RISK MANAGEMENT IN CONSTRUCTION PROJECTS

A paper to be presented at 20th continuing professional development seminar in Dar es Salaam on

20thSeptember.
Prepared by QS Dr. Stanslaus Ntiyakunze
ABSTRACT
The prime objective in any construction project is to attain a successful project, a project that has been
properly designed, constructed according to design and specifications, completed within agreed time and
cost. However, construction projects are inherently complex, involve multiple inputs and feedback
processes and are done in uncertain environment. This naturally creates problems calling for a need to
manage the projects so as to attain the desired objectives.
The Project Management Institute (PMI) (2004) provides nine most critical parts of project management,
which are: project integration, scope, time, cost, quality, human resource, communication, procurement
and risk management. In practice all these parts are equally important in-order to attain a successful
construction project. This paper focuses on one critical part; risk management.
Risk management (RM) is a common concept which is used in construction industry as well as in other
industries. RM is a systematic process of identifying, assessing, responding and monitoring risks. The
overall goal of the risk management process is to maximize the opportunities and minimize the negative
consequences of risk threats in a project.
Construction projects are always unique, and risks may arise from a number of different sources.
Moreover project success could be viewed from different perspectives of the individual owner, developer,
contractor, user, the general public, and so on. These different perspectives explain the reason why the
same project can be considered a success by one party and unsuccessful by another.
The aim of this paper is to enable seminar participants to understand the process of risk management in
construction projects. To achieve that, the paper first discusses key terms and concepts used in risk
management whereby meanings of risk and uncertainty the terms which often are used interchangeably
are clarified. The importance of risk management and factors influencing risks in construction projects
are cited. The paper outlines the process of risk management in construction projects by explaining briefly
the steps involved in risk management process. The steps covered include: risk identification which is the
process of identifying and documenting the associated risks in a project; risk analysis the process of
examining each identified risk issue to determine the likelihood and impact on the project; risk
response/handling the process of selecting and applying strategies in-order to set risks at acceptable
levels; risk monitoring the process that tracks and evaluates the performance of risk handling actions;
and risk planning which is formulation of a detailed program of action for the management of risks. The
important output of risk planning process is the Risk Management Plan (RMP) which is the risk related
road map for the management of risks in a project.
The last part of the paper reviews some standard forms of contracts/agreements commonly used in
construction projects undertaking in Tanzania with the aim of examining how risk provisions are
addressed in the documents so as to propose areas for improvements.