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NICMAR NICMAR INSTITUTE OF CONSTRUCTION MANAGEMENT AND RESEARCH SCHOOL OF DISTANCE EDUCATION

ASSIGNMENT

NICMAR/CODE OFFICE

1. Course No. 2. Course title 3. Assignment No. 4. Date of Dispatch 5. Last Date of receipt

: : : : :

PGPM 31 Project Risk Management 1

of Assignment at CODE office

ASSIGNMENT For the successful implementation of a project, it is essential is that persons involved in its

implementation be sensitive to the risk involved in the project and formulate the most suitable structure for the management of such risks. There are certain variables and uncertainties are common to most of the infrastructure projects. Many risk mitigation techniques are applied to infrastructure projects. Discuss in details the risk management in construction with special reference to any project currently in progress with your company.

SYNOPSIS
Introduction Risk identification in the project Types of risk
Risk mitigation

Risk assessment in a project

o Scope of the work o Risk assessment sheet o Risk control measures Conclusion

INTRODUCTION
The project of any industry depends upon the following uncertainties 1. Time 2. Money 3. 4. Manpower and Resources

It is also a key factor to note that as the project value increases, the risk also increases. But as project duration decreases, the risk also increases. Thus on the successful running for a project, optimum duration and optimum utilization of the resources are the most important to be considered. Thus risk minimization is the most key role for project profit maximization by any project manager. In the present assignment, I have tried to assess the risks involved in the project at which I have involved in my career. I have also explained the risk mitigation techniques undertaken by us to reduce the risk in the project.

RISK IDENTIFICATION IN THE PROJECT


Risk identification occurs through each of the two phases of project development: 1. Planning 2. Construction 1. Planning phase In the planning phase risk is been identified from one of the following methods, 1.1 Brainstorming It is an effective method. Brainstorming can range from a small informal project team. Effort for simpler projects to a full-blown CEVP workshop and Effective brainstorming requires a skilled Facilitator, working together with the project team and specialists who can bring additional expertise. 1.2 Checklists and/or Questionnaires to specialty groups Checklists/questionnaires are a quick and easy-to-use technique but limited in nature; they only deal with the items on the list.

Each project is unique; hence a standard list will often not capture the project specific risks of most concern. Nonetheless a checklist/questionnaire can spark thinking prior to a more formal brainstorming process 1.3 Examination of past similar projects Lessons learned from past projects help us to avoid repeating mistakes; using past examples requires prudent and objective judgment, since a previous project may be similar but is nonetheless different because each new project has unique requirements and features, including uncertainties and risks 1.4 Combination of above methods and/or others It is quite likely that for most projects a combination of the above methods will be used to identify risks. The important thing is that once identified the risks are properly documented

2. Construction Phase Among the most common risks encountered during the construction of a project by a civil engineering contractor under a standard type of construction contract, are the following: 1. Design errors, quantification errors. 2. Design changes found necessary, or required by the employer. 3. Unforeseen physical conditions or artificial obstructions. 4. Unforeseen price rises in labour, materials or plant. 5. Theft or damage to the works, or materials and equipment on site. 6. Weather conditions, including floods or excessive hot weather. 7. Delay or inability to obtain materials or equipment required. 8. Inability to get the amount or quality of labour required, or labour strikes. 9. Errors in pricing by the contractor.

RISK MITIGATION

The following are the ten ways to mitigate risk in construction projects 1. Ensure the adequacy of project funding 2. Obtain more geotechnical information 3. Conduct constructability reviews 4. Set realistic contract performance times 5. Work & rework cost information 6. Introduced phase pricing 7. Pre-plans for permits, utilities & zoning 8. Pre-defined rates, equations & procedures 9. Use experienced project personnel 10. Use the contracting process as a risk avoidance measure The above techniques are the most commonly used to prevent the risk in any project. Ensure the adequacy of project funding Certainly, all parties have a legitimate concern that there will be sufficient funds to design and construct the project. Owners also need protection against the risk of running out of money. such as that provided by a termination-for-convenience clause that expressly limits or precludes recovery of anticipated but unearned profits. Furthermore, owners need to understand, in advance, that changes and cost increases are virtually inevitable. Accordingly, a reasonable contingency should be incorporated into the budget to deal with inevitable changes and unexpected omissions. Obtain more geotechnical information It should go without saying that the more information a contractor has about subsurface conditions. The more accurate the bid - and less likely will be claims for differing site conditions. There is a decided trend toward (1) investing a little more money during project planning and design for the purpose of obtaining more geotechnical information and (2) making all of the geotechnical information available to contractors.

Some owners and their counsel will argue that this open disclosure will lead to claims if the geotechnical Information is wrong. This misses the basic point that if the bid was based on lessthan-complete information, that becomes the bargain. Accordingly, if the actual underground conditions are worse than the geotechnical information provided. The owner should pay because, if the contractor had been advised of the more severe conditions, it certainly would have increased its bid. Conduct constructability reviews Contractors sometimes complain that the designs they are required to follow are not constructible or practical. If this is the case, there may be delays and additional costs incurred in coming up with alternatives. Even if the design is constructible the owner may have to pay more to get the same results. By having the plans and specifications reviewed for "constructability" before contractors bid on them, owners have been able to modify the designs and thereby make construction easier. Set realistic contract performance times If the contract performance time is insufficient. either it will cost more to do By having the plans and specifications reviewed for "constructability " before contractors bid on them, owners have been able to modify the designs and thereby make construction easier. Either scenario is disadvantageous to the owner. Owners are avoiding these problems by obtaining contractor advice and input on setting a realistic time to allow for construction of a.given project Work & rework cost information The owner can require as a contract obligation that the contractor make full disclosure of its cost estimates for all aspects of the work. i.e . procurement of materials. subcontractors self-performed work and even overhead and profit. In doing so, the owner and its staff can better assure themselves that no significant mistakes have been made in pricing .the work and that allowances and alternatives are reasonable. Introduced phase pricing As the design is being developed, each phase of the design can be provided to the contractor for review, analysis and submission of progressive cost estimates. Obviously contractors may talk at this intrusion into their pricing domain.

However, in order to win the project, the contractor will be more likely to agree to this process which in the end will reduce the likelihood for cost-overrun claims. Pre-plans for permits, utilities & zoning Given the various regulatory requirements that have to be complied with in the course of designing and constructing a project, it is obvious that, if these requirements are not known and considered in advance delays will result. To avoid this astute owners and their engineers are now beginning to specifically identify permitting requirements in advance of bidding and signing the contracts Pre-defined rates, equations & procedures In order to eliminate many issues from the contract administration phase, smart owners will specify clear and accurate formulae or methods to predetermine values for disputable items. Home office overhead rates, although subject to wide variation within the industry, can be preset and a contract generally accepted manual for determining the equipment rates to be used in, pricing change orders. It is equally important for the contract to contain very clear provisions with respect to how change orders will be processed and what information should be included in a request for change orders. The same is true for farceaceount provisions; which would enable the contractor to be paid on a timely is for disputed work, pending negotiation of a change order modification. Also give some consideration to including as a unit price. A per diem value for extended project time. In the event of an owner-caused delay.this value could be included in any cbange order carrying with it entitlement to an extension of time. Use experienced project personnel No matter how enlightened the management and allocation of risk .the project personnel (i.e.. people) will still have to design. Build and adminiSter the project, Experience counts, particularly for big projects With a construction boom underway. Design and construction firms are often maxed out in terms of experienced project managers and superintendents. Notwithstanding this reality. no design flrm or contractor wants to lose a good job. Consequently, many projects are being led and managed by inadequately trained and inexperienced personnel. which inevitably leads to problems. claims. disputes and terminations. No

owner, who has the leverage in a megaproject to do so. should pass up the opportunity to investigate the credentials and backgrounds of the key parties' personnel and require, as a matter of contract, that only experienced project managers and superintendents will run the high-profile project. Use the contracting process as a risk avoidance measure The contract documents are an early opportunity to anticipate. define and deal with potential issues and thereby avoid disputes. Essentially. the contracting process is a "what if' exercise, whereby the parties attempt to determine what may go wrong, what issues may arise between the parties, and the best way to resolve these challenges, in advance, by informed and enlightened risk allocation. This approach is of course, the American way of doing things, and at least two downsides to a comprehensive contract are typically a lengthy document and sometimes lengthy negotiations.

SCOPE OF THE PROJECT


Name of the project Location Project definition : : : Metro Rail Project Proposal Mumbai, India The Government of India has decided the increase the

infrastructure facility in India, so as to increase economic growth of the nation by increasing the import & export facility. Project duration Type of contract : : 3765 days Item rate contract

Project funding Design responsibility considered Price fluctuation Extension of time Liquidated damages

: :

Finance arranged by the Government of India Renovation of existing structures needs to be

: : :

Not allowable Not permitted 2% of the contract value per week of the project Limit upto 15% of the contract value