects. Ination was
ranked high (2nd) in Indonesia [3] while low (18th) in
Kuwait [9] and China (30th) [11]. The second risk is that
owners often impose tight construction schedule that might
be dicult and impractical to achieve. This might be
caused by the importance of time to market but often is
caused by political reasons. This risk was ranked 6th in
China [11]. The third risk is subcontractors poor performance and management (RII = 13.2). This is especially
true for local companies who have a number of small subcontractors that can not cope with the size and complexity
of new projects in the UAE. This risk was ranked 9th in
Indonesia [3], 5th in Kuwait [9] and 9th in China [11].

S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

435

Table 2
Overall risk signicance
Risk

Description

Probability
RII

Rank

RII

Rank

Value

Rank

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42

Owners delayed payment to contractors

Owners unreasonably imposed tight schedule
Owners improper intervention
Change of design required by owners
Lack of scope of work denition by owner
Delays in obtaining site access and right of way
Owners breach of contracts and disputes
Owners sudden bankruptcy
Defective design
Deciencies in drawings and specications
Frequent changes of design by designers
Drawings and documents are not issued on time
Accidents during construction
Poor quality of work
Low productivity of labor and equipment
Unpredicted technical problems in construction
Contractors incompetence
Lack or departure of qualied sta
Subcontractors poor performance
Subcontractors breach of contracts and disputes
Delay of material supply by suppliers
Quality problems of supplier material
War threats and political instability
Labor strikes and disputes
Changes in laws and regulations
Corruption and bribes
Delays in approvals
Criminal acts
Substance abuse
Conicts due to dierences in culture
Ination and sudden changes in prices
Currency uctuation
Shortage in material supply and availability
Shortage in manpower supply and availability
Shortage in equipment availability
Unexpected inclement weather
Unforeseen site conditions
Delays in resolving contractual issues
Delays in resolving disputes
Unfairness in tendering
Local protectionism
Diculty in claiming insurance compensation

3.05
3.52
3.28
3.29
3.00
2.57
2.55
1.72
2.32
2.94
2.94
2.83
2.54
2.62
2.74
2.55
3.06
3.17
3.32
2.95
3.23
2.77
1.62
2.06
2.28
2.08
3.20
1.52
1.75
2.20
3.62
2.25
3.08
3.14
2.77
1.77
2.40
3.17
2.80
2.68
2.58
2.65

13
2
5
4
14
27
28
40
32
16
17
18
30
25
22
29
12
8
3
15
6
20
41
37
33
36
7
42
39
35
1
34
11
10
21
38
31
9
19
23
26
24

3.58
3.60
3.65
3.71
3.57
3.25
3.46
3.97
3.37
3.34
3.43
3.38
2.80
3.20
3.45
3.25
3.58
3.75
3.85
3.55
3.86
3.38
3.60
3.37
3.02
2.83
3.74
2.43
2.38
2.55
4.15
3.18
3.60
3.80
3.52
2.80
3.18
3.40
3.20
3.31
2.85
3.11

13
10
9
8
15
28
18
2
24
26
20
22
38
30
19
29
14
6
4
16
3
23
11
25
35
37
7
41
42
40
1
32
12
5
17
39
33
21
31
27
36
34

11.18
13.32
12.38
12.63
11.38
8.95
9.14
7.05
8.29
10.48
10.31
10.12
7.54
8.97
9.97
8.85
11.31
12.15
13.2
10.74
12.8
9.78
6
7.42
7.37
6.51
12.32
4.02
4.52
6.34
15.48
7.78
11.83
12.37
10.17
5.32
8.15
11.38
9.55
9.2
7.83
8.71

14
2
6
5
11
26
24
36
29
16
17
19
33
25
20
27
13
9
3
15
4
21
39
34
35
37
8
42
41
38
1
32
10
7
18
40
30
12
22
23
31
28

Table 3
Ten most signicant risks in the UAE construction industry
Risk

Rank

RII

Ination and sudden changes in prices

Owners unreasonably imposed tight schedule
Subcontractors poor performance and management
Delay of material supply by suppliers
Change of design required by owners
Owners improper intervention during construction
Shortage in manpower supply and availability
Delays in approvals
Lack or departure of qualied sta
Shortage in material supply and availability

1
2
3
4
5
6
7
8
9
10

15.48
13.32
13.20
12.80
12.63
12.38
12.37
12.32
12.15
11.83

Delays in material supply is also an important risk

(RII = 12.8). Again this risk is caused by the large number
and size of new projects in the UAE that impose con-

Impact

Rating

straints on material suppliers. Another reason is that most

material are imported and require a long lead time. This
was ranked low (28th) in China [11]. Change of design
required by owners is ranked 5th (RII = 12.63). This is a
common risk as owners rush into projects without the necessary planning and design time and result in changes in
design as construction progresses. Also, owners are blamed
for the 6th risk (RII = 12.37) that is improper intervention
during construction. This risk was ranked high (8th) in
China [11].
Shortage in manpower supply and availability is an economic risk that is ranked 7th (RII = 12.37). There is an
increased demand on manpower in the UAE as project
numbers, size and complexity increase. To add to this
problem, the government imposes strict quotas for importing manpower from specic nations. Delays in approvals is

436

S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

a political risk that is ranked 8th (RII = 12.32) in the UAE.

This is related to obtaining governmental approvals and
building permits. This delay is not because the government
bodies are not ecient but primarily due to the large number and sizes of ongoing projects. This was ranked 10th in
China [11]. The 9th risk is contractor related. Lack or
departure of qualied sta is a major problem especially
in the elds of construction and project management.
Many talented sta keeps moving from one company to
another as competition oers excellent opportunity for
experienced sta. The 10th risk is the shortage in material
supply and availability which is an economic risk that is
caused primarily because of the large demand.
It is important to note that the social and cultural risks
are of low signicance. Criminal acts (RII = 4.02) is the
lowest ranked risk while substance abuse is ranked 41st
(RII = 4.52) and conicts due to dierences in culture
and traditions is ranked 38th (RII = 6.34). Culture and
traditions play an important role in the Middle East and
the UAE is not dierent. Foreign nationals have to understand these cultural dierences to be able to live and work
in the UAE. However, the UAE is a modern country that
has the majority of its population as foreigners. This minimizes the signicance of this risk. Political risks such as
war threats and political instability, corruption and bribes,
changes in laws and regulations, and labor strikes and disputes are also considered of low signicance. The only
political risk that is signicant is the delays in approvals.
To properly evaluate construction risks, one must consider both the probability of risk occurrence and the impact
on project objectives once the risk event occurs. Some
authors contend that multiplying the probability and
impact values might be misleading [3,19]. This is achieved
best by plotting the risk probability impact matrix
(Fig. 2). In the matrix, the x-axis represents the impact
value while the y-axis represents the probability value.
Both scales are 15 (one being very low to 5 being very
high). The matrix shows 12 of the risks to be high (Probability > 3 and Impact > 3). It also shows that the majority
of the risks are moderate (Probability 23 and Impact > 3).

There are ve risks that have probability of less than 2 and

four risks with impact less than 3. These risks are considered low.
5. Comparison of local and international companies
The UAE construction market is open to local and
international companies. Many of the mega size projects
are handled by international companies with local partners. The perceptions of experts working in international
companies are compared to that of local companies. Table
4 presents the top ten risks according to experts working in
international companies in the UAE. Table 5 presents the
top ten risks according to experts working in local companies in the UAE.
Ination is ranked 1st in both lists. Owners unreasonably imposed tight schedule is ranked 2nd and 4th by international and local companies respectively. Change of
design by owners is ranked much higher by international
companies (3rd rank) than local companies (8th rank).
Shortage in manpower supply and availability is ranked
4th by international companies while ranked 11th by local
companies. This might be due to the ease of importing
labor by local companies relative to international companies who have to meet certain requirements.
Subcontractors poor performance and management is
ranked higher by local companies (3rd) than international
(5th). Lack of scope of work denition is ranked 6th by
international companies while ranked 14th by local compa-

Table 4
Ten most signicant risks according to international companies
Risk

Rank

RII

Ination and sudden changes in prices

Owners unreasonably imposed tight schedule
Change of design required by owners
Shortage in manpower supply and availability
Subcontractors poor performance and management
Lack of scope of work denition by owner
Frequent changes of design by designers
Owners delayed payment to contractors
Lack or departure of qualied sta
Delays in resolving contractual issues

1
2
3
4
5
6
7
8
9
10

16.14
14.82
14.32
14.32
13.82
13.36
12.73
12.64
12.64
12.64

Risk

Rank

RII

Ination and sudden changes in prices

Delay of material supply by suppliers
Subcontractors poor performance and management
Owners unreasonably imposed tight schedule
Owners improper intervention during construction
Delays in approvals
Lack or departure of qualied sta
Change of design required by owners
Shortage in material supply and availability
Contractors incompetence

1
2
3
4
5
6
7
8
9
10

15.14
12.91
12.88
12.56
12.30
12.21
11.91
11.77
11.63
11.42

Probability - Impact Matrix

5.00

Table 5
Ten most signicant risks according to local companies

Probability

4.00

3.00

2.00

1.00
1.00

2.00

3.00

4.00

Impact
Fig. 2. Probability-impact matrix.

5.00

S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

nies. Delay of material supply by suppliers is ranked 2nd by

local companies versus 11th for international companies.
Although the top ten lists share only ve risks, the spearman rank correlation coecient (for all 42 risks) is calculated to be 0.9023 (using Eq. (2)) which indicates strong
agreement between local and international companies on
the importance and ranking of risks.
6. Risk allocation
Risk allocation is an important issue. It refers to the
proper allocation of risks to the contracting party, mainly
the owner or the contractor. Sometimes, risks cannot be
handled by one party alone so the two share that risk. Generally, risks should be allocated to the party that can best
handle it. However, due to an asymmetry in commercial
power, there are no rules regarding risk allocation in con-

437

struction contracts as owners can place any risks to the

contractor. Contractors usually respond to these risks by
increasing their contingency and markup which ultimately
increase the contract price to the owner. Sixty percent of
the questionnaire respondents indicated that risks are not
allocated properly in the UAE construction industry. Table
6 shows the survey results as to the allocation of each risk
and the recommended allocation. The recommended allocation is for the party that gets more than 50% of the votes
for each risk. If a risk did not have a party with more than
50% of the votes, it is labeled undecided. It is surprising
to note that only two risks are allocated to the owners; the
majority of the risks are allocated to contractors or shared
and most of the owner/designer risks were undecided. This
is probably due to the culture and widespread use of traditional contracts that places most of the risk on the
contractor.

Table 6
Risk allocation
Risk

Description

Owner (%)

Contractor (%)

Shared (%)

Allocation

13
15
18
16
19
20
35
17
21
14
34
24
22
33
37
8
4
23
28
39
29
25
32
26
38
41
36
31
9
42
30
5
10
2
40
12
11
6
7
3
27
1

Accidents during construction

Low productivity of labor and equipment
Lack or departure of qualied sta
Unpredicted technical problems in construction
Subcontractors poor performance
Subcontractors breach of contracts and disputes
Shortage in equipment availability
Contractors incompetence
Delay of material supply by suppliers
Poor quality of work
Shortage in manpower supply and availability
Labor strikes and disputes
Quality problems of supplier material
Shortage in material supply and availability
Unforeseen site conditions
Owners sudden bankruptcy
Change of design required by owners
War threats and political instability
Criminal acts
Delays in resolving disputes
Substance abuse
Changes in laws and regulations
Currency uctuation
Corruption and bribes
Delays in resolving contractual issues
Local protectionism
Unexpected inclement weather
Ination and sudden changes in prices
Defective design
Diculty in claiming insurance compensation
Conicts due to dierences in culture
Lack of scope of work denition by owner
Deciencies in drawings and specications
Owners unreasonably imposed tight schedule
Unfairness in tendering
Drawings and documents are not issued on time
Frequent changes of design by designers
Delays in obtaining site access and right of way
Owners breach of contracts and disputes
Owners improper intervention
Delays in approvals
Owners delayed payment to contractors

3.08
0.00
1.54
1.54
1.54
3.08
0.00
6.15
0.00
4.62
1.54
4.62
1.54
0.00
3.08
53.85
50.77
10.77
1.54
6.15
1.54
4.62
3.08
4.62
4.62
15.38
1.54
6.15
26.15
1.54
3.08
30.77
16.92
20.00
30.77
32.31
35.38
24.62
27.69
29.23
30.91
32.31

87.69
83.08
81.54
78.46
75.38
75.38
75.38
66.15
66.15
64.62
64.62
63.08
60.00
52.31
50.77
18.46
10.77
7.69
26.15
24.62
32.31
29.23
32.31
32.31
33.85
23.08
41.54
38.46
18.46
46.15
44.62
18.46
33.85
32.31
21.54
23.08
21.54
33.85
30.77
29.23
30.91
36.92

9.23
16.92
16.92
20.00
23.08
21.54
24.62
27.69
33.85
30.77
33.85
32.31
38.46
47.69
46.15
27.69
38.46
81.54
72.31
69.23
66.15
66.15
64.62
63.08
61.54
61.54
56.92
55.38
55.38
52.31
52.31
50.77
49.23
47.69
47.69
44.62
43.08
41.54
41.54
41.54
38.18
30.77

Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Owner
Owner
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Undecided
Undecided
Undecided
Undecided
Undecided
Undecided
Undecided
Undecided
Undecided
Undecided

438

S.M. El-Sayegh / International Journal of Project Management 26 (2008) 431438

Although some of the results do not appear to be

rational, the majority are properly allocated. The risk of
delays in obtaining site access was undecided. This risk is
beyond the control of the contractor and should be allocated to the owner [3]. Another controversial risk is the risk
of owners delayed payment to contractors. The responses
were split among owner, contractor and shared. Previous
studies in the US [8] and Kuwait [9] showed that is risk is
properly allocated to owners.
Owners and designers risks are usually allocated to the
owner while contractor, subcontractor and suppliers risks
are allocated to the general contractor. On the other hand,
external risks are normally shared between the owner and
the contractor as they are beyond their control. Studying
the responses from international and local respondents
did not reveal major dierences as to the risk allocation
practices.
7. Summary and conclusions
The UAE construction industry is very active. Every
day, there is an announcement of a new mega construction
project. The number, size and complexity of new construction projects are increasing resulting in extra risks. The top
ten risks can be attributed directly to this phenomenon.
The results of this study show clearly that ination and
sudden changes in prices is the highest risk in the UAE construction industry. Fifty ve percent of the respondents
indicated that this risk should be shared between the owner
and contractor while 38% indicated that it is contractors
risk. Owners in the UAE are reluctant to share this risk
with contractors. This allocation problem results in overpricing on the contractor bid to overcome this major risk.
Other economic risks are very signicant such as shortages
in resources supply and availability including material,
labor and equipment. Other major risks included owner
risks such as tight construction schedule, improper intervention and change of design. Contractors should negotiate the construction schedule with owners, if possible, or
at least allow for time contingency and buers in their schedule. Delays in approvals by government entities should be
expected and allowed for in the schedule. Other risks in the
top ten include performance and management of subcontractors and delays of material supply by suppliers. This
places emphasis on proper contract administration and
management with subcontractors and the need for active
expediting with material suppliers. The last risk is the lack
or departure of qualied sta from the contractor side.
This requires proper human resource management to
attract and keep the competent sta.
Political, social and cultural risks are found to be low
and insignicant in the UAE construction industry. These
are encouraging indicators that attract foreign companies
and employees to come and work in the UAE. The views
of local and international experts were compared and they
are found to be in agreement as to the ranking of construc-

tion risks in the UAE. Risks were allocated more to the

contractors or shared between contractors and owners with
only two risks allocated directly to the owners.
This study is important as it sheds the light on the risks
in a booming UAE construction industry. Risk identication and assessment is an important step in project risk
management and shows the signicance of several risks
that are present in the industry. This study lays the foundations for comparisons with other countries, helps international companies interested in working in the UAE
understand and appreciate the risks involved, and assists
local companies in negotiating their contracts as to the
proper allocation of risks. This study also helps in decision
making regarding risk response planning and control.
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