Risk Factors Associated with Budgeting for the Hajj Terminal Construction Project at KAIA - Research Proposal Example

Identifying Risk Factors associated with Budgeting for the Hajj Terminal Construction Project at KAIA in Jeddah, Saudi Arabia. By Name Institution Course Lecturer Date Introduction The Hajj terminal is one of the terminals in King Abdul Aziz International Airport. It was built in 1981 by the Skidmore, Owings & Merrill LLP (SOM) among other engineers and contractors. The terminal has been the main center for decamping by the pilgrims during their pilgrimage for the Hajj. As a result of increased numbers of the pilgrims, there was a need to expand the Hajj terminal during the expansion process of the KAIA and thereby increase its capacity. It was then that the International Finance Corporation (IFC) was given the responsibility of structuring and coming up with a public-private partnership to act as the fundamental unit for nurturing the construction. This study is aimed at identifying the risk factors associated with budgeting for the Hajj terminal construction project. The study will use a qualitative cross-sectional survey to interview staff from the construction company handling the project. Information from the open-ended questions will be coded for ease in analysis. Tables, graphs and pie charts will be used to graphically represent information upon analysis. SPSS will be used to analyze data and derive relationships hence; will be used in testing hypothesis. Subsequently, risk factors of budgeting for the Hajj terminal construction project will be identified. Research Question Identifying the risk factors associated with preparing a budget for the Hajj terminal construction Project in King Abdul Aziz International Airport (KAIA). Significance of the study This study is very important as it will give a green light on some of the overlooked issues associated with budgeting of major projects like that of the Hajj terminal. Budgeting is a very important stage during the planning stage for any project. A budget which is aimed at controlling and managing the funds available is very important. Taking into consideration an international project like the Hajj, it is very important to look at the risk factors that act as hindrances to the successful completion of a project with regard. This study will provide information to managers who are in charge of future projects so that impediments to a reliable budget are dealt with. Research Approach This study will adopt a qualitative kind of study. The study will be qualitative in that it is descriptive and exploratory. The study will explore the risk factors of budgeting in the Hajj terminal construction project in a descriptive style. The study is also typical of a qualitative research in that the study will take place in the natural setting of the project. Information will be collected from the ground as it will easier to get respondents. It will also use the human being as the instrument of the research. Qualitative methods of data collection will be used. All these are characteristics of a typical qualitative research study (Cresswell 1994). The Main Goal The main goal of this research study is to identify the risk factors of budgeting for the Hajj terminal construction project. Objectives 1. To identify any alterations made with regard to the budget of the Hajj terminal construction project 2. To identify how time acts as a risk factor in budgeting for the Hajj terminal construction project 3. To identify is the cost of raw materials is a risk factor of the Hajj terminal construction project’s budget 4. To determine if the environment has a role to play in as far as budgeting of the Hajj construction project is concerned Hypothesis There is a strong relationship between cost and budgeting for the Hajj terminal construction project There is a strong relationship between time and budgeting for the Hajj construction project Literature Review Location The Hajj terminal is among the three terminals in the King Abdul Aziz International Airport (KAIA) in Jeddah, Saudi Arabia. It is situated around 40 to 70 kilometers west from Mecca. Jeddah is the nearest city to Mecca. Therefore, the entire air traffic fraternity headed for the holy cities alights at this city before proceeding on to Mecca by land. It was created as a special facility to handle large traffic for a short duration of time (Bush-Brown 1983). History The Hajj terminal was built when the King Abdul Aziz airport was opened in 1981. It was designed by the Skidmore, Owings & Merrill LLP (SOM) company from Chicago and New York offices. The structural engineers involved were; Schlaich, Bergermann and Partner sbp GmbH and Skidmore, Geiger Berger Associates and SOM. The general contractor was Hochtief AG. Traditional tents used by pilgrims in the desert were what inspired the design of the Hajj terminal. It shelters more than one million pilgrims as they head for Mecca. The terminal is estimated to have a capacity of 50’000 for a time frame of 18 hours during the pilgrimage when the pilgrims are arriving and 80’000 for 36 hours when the pilgrims are departing. This time is necessary for the transfer of transportation from air to land and vice versa (Oswald 1983). The terminal is a convenient stop over for the pilgrims who alight from planes as they await transportation to the holy cities. It has various socio-economic facilities that ensure a comfortable stop over. The terminal stands out to be very welcoming with its unique structure portal and as a cultural symbolic outlook. At the time when it was build in 1981, it occupied 120 acres of land and the terminal itself occupied a project area of 2,800,000 ft2. This space was important for adaptability and flexibility based on the needs of the Hajii. It had a height of 150 ft and consisted of three storeys. As a result of its unique and eye catching design, it has received several awards since the year 1981 (Berger 1996). A sacred journey to Mecca (Hajj) is among the five pillars of Sunni Islam. It is also among the ten branches of Shi’a Islam religion. It is therefore evident that this pilgrimage is very imperative for all the Muslims. Every Muslim as long as he or she is physically healthy and financially stable, they have to engage themselves in a pilgrimage. More than three million visit the Hajj terminal every year in the month of Dhu’l-Hijjah. Other visits known as Umrah or minor pilgrimages occur in the other months. The Hajj terminal is only used for the Hajj and charter flights are the main means of travel (Oswald 1983). Structure of the Hajj Terminal The Hajj Terminal was constructed as a temporal city for Muslims during their travel to the holy cities of Medina and Mecca in the Hajj season. However, it is not until the Hajj project that started in 2006, that the terminal has become the fourth largest in the world. The floor space was increased to cover an area of five million square feet, equivalent to 465, 000m2. It is in a site whose ground area is more than 100 acres and very much renowned for its tent-shaped roof. The presence of harsh sandstorms is a factor that was of great concern during the construction of the Hajj terminal. Its roof is made up of a white fiberglass membrane coated with PTFE. The roofs are semi-conical in shape and were constructed with 4.6m2 of fiber-glass material (Economist Intelligence Unit 2008). Two-storey and two rectangular air conditioned buildings are what make up the Hajj terminal. These buildings have been designed so as to cater for the needs of the pilgrims by provision of a place to sleep, rest, prepare food, as well as a place for refreshing. The buildings are centers for airport services that include baggage reclaim areas, immigration, customs and check-in counters. There are also rectangular platforms with roofs that are in the form of a tent. In addition, there is a central spine which acts as an entry point for buses and taxis. A 144 epoxy-coated grid with 50m steel columns that gradually decrease in diameter from 2.6m at the bottom to 1m at the top is used to support the 210 roofs. The fabric base suspends 20m above the ground and there are an extra rise by 12m by thirty two radial cables of steel that are connected to a tension ring that has a diameter of 4m hence; the enormous structure of the roof. Despite the fact that the roof’s material was designed is translucent, its ability to transmit heat is very low. It only allows 7% of light to pass through and this is of importance in maintaining the temperature to around 80 degrees Fahrenheit in spite of the external temperature that is at 120 degrees Fahrenheit. With these improvements, the terminal can hold up to 80,000 travelers at a go. There is a mosque in the terminal (Berger 1996). The Expansion Process The Hajj construction project was brought about by the need to expand the airport’s capacity which is currently at 13 million passengers. The master plan to increase KAIA’s capacity would take place in three phases: completion of the first phase would see an increment of up to 30 million in capacity, 60 million for the second phase and 80million for the third phase. The airport’s capacity is therefore expected to increase to 30 million passengers after five years; by 2010, as the end of the first phase of the project. The expansion will take into consideration the following; lighting, paved and airfield hard standing areas, storm drainage network and fuel network systems. A support services building is also to be erected. The north and south terminals will be renovated. The current airfield systems and runway will be upgraded so as to create room for the Airbus A380. The Hajj terminal construction is the precedent for other Shariah-compliant BTO projects in the Middle East (Bush-Brown 1983). The first phase of the master plan to expand the KAIA project will see to it that the Hajj terminal is not left behind thus the Hajj terminal construction project. The upgrading process of the Hajj terminal will minimize processing and wait times for the traveling pilgrims. The new Hajj terminal will have enough accommodation of processing 3,800 passengers arriving and 3,500 departing passengers per hour. This improvement will be in correspondence with the level C standard of service for peak times as given by the International Air Transport Association (“IATA) (Hajj Terminal in Saudi Arabia Selected to Receive2010 AIA Twenty-five Year Award” 2010). According to the Civil Aviation Authority, the three stage development process of the Hajj terminal will see an increase of passengers from 30 million to 60 million and finally to 80 million passengers on an annual basis. The airport is expected to increase its profits tremendously as a result of increased passengers. On the other hand, travelers will also have the opportunity to enjoy the upgraded and additional facilities hence making their travel much comfortable and convenient. The project is now at its final stages of planning and design. Kind Abdul Aziz agreed to the proposed budget of SR900 million so as to expand and raise the airport to an international standard. Local companies are expected to complete the construction of this project as stated by the president of the Civil Aviation Authority: Abdullah Al-Rehaimy. Private-Public Partnerships Governments in the Middle East are actively involved in the financing and construction of telecommunications, energy, water, transportation and airports. Development of such kind of infrastructure is funded with the use of state budgets. The region, inclusive of Saudi Arabia has been experiencing problems related to lack of electricity and telecommunications. Public private partnership (PPP) is the relationship used to foster the Hajj project. This kind of partnership is between a private company and the government and is governed by an agreement. The private company is a bid engineering, construction and design company that takes up the responsibility of financing and structuring a certain project (in this case the Hajj project). However, in the governing agreement, the company leases the project at hand for a certain period of time; 20, 30 years or more than 50 years. During this leasing period, the company operates the project and enjoys income, tolls and any other kind of payment made by users of the service in the project (Ernst & Young 2008). Project Company It was in 2006 as earlier stated that the expansion process of the King Abdulaziz International airport began. The Saudi Binladin Group presented the winning bid for the Hajj project whose estimated cost was $250. The Saudi Arabia’s General Authority for Civil Aviation (GACA) was the sponsor of the Hajj project. It sponsored the project through an SPE, Hajj and Unruh Terminal Construction Company. The project adopts a build-transfer-operate (BTO) model for its construction. This model means that after the Binladin Group is through with the construction of the Hajj project, the project will be transferred to GACA for a period of time as stipulated by the agreement of concession (“Bin Ladin Wins Hajj Terminal Job in Jeddah” 2006). Awards In addition to the several awards that the Hajj terminal has received over the years, it won the 2010 twenty- five year award of American Institute of Architects (AIA). The terminal was acknowledged as a presentation of ecology, culture, sense of place and economy of means. Redevelopment of the KAIA started in September 2006 and was perceived to take place in three phases and the first one would end in five years. This process is underway with the sole purpose of increasing capacity and infrastructure. The Hajj terminal’s capacity will also increase from its ability to hold 4.5 million passengers in accordance with its present state to accommodating 9.2 million passengers in 2025 (Frank 2010). Stakeholders The Hajj Construction project has adopted a private-public partnership as initiated by the IFC. The main stakeholders of the Hajj terminal project are the government and GACA through the SPE, Hajj and Unruh Terminal Construction Company. GACA will operate the terminal for 20 years upon completion according to the agreement between the two partners and will enjoy 100% subsidy savings. Three banks will be providing funds for the project. They are the Islamic development bank, credit Suisse and Bank Aljazira (Ernst & Young 2008). Risk Factors Engaging in the construction of the Hajj terminal is a very delicate matter. Each and every action and materials used had to be perfect as there was no room for errors. As a result a pretest was carried out in a wind tunnel that was dynamic in Ohio. The pre-testing is very important to avoid unplanned emerging issues that would subsequently affect the budget. A logic model should be used to guide the Hajj terminal construction project as demonstrated below Several risk factors can seriously impede the construction of the Hajj terminal and these are, Time The project is in three phase and therefore requires a lot of time. The following is a demonstration what should be considered with regard to time Budgeting for this project is therefore challenging with regard to time in that it is difficult to say how much money will be used for the entire project at the onset. It is the budget that determines how much time that will spend in a certain construction project. Time is a risk factor of great concern in far as any budget for any construction work is concerned. Time is unpredictable as it is uncertain if the Hajj construction project will complete within the intended time. With harsh climatic conditions that keep altering the efforts in the Hajj construction project, it becomes difficult to abide by the timeline. Again, need to change a certain design will also affect time and therefore, the project may fail to complete in time. As a result the budget will need to be strained (Harrison 2006). Strained relationships The construction relies on a private-public partnership agreement. The private company is in charge of fully funding and structuring up the Hajj terminal. Transparency and honesty is required to maintain this kind of partnership so that the budget will be support in case of any adjustments. When there is lack of trust between the two parties, the company sponsoring the project may fail to pay for any adjustments necessary for the Hajj project. This would be bad news for the project and the project will not complete as successfully desired (The International Finance Corporation 2010). Changes in planning and design Altering the plan and design of the Hajj terminal is one of the risk factors that will affect the budgeting of the Hajj terminal. At first, contracts aimed at redeveloping the Hajj terminal were to be tendered in tiny packages. Nonetheless, this was later changed to two main packages whose tendering took place in January. Such changes greatly alter the budget because, what had previously been accounted for in the budget may not be compatible to what needs to be accounted for in the new budget (Harrison 2006). Cost Planning and designing a project entails preparing a budget based on the prices in the market. Unfortunately, the budget may face challenges due to fluctuations in price with time. A project like this one of the Hajj terminal whose construction is perceived to take more than five years will face this risk of cost fluctuation. Five years is a long time within which a lot of changes including changes in price will have taken place. While talking about fluctuation in price, it is with reference to the price of raw materials (The International Finance Corporation 2010). Quality The quality of raw materials used in the Hajj terminal should be of very high quality with the best design possible. The quality of these raw materials may improve with time and as common practice, this improvement will come in handy with an increase in price. This increase in price had not been budgeted for previously. On the other hand, since the contractors are interested in using the highest quality of materials that will be embodied to stand the test of time, they will be bent on using these high quality materials. This will subsequently alter the budget as the increase in price of the more quality materials that needs to be used for the construction process will have to be accounted for. Environment Changes in environment are a great risk factor while budgeting for the Hajj terminal. The area has a hot and humid climate. A temperature of 36 degrees Celsius is evident with a humid atmosphere of around 64%. High humidity is derived from sea breezes which in many occasions affect the comfort in the terminal. Rainfall is scarce and is mostly prevalent from November to January. During the construction of the project, sandstorms are a huge cause of straining the budget. Each time that a certain construction process is completed by the end of the day, it is at times destroyed by these harsh sandstorms. Subsequently, the construction will have to be redone. This had not been considered during the budgeting process and poses as a risk for the budget of the project (Oswald 1983). METHODOLOGY Research Design A cross sectional survey will be used to study the risk factors involved in budgeting the Hajj construction project. The study will entail in-depth interviews with the individuals charged with the responsibility of running the project for example the manager of the construction. The survey will be conducted on-site at the Hajj terminal in the KAIA airport in Jeddah, Saudi Arabia. It is easier to get respondents at the site than tracing their residential areas. In addition, being on the site of the area under study is important as I will observe some factors that could also be risks for the budgeting process of the Hajj construction project. I will also affirm respondents’ details by being onsite. Research Setting The Hajj terminal is among three other terminals of the KAIA. It is approximately 64 kilometers away from Mecca. It is under an upgrading process which will take place in three phases and the first phase has already been completed. The area is subjected to a hot and humid climate but frequently experiences harsh sand storms. The Hajj terminal is a tent shaped structure that occupies 120 acres of land and 2.8 million square feet. Plans are however underway to increase the capacity of this terminal and this means expansion with regard to land size. Participants My respondents will mainly include the administrators, managers and accountants of the project as they are the ones who are well versed with the details of the project. Purposive sampling will be used to sample the study population. Therefore, it will target the administrators, managers and accountants as they are the most resourceful individuals in providing information. The participants will be above 18 years of age. Data Collection Data collection will entail the use of data collection tools such as the questionnaire. The questionnaire will be used for pre-testing and during the actual field study. The pre-testing will be done with the trainees who will assist me in data collection. After the questionnaire has been pre-tested and adjusted accordingly, the actual data collection process will begin. It will entail structured open-ended and closed questions with correspondence to the research topic. The trainees and I will engage the participants in an interview session so as to fill in the questionnaires. Secondary data will also be used to gather information on risk factors involved while budgeting for the Hajj terminal construction project. Data Analysis First, answers from the open ended questions will be coded for ease in analysis. Information will then be enumerated into percentages to show different views in relation to proportions. The percentages will be converted to a graphical form for simplicity. Tables, graphs and pie charts are the formants in which data will be presented and conclusions will then be drawn. This will ensure precision and accuracy in data analysis and presentation. SPSS analysis will be used to derive relationships of the given data with regard to risk factors of budgeting. Conclusions will be drawn depending on set objectives and the hypothesis will be tested. Ethical considerations Ethical consideration is a very important domain that has to be kept into mind especially when carrying out a research. To start with, it is important for one to get approval letters that will enable him or her to carry out the research. I will get a letter of clearance from the university so that I can have a go ahead in carrying out my research. In addition, I will have to acquire a gate pass letter from the administrator in charge of the area site under study. In this case, I will obtain a letter from the relevant authorities permitting me to carry out my research. Before collecting information using the questionnaire, I will have to obtain the informed consent of the respondent. In this case, I will explicitly introduce myself by saying who I am and giving details of the purpose of my research. I will also explain why I need information from him or her. I will request the respondent to allow me to proceed by asking him or her a few questions. I will also tell him or her that she is free to withdraw from engaging in the research process. Privacy and confidentiality are some of the psychological risk factors of participants. A respondent may feel as if she or he is being investigated for some malicious or lawful purpose and this may exert psychological pressure on the respondents. I will therefore explain that the information given is solely for research and will not be provided to any other person. I will also explain the essence of privacy and confidentiality as a value of research. Therefore, it will not be appropriate and ethical if I gave out the information that I had obtained from them to other people. After the entire research process is complete and validated, the questionnaires will be burned since their will have ceased to function. An agreement in writing between the respondent and I will be prepared to confirm this if necessary. Questionnaire Serial Number _____________ Name of respondent __________ Gender _______ Position ______________ Date _____________ 1. 1. Do you think it is important to have a budget to govern a project? (Yes) (No) 2. If no, why? 3. What is your definition of a good budget 4. Does the Hajj terminal construction project qualify to be called a good and favorable budget? (Yes) (No) 5. Explain answer 6. Which people should be included during the budgeting process of any project? 7. Have there been strains in your budget as of now? (Yes) (No) 8. If yes, what is the estimate of adjustments made? (Record details) 9. How has the following factors affected the budget of the Hajj construction project Timing of the project Cost of raw materials Quality of raw materials Environment PPP 10. What action can be taken to ensure that the budget is favorable and applicable throughout the construction period of the budget 11. What do you propose should be put into consideration while preparing a budget for such future projects like this of the Hajj terminal References Bin Ladin Wins Hajj Terminal Job in Jeddah, 2006 16 December, viewed 29 May 2010< http://www.arabianbusiness.com/5140> Berger, H 1996, Light Structures of Light: The Art and Engineering of Tensile Architecture, Basel, Switzerland. Bush-Brown, A 1983, Skidmore, Owings, & Merrill: Architecture and Urbanism, Van Nostrand Reinhold Company Inc., New York. Cresswell, JW 1994, Research Design: Qualitative and Quantitative Approaches. Sage Publications. Economist Intelligence Unit. (2008). Saudi Arabia: Travel and Tourism Forecast, viewed 29 May 2010 Ernst & Young 2008, Bridging the Gap: Private investment in Middle East infrastructure, UK. Frank, S 2010, Hajj Terminal in Saudi Arabia Selected to Receive 2010 AIA Twenty-five Year Award. American Institute of Architects, Washington Hajj Terminal in Saudi Arabia Selected to Receive 2010 AIA Twenty-five Year Award, Artdaily.org, 2010, 30 May viewed 29 May 2010< http://www.artdaily.com/index.asp?int_sec=11&int_new=36028&int_modo=1> Harrison, R 2006, Work on New Jeddah Airport to begin by September, Arab News. 6 September, viewed 29 May 2010 Oswald, WG 1983, Skimore, Owings & Merrill: Architecture and Urbanism 1973-1983, Van Nostrand Reinhold Company, New York. The International Finance Corporation 2010, Saudi Arabia: Hajj Airport Terminal, Pennsylvania Avenue, Washington. . Read More