Managing Risk in Construction Projects

Investment in any new project invariably carries risk but the construction industry is subject to more risk and uncertainty than perhaps any other industry. This guide for construction managers, project managers and quantity surveyors as well as for students shows how the risk management process improves decision-making. Managing Risk in Construction Projects offers practical guidance on identifying, assessing and managing risk and provides a sound basis for effective decision-making in conditions of uncertainty. The book focuses on theoretical aspects of risk management but also clarifies procedures for undertaking and utilising decisions. This blend of theory and practice is the real message of the book and, with a strong authorship team of practitioners and leading academics, the book provides an authoritative guide for practitioners having to manage real projects. It discusses a number of general concepts, including projects, project phases, and risk attitude before introducing various risk management techniques. This third edition has been extended to recognize the reality of multi-project or programme management and the risks in this context; to highlight the particular problems of risk in international joint ventures; and to provide more coverage of PFI and PPP. With case studies and examples of good practice, the book offers the distilled knowledge of over 100 man-years of experience in working on all aspects of project risk, giving sound practical guidance on identifying, assessing and managing risk.

Table of Contents:
Preface Authors Biographies Acknowledgements 1 Projects and Risk 1.1 Construction projects 1.2 Decision making 1.3 Risk management strategy 1.4 Project planning 1.5 Summary 2 The Project Environment 2.1 Projects 2.2 The project constitution 2.3 Project organisation 2.4 Project phases 2.5 Effect of project phase on risk 2.6 Project appraisal 2.7 Summary 3 Understanding the Human Aspects 3.1 Risk management - context 3.2 Risk management - organisations 3.3 The risk management process 3.4 Some guidelines to the risk management process 3.5 The risk workshop 3.6 Communication 3.7 Summary 4 Qualitative Methods and Soft Systems Methodology 4.1 Qualitative risk assessment 4.2 Review of project programmes and budgets 4.3 The risk log 4.4 Using a risk log to formulate risk management strategy 4.5 Qualitative methods 4.6 Soft Systems Methodology 4.7 Case Study: SSM in use in the placement of construction projects 4.8 Summary 5 Risk and Value Management 5.1 Introduction 5.2 Approaches to the management of risk 5.3 The standard risk management model 5.4 Applying risk and value management 5.5 Value management processes 5.6 Understanding the project risk 5.7 Applying value and risk management 5.8 Iteration of the process 5.9 Summary 6 Quantitative Methods for Risk Analysis 6.1 Sanction 6.2 Project appraisal and selection 6.3 Project evaluation 6.4 Engineering risks 6.5 Risk management 6.6 Probabilistic analysis 6.7 Response to risks 6.8 Successful risk management 6.9 Principles of contingency fund estimation 7 The Contribution of Information Technology to Risk Modelling and Simulation 7.1 Purpose of RMS 7.2 When to use RMS 7.3 Requirements of the analyst 7.4 Modelling and simulation 7.5 Modelling using RMS 7.6 Data management 7.7 Analytical mechanisms 7.8 Classification of RMS 7.9 Selection of RMS 7.10 Modelling a project for risk management 7.11 Data requirements for realistic modelling 7.12 Choice of variable distribution 7.13 Case study 7.14 Case study simulations 7.15 Analysis of the result 7.16 Discussion of findings 7.17 Summary 8 Risk Allocation in the Contracting and Procurement Cycle 8.1 Typical contracting and procurement processes 8.2 Value planning case study 8.3 Known and unknown risks in contracts 8.4 Risk allocation strategies 8.5 Risk allocation according to payment mechanism 8.6 Contract award 8.7 Summary 8.8 9 Managing Financial Risks in Major Construction and PFI/PPP Projects 9.1 Project financing 9.2 Types of finance 9.3 Appraisal and validity of financing projects 9.4 Typical financial risks 9.5 Promoter 9.6 Financial risk in concession contracts 9.7 Global and elemental risks in concession contracts 9.8 Summary 10 Risks in International Construction Project joint Ventures 10.1 Background 10.2 Concept of joint Venture 10.3 Motives for joint Venture Formation 10.4 Assessing Joint Venture Success 10.5 Case Study 10.6 Summary 11 Risk Management at Corporate, Strategic Business Unit and Project Levels 11.1 Introduction 11.2 Risk management 11.3 The risk management process 11.4 Benefits of risk management 11.5 Recognising risks 11.6 Why risk management is used 11.7 Model for risk management at corporate, strategic business and project levels 11.8 Summary 12 Case Studies 12.1 Introduction2 12.2 Case study - heavy lift vessel design and fabrication programme risk assessment 12.3 Risk identification 12.4 High Speed 1 12.5 Brief history of HS1 12.6 The risk management process 12.7 Risk assessment, analysis and response 12.8 Summary of the preliminary schedule risk analysis results 13 Risk in a Multi-Project Environment 13.1 Introduction 13.2 Drivers for the Multi-project approach to project delivery 13.3 A conceptual model of the Multi-project Environment 13.4 Risks that are unique or amplified in a Multi=project Environment 13.5 The change in mind-set required to manage risk in a Multi-project Environment 13.6 Summary References 14 Guidance in Practical Risk Management 14.1 Decision making 14.2 Preparation for risk management 14.3 Risk Management Process 14.4 Models 14.5 Uncertainty 14.6 Socio-technical approach to risk 14.7 Summary Index

About the Author :
Nigel J. Smith is Professor of Project & Transport Infrastructure Management at the School of Civil Engineering, University of Leeds Tony Merna is Senior Partner of Oriel Group Practice and a lecturer for Manchester Business School Worldwide. Paul Jobling is a managing consultant with Kingsfield Consulting