RISK MANAGEMENT OF HIGHWAY CONSTRUCTION PROJECTS IN AKWA IBOM STATE
Risk in highway project occurs at various stages of projects development thereby limiting in most cases the overall achievement of projects objectives. These shortfalls necessitate an investigation into risk management techniques used in highway construction project in Akwa Ibom state. The study seeks to provide an insight on selected risk factors and its influence in project performance, to examine the risk management technique used in highway construction, evaluate the effectiveness of risk management techniques and to develop a new risk management framework to improve risk management of highway project in the area. A descriptive design approach was adopted to achieve these objectives. A field survey involving 73 respondents (client, contractor and consultant) was conducted. Data was collected using a structured questionnaire and analyzed using mean score, relative effective index, factor analysis and kruski – Wallis test. The result revealed that project funding challenges and construction cost overrun were the most significant risk factors. The study further shows that in risk identification, brainstorming and consulting expert were most significant. In risk analysis, consulting expert and the use of computer and other model were the most significant while reducing the possibility of occurrence was most significant during risk responds. The result also reveals that: in the level of effectiveness of risk identification technique, consulting expert and brainstorming were significant. In risk analysis, consulting expert was the most effective risk analysis technique while reducing the possibility of occurrence and reducing the consequences of risk were most effective risk responds technique. The study also reveals a significant variation in the perception of respondent as regarding influence of the identified risk factor on project performance and a no significant variation in their perception of risk management techniques and its effectiveness in highway construction project. A framework developed is generic and its adoption will enhance effective and efficient risk management of highway construction project in Akwa Ibom State. The study recommended that highway project should be executed in respect of the available funds and risk factors should be properly managed to reduce cost and time overrun thus improve highway project timely completion and performance. TABLE OF CONTENTSCHAPTER TITLE PAGE Cover Page iTitle Page iiDECLARATION iiiCERTIFICATION ivDEDICATION vACKNOWLEDGEMENT viABSTRACT viiTABLE OF CONTENTS viiiLIST OF TABLES xiiiLIST OF FIGURES xv
CHAPTER ONE: INTRODUCTION1.1 Background to the Study 11.2 Statement of Research Problem 31.3 Research Question 51.4 Aim and Objective of the study 51.5 Research Hypothesis 51.6 Significance of the Study 61.7 Scope of the Study 71.8 Assumptions of the Study 71.9 Structure of the Study 7
CHAPTER TWO: REVIEW OF RELATED LITERATUREAND CONCEPTUAL FRAMEWORK2.1 Preamble 82.2 The Concept of Risk 82.3 The Project Life Cycle 92.3.1 Pre-project Phase 122.3.2 Planning and Design Phase 122.3.3 Contractor Selection Phase 132.3.4 Project Mobilization Phase 142.3.5 Project Operation Phase 142.3.6 Project Termination Phase 152.4 Risks in the Project Life Cycle 162.5 Risks in Highway Infrastructural Project 172.6 Risk Management 192.7 The Risk Management Process 192.7.1 Risk Management Planning 212.7.2 Risk Identification 212.7.3 Risk Assessment and Analysis 242.7.4 Qualitative Techniques 272.7.5 Risk handling or control 302.8 Risk Management in Construction Industry 332.9 Benefits of Risk Management 402.10 Theories Underpinning the Research 412.10.1 System Theory 412.10.2 Stakeholder Theory 412.10.3 Psychological Risk Approach 422.10.4 Contingency Theory 422.11 Conceptual framework for Risk Management 43
CHAPTER THREE: RESEARCH METHODOLOGY3.1 Preamble 453.2 Research Design 453.3 Area of Study 463.4 The Population of the Study 473.5 Sampling and Sampling Technique 473.6 Instrument for Data Collection 483.7 Variable of Study 483.8 Ethical Issues 493.9 Reliability of Instrument 503.10 Method of Data Analysis 50
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS, AND INTERPRETATION4.1 Preamble 514.2 Responds Rate 514.2.1 Respondent Characteristics 514.2.2 Sex of Respondents 524.2.3 Educational Qualification 524.2.4 Professional Affiliation 524.2.5 Respondent Working Experience 534.2.6 Respondent stake in highway Infrastructure 534.2.7 Respondent Profession 544.2.8 Respondent number of Project involved 544.2.9 Value of Highway Project Managed 554.2.10 Respondent Level of Satisfaction with highway Project 554.2.11 Respondent Knowledge of Risk Management of Highway Construction Infrastructure 564.3 Risk Factors Associated with the Construction of Highway infrastructure project 564.4 Variation in the Perception of Risk Factors Associated with Highway Construction Infrastructure 584.5 Risk management techniques Currently used in highway Construction Infrastructure 594.5.1 Risk Identification Techniques Currently Used in Highway Construction Infrastructure 604.5.2 Risk Analysis/Assessments Techniques Currently Used inHighway Construction Infrastructure 604.5.3 Risk Responds Techniques Currently Used in Highway Construction Infrastructure 614.6 Variation in the Perception of important Risk Management Technique currently used in Highway Construction Infrastructure 62 4.7 Level of Effectiveness of Risk Management Technique Currently used in Highway Infrastructure 634.7.1 Level of Effectiveness of Risk Identification Technique Currently used in Highway Infrastructure 63 4.7.2 Level of Effectiveness of Risk Analysis/ Assessments Technique Currently used in Highway Infrastructure 644.7.3 Level of Effectiveness of Risk Responds Technique Currently used in Highway Infrastructure 654.8 Variation in the Perception of the Effectiveness of the Risk Management Techniques Currently used in Highway Construction Infrastructure 664.9 Framework Development and Validation 674.10 The Concept of Effective Risk Management Framework of Highway Infrastructure 674.11 Development of Effective Risk management framework 684.12 Framework Validation 734.12.1 Results of Framework Validation 744.13 Discussion of Findings 77
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS5.1 Summary 825.2 Conclusion 835.3 Recommendations 845.4 Contribution to Knowledge 845.5 Recommendations for Further Study 84REFERENCES 86APPENDIX 91
LIST OF TABLES
TABLE TITLE PAGE2.1 Phase in Project life cycle 102.2 Possible Risk factor for Highway Infrastructure project 234.1 Responds Rate to the Questionnaires 514.2 Sex of the Respondents 524.3 Educational Qualification of Respondents 524.4 Professional Affiliation of the Respondent 534.5 Respondents working Experience in the Construction Industry 534.6 Respondents stake in Highway Infrastructure 544.7 Respondents Profession 544.8 Respondents number of Highway Projects involved 554.9 Value of Highway Projects Managed 554.10 Respondents level of satisfaction with Highway Projects 564.11 Respondent knowledge of risk management of Highway construction Projects 56 4.12 Risk factors affecting the performance of Highway Construction Projects 57 4.13 Perceptions of risk factors associated with Highway Construction projects 59 4.14 Extent of the use of risk identification techniques currentlyused in Highway Construction Projects 604.15 The extent of the use of risk analysis techniques Currently used in highway construction projects 614.16 The extent of the use of risk responds techniques currentlyused in highway construction projects 624.17 Perceptions of risk management techniques currently used in highway construction projects 634.18 The effectiveness of risk identification techniques currently used in highway construction projects 644.19 The effectiveness of risk analysis techniques currently used in highway construction projects 654.20 The effectiveness of risk responds techniques currently used in highway construction projects 664.21 Perceptions of the effectiveness of risk management techniques currently used in highway construction projects 674.22 Respondents’ Characteristics 75
CHAPTER ONEINTRODUCTION1.1 Background of the StudyThe development of infrastructure is one of the most important activities that can boost the business of various industries, thereby increasing the economy of such state or country. Construction industry is one of such industry and its projects are always unique with risk rising from a number of different sources.Risk in its simplest form mean uncertainty with a recognise probability distribution (Barkley, 2004). According to Holmes (2002) risk is not the actual being of a problem rather the possibility that a certain problem may arise in the future. Baloi and Price (2003) define risk as the likelihood of an unfavorable incidents occurring to a project. According to Edward and Bowen (1998), risk is the probability that an adverse event occurs during a stated period of time. It is widely accepted across the construction management body of knowledge that a project risk is any even or series of events whether motivated internally or externally, when occurred will negatively affect the project objectives, goals, functionality, performance, time, cost and quality (Devripasadh, 2007).Ashworth and Hogg (2002), Shou et al. (2004) and Florence and Linda, (2006) stated that “projects have life cycles or a sequence of stages and activities from origin to completion and there is always a degree of risk associated in each stage”. Risks are major component of the overall cost of construction and their distribution has significant effect on the project financial plan. The major problem associated with most highway projects in Nigeria is always, cost overrun coupled with delay on completion Odeyinka, (2000); Tar and Carr (2000); Odeyinka (2000), Nasir (2003) and Lowa and Kaka (2007) pointed out that too often this risk is not dealt with satisfactorily which has resulted into poor project delivery in Nigeria. They submitted that to solve this problem the is need to integrate risk management practice into estimation of construction project cost and time, as this will help considerably to avoid excess overrun.Construction project risk management is the process of identifying, analysing and responding to construction project risk (Project Management Institute, PMI, 2003). It involves the maximisation of positive result (opportunities) and the minimisation of negative results and its consequences (treats). It is also defined as a planned form of identifying and evaluating risk, selecting, establishing and applying options for the handling of the risk (Kremljak, 2004). Project risk management involves conducting risk management planning, engaging in risk identification, completing risk analysis, creating risk respond action plan, monitoring and controlling risk on a project while risk management is described as the difficult area within construction management (Winch, 2002; Potts, 2008), its application is promoted in all projects in order to avoid negative consequences Potts (2008).Risk is associated to any project regardless of the industry and thus risk management should be of interest to any project manager.Risk differs between projects due to the fact that every project is unique especially in the construction industry (Gould and Joyce, 2002). The construction industry operates in an uncertain environment where conditions can change due to complexity of each projects (Sanvido et al., 1992). However, there are many practitioners that have not realised the importance of including risk management in the process of delivering the project (Smith et al., 2006).Road construction project due to its nature allows a lot of possibilities for many environment, socio-political and other problems during pre-contract, contract and post-contract stage leading to completion time problem, cost overruns or exceeding budget in project and poor quality finish (Akintoye and Macloed, 1997). In order to avoid or reduce the losses, the management of the risk involved in the construction project is required. It should be underlined that risk management is not a tool which ensures success rather a tool which helps to increase the probability of success. Risk management is a proactive concept rather than a reactive concept. Nigerian construction industry is characterised by frequent set back, or interruptions, cost overruns, low quantity standard, and abandonment of project (Awodele et al., 2009). These are caused by different risk event involved in construction project. Risk factors are believed to be familiar to Nigerian construction professional, yet the probability of occurrence and its impact at pre-contract and post-contract stages is yet to be fully investigated. However there is little research conducted on risk management within the construction industry in Nigeria. In Nigeria, the construction industry mainly depends on government’s budget and the industry is performing very poor due to avoidable risk factors. The need to understand how to manage project risk becomes a very important issue. This study will outline risk management technique of highway construction infrastructure in Akwa Ibom State.1.2 Research Problem Contemporary project management practice is characterised by late delivery, exceeded budgets, reduced functionality and questionable quality Williams (1999) while risk management is a recognised practice that helps clients deliver project on schedule and within budget (Project Management Institute, 2002). One of the challenges facing the construction industry is to manage the risk of cost overruns and deliver project within budget. At the beginning of the last decade, Brando (1990) stated that in construction, the new orthodoxy is to accept risk and the uncertainty. Latham (1994) put forward that no construction project is not risk free, and risk can only be managed, minimised, shared, transferred or accepted; It cannot be ignored. The risk can cause loses that lead to increase in cost, time, delays and poor quality standard neglecting the achievement of projects objectives Simu (2006);According to Shehu and Sommervills (2006) highway construction is risk prone with poor track record of copping with risk. Consequently, Projects risk is often not adequately dealt with (Thompson and Perry, 1992) and the complexity of projects is a significant contributor to risk in highway projects. Construction stakeholders are rarely engaged in evaluation of various risk management practices used in highway construction sector thus lack adequate knowledge of everyday situation in the sector. Often, stakeholders limit the application of risk management technique to pre-contract stage only thereby neglecting the inherent danger during the construction stage (Deviprasadh, 2007).In the construction industry, construction project is unique, risk factor varies, and risk management framework varies. As a result, a framework used in one project can turn out to be completely inapplicable in another and as such key project participants may not know their commitment so as to minimise negative impacts of risk on construction projects. For example, risk framework for building projects is totally different from that of highway engineering projects. For these reason, the study set out to develop a risk management framework that can be used by shareholders towards improving risk management on highway construction infrastructure base on the risk factor identified in the project.1.3 Research QuestionsIn order to achieve the purpose, the following research questions have been formulated to support the investigation.i. What are the risk factors in Highway construction projects in Akwa Ibom?ii. How is risk management techniques perceived in Highway construction projects?iii. How effective is the use of risk management techniques in practice?iv. How can risk management practice of Highway construction be improved?
1.4 Aim and Objectives The study aims at developing a risk management framework to respond to the management of highway construction infrastructure projects in Nigeria. To fulfill the above aim, the following specific objectives are to: i. evaluate the risk factors associated with the construction of highway infrastructure;ii. examine the risk management techniques currently used in highway construction project;iii. evaluate the effectiveness of risk management techniques currently used in highway construction infrastructure; andiv. develop a risk management framework for improving the management of highway construction project risk factors.
1.5 Research Hypothesis The hypotheses of the study state that:i. There is no significant variation in the perception of important risk factors associated with highway construction projects among the clients, consultants and contractors’.ii. There is no significant variation in the perception of important risk management techniques currently used in highway construction projects among the clients, consultants and contractors’.iii. There is no significant variation in the perception of the effectiveness of the management techniques currently used in highway construction projects among the clients, consultants and contractors’.
1.6 Justification of the StudyThe purpose of this research is to evaluate risk management practices use in the highway construction infrastructure and how practitioners are managing risk in everyday situation. Risk management technique currently used in highway construction infrastructure was examined. This will prove useful to users with knowledge of selecting appropriate risk management technique of highway construction projects and know how effective these tools are deployed.The research also attempts to evaluate the effectiveness of various risk management techniques currently used in highway construction infrastructure and further encourage construction stakeholders on the need to strengthen the ineffective techniques and therefore provide solution to check the effect. The fact that risk management applies not only in pre-contract stages in highway construction project was emphasis. The risk management framework developed will further strengthen the existing framework.It is hoped that the result of this study would be of immense benefit to the clients, contractors or developers, consultants to meet their commitments and minimise negative impact on highway construction project performance in relation to time, cost, environmental sustainability, stakeholder management, and quality objectives.Lastly this study serves as additional literature to complement existing work on the study and act as a springboard to other studies.
1.7 The Scope of the StudyThis research focuses on highway construction infrastructure project and is based on theories of risk management described in the literature. It is complemented by a study of a road construction project in Akwa Ibom State where key project stakeholders are involved. It is necessary to state that this research acknowledges risk management techniques in highway construction project during the planning, design, and construction stages.1.8 Limitation of the StudyThe major limitation to the researcher is the inability to assess the records or the archival data of some companies/organisations that would have helped in gathering more information citing anti-company policy as the main reason.1.9 Structure of the StudyIn this study, it is assumed that the respondents have experience in highway construction risk management and are therefore competent to give opinion which can be relied upon..