Risk Management in Construction Sites in Cambria - Article Example

Running Head: Risk Management in Construction Sites in Cambria Your Name: Course: Institution: Instructor’s Name: Date: Table of Content: 1.0 Introduction 4 2.0 Background information 4 3.0 Research objectives, Question and scope 6 4.0 Research methods 7 4.1 Structure of the study 8 4.2 Figure 2 structure of the study 8 5.0 Literature Review 9 5.1 Site Construction risk management 9 5.2 Site construction risk and uncertainty 9 5.3 Risk categorizations 9 5.4 Typical construction risks and uncertainties 9 6.0 Site construction risk management process 10 6.1 Risk identification 10 7.0 Risk examination or Analysis 11 7.1 Monte Carlo Method 11 7.2 Sensitivity Analysis 11 7.3 Delphi Technique 12 8.0 Risk response 12 9.0 Risk control 12 10.0 Close down 13 11.0 Identified risk in construction sites 13 11.1 Designers 13 11.2 Contractors 14 11.3 Subcontractors 14 11.4 Clients 15 11.5 Government bodies 15 11.6 External environment 15 11.7 Project life cycle 16 12.0 Research Methodology 16 13.0 Models of risk management in Construction sites 16 13.1 Findings 17 14.0 Discussion and recommendations 18 15.0 Conclusion 19 15.0 References 19 1.0 Introduction Cambria is a county in North West England, which is a non-metropolitan. The local authority of Cambria county council and county came in to existence in 1974, which is after the passage of the Local Government Act 1972, and contained of six districts. In the year 2008, its population was half a million. Cambria is one of those counties with sparingly population in the united kingdom with 73.4 people per kilometer square (190/sq mi). Cambria is the third biggest ritual county in England; it is bordered to the north by the Scottish council area of Dumfries and Galloway. The west side there is Irish Sea, the south by Lancashire, while southeast by north Yorkshire and to the east by county Durham plus Northumberland. The Cambria County is considered the most exceptional area of natural beauty in England because of Lake District and Lake District national park. This area serves as a brainwave for novelists, composers and artists. Cambria is much of precipitous and consist every peak in England over nine hundred meters (3000 ft) above sea level, amid Scafell Pike at nine hundred and seventy eighty meters (3,209 ft), considered the highest point of England. Cambria’s inheritance is typified by immigration, invasion, settlement, scuffles as well as skirmishes between Scottish and English (Molenaar, 2005). 2.0 Background information In recent years, exhaustive development and research has been carried out in the area of risk management in construction sites. It is largely realized that it is one of the most vital measures and ability areas in the field of risk management. Construction is a process that entails assembling of infrastructures. For any construction to be successful an effective planning is required and its very essential, in case of those involve the execution and design of the infrastructure they must consider the environmental impacts of the job, construction site safety, budgeting , availability of the raw materials and inconvenience to the public due to the construction delay. The Cambria design build was formed in 1995 as a universal project and contracting management firm. It started as a small company but possessing competent workforce. Currently it has grown and achieved good reputation among the small and medium commercial build sectors. The company has built a good reputation of prized labor for the customers as well as achieving competitive edge on costs. The company offers the following design build constructions and project management for both small and medium companies Beach at el 2005). The construction project management (CPM) is the general coordination, planning and control of a project start from setting up to the finishing point. It aims at achieving customers expectations so as to make operationally and monetarily feasible project which will be finished on time, with necessary quality standards and within the cost endorsed. The construction project management is that management which is applied to the construction sector (3rd forum, International construction project management”26th /27th June 2003 in Berlin). The construction management association of America (CMAA) states that the one hundred and twenty main responsibilities of a construction manager are classified in to seven categories. These are; quality management, safety management, project management, planning, cost management, time management, and construction management professionals. Therefore in Cambria it doesn’t matter the size of the job starting from the construction of the house for dwellers to multi-sites retail parks all workers in the construction firms must possess a legal, moral and economical reasons to minimize the perils of injuries to the personnel. 3.0 Research objectives, Question and scope The objective of the study is to identify the risk management ways for the perils, which are interrelated with the construction sites in Cambria. To produce the improved solutions on the use of these risk management methods. Recently, an enormous number of risk management methods exist but not even one is applicable to the circumstance where several performers are needed to work together in a single project. The first auxiliary objective is to determine the perils that are rooted by constructing the work in a progressively more complex development. The main purpose is to establish the perils in construction sites in Cambria through use of existing literature together with interviews. The other objective is to determine the methods for development risks management in construction sites. This will be done through interviewing central performers who are working in two different constructions sites. More emphasis will be on the causes of the risks in the construction sites and thereafter the focus will be on ways to prevent, reduce and manage these risks. In so doing it is important to acquire a closer view of the company structures and ways of risk management. Another objective of the study is to elaborate some risk management ways in construction sites through governance network theory. It is believed that the governance network can provide useful capability concerning the risks linked to the construction and ways to control these perils. These are the research questions; 1. What is construction risk management? 2. What is construction network to governance? 3. What is risk management in construction site? 4. How risks are managed in construction sites? 5. What is the existing supportive way to manage risks? The first question is the construction risk management is today. The literature from the risk management area is large but not good in managing risks associated to the construction. The second question the governance will provide valuable information on how to manage risk in construction site and also fund companies to be able to provide useful services to deal with risks in construction sites. The third question reacts to the pre-se assumption that constructions are associated to several risks. While doing the beginning study plan the construction industry representatives were swayed that these risk are caused by lack of good risk management and competent workers in the construction industries. The fourth and fifth question can be viewed as the main question of the study. The main objective of the study is to go beyond a single performer and establish ways of preventing, controlling and to manage risks in construction sites. 4.0 Research methods The study starts with a literature review; the purpose of the literature review part is to answer the first two research questions and to and to prop up the other three. The literature review should give an overview of both risk management and construction sites. To conclude the literature review a fusion of present understanding and the management of the risks in the construction sites is offered (Beach et al, 2005). Then the empirical part will carry on filling the unspecified discrepancies between the present state of the risk management and risks in the construction sites. The empirical study will include twenty interviews made to the representatives of the two different construction sites in Cambria. 4.1 Structure of the study The structure (figure 1) will prop up the objectives of the study is to provide some imminent in to present knowledge, initiating both risk management. The study will go on to present the findings from the interviews lastly merge these two areas to detect the similarities and existing discrepancies and describe why they exist. 4.2 Figure 2 structure of the study The study is divided in to several parts, these are introduction. This is where the researcher will introduce about the company and give an overview of the country. The construction risk management and risk management in the construction sites in this case the researcher will identify risks and the ways of managing these risk. In empirical findings entails the researches which has been done by other researchers then conclusion and recommendation (Beach et al, 2005). 5.0 Literature Review 5.1 Site Construction risk management Risk evaluation in this study can be defined as methods that intend to identify and make an educated guess on risk to persons and property affected by the project. Conventional risk appraisal for construction has for a long time been identical with probabilistic evaluation (AbouRizk, 2009). 5.2 Site construction risk and uncertainty Risk analysis is important in any construction site as it helps to play down management by catastrophe, it also helps to minimize blows and troubles, increase the possibility of the development achievement and finally it enables the project manager to have true costs and plan on hand by correctly guessing unforeseen event (AbouRizk, 2009). 5.3 Risk categorizations Construction risks can be grouped in various ways depending on the level of content or particular perspective. Other based on the origin of risks, the effect it has or by construction phase. These types of risk include; financial risks, pure risks, country or political risks and business risks (Klemetti, 2006). 5.4 Typical construction risks and uncertainties Risk usually depends on the degree to which the subject matter in question is exposed to for example higher return calls for higher risks. Risk also depends on the individual risk profile (risk-averse, risk taker and risk neutral). For risk to exist a specific level of uncertainty must play part, this means that risk is an expectations of a coming event in that case then time have an effect on risk perception. Today’s risk is not tomorrow’s risk (AbouRizk, 2009). 6.0 Site construction risk management process Construction risk can be managed by following a risk management process which start with planning for risk examination or analysis, the persons involved in risk management should then identify risks that the construction site is exposed to. Risk examination is carried out; this involves quantifying risk and measuring the risk exposure. After measuring the exposure the management or the stakeholders should respond or mitigate the exposure through the use risk management instruments. Risk should be controlled by comparing the exposure with the actual damage caused as a result of unexpected event. In case of uncontrollable risk, the contractor should decide on whether the site should be closed down or not depending on the damage (AbouRizk, 2009). 6.1 Risk identification Risk identification involves spotting each and every probable incident or problem that may negatively harm the organization or the project. When stating risk causes the risk manager should state these causes as “may possibly take place at some point in the implementation of. This may negatively impact ….” or “if … Take place, then it will impact on … And …. Will become conscious?” For example, “If the foundation is not well laid out then it will lead to the cave in of the building or the government will intervene.” Alternatively, “if the project is not approved in two weeks time, then the construction will be delayed.” To do this a number of techniques are applied these include; expert interviews, Delphi Technique, standard checklists, making a comparison to similar projects and carry out a brainstorming conference (AbouRizk, 2009). 7.0 Risk examination or Analysis Data analysis is the process of inspecting, cleaning and transforming data with the purpose of providing clear information to support decisions or make conclusions. Data analysis encompasses various techniques and can be either qualitative or quantitative. The difference between the initial data analysis and the main data analysis is that the initial stages are not aimed at answering the research question but it is based on quality of data, quality of measurements and the initial transformation. In the main data analysis phase, analysis is done aimed in answering the research question and any other analysis required in writing the first draft of the research report is done as well (Pennock and Haimes, 2001).. There are various techniques used in data analysis, which include; 7.1 Monte Carlo Method This is a quick and cost effective method for quantifying risks in a project. They are mostly suited to calculation by a computer and mostly rely on repeated samples to compute their results. John von Newmann and Stainslaw Ulam while working on Nuclear weapon project developed Monte Carlo simulation technique in 1940s. Monte Carlo methods vary although they tend to follow a particular pattern. The first step is the defining a domain of possible inputs. The inputs are then generated randomly from a probability distribution over the domain and a deterministic computation of the inputs is then performed. The last step is aggregating the results. Monte Carlo method is mostly useful in simulating phenomena that have significant uncertainties in inputs (Molenaar, 2005). 7.2 Sensitivity Analysis This is the study of how the difference in uncertainties in the output of a mathematical model can be proportional either qualitatively or quantitatively to different sources of variation in the model inputs. Decision makers to make useful decisions can use sensitivity analysis and it is important in enhancing communication from modelers to the main stakeholders in a project. It is also used for model development, as well as in understanding the system better. 7.3 Delphi Technique The Delphi method was originally developed as a tool for forecasting dependent on a panel of experts. It is a standard communication technique where experts answer questionnaires in two or more rounds. The results of the two rounds are then summarized and the reasons that the experts provide for their judgments are summarized as well. Delphi method is based on the principle that forecasts are more accurate from structured group unlike those from unstructured groups. It is widely used for investments forecast (Molenaar, 2005). 8.0 Risk response To take action on the risk identified the risk manager should decide on the course of action, if the effect surpass the risk doorsill, actions that can be taken include; reduction of uncertainty by getting hold of more information, keep away from risk problems by use of complete or partial re-design, a diverse strategy or procedure. Risk can also be transferred by insuring, and contracting. The risk manager can also close down or terminate the project in case of intolerable risks and other ways can be used to mitigate its reparation (AbouRizk, 2009). 9.0 Risk control Risk control involves developing and executing a risk plan through incorporation with the majority of the managers. The risk mitigation proposals should be managed as agreed. Plans should be periodically reviewed and revised at each stage project this is in order to mirror changes in the environment, information or as consequence of carried out response and finally changes should be reported (AbouRizk, 2009). 10.0 Close down The actual results of the project should be considered against the originally set objectives. This is done by comparing the anticipated risk impact and the actual impact. The risk examination process should be reviewed by assessing the usefulness of the process and its function. Lessons should be drawn for future construction and make a proposal for process improvement and finally result should be communicated (AbouRizk, 2009). 11.0 Identified risk in construction sites The stakeholders such as designers, contractors and subcontractors, clients, government bodies, employees and the external environment are sources of risk in any construction site (AbouRizk, 2009). 11.1 Designers These are as an outcome of substandard designs and discrepancy by the client. Project designers must be able to comprehend the needs of the client completely to avoid substandard designs and establish an efficient communication system among the designers. Designers should also be able to help in minimizing the time proposed for the project and the practical time required to accommodate uncertainties that surrounds a construction project. Inexperienced and unknowledgeable designers cause incomplete or inaccurate cost estimates (Federal Highway Administration, 2002). 11.2 Contractors Examples of these risks include, unsuitable program planning and variations in construction programs that can result to inadequate program scheduling or lack of knowledge in planning construction programs. To minimize the risk, an informative program scheduling should be worked out in the design phase of the project and innovative designers who have the ability to manage construction programs should be employed (Molenaar, 2005). Lack of coordination between project participants is also another type of risk associated with contractors. Teamwork and communication are vital for any project succession and this required the expertise of a project manager skilled in team and program coordination. There is also the risk of disputes in construction as well as noise pollution experienced during construction. Disputes may arise due to variations in the design and construction but to overcome this, contractors should always discuss with the team and negotiate with the project manager. Noise pollution can result to delays due to government interference. Contractors must therefore prepare adequately for these occurrences by allocating suitable time for construction and also taking measures to insulate noise on site (Beach et al, 2005). 11.3 Subcontractors Contractors manage a construction site for a long period of time but sub contractors allocate manpower and other resources to different projects as a way if maximizing profits. The risk occurs if the subcontractor lack management skills to manage their resources in several concurrent construction sites leading to delays in the construction phase. In view of this therefore, management skills should be a key consideration when seeking out sub contractors in a project (Mehndiratta, Brand and Parody, 2000). 11.4 Clients These are risks occurring from client variations and can result in changes in the planning, design and construction. The variations can occur due to clients changing their mind or misunderstanding of the client’s needs for the project. In most cases, the client bears the responsibility for changing their minds by implementing and defining performance and quality expectations of the proposed project by doing their own research and analyzing the needs of the market (Federal Highway Administration, 2002). To prevent misunderstanding of the client’s needs for the project a knowledgeable project team should established as early as possible to define the project scope and functions (Highways Agency, 2001). 11.5 Government bodies These are normally risks, which a contractor or sub contractor cannot control. For instance, getting an approval from a government office may prove to be difficult because of the many procedures it involves or the bureaucracy in the government. To minimize the risk, project should strive to maintain cordial relationship with the government officers while maintain the communication channel open at all times (Cooper, 2002). 11.6 External environment One such risk is the risk of inflation of construction materials, which is usually unavoidable. Changes can occur due to the changes in demand and supply of the materials. The risk can be minimized by transferring the risk to other parties by way of insurance or choosing an appropriate type of contract e.g. lump sum contracts (Molenaar, 2005). 11.7 Project life cycle These are risks arising in more than one phase of a construction phase. Examples include the risk of working on a tight project schedule may arise both in the design phase, construction phase as well as client expectations. When this occurs, the project can be impacted negatively in terms of cost, quality, environment, and safety and ultimately delay the project (Pennock and Haimes, 2001). 12.0 Research Methodology This was done in six stages. The first stage was to review the relevant literature followed by structuring both semi structured and case study questions and then deciding which ones are relevant in this case (Mehndiratta, Brand and Parody, 2000). Semi structured interview format based on pre-established framework of questions was used. Interview was done on five cost-consulting firms and a professional senior Quantity Surveyor within each organization was chosen for the interviews. The Delphi Technique was then employed to convert individual opinion to group opinion in order to legitimize the results. To verify the various trends being formulated by the consultants, exploratory case studies were implemented in order to establish a grounded theory. Afterward, interviewee selected the appropriate case studies based on a project where risk management was applicable. Results were recorded and content analysis was done to summarize the responses. This kind of methodology was advocated to give a comprehensive and impartial insight into the situation (AbouRizk, 2009). 13.0 Models of risk management in Construction sites A model is defined as simplification of a real phenomenon that is defined mathematically for making predictions or implications. Risk management models are uniquely designed to suit each unique project that arises. There are two types of models which are theoretical or statistical (Highways Agency, 2001). A theoretical model is based on economical reasoning to understand cause and effect and the parameters are estimated form historical data. Statistical model on the other hand identifies patterns in historical data that are expected to continue into the future (Pennock and Haimes, 2001). 13.1 Findings The interviewed professionals recognized the importance of risk management and the various stages it involved i.e. risk identification, analysis, response, monitoring and control. Majority of them also practiced risk management as part of their activities. However, several of the participants were of the opinion that the time spent on risk management was dependent on the size of the project. A larger project requires well structured risk management programmed, unlike the smaller one that required intuition. Consensus also stressed on the importance of managing risks from the time of inception of the project when risks are high due to lack of information (Beach et al, 2005). Several participants also suggested that risk management is not primarily the contractor’s responsibility but also that of the client. Some interviewees thought that the client must be well informed of the risks in order to be able to plan adequately. All participants also suggested that risk management framework in Cambria needed improvement as the lack of systematic benchmark procedures resulted in lack of awareness of the many options available in managing of risks. Several participants proposed the introduction of a standard procedure that would give guidelines in risk management. Participants were unanimous in suggesting that experience was required in order to successfully practice risk management (Mehndiratta, Brand and Parody, 2000). 14.0 Discussion and recommendations The findings of this case study in Cambria are that there is a need to introduce standard procedures in risk management. In Australia, the government has made it compulsory for each person who has control of design of infrastructure projects, buildings or those of a system to comply with new safe design duties and legal obligations. This means that designers and project managers must carry out risk assessments and risk controls so as to minimize on construction risks (Hastak and Baim, 2001). Data analysis also indicated that the methods adopted in risk identification in Northern Ireland were unsophisticated. They used methods such as risk workshops that involved brainstorming aided by checklists and previous risk registers (Pennock and Haimes, 2001). Though this method may look simple and easy to use, lack of team participation and lack of understanding in the workshop can lead to failure of the process. There was also a lack of standard risk categorization process and majority of the consultants lacked understanding of sophisticated techniques such as FMEA, Delphi technique and HAZOPS (Hastak and Baim, 2001). Their option was to use the unsophisticated techniques because of their familiarity with them. It is also evident from the results that there was familiarity with the risk analysis principles and such sophisticated risk analysis techniques e.g. sensitivity analysis and Monte Carlo Technique were used. In conclusion, this research established that there was need to bridge the gap between the theories and techniques used to manage risks and those that were implemented. In addition, both consultants and client needed to be effectively trained and educated on the benefits of enforcing risk management practices (AbouRizk, 2009). 15.0 Conclusion Workplace safety in any building site whether civil, residential, commercial or retail is critical to the succession of any project. This should be done by creating a good risk management plan to effectively reduce and ultimately accidents. Risk is a chance of something happening and the likelihood of the risk bringing negative impact to the objectives and goals of the project. Risk can be measured in terms of consequences and the likelihood of the risk happening. Although risk is uncertain and ambiguous it can be controlled and project managers prefer to insulate the risk and in turn allow more time to slow the project to minimize the risk (Mehndiratta, Brand and Parody, 2000). 15.0 References AbouRizk, S. (2009). “Risk and Uncertainty in Construction: An overview”. Retrieved from http://www.construction.ualberta.ca/ (Accessed 25, 05, 2011) Beach, R., Webster, M., Campbell. (2005) “An evaluation of partnership development in the Construction industry”, International Journal of Project Management, 23 (8)611 Cooper, J.A. (2002). "Decision Analysis for Transportation Risk Management." Cambridge University Press-Risk Decision and Policy, 7(1). Federal Highway Administration (2002). Contract Administration: Technology and Practice in Europe. Report #FHWA-PL-03-002, Federal Highway Administration, Washington, DC. Hastak, M., and Baim, E.J. (2001). "Risk Factors Affecting Management and Maintenance Cost of Urban Infrastructure." Journal of Infrastructure Systems, 7(2), 67-76. Highways Agency (2001). Highways Agency Framework for Business Risk Management. Report of the Highways Agency, London, England, http://www.highways.gov.uk/ aboutus/2059.aspx. Klemetti, A. (2006). Risk management in construction projects networks, retrieved from http://lib.tkk.fi/Reports/2006/isbn9512281473.pdf Mehndiratta, S.R., Brand, D., and Parody, T.E. (2000). "How Transportation Planners and Decision Makers Address Risk and Uncertainty." Transportation Research Board(1706), 46-53. Molenaar, K.R. (2005). "Programmatic Cost Risk Analysis for Highway Mega-Projects," ASCE Journal of Construction Engineering and Management, 131(3), 343-353. Pennock, M., and Haimes, Y. (2001). "Principles and Guidelines for Project Risk Management," Systems Engineering, 5(2), 89-108. Read More