RISK ASSESSMENT IN MECHANICAL AND ELECTRICAL CONSTRUCTION

PROJECT

Zulhilmi Makhzani
Azli Abd Razak

ABSTRACT
In this rapidly evolved environment, there is a high risk of construction projects exposed to
uncertainty due to accumulation of many interrelated parameters, especially the Mechanical
and Electrical (M&E) construction projects. This research aims to apply specific analytic
tools to assess risks involved in the M&E construction projects. The research covers identi-
fying and assessing the main risk criteria of construction projects by the integrated hybrid
methodologies known as Analytic Hierarchy Process (AHP) and The Technique for Order
of Preference by Similarity to Ideal Solution (TOPSIS). Five construction projects were re-
viewed based on five key criteria namely safety risk, financial risk, management risks, de-
sign risk and execution risks. The combination of these two methods was found to be able to
evaluate the overall risks of construction projects and the project that has the lowest risk can
be selected. For further research, the risk response can be planned and implemented in the
ongoing and upcoming project.

Keywords: risk assessment, mechanical, electrical, construction, project

INTRODUCTION
Mechanical and Electrical (M&E) construction involved all the internal systems of a build-
ing that include a building function such as air conditioning, electrical, plumbing, sanitary,
fire protection, lightning protection, lift, and escalators. In construction industry nowadays,
it is one of the biggest contributors to the construction cost of the building. Company in-
volved in M&E construction need to make sure the systems that they design and implement
in the building are practical in life. For example, different areas have different temperature
requirement and lighting level requirement where they cannot compromise on the comfort
level of the building occupant. Despite of that, due to below return in profit margins and
huge labour component make, M&E constructions being categorised as high-risk industries
(Hanna et al, 2002).

In Malaysia, company registered under Construction Industry Development Board (CIDB)

with M&E engineering category can specify their job scope into 35 electrical job scope and
23 mechanical related job scope (Centralised Information Management System, 2019).
Among these jobs scope, this research focuses on a company registered under code work
M01- air conditioning and mechanical ventilation system (ACMV) and M02- protection and
prevention fire system.

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ZULHILMI MAKHZANI & AZLI ABD RAZAK

Risk in Mechanical and Electrical Construction Project

Risks are concerned with events that may or may not happen in future. Concept of risk can
be applied to nearly every human decision-making action. Risk is mainly the consequence
of uncertainty on objective and the effect can either be positive or negative deviation from
an objective (Edmundas K. Z., 2010).

Krantikumar et al. (2016) listed out risk related to the construction industry into seven dif-
ferent types; technical risks, construction risks, physical risks, organizational risks, financial
risks, socio-political risks, and environmental risks. Project Management Book of
Knowledge (PMBOK) highlights risk management is one of nine focus areas in project
management and it can be described as a process for identifying potential risks, analyzing
and responding to project risks. This includes all probabilities involving positive events as
well as incidents that do not meet the project objectives (Shahid et al., 2015). While doing
the classification of risk, the separation of project risk from the organisational risk need to
be accounted for such as resignation of the team member or unplanned leave by key person-
nel. Risk management cover process of identifying and analyse project risk, and then deter-
mine appropriate actions to avoid threats to any project.

Construction risk management provides better understanding of the risks and strategies used
to mitigate and reduce them. After risks are identified and ranked, appropriate action must
be taken. A risk manager can choose to avoid the risk, mitigate the risk or accept the risk.
No matter what the proper solution might be, communication is vital. For construction com-
pany to have a good risk management process, they have to be able to categorise and meas-
ure risks, also considering risk containment and risk reduction policies. With the ability to
do so, those construction companies will experience financial savings, greater productivity,
improve success rate and better decision making (A. Nieto-Morote, 2011).

To control all the risks, the company is not only considered a hazard risk which covers in-
surance coverage and safety training but also financial risk which is about cost and credit
availability, both from bank and insurance. Operational risk is to consider on internal system
processes and procedures. By executing construction contract blindly can expose to a very
high risk. Project risks are evaluated by qualitative techniques rather than by quantitative
approaches (Osman et al, 2014). The emotions and personal judgement of decision makers
involve more in project assessments. Hence, these added high risk for decision making.

Risk Identification
Identifying risks is the most crucial stage in the risk management process. There are few
methods of identifying risks such as: flowchart method, brainstorming, SWOT analysis, risk
questionnaires and risk surveys. (DINU, 2012). Forbes et al (2008) suggest that the funda-
mental argument for this is less familiar with the tools. On the other hand, inadequate tools
and techniques demand extra time, work and investment that may be perceived as uncom-
fortable by risk professionals. Due to these constraints, companies involved in the construc-
tion industry prefer to use conventional risk identification approach for instance brainstorm-
ing and checklists. Nonetheless, as construction projects become more complex, the use of
conventional approach may not be enough. Identification of risk is repetitive; because as the

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ELECTRICAL CONSTRUCTION PROJECT

project progresses throughout its life cycle, new risks may arise. It is possible that previous
risks will be addressed when new risks arise (George, 2018).

MATERIALS AND METHODS

Analytic Hierarchy Process (AHP)
Analytic Hierarchy Process (AHP) is one of the famous methods used by decision makers in
multiple criteria decision-making tools (Russo and Camanho, 2015). The basic of the AHP
method are taking a subjective problem and create from that very precise discrete numerical
quantification of these priorities. The process involved are get the input very subjective type
of information and this subjective information has to be prioritized. The paired comparison
then formed into a matrix and raised to infinite powers. Eigen vector need to be calculated to
get the relative priorities of the items.

Kim et al (2010) suggested a method for assessing safety risks in considering factors that
influence risk at construction sites by applying expert judgement and AHP. AHP were also
used by Badri et al (2012) in which they suggested a method for occupational health and
safety risk assessment based on various analytical techniques and expert survey.

The Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS)

Variety of methods can be used to rank the risk of construction project. One of the methods
proposed by Maghsoodi and Khalilzadeh (2017) to rank the alternative is Multiple Criteria
Decision Method (MCDM) using TOPSIS method because it provides simple and fast solu-
tion. The advantages of using this method are not bound by neither positive nor negative
criteria and has no constraint on number of criteria and option. This method also use both
qualitative and quantitative criteria and provide possibility for large-scale questionnaire dis-
tribution in statistical population through the MCDM method. TOPSIS method regards the
most excellent alternative should has the shortest distance from the ideal solution and vice
versa for weakest alternative.

There are various studies about TOPSIS method that might be found in the literature review.
The application of TOPSIS method is deemed appropriate to solve group decision making
problem under the fuzzy environment (Osman et al, 2014; Daniel Jato-Espino, 2014;
Pangsari, 2015). Nazam et al. (2015) adopted a new method for assessing the risks involved
in warehouse operations using Failure Mode and Effects Analysis and the combination of
AHP-TOPSIS methods under uncertain environment. The use of two-stage AHP prototype
was proposed by Wang et al. (2012) to assess risks in implementing green initiatives in the
fashion supply chain. The multi-objective approach places it in a better position compared to
other systems. Also, evaluation on project’s risk assessment can be used using this ap-
proach. Good quality low cost initial solutions were obtained by the developed algorithm.

Based on TOPSIS method, it helps to identify solutions from a limited set of alternatives.
The method is an extension for group decision making and incremental analysis for MCDM
with an application to group TOPSIS (Tamosaitiene et al, 2013). When the TOPSIS process
is carried out, the elements of the initial decision-making matrix generally involve real num-
bers or linguistic expressions from the given group of expressions. Linguistic criteria must
be quantified within previously determined and agreed value scale.

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ZULHILMI MAKHZANI & AZLI ABD RAZAK

Aside from being used in construction companies, TOPSIS method is also widely used in
determining employee performance such as in sales section (Lestari et al, 2018). Kabir
(2012) combined AHP and TOPSIS method for the selection of optimum concrete produc-
tion sites evaluated based on several factors namely technology, economy, social, environ-
ment, and transportation. This makes the decision-making process more realistic and effec-
tive due to the use of linguistic variables. Chaharsooghl and Ashrafi (2014) in their study
introduced the MCDM approach by using the TOPSIS method to make supplier selection
decisions taking into account the sustainability criteria and numerical examples provided to
illustrate the proposed method. Criteria importance not only portrays the decision maker's
subjective preference, but also the objective characteristics of the criteria themselves. The
decision makers put subjective preferences based on their knowledge, expertise and percep-
tion of the problem via a preference elicitation technique such as the AHP.

METHODOLOGY
Samples construction projects were taken from Company X located in Klang Valley and
being analysed. Company X managements define five criteria to be used in this research.
Those criteria are management risk, financial risk, design risk, safety risk and execution
risk. Management risk involves managerial related risk such as poor project strategies and
inadequate involvement in risk management. Secondly, financial risk represents all costs
involved and the financial plan allocated to the project. Another risk is on design risk which
relates to flaw design coordination, overconfident in design with less detailing of the pro-
ject. Safety risk can be defined during project implementation phase whereby the project is
being carried out with unregulated safety equipment and lack of safety instructions. Last but
not least, execution risk involves poor decision-making during construction and delay con-
firmation from main contractor.

RESULTS AND DISCUSSIONS

AHP for Risk Assessment Criteria Weight Determination
In this project, the criteria are selected from expert person in total of four personnel consists
of engineer, site supervisor, assistant technical engineer and administrative personnel by us-
ing questionnaire method or known as decision makers. Based on the results, five criteria
are management risk, financial risk, execution risk, design risk and safety risk. As shown in
Table 1, judgements are assigned using pair-wise comparison matrix to determine the
weights of decision makers.

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ELECTRICAL CONSTRUCTION PROJECT

Table 1: The Saaty Rating Scale

After that, the hierarchical structure of this decision problem was created and with criteria at
the second level and the alternatives at the third level. Weights of each criteria then evaluate
by using Analytic Hierarchy Process (AHP) as shown in Figure 1.

Figure 1: Decision Hierarchy of Risk Assessment in Construction Project

Determination of the Weights of Criteria

The pair-wise comparison matrix is created with the help of scale relative importance. The
length of pair-wise matrix is equivalent to the criteria used in decision making process. The
value in the matrix depends on the decision by the decision makers. Decision makers have
been asked the importance of each criteria in the column in respect to each criteria in the
row. Table 2 shows the original results of four decision makers where the accumulated
fuzzy numbers are obtained by averaging the opinions of the decision makers.

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ZULHILMI MAKHZANI & AZLI ABD RAZAK

Table 2: Pair-wise Comparison Matrix

All the fraction value converted to decimal value and sum of each value is calculated. Nor-
malised pair-wise matrix calculated by each value of the cell divided by sum of its column.
Criteria weights then calculated by averaging all the elements in the row as shown in Table
3.

Table 3: Criteria Weights for Each Criteria

Calculation of the Consistency

This step is done to validate the calculated values are correct or wrong. By using AHP
method inconsistency can be eliminated. The first step to calculate the consistency is by
multiply all the elements in the column with criteria weights. Weighted sum value then cal-
culated by taking sum of all value in the row and it is being divided by each criteria weight
to get the ratio between these two elements as shown in Table 4.

Table 4: Weighted Sum Value, Criteria Weights and Ratio for Each Criteria

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By using Equation 1, λmax can be calculated by averaging each criteria ratio.

(1)

Next step, calculate Consistency Index (CI) by Equation 2.

(2)

Where n is the number of compared elements. Finally, calculate Consistency Ratio by di-
viding CI with Random Index (RI) using Equation 3. Value obtained then compared with
Table 5 to check the consistency of the criteria.

𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑐𝑦 𝐼𝑛𝑑𝑒𝑥(𝐶𝐼) 0.06 (3)

𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑐𝑦 𝑅𝑎𝑡𝑖𝑜 = = = 0.06
𝑅𝑎𝑛𝑑𝑜𝑚 𝐼𝑛𝑑𝑒𝑥 (𝑅𝐼) 1.12

Since the CR 0.06 < 0.10, the proportion of inconsistency CR is less than 0.10 which is the
standard. Thus the opinion from decision makers are reasonably consistent and the weights
of each criteria can be used in next multi criteria decision making process.

Table 5: Random Consistency Index Values for Different Values of n

Analysis of Risk Assessment by TOPSIS Methodology

Objective of this research is to focus on TOPSIS fuzzy environment as the extension of
AHP method. As it is hard for decision makers to make accurate numerical judgements
about the possibility and effect of each risk incident, fuzzy linguistic variables and terms
were being used. The collected judgement of the decision makers was equally important and
evaluated as a MCDM problem. As stated, the outcome of MCDM problem with m alterna-
tives (Project 1, Project 2... Project 5) was evaluated by four decision makers, based on five
criteria was assessed by matrix given in Table 6.

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ZULHILMI MAKHZANI & AZLI ABD RAZAK

Table 6: Decision Matrix of Alternative Projects

In TOPSIS vector normalisation is done as per Equation 4.

𝑋𝑖𝑗 (4)
𝑋𝑖𝑗 =
𝑛
𝑗 =1 𝑋𝑖𝑗
2

As shown in Equation 4, for denominator the square root of the squared summation gives
the denominator. The performance value in each cell is divided by the rooted summation of
square value. Next step, weight of each criteria multiplied with the normalised performance
value of each cell to get the weighted normalised decision matrix. Then, the ideal best and
the ideal worst value for criteria is calculated using Equation 5 and 6. This equation is used
to calculate the Euclidean distance from the ideal best and ideal worst.

1 (5)
𝑚 2
2
𝑆𝑖+ = 𝑉𝑖𝑗 − 𝑉𝑗+
𝑗 =1

1 (6)
𝑚 2
2
𝑆𝑖− = 𝑉𝑖𝑗 − 𝑉𝑗−
𝑗 =1

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Table 7: Distance from the Ideal Best and Ideal Worst Solution

The performance score is calculated by using Equation 7. To get performance score, ideal
best and ideal worst value for each alternative should be added. Euclidean distance from the
negative solution is divided with a sum, so based on the performance score, alternative can
be ranked.

𝑆𝑖− (7)
𝑃𝑖 = +
𝑆𝑖 + 𝑆𝑖−

Table 8: Ranking of Project Risk Assessment by TOPSIS Method

From the calculation, the best alternative is Project 5 as it has the maximum value. TOPSIS
method facilitated us to calculate the performance score of each alternative project. The pro-
ject which has the highest accumulated performance score was considered as the highest
risk. Calculations show that Project 5 accumulated the performance score of 0.7588 which is
highest and can be categorised as highest risk project. Similarly, the performance score of
Project 3 was determined to be 0.4893. This project was found that carried second order
high risk level. While, calculation for Project 4 which is 0.4577 carried the third order high
risk level.

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ZULHILMI MAKHZANI & AZLI ABD RAZAK

CONCLUSION
In conclusion, risk management plays a crucial role as it is a complicated process that in-
volves multiple steps that are interrelated. First starts with identifying the potential risks,
followed by analysing and responding to the analysed risks. This is a time-consuming pro-
cess to successfully managing the risk, it should start with a perfect risk identification to
capture all possible risks. The next process will certainly easy to conduct and handle if first
step went well.

There are several methods and tools available in order to perform risk analysis. The selec-
tion of method and tool is normally based on what output that needed to understand the be-
haviour of the risk. The common method and tools that are used in this research is AHP
method and TOPSIS method. The next process after analysing risk is how do we respond
and handle the risk. There are several of actions can be taken to tackle the risk such as by
eliminating or reducing the risk effect toward the project objective.

The outcome of this research is a series of risks that have been identified and occurred in
project construction. As the criteria’s description of risk under project construction are am-
biguous, imprecise and vague, the use of integrated AHP and TOPSIS are important in esti-
mating the overall risks of construction project.

There are many risks and problems affecting all five projects, and they will delay the ac-
complishment of any of these objectives. Risk awareness clearly leads to not only delays
and wasted time, but also impact on higher costs, and lower quality due to financial and re-
source constraints. To effectively manage these risks, top management need to find strate-
gies from the view of the project stakeholders and the project life cycle.

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ZULHILMI MAKHZANI is working at Institut Latihan Perindustrian Kangar, Manpower

Department, Ministry of Human Resources.

AZLI ABD RAZAK is working at Faculty of Mechanical Engineering, Universiti Teknolo-

gi MARA Shah Alam.

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