Construction Project Risk Assessment: Development of

Model Based on Investigation of Opinion of

Construction Project Experts from India
Hariharan Subramanyan1; Priyadarshi H. Sawant2; and Vandana Bhatt3
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Abstract: Risk is involved in every business, and the construction industry is no exception. Most of the project management issues that
impact a project arise from associated uncertainties. The Indian construction industry is worth about $120 billion and this could grow con-
siderably, driven by major projects across the country. There are a number of problems in the construction industry in India that are attributed
to various factors. The focus of the present research is to identify factors that influence the smooth completion of a project and develop a risk
assessment model. The authors of the paper have made an attempt to analyze the present risk condition in the construction industry by
meeting experts in the field to collect first-hand information as a first step towards risk assessment and suggest a risk response strategy.
A total of 93 risk factors were identified and listed under various subgroups in this paper. A questionnaire was prepared on the basis of a
literature review and was filled by six contractors, four owners, five project management experts, having more than 20 years of experience in
the construction field in India. As the factors are represented in qualitative terms, fuzzy analytical hierarchy process (AHP) is used. The result
of the study is listed, in which the percentage contribution of various factors to smooth completion is shown. Because the findings are based
on a small cross section of experts, Student’s t-test, a significance test, has been applied to know the significance of test findings on the general
construction industry. The study results are reduced further into two groups for simplification and better understanding. The first group covers
owner-, contractor-, project manager-, finance-, and resource-specific risks; and the second group covers risk pertaining to project-, architect/
consultant-, external environment-, and contract-clause-specific factors. The analysis results indicate that the risks specific to the first group
are found to be 10.5 to 12.0% with a standard deviation less than 1.66, whereas the percent apportionment of second group ranges from 9.5 to
13%, a larger range than the first group of factors with standard deviation up to as high as 3.3, indicating wider variation, thus making it
difficult to predict their occurrence in a project. The findings are also confirmed by the project disputes related to various projects discussed in
the paper. The risk response strategy suggested in this paper will be useful in mitigating the adverse effects of risk in project completion in the
Indian construction industry. A planned approach in handling a project-specific and external-environment-specific risk coupled with a proper
contract administration can mitigate overall risk to a greater extent in the Indian construction industry. DOI: 10.1061/(ASCE)CO.1943-7862
.0000435. © 2012 American Society of Civil Engineers.
CE Database subject headings: Contract management; India; Construction industry; Risk management.
Author keywords: Analytical hierarchy process; Contract administration; Project risk management; Student t-test.

Introduction Conflict is increasing, resulting in litigation and arbitration. One

of the widely researched topics in project management is identify-
Risk is involved in every business, and the construction industry is ing factors that influence the smooth completion of a project. The
no exception. Most of the project management issues that impact a authors of this paper have made an attempt to analyze the present
project arise from associated uncertainties. The Indian construction risk conditions in the construction industry in India by meeting ex-
industry is worth about $120 billion, and this could grow consid- perts in the field to collect first hand information as a first step to-
erably, driven by major projects across the country. There are a ward risk assessment; i.e., recognizing risk factors that influence
number of problems in the construction industry in India that the smooth completion of the project. On the basis of the interaction
are attributed to various factors. Project schedules are delayed, re- with industry experts, the factors have been grouped and listed
sulting in cost overrun and suffering from poor workmanship. under various categories. This paper aims at using fuzzy analytical
hierarchy process (AHP) as a tool in assessing the risk and under-
1
Assistant Professor, Civil Engineering Section, TSEC & Research standing the significance level of risk factors in the smooth com-
Scholar, SPCE, Univ. of Mumbai, India. (corresponding author). E-mail: pletion of the project.
[email protected]
2
Research Supervisor & Principal, SPCE, Mumbai, India. E-mail:
[email protected]
3
Adjunct Associate Professor, Civil Engineering Dept., IIT Mumbai,
Background and Objective
India. E-mail: [email protected]
Although the Indian construction industry has gained far more im-
Note. This manuscript was submitted on September 15, 2008; approved
on June 13, 2011; published online on February 15, 2012. Discussion per- portance in recent times because of the opening up of Indian mar-
iod open until August 1, 2012; separate discussions must be submitted for kets to international and private sector competition with the arrival
individual papers. This paper is part of the Journal of Construction En- of megaprojects for infrastructure development, the performance of
gineering and Management, Vol. 138, No. 3, March 1, 2012. ©ASCE, Indian construction projects has, however, not been very encourag-
ISSN 0733-9364/2012/3-409–421/$25.00. ing (Iyer and Jha 2006). The demand for infrastructure is growing

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J. Constr. Eng. Manage. 2012.138:409-421.

 and is going to be in great volume in the coming future. Use of by impact then by frequency. The most relevant ones are related
modern construction equipments and techniques has accelerated to issues, such as an inadequate prequalification system, insuffi-
the growth. Risk management in construction is an important area cient training of public servants, or political considerations prevail-
that needs attention for the smooth completion of a project. The ing over real needs, among others. Tang et al. (2007) identified
objective of the research is to identify risk factors that influence factors, such as estimator-specific, design- and project-specific,
the smooth completion of the project and their relative level of sig- subcontractor-specific, client-specific, unknown geology condi-
nificance in the Indian construction industry. Fuzzy AHP is used in tions, and economic- and contract-specific, as critical factors for
performing risk analysis. The results of the study will be useful in the smooth completion of the project.
making recommendations to project managers on risk assessment
methodology and risk response strategy.
Schedule Related Risk Factors

Definition of Risk and Risk Management Schedule related risk is found to be very high in the Indian con-
struction industry, and the same is attributed to differing site con-
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Webster’s Dictionary defines risk as “the possibility of loss, injury, ditions, soil properties, and labor productivity. Iyer and Jha (2006)
disadvantage or destruction.” British standards define risk as a stated that if the single most important factor, that of schedule over-
combination of the probability of frequency of occurrence of a run, could be controlled, a major part of cost overrun, including
defined hazard and the magnitude of the consequences of the general escalation and interest during construction, could also be
occurrence. Construction projects are of different sizes and of contained in the Indian construction industry. Bar charts, line of
different nature, hence the risk associated with them also varies. balance and the critical path method (CPM) have been the most
Okmen and Oztas (2008) defined risk management as a system- popular methods of construction scheduling. The CPM is more
atic controlling procedure for predicted risk to be faced in an in- deterministic in approach, and the critical path is calculated without
vestment or a project. It is a stepwise procedure consisting of considering the level of uncertainty of various activities. However,
risk identification, risk classification, risk analysis, and risk re- construction schedules are affected by uncertainties in weather,
sponse tasks. productivity, design, scope, site conditions, soil properties, material
delivery time, and equipment efficiency. Okmen and Oztas (2008)
found that these risk factors in a project make certain activities criti-
Construction Risk Factors Identified by Researchers cal even though they are originally not on the critical path. Vaziri
in the Past et al. (2007) concluded that project task durations are not determin-
istic, as they are subject to considerable uncertainty and that uncer-
A study of literature shows a number of factors, were identified by tainty can be influenced by the resources assigned.
researchers in the past as risk factors in construction projects. Assaf
and Hejji (2006) listed a number of factors such as poor commu-
nication, legal disputes, ineffective delay penalties, delay in site Contract-Clause-Specific Risk Factors
mobilization, equipment breakdown, and low productivity, influ-
encing timely completion in large construction projects in Saudi The adversarial nature of the construction industry contributes
Arabia. Many researchers have recorded their findings on risk as- to the germination and manifestation of construction disputes.
sociated with the Indian construction industry. Earlier researchers Negotiation between the disputants is most often the first attempt
in India have found the following items as the origin of risk: (1) risk in getting disputes resolved. Cheung et al. (2006) studied
from outside the company—natural hazards, activities of suppliers, negotiating behaviors, which is of both academic and practical
debtor customers, government policies; (2) risk from within the value. An organizational conflict inventory was used to measure
company—physical damage, accidents; and (3) risk that originates the negotiating styles of construction professionals. Problems of
from company’s activities—negligence. Elaborate study on exter- contract management in civil engineering construction in India
nal and internal factors that influence smooth project completion in can be minimized to a great extent if management of contracts
the Indian construction industry included complacent project staff, is taken up even before drafting the contract documents. (Laskar
risk attributed to overconfidence, cost and time over runs, risk and Murty 2004).
attributed to land acquisition, changes in the scope of the project,
and the overestimation of the efficiency of human resources. Risk
was classified in two different ways, i.e., likelihood of occurrence Construction Risk Management—Models Suggested
and severity of its effect. The main construction risks in operation by Researchers in the Past
were found to be in the following areas: (1) heavy lifts, (2) construc-
tion equipment failure, (3) error in interpretation of specfication, Thomas Saaty developed the mathematical foundations of the AHP
(4) labor problems, and (5) electrical risks. Over 40% of Indian at the University of Pittsburgh. Ahmed and Almishari (2003) de-
construction projects are facing time overrun ranging from 1 to veloped a risk assessor model and computerized it to determine the
252 months; the reasons for which are being studied by researchers risk associated with a particular activity. Zheng et al. (2004) pro-
to suggest possible remedial measures (Muthanna and Hegde 2002; posed a model that integrates adaptive weights derived from pre-
Iyer and Jha 2006). Iyer and Jha (2005) identified 55 attributes vious generations and induces a search pressure towards an ideal
responsible for impacting the performance of the projects and point. Choi et al. (2004) suggested a risk assessment procedure that
presented them to Indian construction professionals in the form is composed of identifying, analyzing, evaluating, and managing
of a questionnaire. On the basis of responses received, they con- the risks inherent in construction projects by using the fuzzy con-
cluded that two success factors, i.e., commitment of project partic- cept. Singh and Tiong (2005) presented a systematic procedure
ipants and owner’s competence and one failure factor, i.e., that based on the fuzzy set theory to evaluate the capability of a con-
conflict among project participants contributes significantly in tractor to deliver the project, as per the owner’s require-
the enhancement of the performance level of the project. One study ments. Zhang and Zou (2007) provided a generic quantitative
included a list of 96 risk events, categorized and prioritized first model by using the fuzzy AHP to evaluate the viability of project

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J. Constr. Eng. Manage. 2012.138:409-421.

 delivery. Fuzzy logic models were used to integrate daily site re- of quantitative parameters. A weight scale of 0 to 9 is chosen to
porting of activity progress and delays, with a schedule updating represent the level of significance and probability of occurrence
and forecasting system for construction project monitoring and of each factor, in ascending order. Factor weights are combined
control (Ordonez and Fayek 2005). The use of fuzzy logic in to get the final project weight, which indicates the distribution
the model allows linguistic and subjective assessments to be made of various factors and their level of risk to which the project is
and thereby, suits the actual practices commonly used in the indus- exposed.
try. Yi and Langford (2006) studied the combined effects of differ- Once the relation is established between the individual factor
ent risk factors to the accident. To predict when and where the risk weights and the overall project weight, it can be used for training
will reach its highest level, analysis is performed on the basis vari- the data by using artificial neural networks (ANN) to generate a
ous information, including statistical sources such as accident his-
general representative model. As the scope of the paper is limited
tories in coordination with the activity scheduling.
to application of AHP as a risk assessment tool, the pattern predic-
tion using ANN is not discussed. The research methodology dis-
cussed in this paper involves the following steps:
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Overview of the Research

1. Identifying and grouping risk factors,
It becomes clear from previous discussions that various researchers 2. Quantifying the qualitative risk parameters by assigning level
have tried to determine the factors that influence the smooth com- of risk and probability of occurrence to each of the risk factor
pletion of the project. Many variables have been found in the liter- on a scale of 0.1 to 9,
ature, but no general agreement can be made specific to the Indian 3. Applying the analytical hierarchy method for finding the sig-
construction industry. Therefore, in the present research, it was de- nificance of each of the risk factors,
cided to include previously studied factors along with additional 4. Studying the results of the analysis by appropriate interpreta-
factors such as project, finance, and contract-clause-specific factors tion and testing the consistency of results of a small group as
that are applicable to the Indian construction sector. applicable to the larger construction industry, and
Timely completion of the project, cost within budget, quality 5. Risk response strategy.
confirming to standards, and clear contract documents are some
of the success factors, whereas there are many risk factors that in-
fluence the previous success factors. For example, if we consider Identifying and Grouping Risk Factors
timely completion as a success factor, then there are many uncer-
tainties such as weather, productivity, clearance from regulatory Many researchers in the past have identified factors that influence
agencies, socio political factors, scope changes, site conditions, soil smooth project completion. The list of factors made by the authors
condition, material delivery time, and equipment efficiency, that was originally based on the literature review, and it was further re-
increase the risk of the smooth completion of the project and vised on the basis of interaction with industry experts. The discus-
are termed risk factors. If quality confirming to standards is con- sion with industry experts resulted in the inclusion of some
sidered a success factor, then there are many uncertainties, such as additional factors that are specific to project, finance, external envi-
workmanship, supervisory skills, training standards, and the exe- ronment, and contract clause, as applicable to the present condition
cution at the site, that influence the risk of completion of the of the construction industry in India.
project. The factors under the following subgroups are listed in the form
In this research, it was attempted to identify factors that influ- of Tables 1–9 with explanation for each of the terms used in the
ence the smooth completion of the project. This requires interaction questionnaire.
with experts in the construction industry, such as government agen- 1. Project-specific; 2. Owner-specific; 3. Contractor-specific;
cies, private contractors, technical, finance and technological legal 4. Architect and consultant-specific; 5. Project-manager-specific;
consultants, and project management experts. This ensures that a 6. Resource-specific; 7. External-environment-specific; 8. Finance-
fair cross section of project participants is covered and that their specific; and 9. Contract-clause-specific factors.
views are reflected. The factors are classified into major groups
and subgroups, and the appropriate analysis methodology is
identified. Quantifying the Qualitative Risk Parameters—
Because risk is not quantified or expressed as a finite figure, the Discussion on the Weights Adopted in the Model
analysis of the same becomes more complex. For example, the data
collected are expressed in the form of subjective judgments with The quantitative model is developed on the basis of the probability
qualitative linguistic terms, such as “high level of significance” of occurrence of a risk and its level of significance. The weight
and “most likely to occur.” Therefore, an attempt is made to convert scale is chosen from 0 to 9, in which 0 corresponds to least or
subjective qualitative terms to quantitative parameters. Fuzzy logic
no risk situation, and 9 corresponds to highest probability of oc-
used in the model captures both subjectivity and linguistic terms.
currence of risk. Similarly, 0 corresponds to a low level of risk,
Fuzzy logic provides project managers with a tool that is capable of
and 9 corresponds to the highest level of risk. However, when
dealing with the uncertainties inherent in the nature of the delay
analysis process and allows the user to make an assessment by us- the numbers are taken as elements of the AHP matrix, 0 needs
ing linguistic terms, which suit the actual practice common in the to be replaced by 0.1 to avoid computation complexities. Therefore,
industry (Ordonez and Fayek 2005). The AHP is used for scaling 0.1 is placed instead of 0 wherever the level of risk is zero or the
the weights of the elements (risks) in each level of hierarchy with occurrence of risk is found to be very low. For example, weight
respect to elements (risks) of the next higher level. The fuzzy AHP number 1 indicates a 10% chance of occurrence (probability) or
model is often used to tackle complex decision making that calls for 10% significant (level of significance) with respect to overall per-
subjective judgment on the basis of logical reasoning rather than formance of the project.
simple feeling or intuition (Zhang and Zou 2007). Hence, fuzzy A stepwise model development procedure is explained
AHP is found effective in working out factor weights on the basis subsequently.

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 Table 1. Project-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Risk factors that are project specific Meaning of the terms
1.1. Size of the project Many stake holders; longer duration; more uncertainties
1.2. Location uniqueness Strong winds; severe climatic variations; hilly terrain
1.3. Regulatory approvals Costal clearance; chances of project encroaching costal zones, river zones; environmental clearances
1.4. Type of project Turnkey, construction only
1.5. Intense competition at tender stage Many contractors chasing few projects; short duration is available for the contractor to do a SWOT
analysis
1.6. Tender selection methodology Lowest bid method of selection
1.7. Deviation of scope Nature of work not as per tender specification; changes made after the work starts
1.8. Original contract duration is rigid Chances of delay because of change in nature of work
and has no scope to accommodate any changes
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1.9. No clear definition of completion of work Scope, specification, and nature of work is not well-defined in the contract clause
1.10. Delay penalties Contract clause being ambiguous/one-sided
1.11. Legal disputes and lawsuits Claims not settled on time
1.12. Flow of finance Mechanism to check/guide the flow of finance; exposure to share markets
1.13. Insurance strategy Compliance of insurance and regulatory guidelines
1.14. Exposure to accidents Accident statistics in case of different projects, such as high rise building projects, tunnels, bridges
1.15. Information management Organization’s ability to receive right information and make most use of it; use of SAP/ERP software
1.16. Unanticipated impacts Anything that is not covered previously but may have a strong impact if occurs (this is optional, and we
have added this item in all nine sheets)

Table 2. Owner-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Owner specific Meaning
2.1. Inadequate definition of project scope in the beginning Major changes made in functional use of the building
2.2. Delay in handing over the site to contractor Chances of delay in getting the site cleared of encroachments
2.3. Chances of facing financial crisis Financial standing of owner
2.4. Delay in revising and approving design document by owner, Owner consuming most of the float time in a construction project
i.e., inefficient in decision making
2.5. Delay in payments by owner; not offering incentives for early Unable to attract/retain better talents because of poor payment practices
completion of activities
2.6. Sudden termination of work by owner Owner terminating the project without sufficient cause
2.7. Unreasonably high expectation of owner Owner expecting a high degree of efficiency and economy
2.8. Lack of vision/inability in identifying critical activities Failure of owner to identify critical activities
2.9. Holding key decisions in abeyance Extent of setback in project because of owner’s inefficiency; conflict among owners
2.10. Changes made by owner during construction Owner making changes in original plan
2.11. Owner’s lack of exposure to changing trends in industry Owner’s reservations in changing to deploy modern techniques

Table 3. Contractor-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Contractor specific Meaning
3.1. Delay in mobilization Contractor not mobilizing the resources in spite of getting possession of the site
3.2. Poor site management and supervision by contractor Contractor not fully equipped with site management system
3.3. Improper construction methods/quality variations No formalized system for construction quality in execution
3.4. Delays in subcontractor’s work Can have a cascading effect on the progress of project
3.5. Frequent change of subcontractors Disputes between contactors and subcontractors
3.6. Poor qualification/experience of the contractor Contractors not academically qualified
3.7. Holding key decisions in abeyance Inability in coping with critical activities
3.8. Ignorance of impact of contract clause Contractor not giving due emphasis on effect of contract clause on performing or
nonperforming
3.9. Chances of facing financial crisis Financial standing of contractor

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 Table 4. Architect/Consultant-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Architect and consultant specific Meaning
4.1. Insufficient data collection and survey before design Collected data not representing the actual site conditions
4.2. Inadequate experience of consultant with regard to Nature of project being special and consultant not having sufficient exposure to similar
type of project projects
4.3. Delay in performing inspection and testing by consultant Lack of coordination between consultant and other parties and subsequent delays
4.4. Inflexibility of consultant Rigid in approach and lack of support
4.5. Complex/nonexecutable design Design not taking into account the constructability considerations
4.6. Unclear and inadequate details in drawings Design drawings do not include revisions
4.7. Chances of consultant leaving the project midway No binding on the consultant or no formal agreement between consultant and
contractor
4.8. Non use of advanced engineering design software Inadequate design-team experience
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Table 5. Project-Manager-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Project manager specific Meaning
5.1. Project manager's technical capability Project manager being not equipped with technical know how
5.2. Use of appropriate planning tools and techniques by Not identifying techniques/methodologies that suit the project beforehand
project manager
5.3. Holding key decisions in abeyance Inability to manage critical activities
5.4. Lack of induction and training of human resources No training/education program for employees in risk matters
5.5. Negative attitude of project manager Lack of confidence and leadership
5.6. Lack of coordinating ability and rapport of project manager Poor system of communication among project team
with other contractors at site
5.7. Reluctance in maintaining target schedule by top Availability of system for identification, recording, quantification, and reporting of
management the risk associated with activities
5.8. Lack of leadership quality of project manager Not rendering assistance to line managers in the area of risk identification,
quantification, and control
5.9. Lack of effective monitoring and feedback by project manager Lack of progress review control meetings
5.10. Chances of project manager leaving the project Provision for external risk consultancy services under exigency situations
5.11. Tools and techniques Use of competent heavy equipments to avoid failure of equipments

Table 6. Resource-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Resource specific Explanation
6.1. Selection of material and equipments Finance policies, competition, cost inflation, interest rates, exchange rates
6.2. Delay in materials delivery Shortage of construction materials in market and delay in delivery
6.3. Changes in material types and specifications during construction Forecasting demand, competition, and obsolescence
6.4. Unrealistic price variation in material Sudden price increase on key materials; increase in government duties on imported
materials
6.5. Improper selection of equipment No matching among various equipments used in the speed of functioning, speed of
loading, unloading; frequent wear and tear of tiers used in equipments
6.6. Equipment breakdowns Lack of knowledge/training in using of equipments
6.7. Shortage of equipment Lack of planning in equipment schedule
6.8. Quality variations Low productivity and efficiency of equipment
6.9. Shortage of labors Labor shortage/strike
6.10. Unqualified workforce No formal training
6.11. Poor inventory management Lack of planning with respect to material scheduling and assigning priorities;
losing time in negotiation

Applying Analytical Hierarchy Method for Finding risk and the probability of its occurrence). Individual factors in-
the Significance of Each of the Risk—Model clude factors specific to the project, contractor, consultant, owner,
Development resource, and external factors.
The following ten step procedure is adopted:
If a quantitative dimension can be given to risk its effect, it would Step 1: A list of factors were prepared and divided into sub-
be easily appreciated. groups as shown in Tables 1–9;
In this model, overall project risk = function of (individual factor Step 2: The factors are presented to experts for obtaining their
risk) where individual factor risk = function of (product of level of qualitative opinion in the level of risk and probability of occurrence

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 Table 7. External-Environment Specific risk factors that Influence Project Success with Explanation of the Terms
External environment specific Meaning
7.1. Unfavorable social environment Owners unwilling to sell the land; local communities posing resistance
7.2. Unfavorable economic/market fluctuations Unreasonable high expectations of stakeholders; increase in material cost because of market forces
7.3. Unfavorable political environment Political support for the project changes because of change in political environment
7.4. Changing government policies E.g., water quality regulations and changes in storm water drain regulations
7.5. Labor strikes Labor shortage/strike
7.6. Natural calamities Earthquake/flood
7.7. Sudden unforeseen events Threat of lawsuits

Table 8. Finance-Specific Risk Factors that Influence Project Success with Step 6: The product of normalized level of risk weights and nor-
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Explanation of the Terms malized probability weights are computed as the effect of a risk
factor is a function of both the level and likelihood of occurrence;
Finance specific Explanation
the sum of the products thus obtained represents the subgroup
8.1. Financial policies Competition, cost inflation, interest rates, and weight in Table 11; the same procedure is adopted for other sub-
exchange rates groups;
8.2. Liquidity Lack of liquidity at any point of time during Step 7: The subgroups can also be prioritized among them-
execution of the project selves, and a separate subgroup weight shall be created; Table 12
8.3. Cost of capital A proper choice/methodology of raising capital showing subgroup wise factor weights on the basis of data collected
8.4. Market risk Price risk
from various experts;
Step 8: The sum of the product of subgroup weight and indi-
8.5. Credit risk Lack of planning in prudential limits of credit
vidual factor weight gives the final number, which indicates the
exposure
final risk index; e.g., the final index number 0.064 corresponding
8.6. Operational risk Frauds, manipulations, communications risk, and to expert 1 in Table 12 is obtained in the following way:
transaction risk i.e., ð0:040
0:16 þ 0:048
0:16 þ 0:075
0:11 þ … þ 0:075

8.7. Profitability risk Not able to achieve the reasonable profit targets 0:09 þ 0:062
0:11Þ;
8.8. Contingency risk Contingent liabilities and their planning Step 9: Similar values are worked out for the data obtained from
8.9. Time risk Unable to predict the right time for the right other experts; this helps in obtaining a range of values that represent
financial the ranking in final weights; and
Step 10: The numbers obtained in Table 12 need to be explained
further to know their implication; Table 13 is therefore developed,
of that risk and the same is marked in terms of quantitative num- which gives the percent apportionment of risk factors in the opinion
bers. (as shown in sample Table 10); of various experts. For example, a value of 0.04 provided by Expert
Step 3: A level-of-risk nonsingular matrix is created for each 1 for the project-specific subgroup is interpreted as 9.38%
(0.04*0.15*100/0.064). The procedure is repeated for all sub-
item of the chosen subgroup, as in Table 25 (elements of row 1
groups and experts; Table 13 gives the percent influence of various
are divided by weight 3 and so on);
factors on the overall project as expressed by various experts.
Step 4: Probability weight nonsingular matrix is created for each
item of the chosen subgroup, as shown in Table 26;
Step 5: The level of risk weights and probability weights are Studying the Results of the Analysis by Appropriate
normalized, e.g., consider the first row of Table 25, the normalized Interpretation—Applicability of Test Results to
number 0.085 is arrived as follows: General Construction Industry
P Normalized value ¼ fð1
1
1:33
1:0
…
0:67Þ1=n g=
fð1
1
1:33
1:0
…
0:67Þ1=n where n = number of items Because the sample size is much smaller than the size of the
under the chosen subgroup; construction industry, the results cannot be generalized without

Table 9. Contract-Clause-Specific Risk Factors that Influence Project Success with Explanation of the Terms
Contract specific Explanation
9.1. Differing site conditions clause Contract clause shifts the responsibility to contractors
9.2. Delay damages clause Many of the times one sided
9.3. Extension of time clause Time once expires the contract enters a tacit zone unless revalidated on time by agreement
9.4. Forfeiture of security deposit clause Very sensitive clause which can put the contractor in trouble even if he defaults to complete
a small percentage of work as scheduled
9.5. Termination of contract clause Sudden termination puts the project into trouble
9.6. Responsibility of design clause Proper apportionment of responsibility should be reflected in the clause
9.7. Defect liability period clause The period for which contractor is responsible for any failure in work should be specified
9.8. Dispute resolution clause Proper mechanism should be spelled out, i.e., arbitration/Dispute Review Board (DRB)
9.9. Price escalation clause The formula of arriving at increased rates should be clearly mentioned
9.10. Use of barchart/CPM clause Should be specific to the project and viable to follow
9.11. Ambiguities in defining certain clauses Lead and lift clause; excavation including dewatering

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 Table 10. Factors With Their Level of Risk and Probability Expressed in Weights Under Consultant Specific Subgroup (as per Expert 15)
Risk factors that are:
Subgoup number 4 Consultant specific Notation Level of risk Occurrence probability
4.01 Insufficient data collection and survey before design ISD 3 3
4.02 Inadequate experience of consultant with regard to type of project IEP 3 3
4.03 Delay in performing inspection and testing by consultant DP 4 5
4.04 Inflexibility of consultant IC 3 3
4.05 Complex/nonexecutable design CCD 3 3
4.06 Unclear and inadequate details in drawings MDD 3 3
4.07 Chances of consultant leaving the project midway CCL 2 3
4.08 Non use of advanced engineering design software NUAS 1 3
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4.09 Any other unforeseen factor AOF 2 0.1

Note: The following values can be adopted as weights corresponding to different levels of risk and their probability of occurrence. Very high Level of Risk and
Very high probability of occurrence ¼ 8:1 to 9; High Level of Risk and High probability of occurrence ¼ 6:1 to 8; Medium Level of Risk and Medium
probability of occurrence ¼ 4:1 to 6; Low Level of Risk and Low high probability of occurrence ¼ 2:1 to 4.0; Least Level of Risk and Least probability of
occurrence ¼ 0:1 to 2.

Table 11. Individual Factor Weights Under Consultant Specific a suitable statistical analysis. It is therefore suggested to adopt
Factor notation Normalized Normalized Individual
Student’s t-test to suit the small sample size considered whose
(Table 1) level of risk probability weights factor risk population variance is not known. The relevant test statistic, t, is
calculated from the sample data and then compared with its
ISD 0.0854 0.0259 0.0022 probable range, which is to be found out. For example, the percent
IEP 0.0854 0.0259 0.0022 values as given by all experts for one specific group, such as
DP 0.0642 0.0156 0.0010 project-specific, are tabulated in Table 14.
RC 0.0854 0.0259 0.0022 Standard deviation for the set of data is worked out, and a set of
CCD 0.0854 0.0259 0.0022 new values of mean are introduced in the increment of 0.5 to find
MDD 0.0854 0.0259 0.0022 the probable range of value of risk. The increment value is a trial
CCL 0.1276 0.0259 0.0033 value that will be any number in the increment of 0.2, 0.25, or 0.5.
UAS 0.2535 0.0769 0.0195 However, once chosen, the increment value will be kept the same
AOF 0.1276 0.7519 0.0959 for all the factors to maintain uniformity. As per the null hypothesis
Sub sub group weight 0.130 of Student t-test, the values of t more than 2.26 on either side of a
distribution will be rejected. In other words, the values of t less than
2.26 on either side of a distribution will be accepted. Trials in
Tables 15 to 23 are introduced in which some values are supplied
to know the acceptable range of values.

Table 12. Subgroup Wise Factor Weights Collected from Various Experts
Subgroup number 1 2 3 4 5 6 7 8 9
Subgroup name PS OS CS CNS PMS RS EES FS CCS
Subgroup weights 0.15 0.16 0.10 0.09 0.12 0.12 0.06 0.10 0.11 Final Index
Industry expert
Expert-1 0.040 0.048 0.075 0.078 0.065 0.069 0.092 0.075 0.062 0.064
Expert-2 0.067 0.071 0.115 0.119 0.090 0.084 0.131 0.094 0.081 0.091
Expert-3 0.069 0.060 0.051 0.117 0.047 0.060 0.161 0.056 0.057 0.070
Expert-4 0.080 0.075 0.123 0.142 0.097 0.096 0.164 0.111 0.097 0.104
Expert-5 0.089 0.068 0.084 0.090 0.077 0.077 0.181 0.070 0.070 0.085
Expert-6 0.042 0.022 0.049 0.053 0.042 0.062 0.189 0.053 0.037 0.053
Expert-7 0.071 0.057 0.136 0.102 0.092 0.080 0.165 0.110 0.091 0.094
Expert-8 0.057 0.060 0.102 0.109 0.091 0.076 0.148 0.075 0.069 0.082
Expert-9 0.068 0.074 0.112 0.126 0.095 0.091 0.168 0.111 0.167 0.106
Expert-10 0.069 0.064 0.108 0.126 0.106 0.092 0.168 0.114 0.092 0.098
Expert-11 0.076 0.074 0.117 0.119 0.098 0.091 0.176 0.110 0.101 0.101
Expert-12 0.041 0.040 0.063 0.022 0.048 0.066 0.070 0.054 0.091 0.054
Expert-13 0.032 0.046 0.080 0.100 0.058 0.070 0.120 0.107 0.091 0.072
Expert-14 0.081 0.071 0.112 0.128 0.093 0.092 0.167 0.120 0.095 0.101
Expert-15 0.081 0.066 0.132 0.130 0.086 0.095 0.194 0.114 0.103 0.104

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 Table 13. Percent Apportionment of Various Factors in the Opinion of Various Experts
Subgroup number 1 2 3 4 5 6 7 8 9
Subgroup name PS OS CS CNS PMS RS EES FS CCS
Industry expert
Expert-1 9.38 12.00 11.72 10.97 12.19 12.94 8.63 11.72 10.66
Expert-2 11.04 12.48 12.64 11.77 11.87 11.08 8.64 10.33 9.79
Expert-3 14.79 13.71 7.29 15.04 8.06 10.29 13.80 8.00 8.96
Expert-4 11.54 11.54 11.83 12.29 11.19 11.08 9.46 10.67 10.26
Expert-5 15.71 12.80 9.88 9.53 10.87 10.87 12.78 8.24 9.06
Expert-6 11.89 6.64 9.25 9.00 9.51 14.04 21.40 10.00 7.68
Expert-7 11.33 9.70 14.47 9.77 11.74 10.21 10.53 11.70 10.65
Expert-8 10.43 11.71 12.44 11.96 13.32 11.12 10.83 9.15 9.26
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Expert-9 9.62 11.17 10.57 10.70 10.75 10.30 9.51 10.47 17.33
Expert-10 10.56 10.45 11.02 11.57 12.98 11.27 10.29 11.63 10.33
Expert-11 11.29 11.72 11.58 10.60 11.64 10.81 10.46 10.89 11.00
Expert-12 11.39 11.85 11.67 3.67 10.67 14.67 7.78 10.00 18.54
Expert-13 6.67 10.22 11.11 12.50 9.67 11.67 10.00 14.86 13.90
Expert-14 12.03 11.25 11.09 11.41 11.05 10.93 9.92 11.88 10.35
Expert-15 11.68 10.15 12.69 11.25 9.92 10.96 11.19 10.96 10.89
Note: PS: Project-specific factor; OS: Owner specific; CS: Contractor specific; CNS: Consultant specific; PMS: Project manager specific; RES: Resource
specific; EES: external environment specific; FS: Finance specific; CCS: Contract clause specific.

Table 14. Consistency of Results Corresponding to Project-Specific Table 15. Acceptable Range of Values Corresponding to Project-Specific
Percent Apportionment of Risk Percent Apportionment of Risk on the Basis of Student t-test
% Average value X-Xavr ðX-XavrÞ2 μ t-value Range
p
9.38 11.29 1:91 3.66 x average Trial value ðx mean-μÞ=σ= n
11.04 11.29 0:24 0.06 11.29 10.0 2.374 Rejected
14.79 11.29 3.50 12.23 11.29 10.50 1.363 Accepted
11.54 11.29 0.25 0.06 11.29 11.00 0.500 Accepted
15.71 11.29 4.42 19.51 11.29 11.50 0:362 Accepted
11.89 11.29 0.60 0.36 11.29 12.00 1:225 Accepted
11.33 11.29 0.04 0.00 11.29 12.50 2:088 Accepted
10.43 11.29 0:86 0.74 11.29 13.00 2:950 Rejected
9.62 11.29 1:67 2.78
Note: Highlighted numbers indicates acceptable range.
10.56 11.29 0:73 0.53
11.29 11.29 0.00 0.00
11.39 11.29 0.10 0.01 Table 16. Acceptable Range of Values Corresponding to Owner-Specific
6.67 11.29 4:62 21.36 Percent Apportionment of Risk on the Basis of Student t-test
12.03 11.29 0.74 0.55
μ t-value Range
11.68 11.29 0.39 0.16 p
x average Trial value ðx mean-μÞ=σ= n
11.29 62.01
Note: Number of sample ðnÞ ¼ 15; Degree of freedom ðn  1Þ ¼ 14; 11.2 9.5 3.9089124 Rejected
ðx-averageðxÞÞ2 ¼ 62:01;
p ðx-averageðxÞÞ2 =ðn  1Þ ¼ 4:429;
p Standard
11.2 10.00 2.7310561 Rejected
Deviation σ ¼ fðx-aveðxÞÞ
p
2 =ðn  1Þg ¼ 2:104; σ= n ¼ 0:5434 11.2 10.50 1.5531998 Accepted
t ¼ fðAveðXÞ  μÞ=σ= ng. 11.2 11.00 0.3753435 Accepted
11.2 11.50 0:8025128 Accepted
On the basis of the test, it is found that the probable distribution 11.2 12.00 1:9803691 Accepted
of percent apportionment of project-specific risk in any project can
11.2 12.50 3:1582254 Rejected
be in the range of 10.5 to 12.5%. Similar analysis is done for all the
factors, as shown in Tables 15–23, and the result range is tabulated
in Table 24, and the range of values can be applicable to the general
construction industry in India. have grown in size, and large infrastructure projects are being
executed in various parts of the country. The Indian construction
industry is expected to grow 25–30% during 2010–2012. The
Construction Project Risk Unique to the Indian World Bank estimates suggest that India’s urban population will
Construction Market be close to 500 million by 2017, putting massive pressure on civic
infrastructure. The government is expected to spend more than $1
A brief background of the Indian construction industry and asso- trillion on infrastructure upgrades between 2012 and 2017. The In-
ciated risk is presented in this section. Projects undertaken in India dian construction industry, with such huge investments, is largely

416 / JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT © ASCE / MARCH 2012

J. Constr. Eng. Manage. 2012.138:409-421.

 Table 17. Acceptable Range of Values Corresponding to Contractor- Table 20. Acceptable Range of Values Corresponding to Resource-
Specific Percent Apportionment of Risk on the Basis of Student t-test Specific Percent Apportionment of Risk on the Basis of Student t-test
μ t-value Range μ t-value Range
p p
x average Trial value ðx mean-μÞ=σ= n x average Trial value ðx mean-μÞ=σ= n
11.3 9.5 4.1909197 Rejected 11.5 10.50 2.8571429 Rejected
11.3 10.00 3.0267753 Rejected 11.5 11.00 1.4285714 Accepted
11.3 10.50 1.862631 Accepted 11.5 11.50 0 Accepted
11.3 11.00 0.6984866 Accepted 11.5 12.00 1:4285714 Accepted
11.3 11.50 0:4656577 Accepted 11.5 12.50 2:8571429 Rejected
11.3 12.00 1:6298021 Accepted
11.3 12.50 2:7939464 Rejected
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Table 21. Acceptable Range of Values Corresponding to External-

Environment-specific Percent Apportionment of Risk on the Basis of
Student t-test
Table 18. Acceptable Range of Values Corresponding to Consultant-
Specific Percent Apportionment of Risk on the Basis of Student t-test μ t-value Range
p
μ t-value Range x average Trial value ðx mean-μÞ=σ= n
p
x average Trial value ðx mean-μÞ=σ= n 11.0 0 9.0 2.3809524 Rejected
11.0 0 9.5 1.7857143 Accepted
11.8 9.0 2.8571429 Rejected
11.0 10.00 1.1904762 Accepted
11.8 9.5 2.0634921 Accepted
11.0 10.50 0.5952381 Accepted
11.8 10.00 1.2698413 Accepted
11.0 11.00 0 Accepted
11.8 10.50 0.4761905 Accepted
11.0 11.50 0:5952381 Accepted
11.8 11.00 0:3174603 Accepted
11.0 12.00 1:1904762 Accepted
11.8 11.50 1:1111111 Accepted
11.0 12.50 1:7857143 Accepted
11.8 12.00 1:9047619 Accepted
11.0 13.00 2:3809524 Rejected
11.8 12.50 2:6984127 Rejected

Table 22. Acceptable Range of Values Corresponding to Finance-Specific

Percent Apportionment of Risk on the Basis of Student t-test
Table 19. Acceptable Range of Values Corresponding to Project-Manager-
Specific Percent Apportionment of Risk on the Basis of Student t-test μ t-value Range
p
μ t-value Range x average Trial value ðx mean-μÞ=σ= n
p
x average Trial value ðx mean-μÞ=σ= n 10.7 0 9.0 3.9534884 Rejected
11.0 0 9.0 5.7142857 Rejected 10.7 0 9.5 2.7906977 Rejected
11.0 0 9.5 4.2857143 Rejected 10.7 10.00 1.627907 Accepted
11.0 10.00 2.8571429 Rejected 10.7 10.50 0.4651163 Accepted
11.0 10.50 1.4285714 Accepted 10.7 11.00 0:6976744 Accepted
11.0 11.00 0 Accepted 10.7 11.50 1:8604651 Accepted
11.0 11.50 1:4285714 Accepted 10.7 12.00 3:0232558 Rejected
11.0 12.00 2:8571429 Rejected

unorganized with workers being itinerant; the general construction Recent infrastructure projects with public-private partnership (PPP)
suffered heavily because of schedule and cost overrun. Few cases
management requires improvements on various fronts. Inadequate
are discussed in this section. The National Highway Authority of
training, lack of qualified manpower, and poor coordination com-
India (NHAI), a government organization which undertakes major
pound the problem because no formal training is in place for con-
infrastructure projects, suffered from delays in completion attrib-
struction workers. Very few employers invest in training their uted to lack of planning, poor coordination, deficiencies and delays
workers, and there is a substantial drop in the percentage of quali- in producing drawings and design, cost estimation, and traffic pro-
fied engineers employed at the work sites from 4.71% in 1995 to jections. The performance audit report of government revealed that
2.65% in 2005, as per the eleventh 5-year report of the government out of 17 highway projects undertaken by NHAI along with private
of India (2005). The strength of skilled workforce has also been sector participation between 1998 to 2003, only five were com-
consistently and substantially going down from 15.34% in 1995 pleted in time.
to 10.57% in 2005, whereas relative proportions of unskilled work- Another infrastructure project that suffered major setback in
ers have gone up from 73.08% in 1995 to 82.45% in 2005. land acquisition is the Navi Mumbai International Airport project.
Many of the large infrastructure projects suffer because of the The proposed project site located 35 km from mumbai was to be
lack of planning and coordination resulting in claims and disputes. developed through PPP. Although the project received an in

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J. Constr. Eng. Manage. 2012.138:409-421.

 Table 23. Acceptable Range of Values Corresponding to Contract-Clause- case, the project developer, Hindustan Construction Company
Specific Percent Apportionment of Risk on the Basis of Student t-test (HCC), had to stop the “Lavasa” township project near pune, which
μ t-value Range is developed over a 100 km2 area, because it got into environment
p related disputes. Although the site was cleared by the state
x average Trial value ðx mean-μÞ=σ= n
government, the project suffered a major setback because environ-
11.2 0 9.0 2.851 Rejected mental activists claimed that the project, if completed, will have an
11.2 0 9.5 2.164 Accepted adverse impact on the biodiversity of the region. The uncertainties
11.2 10.00 1.527 Accepted have not only hampered project progress but also resulted in a huge
11.2 10.50 0.891 Accepted financial loss, which is estimated close to 2 crores per day to the
11.2 11.00 0.255 Accepted construction company.
The other project recently completed by HCC is the “Bandra
11.2 11.50 0:382 Accepted
worli sea link project,” which was originally conceived at a cost
11.2 12.00 1:018 Accepted
of Rs 300 crore (Rs 3 billion) for constructing a sea link of length
11.2 12.50 1:655 Accepted
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5.6 kms. The project was scheduled for completion by 2004 and
11.2 13.00 2:291 Accepted actually got completed in 2009, after a time overrun of 5 years re-
11.2 13.50 2:928 Rejected sulting in cost of completion to Rs 1,600 crore (Rs 16 billion), a six-
fold increase to original estimation. Constant change in bridge
alignments and designs plans and payment related disputes were
major drivers in delay.
Table 24. Acceptable Range of Values Corresponding to Larger However, there are some exceptions to what is discussed pre-
Population on the Basis of Percent Apportionment of Risk Results of
viously. For example, the Delhi metro railway project phase-I
Sample Population Considered
was completed on schedule and within the budgeted cost. The De-
Factor Standard deviation observed Accepted range for large sign Build Turnkey project involved international contractors for
list in analysis results population in % construction of a total length of 6,569 m of metro rail and was com-
PS 2.10 10.5 to 12.5 pleted in a 5-year period at a total cost of Rs. 1,800 crores. The
OS 1.64 10.5 to 12.0 success was attributed to transparency in the tendering system
CS 1.66 10.5 to 12.0
and proper planning.
In all the cases discussed previously size of project, regulatory
CNS 2.44 9.50 to 12.0
approvals related to environment, land acquisition, scope change,
PMS 1.37 10.50 to 11.5
tender selection methods (government projects relying heavily on
RES 1.34 11.0 to 12.0 low bid criteria, Indian prequalification system is not adequate),
EES 3.26 9.50 to 12.5 location uniqueness are found to influence smooth completion
FS 1.66 10.0 to 11.5 in some way or an other. All these factors are grouped as project
CCS 3.04 9.50 to 13.0 specific and external environment specific in the study. The draw-
Note: PS: Project-specific factor; OS: Owner specific; CS: Contractor spe- ings and design details are subject to continuous revisions even
cific; CNS: Consultant specific; PMS: Project manager specific; RES: Re- after the commencement of the work resulting in delays. These
source specific; EES: External environment specific; FS: Finance specific; are grouped as architect/consultant-specific factors. The delays
CCS: Contract clause specific. coupled with unrealistic price variations have resulted in projects
costing more than what was anticipated. Steel prices suddenly shot
up in recent times leaving the contractors to bear the brunt. Con-
principle clearance from the Ministry of Environment and Forests struction contracts in India are found to be heavily one-sided and
(MoEF) in 2008, the final clearance was given only in 2010 with unbalanced in risk apportionment. Although FIDIC contracts can
additional riders. As a result, the cost of the project, which was provide better risk apportionment, they are not widely used except-
originally estimated at Rs 9,000 crore (Rs 90 billion), shot up to ing those funded by World Bank or Asian Development Bank.
Rs 15,000 crore (Rs 150 billion). Unrealistic price variation, absence of unified construction law,
Some of the large infrastructure projects in recent times suffered and contract administrator are grouped as contract-clause-specific
a major setback because of environmental regulations. In one such factors.

Table 25. Sample Nonzero Singular Matrix Developed for the Level of Risk Values Entered in Table 1
Level of risk matrix 9 × 9
ISD IEP DP IC CCD MDD CCL NUAS AOF weight Normalised
3 3 4 3 3 3 2 1 2
ISD 3 1.00 1.00 1.33 1.00 1.00 1.00 0.67 0.33 0.67 0.8366 0.0854
IEP 3 1.00 1.00 1.33 1.00 1.00 1.00 0.67 0.33 0.67 0.8366 0.0854
DP 4 0.75 0.75 1.00 0.75 0.75 0.75 0.50 0.25 0.50 0.6293 0.0642
RC 3 1.00 1.00 1.33 1.00 1.00 1.00 0.67 0.33 0.67 0.8366 0.0854
CCD 3 1.00 1.00 1.33 1.00 1.00 1.00 0.67 0.33 0.67 0.8366 0.0854
MDD 3 1.00 1.00 1.33 1.00 1.00 1.00 0.67 0.33 0.67 0.8366 0.0854
CCL 2 1.50 1.50 2.00 1.50 1.50 1.50 1.00 0.50 1.00 1.2498 0.1276
NUAS 1 3.00 3.00 4.00 3.00 3.00 3.00 2.00 1.00 2.00 2.4824 0.2535
AOF 2 1.50 1.50 2.00 1.50 1.50 1.50 1.00 0.50 1.00 1.2498 0.1276
9.7943 1.0000

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J. Constr. Eng. Manage. 2012.138:409-421.

 Table 26. Sample Nonzero Singular Matrix Developed for the Probability of Risk Values Entered in Table 1
Probability of occurrence matrix 9 × 9
ISD IEP DP IC CCD MDD CCL NUAS AOF weight Normalised
3 3 5 3 3 3 3 3 0.1
ISD 3 1.00 1.00 1.67 1.00 1.00 1.00 1.00 1.00 0.03 0.7276 0.0259
IEP 3 1.00 1.00 1.67 1.00 1.00 1.00 1.00 1.00 0.03 0.7276 0.0259
DP 5 0.60 0.60 1.00 0.60 0.60 0.60 0.60 0.60 0.02 0.4388 0.0156
RC 3 1.00 1.00 1.67 1.00 1.00 1.00 1.00 1.00 0.03 0.7276 0.0259
CCD 3 1.00 1.00 1.67 1.00 1.00 1.00 1.00 1.00 0.03 0.7276 0.0259
MDD 3 1.00 1.00 1.67 1.00 1.00 1.00 1.00 1.00 0.03 0.7276 0.0259
CCL 3 1.00 1.00 1.67 1.00 1.00 1.00 1.00 1.00 0.03 0.7276 0.0259
NUAS 3 3.00 3.00 5.00 3.00 3.00 3.00 3.00 3.00 0.10 2.1591 0.0769
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AOF 0.1 30.00 30.00 50.00 30.00 30.00 30.00 30.00 30.00 1.00 21.0994 0.7519
28.0632 1.0000

Among various risk factors discussed previously, the risk per- vendors, subcontractors, specialty contractors, environmentalists,
taining to project-specific, architect/consultant-specific, external- and a whole lot of related professionals. Construction projects
environment-specific, and contract-clause-specific factors vary and contracts have become complex with a potentially greater
widely with respect to their level of uncertainty and influence, risk. Project completion depends largely on competent project
to a greater extent, successful project completion in Indian con- administration coupled with more accurately worked out project
struction industry. risk management. Each one is connected to the other through a net-
work of a large number of activities creating rights and obligations.
Uncertainty of performance by one or the other agency has serious
Risk Response Strategy ripple effect, challenging project managers to find solutions almost
on a continued basis to eliminate or minimize various risks. (Dave
In the light of previous risk factors, the following risk response 2007). Organizational conflict inventory can also be used to under-
strategy is suggested, which will be used to mitigate the adverse stand the negotiating styles of construction professionals. Only
effects of risk in project completion. Risk factors can vary from
three policies are available in Indian construction market i.e., Con-
project to project. Therefore, the term risk is very relative and de-
tractors All Risk Policy (CAR Policy), Plant and Machinery Policy,
pends on individuals executing the project. In other words, risk
and Workmen’s Compensation Act Policy. The Construction Indus-
level in a project varies depending on the parties that are involved
try Development Council (CIDC) has recently proposed a few addi-
in the contract. The impact of risk can be positive or negative, and
tional insurance policies, such as loss of profit policy, force majeure
therefore, assessment of risk should be ongoing and dynamic.
loss policy, and bidding indemnity policy, to mitigate risk.
Out of various factors considered in the research, those specific
A proper methodology of award of work should be arrived at
to owner, contractor, project manger, and resource are subject to
instead of selecting the lowest tender. Experts in the construction
smaller deviation from expected levels than that pertaining to
industry believe that the traditional principle of choosing the lowest
contract-clause-specific, project-specific factors, architect/consul-
tant-specific, and external-environment-specific factors. Therefore, possible price by adopting a hard bid method carries a high degree
a better risk response strategy needs to be devised to handle the of risk. Public work constructions on the basis of the hard bid
second group of factors. method have experienced a surge in litigation during the 1990s,
Contract clause specific factors indicate that the responsibility which tends to increase the risk of the project. The selection of
of design, ownership float, risk of incomplete information (for a lowest bidder is one of the major reasons for project delivery
example information of geological strata), risk of material problems because contractors, when faced with a shortage of work,
nonavailability (recently sand shortage was witnessed at various desperately quoted a low bid price simply to remain in business
sites because of government regulation), use of a specific type with the expectation to be offset through claims (Singh and Tiong
of network technique to measure delay, delay damages, project de- 2006). The research outcome suggests that the Indian construction
livery system, role of project participant, and the clause to handle industry needs to employ innovative technologies and better con-
unrealistic price variation are either missing in the present contract tract management strategies to overcome these challenges. A shift
documents or not spelled out clearly in the contract clause. This from the current practices toward electronic tendering process and
results in disputes at a later stage and poses a risk to the completion an online contract bidding document can make the bidding process
of the projects. In the Delhi Metro Railway project discussed pre- transparent.
viously, the consultancy and contracts were undertaken by a global Project-specific risk factors, such as size of project, scope
bidding program, and the success was attributed to transparency in change, tender selection methods, location uniqueness, regulatory
the tendering system and proper contract administration. The Delhi approvals, change order, extra items, and variations shall be
Metro Railway (Operation and Maintenance) Act 2002 was handled on a fair basis by providing a suitable built-in mechanism
enacted, superseding the local municipal laws of Delhi, and the in the contract. Climatic conditions, equipment breakdown, and dif-
lower courts were barred from issuing stay orders. A balanced con- fering site conditions are very closely related and need to be as-
tract document is therefore the first step in mitigating uncertainties sessed as a single combined factor, i.e., the adverse climatic
in the project. condition coupled with equipment breakdown or differing site con-
There are more stakeholders in the game of delivery of projects dition can be serious and can increase the project risk in geometric
than ever before. They include bankers, insurance agencies, proportion.

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J. Constr. Eng. Manage. 2012.138:409-421.

 Architect/consultant-specific risk can be handled by early freez- concluded that the risk associated with the previous factors are
ing of design details and development of synchronized drawings more or less of the same level, and they can be reasonably
(super imposed drawings of architectural, RCC, and service draw- predicted. Those factors that are predictable can be managed by
ings), which in turn will minimize disputes, related delays, and appropriate contract provisions. Whereas the percent apportion-
extra item claims. In the contracts, provision needs to be given ment of second group, i.e., risk pertaining to project-, architect/
to the contractors that after the award of contract the contractor consultant-, external-environment-, and contract-clause-specific
has to study the same in detail and come back with the suggestions, factors range from 9.5 to 13%, a larger range than factors of the
probable extra items, extraordinary difficulties, and risks involved, first group with standard deviation up to as high as 3.3 indicate
if any, within a reasonable period. Thereafter, a risk mitigation plan a wide variation making it difficult to predict their occurrence in
can be achieved at an early stage of the projects. Risk registers a project. The first group of risk factors, although varied in
should be maintained, which will help in knowing the nature their uncertainties, can be effectively handled, and risk can be con-
and cause of risk. trolled by existing provisions in contracts. The expert interviews
Lack of training and poor coordination are also found to influ- suggest that a planned approach in handling project- and external-
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ence project completion in the Indian construction industry. The environment-specific risk coupled with a proper contract
tender prequalification system should have a mechanism to encour- administration can mitigate overall risk to a greater extent in the
age contractors to train their men. For example, NHAI has recently Indian construction industry. The findings are also confirmed by
introduced a prequalification condition of a minimum of 5% of the project disputes related to various projects that were discussed
trained and certified workers to be available with the contractor previously. The study is expected to deliver recommendations to
to become eligible for any of the bid from NHAI. The level of trust project managers about risk assessment methodology and risk re-
and mutual confidence between the parties to the project is also sponse strategy.
found to be poor. For example, in the case of residential buildings,
the work is awarded to main (RCC and civil) contractor and for
MEP (mechanical, electrical and plumbing) services different con- Recommendation
tractors are appointed. This creates the coordination problems at the
closing stage of the project because most of the finishing activities The study has resulted in recommendations to project managers
about risk assessment methodology. A quantitative model gives
take place in the end, and the clients are short on time. The experts
a crisp value to the otherwise vague subjective judgments. Care
interviewed have expressed the opinion that it is at this stage of the
should be taken to cover the correct cross section of experts because
project, when they are required the most, that the contractors are
the success of the model is based on the expert assigned values.
reluctant to deploy the labor resources. This causes the main prob-
Care should also be taken in the profile of the experts and the type
lem in the finishing of the projects, which is seen as the visual qual-
of projects executed by them in the past. The results of the study are
ity of the product and is observed by the customers.
presented in Table 24. Risk response strategy suggested in this pa-
External-environment-specific factors, such as unfavorable so-
per will be useful in mitigating the adverse effects of risk in project
cial environment, unfavorable market fluctuations, unfavorable
completion.
political environment, and changing government policies need to
be handled with a professional and logical approach. In other
words, the parties should know what the major risks are that cannot
Acknowledgments
be transferred and identify suitable mechanisms to cover such risk.
For example, many a times a contract is silent on the risk related to The authors thank all consultants, contractors, project managers,
unrealistic price variation and regulatory clearance. Suitable provi- finance, and technolegal experts for their participation in the inter-
sion in the contract clause is required to work under an escalating view survey.
price condition in which the project suffers in time with reduced
profit margins.
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