ASSESSMENT OF RISK ON ROAD PROJECTS IN NIGERIA CONSTRUCTION INDUSTRY
ASSESSMENT OF RISK ON ROAD PROJECTS
IN NIGERIA CONSTRUCTION INDUSTRY (A CASE STUDY OF LAGOS METROPOLIS)
Consequences of uncertainty and its exposure in a
project, is risk. In a project context, risk is the chance of something
happening that will have an impact upon objectives. It includes the possibility
of loss or gain, or variation from a desired or planned outcome, as a
consequence of the uncertainty associated with following a particular
course of action. (Deviprasadh, 2007). Risk thus has two elements: the likelihood
or probability of something happening, and the consequences or impacts if it does. Managing risk
is an integral part of good management; it is fundamental to achieving good
business and project outcomes and the effective procurement of goods and services Risk management provides a structured
way of assessing and dealing with
future uncertainly. Project risk management includes the processes concerned with identifying, analyzing, and responding to
project risk. It includes maximizing the
results of positive events and minimizing the consequences of adverse
events." (Deviprasadh, 2007).
Project Management Institute (2004) defines project risk
as an uncertain event or condition that, if it occurs, has a positive or a negative effect
on at least one project objective, such as
time, cost, scope, or quality. A risk may have one or more causes and, if it occurs, one or more impacts
Construction projects vary in type and nature and a large number of people with professional skills. The variations
are endless, but what all projects
have in common is their exposure to risk (Flanagan and Norman, 1999).
Civil engineering is the branch of engineering
that deals with the creation, improvement, and protection of the
communal environment, providing facilities for living, industry and
transportation, including large buildings, roads, bridges, canals, and
other engineered constructions (Stark, 2008). It is characterized by its high magnitude,
uncertainties and the level of risk involved (Seeley and Murray, 2001). Civil
engineering is a professional engineering discipline that deals with the
design, construction,
and maintenance of the physical and naturally built environment, it is traditionally broken into several sub-disciplines
including environmental engineering, geotechnical
engineering, structural engineering, transportation engineering, municipal or urban engineering, water resources
engineering, materials engineering. Coastal engineering, surveying, and
construction engineering. (Oakes 2001).
Civil engineering takes place on all levels:
in the public sector and in the private sector from individual
homeowners through to international companies (ICE, 2007), Civil engineering
was first introduced as a profession in 1828 and the Royal charter of the
Institute of Civil Engineers (2007) defined civil engineering as the art of
directing the great sources of power in nature for the use and
convenience of man, as applied in the construction of roads, bridges,
aqueducts, canals, river navigation and docks, and in the
construction of ports, harbours, moles, breakwaters and lighthouses, and in the art of navigation
by artificial power for the purposes of commerce, and in the construction and application of machinery, and in
the drainage of cities and towns (ICE,
2007). Construction engineering is a civil engineering sub discipline that involves
planning and execution of the designs from transportation (Wikipedia, 2011). The
modes of transportation as identified by Lam (1999) are roadways, railways, waterways, and airways. A road is a route on land
between two places which typically has been paved or other wise improved to allow travel by some
conveyance (Wikipedia, 2011).
Cost overruns and delays are not unusual in
civil engineering works. This pattern of risk is' largely
influenced by the financial structure of the projects (Lam, 1999).
During
limes of foreign exchange and interest role fluctuations, most conventional
projects funded by direct capital injection from the governments may be
affected by cost increases in their imported elements. The use of project
finance in privatized projects also means that lenders rely solely on the
prospective income stream for repayment of their loans. Late
completion will erode the financial plan and extra interest
costs on the part of the sponsors. There are also uncertainties as to the level
and stability of income which depends on the market condition of the
product in question. In road project, land acquisition can be a slow
and expensive process especially when a long road has to go through
different municipalities or different provinces having non-standardized land resumption
procedures. Right of way disputes sometimes creep in, as is the likelihood of
treading on archeological mines and former industrial
site with contaminated grounds (Lam, 1999).
There are many examples of non-achievement of time, cost
and quality of projects due to the absence of risk management
techniques in project management. Therefore, the success
parameters of a construction project, namely, the timely completion, staying
within the specified budget, and achieving requisite performance would depend
upon the capability of each party in risk management. (Perera, 2009).
1.2
STATEMENT OF THE PROBLEM
As construction and engineering projects increases in
complexity, the magnitude of risk involved for all the parties
involved increases, from the clients, to contractors, architects, quantity
surveyors, engineers, investors, and financial institutions (Seeley &
Murray, 2001). Risk has been studied by different researchers (Farinloye 2009: Onukbwe 2009; Dada and Jagboro, 2007; Baker
1999; Perera et al, 2009) in the light of the
influence it has made in decision making in the construction industry and the techniques that could be used by
the design and construction team in the management of risk on construction
projects.
Farinloye et al.,
(2009) assessed the construction professional's perception of risk impact
on cost of building projects and concluded that completion delay is the risk variable
that has the highest probability of occurrence and this risk has the second highest
impact on construction cost. Onukwube et al., (2009) also assessed risk in the light
of the impact it has on contractors' pricing in building projects and concluded
that
inadequate cash flow had a significant impact on contractors pricing of
building projects. These studies were
limited to building projects in
Dada and Jagboro (2007)
carried out an evaluation of the impact of risk on project
cost overrun; they identified the risk factors inherent in different building
procurement methods and assessed their impact on project cost. However, this
study was limited to risk factors in relation to building procurement methods
and the impact on cost. Baker et al., (1999) examined the risk response techniques employed
for major projects and they concluded that the construction
industry concentrates almost exclusively on reduction of financial
risk. Perera et al., (2009)
also assessed risk in civil engineering construction, they
identified the risk responsibilities of contractual parties’
in order to improve their risk handling strategies but the study was limited to road
construction in
Therefore, this study becomes vital to fill
the gaps identified above as the research works identified did not
cover the impact of risk on road projects in Nigerian Construction
industry. In the light of this, the following research questions are raised:
1.3 RESEARCH
QUESTIONS
i.
What are the risk factors inherent in
road project?
ii.
What are the effects of risk on the duration of road?
iii.
How do these factors affect the total
construction cost of road project?
1.4 AIM
AND OBJECTIVES
The
aim of this research is to examine the impact of risk on road projects in
Nigerian construction industry. The specific
objectives are to;
i.
Identify and assess the various risk factors
associated with road project in Nigerian construction
industry.
ii.
Determine the effect of risk factors on cost
of road project in the study area.
iii.
Determine the effect of risk factors on
completion time of road project in the study area.
1.5 JUSTIFICATION OF THE STUDY
Civil engineering works encompass a wide range of
different projects which are of great magnitude. Vast cuttings and
embankments, mass and reinforced concrete structures, large structural
steel construction, reservoirs, sewage schemes, piling for
heavy foundations, harbor works, dry docks, roads, canal and railways, all form
subject matter of civil engineering contracts.
These works require considerable skill and
technical knowledge in both their design and construction. Continual changes in nature and methods of
construction in these projects, and the increasing size and complexity of these works increases the risk
involved (Seeley & Murray, 2001). Road projects however often confront many
uncertainties, due to factors such as resource
availability, the physical, economic and political environments, statutory
regulations, etc.(Perera et al., 2009).
According to Wang and Chou (2003), such risks have a significant effect on the
outcome of a road construction process.
Assessing risk offsets negative impact
it may have and pursue positive impact (PM1, 2004). The
study therefore becomes necessary to identify the impact of risk on road projects with a view to providing
information to construction professionals in reducing to the barest minimum the risk associated with
road projects in
1.6
SCOPE AND LIMITATIONS OF THE STUDY
This study focused on the assessment of the
impact of risk on road projects in
1.7 RESEARCH METHODOLOGY
The approaches that were
adopted to achieve the stated objectives include the following: primary and secondary data source.
The primary source of data was generated
through questionnaire survey administered to construction professionals in
civil engineering construction and consulting companies,
and professionals that coordinate road project in the federal and state
ministries in the study area. The survey was carried out in order to assess the
risk-factors inherent in road
projects in terms of their degree of severity and assess their impact on total
cost and duration of the project.
The secondary source of data included
reports such as published textbooks, refereed conference
proceedings; dissertation or theses and government publications which focus on the theme of the
research.
EDITOR SOURCE: Assessment Of Risk On Road Projects In Nigeria Construction Industry
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