RISK MANAGEMENT IN CONSTRUCTION PROJECTS

Thesis Overview

<p><b>1.0 INTRODUCTION&nbsp;</b></p><p><b>1.0 BAKGROUND STUDY</b></p><p>The construction industry in Tanzania has been expanding its participation in the market, mainly because of the increasing demand of infrastructure and building construction industries. According to Kerzner (2002), with this increase of demand, it is necessary to include risk management in project planning and management so as to identify, assess, manage and control the risks that would be adverse to the project goals. The construction industry is a vehicle through which a nation‟s physical developments are activated by initiating projects from the blue print stage to the implementation. The implementation and materialization of such projects inevitably can bring about benefits to the people and to the nation at large, thus satisfying the aspiration of national progress, growth and in uplifting the status of the national economy (Ministry of works, 2003). Risks are considered as the probability of an unfavorable outcome arising from a decision (Wood and Ernest, 1977).&nbsp;</p><p>In the construction management domain, Perry and Hayes (1985) define risk as an exposure to economic loss or gain arising from involvement in the construction process. A project is said to be successful when the objectives of that project are met within allocated time period, budgeted cost, and within required specifications. One of the most single important things someone can do to ensure a successful project is managing risks. A risk is anything that could adversely affect project schedule, cost, quality or scope. That is a risk may impact project performance, cost, time and scope targets (Lewis, 2011). Risks are unavoidable in almost every construction project whether if it is building projects, civil works, or any other type of construction projects.&nbsp;</p><p>Risk is inherent in all human endeavors, including construction activities, and the risk factors involved are diverse and varied. Managing construction project risks is considered as compulsory for any project to be successful. Thus, this paper is aiming at providing comprehensive discussion on concepts of managing risks in construction projects.</p><p><b>1.2 STATEMENT OF THE STUDY</b></p><p>In construction projects, project stakeholders face the risk of cost overruns, schedule delays, and even waste, fraud, or abuse. Environmental, quality, and safety factors are also representing sources of risks. And further in some projects, managers run the risk of generating political controversy at the federal, state, or local level. An absence of concern on risk assessment and management could lead to several serious problem, resulting in unachievable goals and unmet expectations. It is common in our country and even in other places for problems such as delays to occur in project completion, it is necessary for managers and project teams to ensure such common problem can be eliminated in future by applying the theoretical concepts of project management such as managing risks into practice despite of numerous limitation and pressures.&nbsp;</p><p>Delays, incompletion, cost overrun, unsafe site condition and poor quality in construction projects resulting from lack of awareness on risk aspects are intolerable excuses. Thus, managing risks effectively requires implementing a structured, well thought- out risk management plan. Although managers cannot eliminate risk entirely, they can minimize it by monitoring project's risks, developing strategies to mitigate them, and establishing fallback positions and contingencies.</p><p>&nbsp;Managing risks also can lead to more creative and efficient management techniques, such as innovative financing, new methods of accountability and control, and increased options for contractual arrangements.&nbsp;</p><p><b>1.3 RESEARCH OBJECTUVE</b></p><p>&nbsp;i. Main Objective To assess the management of risks in construction projects&nbsp;</p><p>ii. Specific objectives a) To determine types of risks commonly found in construction projects b) To evaluate the level of risks in construction projects c) To suggest measures for managing risks in construction projects</p><p>&nbsp;3 1.4 Research questions a) What are the risks associated in&nbsp;</p><p>construction projects b) To what extent are risks i construction projects c) What measures to be taken in order to manage risks in construction project 1.5 Significance of the research The Development of infrastructure is one of the most important activities that can boost up the business of the various Industries, thereby increasing the Gross Domestic Product (GDP). Due to this fact countries stress on infrastructure development and provide finances for the same in their yearly budget. The various such projects are in themselves vast and big and involve a lot of money. This vastness of each Project leaves lot of scope for various problems from clearances to land acquisition, wastage, unforeseen delays, natural calamities etc., leading to time and cost overrun in the project. The cost overrun can be of huge magnitude in a project involving large amount of money. The importance of risk management is to protect the continuity of risky operations by contractors. Also this research will help contractors to know and understand about the vulnerable risks in construction projects in Tanzania.&nbsp;</p><p>Generally, this research of will help contractors to identify and quantify all risks to which the business or project is exposed so that a conscious decision can be taken on how to manage the risks. It must be practical, realistic and must be cost effective. Apart from being beneficial to contractors, this research will also be a good reference in the subject matter. The loss of services given by the project during the time by which the project overruns can be enormous if put into monetary terms. Hence, to reduce the losses efficient management of a construction project is required.&nbsp;</p><p>Application of various project management techniques have to be made from the conception to the completion stages which includes managing the various risks associated with the project in its every stage.&nbsp;</p>