Professional Documents
Culture Documents
PGPM 31 Nicmar Assignments
PGPM 31 Nicmar Assignments
PGPM 31 Nicmar Assignments
ASSIGNMENT
NICMAR/CODE OFFICE
1. Course No.
PGPM 31
2. Course title
3. Assignment No.
4. Date of Dispatch
ASSIGNMENT
For the successful implementation of a project, it is essential is that persons involved in
its implementation be sensitive to the risk involved in the project and formulate the most
suitable structure for the management of such risks. There are certain variables and
uncertainties are common to most of the infrastructure projects. Many risk mitigation
techniques are applied to infrastructure projects. Discuss in details the risk management in
construction with special reference to any project currently in progress with your company.
SYNOPSIS
Introduction
Risk identification in the project
Types of risk
Risk mitigation
Risk assessment in a project
o Scope of the work
o Risk assessment sheet
o Risk control measures
Conclusion
INTRODUCTION
The project of any industry depends upon the following uncertainties
1. Time
2. Money
3. Manpower and
4. Resources
It is also a key factor to note that as the project value increases, the risk also increases. But
as project duration decreases, the risk also increases. Thus on the successful running for a
project, optimum duration and optimum utilization of the resources are the most important to
be considered. Thus risk minimization is the most key role for project profit maximization by
any project manager.
In the present assignment, I have tried to assess the risks involved in the project at which I
have involved in my career. I have also explained the risk mitigation techniques undertaken
by us to reduce the risk in the project.
2. Construction Phase
Among the most common risks encountered during the construction of a project by a
civil engineering contractor under a standard type of construction contract, are the following:
1. Design errors, quantification errors.
2. Design changes found necessary, or required by the employer.
3. Unforeseen physical conditions or artificial obstructions.
4. Unforeseen price rises in labour, materials or plant.
5. Theft or damage to the works, or materials and equipment on site.
6. Weather conditions, including floods or excessive hot weather.
7. Delay or inability to obtain materials or equipment required.
8. Inability to get the amount or quality of labour required, or labour strikes.
9. Errors in pricing by the contractor.
RISK MITIGATION
The following are the ten ways to mitigate risk in construction projects
1. Ensure the adequacy of project funding
2. Obtain more geotechnical information
3. Conduct constructability reviews
4. Set realistic contract performance times
5. Work & rework cost information
6. Introduced phase pricing
7. Pre-plans for permits, utilities & zoning
8. Pre-defined rates, equations & procedures
9. Use experienced project personnel
10. Use the contracting process as a risk avoidance measure
The above techniques are the most commonly used to prevent the risk in any project.
Ensure the adequacy of project funding
Certainly, all parties have a legitimate concern that there will be sufficient funds to
design and construct the project. Owners also need protection against the risk of running out of
money. such as that provided by a termination-for-convenience clause that expressly limits or
precludes recovery of anticipated but unearned profits.
Furthermore, owners need to understand, in advance, that changes and cost increases
are virtually inevitable. Accordingly, a reasonable contingency should be incorporated into the
budget to deal with inevitable changes and unexpected omissions.
self-performed work and even overhead and profit. In doing so, the owner and its staff can
better assure themselves that no significant mistakes have been made in pricing .the work and
that allowances and alternatives are reasonable.
Introduced phase pricing
As the design is being developed, each phase of the design can be provided to the
contractor for review, analysis and submission of progressive cost estimates. Obviously
contractors may talk at this intrusion into their pricing domain.
However, in order to win the project, the contractor will be more likely to agree to this
process which in the end will reduce the likelihood for cost-overrun claims.
Pre-plans for permits, utilities & zoning
Given the various regulatory requirements that have to be complied with in the course
of designing and constructing a project, it is obvious that, if these requirements are not known
and considered in advance delays will result.
To avoid this astute owners and their engineers are now beginning to specifically
identify permitting requirements in advance of bidding and signing the contracts
Pre-defined rates, equations & procedures
In order to eliminate many issues from the contract administration phase, smart owners
will specify clear and accurate formulae or methods to predetermine values for disputable
items. Home office overhead rates, although subject to wide variation within the industry, can
be preset and a contract generally accepted manual for determining the equipment rates to be
used in, pricing change orders.
It is equally important for the contract to contain very clear provisions with respect to
how change orders will be processed and what information should be included in a request for
change orders.
The same is true for farceaceount provisions; which would enable the contractor to be
paid on a timely is for disputed work, pending negotiation of a change order modification. Also
give some consideration to including as a unit price. A per diem value for extended project
time.
In the event of an owner-caused delay.this value could be included in any cbange order
carrying with it entitlement to an extension of time.
Location
Mumbai, India
Project definition
3765 days
Type of contract
Project funding
Design responsibility
Price fluctuation
Not allowable
Extension of time
Not permitted
Liquidated damages
considered
Project Summary
The project considered for analysis is the construction of an underground corridor for metro rail
operations in the capital city of an emerging economic nation in South Asia. Phase-I of the project is
about 65 kms with 59 stations. The estimated capital cost of Phase-I is about INR 105 billion. The
project under study for this research work is a part of Phase I. The scope of work is the design and
construction of a 6.6 km underground metro corridor with six underground stations and a twin tunnel
system. The underground stations are referred to as S1, S2,. S6. Here S6 is the terminal station
equipped with an over-run tunnel (where an up train can be converted to a down train). The client is a
public sector company floated jointly by the State and Central
Government.
The principal contractor is a Joint Venture (JV) of three foreign contractors and two
domestic contractors. The type of contract is a Design Build Turnkey (DBT) where the principal
contractor is required to design the underground corridor and execute the project. The project cost for
the execution of 6.6 kms is about INR 18 billion. The contract period is about five years (exclusively
for execution).
Table 1: Major Activities and their Time Estimates in the Underground
Corridor Construction Project (Terminal Station S6)
Activit
y A
B
C
D
E
F
G
H
I
J
K
Descripti
on
Feasibility studies
Design
Technology selection
Traffic diversion
Utility diversion
Survey works
Shoulder / King piles
Timber lagging
Soil excavation
Rock excavation
Fabrication and erection of
Immediate Duratio
Predecesso
n
1875
A
29
rs A
(Days
90
5
B,
47
)
C
31
E
5
B,
29
5
D
35
E
0
C
24
6
G,F,H
33
0
L,
16
0
C
17
R
5
constructionand
decks
0
Fabrication
erection of steel
C
69
L
Rock anchor installation
N,
28
M
struts
0
Shotcreting
& rock bolting
L,
12
N
O
5
Subfloor drainage
Q
17
O
R
0
Water proofing
I,K,J,M
12
P
0
Diaphragm wall construction
C
14
Q
0
Top down construction
Q
12
R
5
Permanent structure
N,
57
S
2
Mechanical / Electrical
P,
22
T
O
0
Backfilling
N,
22
U
installations&&restoration works
S
5
ES: Early Start; EF: Early Finish; LS: Late Start; LF: Late Finish
O
5
services
ES
0
1875
1875
2280
1965
2280
2755
1965
3111
2655
1965
EF
1875
2170
1965
2755
2280
2570
3111
2205
3411
2820
2135
LS
0
1985
1875
2280
1965
2821
2755
2871
3111
3276
2941
LF
1875
2280
1965
2755
2280
3111
3111
3111
3441
3441
3111
1965
2280
2655
2110
3441
1965
2110
2280
3561
2280
2655
2565
2775
2280
3561
2110
2232
2850
3786
2505
2421
3156
2871
2821
3441
2604
2749
2991
3561
3561
3111
3441
2991
2991
3561
2749
2871
3561
3786
3786
METHODOLOGY
Risk Analysis by Expected Value Method (EVM)
Assume a network of deterministic time and cost. We also assume that the critical path
model network has N activities which are indicated by j = (1 N) and there are M risk
sources indicated by i = (1..M). We extend the work of Roetzheim (1988) and Nicholas
(2007), and explain, in this section, the concept of risk analysis by the Expected Value
Method (EVM).
Define the variables as follows:
Lij
Wij
Iij
CLFj
CIFj
BTEj
BCEj
CCj
CTj
RCj
RTj
ECj
ETj
Base time estimate (BTE) of the project is the estimated basic project duration
determined by critical path method of the project network. Similarly, the estimated basic cost
of project determined by the cost for each activity is termed as the base cost estimate (BCE).
The BTE and BCE data of all the major activities of the project have been obtained as per the
detailed construction drawings, method statement and specifications for the works collected
from the project. The corresponding corrective time (CT) or the time required correcting an
activity in case of a failure due to one or more risk sources for each activity and their
corresponding corrective cost (CC) have been estimated based on the personal experiences and
have been tabulated. An activity may have several risk sources each having its own likelihood
of occurrence. The value of likelihood should range between 0 through 1.
The likelihood of failure (Lij) defined above, of the identified risk sources of each
activity were obtained through a
experts and professionals involved in and associated with the project under analysis and also
other similar projects. The corresponding weightage (Wij) of each activity has also been
obtained from the feedback of the questionnaire survey circulated among experts. The
summation of the weightages should be equal to 1.
M
Wij = 1 for all j ( j = 1 . N) .
(1)
i1
The weightages can be based on local priority (LP) where the weightages of all the subactivities of a particular activity equal 1. Also, weightages can be based on global priority
(GP) where the weightages of all the activities of the project equal 1. The mean of all the
responses should desirably be considered for analysis. Inconsistent responses can be modified
using a second round questionnaire survey using the Delphi technique. The next step is to
compute the risk cost (RC) and risk time (RT) of the activities of the project. RC and RT for
an activity can be obtained from the following relationship:
Risk Cost for activity j (RC)j = (CC)j x Lj
for all j.
(2)
(3)
The total risk time for an activity is the summation of the risk time of all the sub
activities along the critical path.
The likelihood (Lij) of all risk sources for each activity j can be combined and
expressed as a single composite likelihood factor (CLF)j. The weightages (Wij) of the risk
sources of the activities are multiplied with their respective likelihoods to obtain the CLF
for the activity.
The impact of a risk can be expressed in terms of the effect caused by the risk to the
time and cost of an activity. This time impact and cost impact can be considered as the risk
time and risk cost of the activity. A similar computation as that of likelihood can be done for
obtaining a single combined composite impact factor (CIF) by considering the weighted
average as per the relationship given below:
M
Composite Impact Factor (CIF)j = Iij Wij
(5)
i1
M
0 Iij 1 and Wij = 1 for all j.
i1
Risk consequence or severity can be expressed as a function of risk likelihood and
risk impact. Thus the numerical value will range from 0 to 1. This severity can also be
expressed in terms of qualitative rating as no severity for value 0 and extremely high
severity for value 1. The numerical value of the Risk Severity (RS) is obtained from the
below mentioned relationship:
Risk Consequence / Severity (RS)j = Lj x Ij for all j
..
(6)
The risk consequence derived from this equation measures how serious the risk is to
project performance. Small values represent unimportant risks that might be ignored and large
values represent important risks that need to be treated.
The expected cost (EC)j and expected time (ET)j for each project activity and
subsequently the computation of the expected project cost and time was carried out
from
..
(7)
. (8)
CASE ANALYSIS
The sample stretch under analysis consists of a 530 metre(m) cut and cover tunnel
connecting station S5 and S6, a 290m S6 station box and a 180m cut and cover over run
tunnel adjoining the S6 station box. S6 station being the terminal station, the down trains
towards this station after leaving station S5 will travel through the 530m cut and cover
tunnel and enter the platforms of the terminal station S6. After the commuters vacate the train
at this terminal station, this down train will travel through the 180m over run tunnel and will
be converted into an up line train which will travel from station S6 to S1.
The activities of the sample stretch under analysis consist of the installation and erection
of temporary supporting and retaining structures to enable construction by cut and cover
technology and for the construction of permanent structures like tunnels and station boxes
which are RCC single boxes / twin boxes for tunnels and RCC boxes with intermediate
concourse slab for station boxes.
We have considered some basic assumptions during the analysis. These assumptions
are (i) the maximum cost overrun permissible is 25 % of the basic cost estimate beyond which
the project becomes less feasible and (ii) the maximum permissible time overrun
for infrastructure projects is about 30% of the base time estimate, beyond which the feasibility
of the project reduces.
Risk
Nomenclature
Description
FPR
PEPR 1
PEPR 2
EPR 1
EPR 2
EPR 3
EPR 4
EPR 5
EPR 6
EPR 7
EPR 8
EPR 9
EPR 10
EPR 11
EPR 12
EPR 13
EPR 14
EPR 15
EPR 16
EPR 17
EPR 18
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
TOTAL
Base Cost
Corrective
Risk
Base
Cor.
Risk
Exp
Exp
EC
ET
Estimate
Cost
Cost
Time
Time
Time
Cost
Time
(BCE)j
(CC)j
(RC)j
Estimate
(CT)j
(RT)j
(EC)
(ET)j
Hig Hig
Days
j
Days
0.348
393.24 INR
260. 2268.
0.356
87.22
121. 382.2
88
24
0.27
22.95 Milli
4
112.9
392
2588.2
0.319
113.25 53.7
on
2
0.262
69.95 121.5 5384.9
961
5335.9
0.186
45.94 11.61
.
0.28
99.68 888
269.4 5455.6
4285.3
7
0.252
45.36 076
24.0
102
0.377
77.29
195. 8407.2
257
0.419
58.66
103. 6223.6
994
0.398
44.97
162. 9214.9
464
0.367
178
389. 68
984
0.345
86.25
66.9 7371.2
915
6
0.343
63.46 104.1 323.4
74
5
0.306
39.78
77.7 209.7
8
0.384
36.48 129
151.9 6156.4
48
8176.9
0.278
31.97
76.4
488
0.227
19.98
97.5 8141.9
576
7662.5
0.223
92.55 933.0
244
8296.6
0.398
71.64 386.6
195
0.354
57.7
317.0 5282.7
446
4
884.47 3969.
4670.
122
56
2026 47
As per Figure 1 which represents the critical path diagram of the entire
INR
240
Million
110
40
50
100
10
220
20
150
80
120
300
50
80
60
120
60
80
800
300
250
3240
INR.
60
Million
32
10
11.9
82.4
8.66
176.465
15.975
122
56
108
245
49.2
70.3
58
83.2
59.2
77.2
596.5
217.7
189.3
2329
INR
(BTE)j
20.88
1875
Millio
Days
11.392
295
n
2.7
90
3.7961
475
21.5888
315
1.61076
290
49.4102
356
4.0257
240
45.994
330
23.464
165
42.984
170
89.915
690
16.974
285
24.1129
260
17.748
170
31.9488
120
16.4576
145
17.5244
122
133.019
570
86.6446
225
567.0122
225
729.202
3786
Days
1130
245
85
355
267
247
356
180
205
140
113
485
250
185
130
95
115
88
415
180
163
project of the underground corridor construction, and Table 4, for activity A (feasibility
her
8
tha
10.
.
n6.7
36
7.5
BC
57
21.
9
E
16.
59
22.
11
20.
46
30.
13
29.
66
35.
33
29.
82
33.
97
30.
95
29.
14
26.
58
27.
62
21.
43
16.
91
28.
63
26.
88
22.
8
51
her
20.9
tha
29.5
725.
n
723.8
BT
5
22.2
415.8
E
12
418.
8
23.4
9
35.5
226.4
525.
630.2
8
24.4
623.
130.
4
22.0
4
16.3
516.2
731.8
425.6
423.3
5
6
studies) the CLF is 0.348 as obtained from the feedback of the questionnaire survey (refer
appendix 2). The base cost estimate (BCE)j for the activity feasibility studies (A) is INR
240 Million, the corrective cost (CC)j is INR 60 Million (assumed in consultation with
experts); the base time estimate (BTE)j is 1875 days; the corrective time (CT)j is 1130
days (assumed in consultation with experts).
As per equations (2) and (3), Risk cost (RC)j = 0.348 x 60 x 106 = INR 20.88 x 106;
Risk time (RT)j = 0.348 x 1130 days = 393.24 days. Thus as per equations (7) and (8), the
expected cost (EC)j = BCEj + RCj
Base
Risk
Base
Risk
Expected
Expecte
Cost
Cost
Time
Time
Cost (INR
d Time
Estimat
e3240
(INR
(INR
729.2
Million)
Estimate
3786
(Days)
(Days
884.47
)
Million)
3969.2
(Days)
4670.47
Milion)
Thus as per the analysis, the EC of the project is 22.51 % higher than the BCE of the
project. The ET of the project is 23.36 % higher than the BTE.
assumptions considered for risk management analysis the cost overrun should not exceed 25%
of the estimated base cost and the time overrun should not be more than 30% of the estimated
base time. Exceeding these limits would increase the chances of the project becoming less
feasible. The risk management analysis predicts that the expected cost of the project is
22.51% higher than the estimated base cost. This situation is highly alarming as it is the upper
limit of the permissible cost overrun. It requires meticulous planning and proper risk
mitigation measures to enhance the probability of success of the project. The expected time
predicted from the analysis is 23.36% higher than the estimated base time which is close to
the upper limit of the permissible time overrun. Thus it is essential to judiciously follow
the risk mitigation measures to ensure that the project is completed within the scheduled time
frame.
Composite
Description of project
Likelihood
Impact
risk (activity)
Factor
Factor
(CLF)j
(CIF)j
0.348
0.393
0.27
0.319
0.262
0.186
0.28
0.252
0.377
0.419
0.398
0.367
0.345
0.343
0.306
0.384
0.278
0.227
0.223
0.513
0.254
0.875
0.868
0.829
0.784
0.809
0.832
0.827
0.818
0.863
0.816
0.842
0.828
0.86
0.827
0.806
0.858
0.872
0.837
0.811
0.845
0.544
FPR (A)
PEPR 1 (B)
PEPR 2 (C)
EPR 1 (D)
EPR 2 (E)
EPR 3 (F)
EPR 4 (G)
PER 5 (H)
PER 6 (I)
EPR 7 (J)
EPR 8 (K)
EPR 9 (L)
EPR 10 (M)
EPR 11 (N)
EPR 12 (O)
EPR 13 (P)
EPR 14 (Q)
EPR 15 (R)
EPR 16 (S)
EPR 17 (T)
EPR 18 (U)
Severity
Quantitative
Qualitative
CLFj x CIFj
0.305
0.341
0.224
0.25
0.212
0.155
0.232
0.206
0.325
0.342
0.335
0.303
0.298
0.284
0.247
0.329
0.242
0.19
0.181
0.433
0.138
V. High
V. High
V. High
V. High
V. High
Medium
V. High
High
V. High
V. High
V. High
V. High
V. High
V. High
V. High
V. High
V. High
High
High
V. High
Medium
The risk severity analysis has also been carried out by PERT analysis and the outcome of both
the EVM and PERT analysis in terms of the severity of the major activities of the project is
presented in Table 8
Table 8: Outcome of Risk Severity analysis by Expected Value and PERT
V.High
High
Medium
Design Technology
Survey Backfilling
selection
down
&
Electrical Works,
Diaphragm
Permanent Structure
wall Steel
struts Rock
anchors
Shotcreting and rock
bolting
Restoration
Low
Nil
Cost
Path
Activity / Node
duration
(Rs. Crores)
1
2
3
4
5
6
7
8
9
A-B-D-G-I-P-T
A-C-E-D-G-I-P-T
A-C-E-F-I-P-T
A-C-H-I-P-T
A-C-K-P-T
A-C-L-J-P-T
A-C-Q-R-J-P-T
A-C-Q-O-S-T
A-C-Q-O-U
3676.17
(days)
3785.98
3244.88
2879.88
2479.67
3164.79
2741.60
3074.89
2504.95
119.28
122.28
96.17
87.11
82.09
108.19
92.20
150.10
65.07
From the above analysis we observed that path 2 (A-C-E-D-G-I-P-T) has the longest
duration of 3785.98 days and remains critical. The corresponding cost for the completion of
all the activities along the critical path is INR 1222.8 Million. The probability of the
successful completion of path 2 or the critical path within the scheduled time is 50%. The
probability of the successful completion of the near critical path or path 1 within the
scheduled time is 84.13% (Z = 1.009, P = 0.8413). Also the probability of the successful
completion of all the paths within the scheduled time is 42.05% (P = 0.8413 x 0.5 x 1 x 1 x
1 x 1 x 1 x 1 x 1 = 0.4205)
Carrying out about 10,000 runs of the Monte Carlo simulation, the EC was found to
have a value of INR 3532.9 Million and the ET of the project was found to be 4351.12 days.
Proposed Risk Management Model for the Underground Corridor Construction for
Metro Rail
The generalized risk management model for the underground corridor construction for
the metro rail is proposed on the basis of the detailed analysis carried out. This model can be
effectively implemented in the ongoing and upcoming metro rail projects across the nation.
As a part of the formulation of risk mitigation strategies, the following risk response
planning can be adapted by the project authority:
(i)
Risk transfer,
(ii)
Risk sharing
(iii)
Risk reduction
(iv)
(v)
CONCLUSION
Project risk management which primarily comprises schedule and cost uncertainties and
risks should be essentially carried out for complex urban infrastructure projects such as the
construction of an underground corridor for metro rail operations. In the current research
work we found that the number of major and minor risks involved during the construction of
the project, from the feasibility to the completion of the execution, are large, and if not treated
or mitigated properly, the probability of successful completion of the project within the
stipulated time and cost frame will reduce. This will have a direct impact on the efficiency
and profitability of the organization.
As per the analysis carried out by EVM, based on the expert questionnaire
survey, the expected project cost for the sample stretch under analysis (530 m tunnel from
station S5 to S6, S6 station box and 180 m over-run tunnel) is about 22.51% higher than the
base cost estimate of the project. According to the basic assumptions made for the analytical
procedure adopted, the maximum permissible cost overrun for the project is 25%. Thus if
proper project risk management is not carried out by the authority, the project may result in a
cost and time overrun which will ultimately reduce the feasibility of the successful
completion of the project. The expected project time as obtained by the analysis is about
23.36% higher than the base time estimate of the project, the maximum permissible time
overrun as per the basic assumptions being 30% of the base time estimate. This value is also
quite alarming making the concerned authority feel the need for carrying out proper risk
management for such complex infrastructure projects.
Hence considering the results of all the analyses carried out in this research work, it can
be concluded that for complex infrastructure projects like that of an underground
corridor construction, based on EVM, about INR 0.82 Million extra per day per station would
be incurred if proper risk management is not followed to mitigate the anticipated risks. Thus
for six underground stations for this 6.6 km underground metro corridor package
approximately INR 4.92 Million extra per day will have to be incurred by the project
authorities. Although at present, a very nominal percentage of identified risks can be insured
under the existing Contractors All Risk Policy, the potentiality of insurance and the means
of making insurance a strong risk mitigation tool for the construction industry provide scope
for future research.
APPENDIX 1: Additional Project Details
Length of route
Project
Detail
Description
(a) Tunnel (by Tunnel Boring Machine [TBM])
6569m
(c) Concreting
(d) Reinforcement
(e) Strutting
10,90,000 cum.
super structures
2,15,000 cum.
3,00,000 cum.
47,500 MT
24,500 MT
Weightag
Impac
Likelihoo
d
0.15
(Lij
0.20
)
(LP
0.02
)
9
0.03
(Wi
t
0.65
(Iij
0.75
)
0.20
0
0.018
j)
0.30
Total0.04
0.85
0.90
0.121 4
CLF = 0.027
CIF = 0.096
FPR 2: Resettlement and Rehabilitation Risks
Resettlement site not accepted by affected parties
Resettlement site very costly
0.35
0.08
0.95
0.15
5
0.05
0.80
0.45
5
0.03
0.95
0.5
5
Total0.01
0.90
CLF = 0.059
CIF = 0.167
0.185
0.1
0.02
0.90
0.35
3
0.05
0.95
0.3
2
Total0.08
0.80
CLF = 0.045
CIF = 0.134
0.155
Risk
Political interference
Description
Delay in finalizing temporary rehabilation schemes
Likelihood
Weightage
0.55
0.01
0.9
0.4
3
0.05
0.85
0.25
5
0.05
0.9
0.4
5
0.01
0.9
0.35
2
0.03
0.9
traffic
Problems
with the physical possession of land
0.2
0.01
0.85
0.65
40.295
0.11
Total:
6
0.95
0.2
0.03
0.85
0.15
5
0.00
0.75
0.1
50.075
0.03
Total:
0.80
0.2
0.02
0.80
0.25
3
0.01
0.85
0.45
0.04
0.90
departments
CLF = 0.070 CIF = 0.153
0.5
0.07
9
Total:80.169
0.95
Grand
Total: 1