RISK ASSESSMENT AND MANAGEMENT IN CONSTRUCTION PROJECTS

by

A.DEVIPRASADH
A thesis report submitted to the

FACULTY OF CIVIL ENGINEERING In partial fulfillment of the requirement for the award of the degree of

MASTER OF ENGINEERING IN CONSTRUCTION ENGINEERING AND MANAGEMENT

DEPARTMENT OF CIVIL ENGINEERING, COLLEGE OF ENGINEERING GUINDY CAMPUS, ANNA UNIVERSITY CHENNAI – 6000 25 JUNE 2007

ABSTRACT OF THE PROJECT WORK

Degree and Branch

:

M.E CONSTRUCTION ENGINEERING AND MANAGEMENT

Month and Year of Submission Name of the Student Roll Number Name and Designation of supervisor

: : : :

June 2007 A.DEVIPRASADH 200511840 Dr.M.SEKAR PROFESSOR & DEAN COLLEGE OF ENGINEERING - GUINDY ANNA UNIVERSITY CHENNAI-600025

Construction projects are initiated in complex and dynamic environments resulting in circumstances of high uncertainty and risk, which are compounded by demanding time constraints.

Construction industry has changed significantly over the past several years. It is an industry driven primarily by private investors; the presence of securitized real estate has increased considerably. It is vulnerable to the numerous technical & business risks that often represent greater exposures than those that are traditional. Thus risk assessment need arises. Risk assessment is a tool to identify those risks in a project and manage it accordingly with proper treatment. Risk assessment is defined in this study as a technique that aims to identify and estimate risks to personnel and property impacted upon by a project.

The general methodology of this study relied largely on the survey questionnaire which was collected from the local building contractors of different sizes by mail or by

personnel meeting. A thorough literature review was initially conducted to identify the risk factors that affect the performance of construction industry as a whole.

The questionnaire prepared for the pilot survey was formulated by seeing the relevant literatures in the area of construction risk management. Totally for seventy five companies the questionnaires were given, out of which forty five had an effective reply and two were rejected due to improper answering. Thus the response rate is 60% which is considered a good response in this type of survey. This research seeks to identify and assess the risks and to develop a risk management framework which the investors/ developers/ contractors can adopt when contracting construction work in India.

Risk factors for this study were classified into seven categories, namely: 1. 2. 3. 4. 5. 6. 7. Financial risk Legal risk Management risk Market risk Policy and political risk Technical risk Environmental risk

As far as the contractor is concerned shortage of skilful workers has the maximum risk rating and other risks which have maximum risk rating are time constraint, sub-contractor related problems, project delay, improper verification of contract documents, and competition from other companies. For the owners time constraint has the maximum risk rating and other risks which have maximum risk rating shortage of skilful workers, project delay, errors in design drawings, Improper project planning and budgeting, loss due to fluctuation of inflation rate. The least risk rating given by both owners and contactors are environmental risk, relation with government departments, local protectionism and industrial disputes. Shortage of skilful workers is the major risk faced by almost all the companies. This is because; the skilled workers are migrating between companies very often due to the

high demand in the market. And also huge vacuum is created by the workers who move to Middle East countries where they are offered very high packages when compared to India. Since real estate, construction sector are in the boom side, construction companies are in move to make profit as soon as possible in current wave itself; but this creates tremendous pressure to the workers to complete the project in a very short span. This time constraint risk prevails in all the companies surveyed. The risk of competition from other companies constitutes major problem to the small & medium sized companies. Due to the policy of the Indian government that 100% FDI is allowed in the construction sector which allowed foreign companies to enter the market, created a stiff competition to the local companies both technically and financially.

Overall market, management, and the financial risks are high when compared to other risks.