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Research Title Deriving Value for Money by “Managing Risks through Effective Public Procurement of Road Construction works in Sri Lanka by “Road Development Authority” (RDA)” CHAPTER 1. INTRODUCTION 1.1 SRI LANKA TRANSPORT SECTOR Sri Lanka’s strategic location at the crossroads of Asian trading routes has contributed to its growth as a regional trading hub. In 2003, the transport sector contributed 10 percent to the country’s GDP and generated about 4 percent of employment. Nonetheless, potential exists to further develop this island nation’s transport system. Roads: Roads are the backbone of the transport sector in the country. They are vital for the movement of people and goods and play an important role in integrating the country, facilitating economic growth, and ultimately reducing poverty. National roads carry over 70 percent of the traffic in Sri Lanka. However, uncontrolled roadside development, as well as years of neglect and poor road maintenance has resulted in low travel speeds and poor service. This has discouraged long distance traffic and hindered the spread of economic activities and development in regions other than the Colombo Metropolitan Area (CMA). Roads are extremely important for the large majority of Sri Lanka’s people who live in the villages - some 65 percent of the country’s population. They are often the only way for most rural people to reach essential services such as hospitals, schools, markets, and banks, which are mostly situated far from their villages. Although Sri Lanka enjoys a higher road density than in many developing countries, the conditions and standards of the roads are inadequate to meet rapidly growing freight and passenger traffic. More than 50% of the national roads have poor or very poor surface condition and many are seriously congested. In spite of the substantial increase in traffic volume there have been insufficient investments for construction of new highways or widening and improving existing roads. Over the past decade the investment in the road sector has been mainly concentrated on the rehabilitation of the existing road network. 1.1.1 Challenges To place the country on a path of economic growth, the Government of Sri Lanka (GOSL) needs to address several serious weaknesses in the country’s transport infrastructure. These are: weak institutional capacity at all levels; the inability of transport agencies to mobilize resources; and an underdeveloped private sector. These weaknesses result in the inadequate upgrading, development, and maintenance of assets, which adversely affects the quality of transport services. As a result, the sector experiences the following bottlenecks: Low capacity of highways and lack of expressways to connect major growth centers. National highways, which are mostly two-lane, are unable to carry the current volume of mixed traffic (pedestrians, bikes, bullock-pulled-vehicles and motor vehicles). This, together with the lack of side lanes and paved shoulders,

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leads to uncontrolled development of roadsides and causes low travel speeds, poor level of service, and less long-distance traffic. Severe deterioration of provincial and local roads. Neglected maintenance, as well as the lack of official capacity and resources, has led to the severe deterioration of roads. This adversely affects farmers taking produce to markets and villagers traveling to cities to reach social services. 1.1.2 Key Government Initiatives

In its election manifesto, the Government of Sri Lanka recognizes an urgent need to invest in the improvement of its transport infrastructure to meet the country’s economic and social needs and “foster pro-poor growth and reduce regional disparities”. Priority actions are as follows:

Infrastructure development is of paramount importance to meet the Government’s target of economic growth at 6 to 8 percent each year for the next five years. To this end, the medium term target is to substantially increase expenditure on transport infrastructure from 7 percent in 2007 to 16 percent of Gross Domestic Production (GDP) by 2012.

1.1.3 RDA’s Role

Since, it was mentioned above that National roads carry over 70 percent of the traffic in Sri Lanka From the late 1960s to the mid-1990s,the the foreign funding agencies and national funds are provided through loans, credits, aids, grants etc, to improve Sri Lanka’s roads and assisted in the development of sector policy through Road Development Authority(RDA) to finance the maintenance, rehabilitation and upgrading of the country’s national highways and support the government’s reform initiatives for financing sustainable road maintenance through RDA

1.2 ROAD DEVELOPMENT AUTHORITY (RDA) RDA is a statutory body incorporated under the RDA Act. NO.73 of 1981 under the Ministry of Highways & Road Development and is the premiere highway authority in the country. RDA is entrusted with the responsibility of maintaining and developing the National Highway network, which comes under purview of Central Government. The National Highway Network consists of 3,727 km of “A” Class Road and 7,375 km of “B” Class Roads and 4,400 bridges. The functions performed by the RDA include planning, design and construction of new highway and bridges in addition to maintaining and carrying out improvement to the existing national highway network. A Board of management appointed by the Hon. Minister of Highways & Road Development effects the management of the RDA. The board of management is responsible to the Hon. Minister for the implementation of government policy, for the development of the Network. Also Road Development Authority, is having following it’s strategically components. RDA’s organization chart is annexed in Appendix-A

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1.3STRATEGIC DIRECT COMPONENTS--RDA

Vision of Road Development Authority “To achieve a safer and adequate National Highway Network to meet the expectations of all stakeholders for the speedy Socio-Economic development of the country and to make the Road Development Authority an institution of multi disciplinary excellence in Highway Engineering.”

Mission of Road Development Authority “As the premier National Organization of the road sector, to provide an adequate and efficient network of National Highways, to ensure mobility and accessibility at an acceptable level of safety and comfort, in an environment-friendly manner for the movement of people and goods for the socio-economic development of the nation”

Goals and Objectives of Road Development Authority 1. Achieve an adequate National Highway Network. 2. Achieve an acceptable level of mobility in the National Highway Network. 3. Provide a high mobility expressway network. 4. Maintain the National Highway Network at an acceptable condition. 5. Reduce road user cost. 6. Improve road safety in the National Highway Network. 7. Ensure efficient utilization of assets and investments. 8. Ensure protection of the environment in all activities. 9. Promote organizational development. 10. Assist in the development of the local road construction industry 1.4 Overview of the Study To achieve the above goals and objectives, RDA is implementing more than 1000 Projects Island wide funded by various foreign funding agencies and foreign banks as well as through local national budget from the treasury. Though the projects, which are implemented through public funds, which are accountable and all of us are answerable when utilizing public funds, disbursement rates are not very satisfactorily up to the expected target in accordance with the funding agency indicators. Progresses of most of the Projects are very slow and cost overrun due to the delays, failures, massive cost escalation claims & variation claims in implementing stage. One of the ongoing failures Road Project, which is presently implemented to rehabilitate roads in North & East areas, identified as Conflicts Area Affected Project (CAARP) funded by Asian Development Bank (ADB). When analyzing the causes of the failures of the each project, it is decided to analyze and to do a study research to find out the causes of the failure in one of the maligned area identified as Managing Risks in Procurement of Road Construction in works contracts.

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1.5 Statement of the Problem By the way of implementing following Asian Development Bank funded Conflict Affected Area Rehabilitation Project (CAARP), the following Main Problem was identified for this study;

What are Risks involved in achieving the Goals & Objectives of CAARP Project? SUMMARY OF CAARP PROJECT

Name of the Project : Conflict – Affected Area Rehabilitation Project (CAARP)

Effectiveness : Loan Agreement was signed on 14th January 2004 Loan Expiry : 30/06/2008 and Extended to up 31/12/2009 Loan Amount : US$ 56.5 Million Scope of Work : Rehabilitation of 240km National Highways in North –

East Province 1.6 Objectives of the Study : The overall objective of the study will brief how risks are going to identified and studied and how are going to be Managed be to the achievement of the project objectives will be managed on the Design and Construction of the Specific Conflict Affected Area Projects (CAARP) in Sri Lanka. Specifically, the following study to be taken place to identify risks and to find-out the appropriate techniques to recommend and eliminating such risks or to be well Managed in the future Roads Projects under taken by Sri Lanka by this Dissertation in order to ensure that high quality construction is achieved in time, within budget, and that all work is carried out in full compliance with the approved engineering designs, technical specifications, agreed work schedule, the terms and conditions of the Contract documents and as per sound engineering practices inline with the Goals & Objectives of the Employer (RDA). Also this study will involve the development of frameworks and strategies aimed at enhancing the transparency, efficiency and accountability with which the public sector resources (financial and human) are used, making the financing, provision and delivery of basic public services more efficient and effective, and improving the accountability and performance of the public service and its personnel. Also this study has the following Objectives;

(a) Achieve sustainable maintenance, rehabilitation and construction of economically justifiable roads in the strategic road network within the Priority Investment Plan framework; (b) Improve the access to district headquarters not currently served by road, and

reduce vehicle transport costs and delays in project areas; (c) Promote more sustainable funding and more efficient public sector management

of road maintenance; (d) Adopt and disseminate environmentally sustainable road construction and

maintenance practices; and (e) Generate rural-employment through adoption of labor-based technologies and long-term employment for the additional generated economic activity.

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1.7 Outline of the Study: ��An outline of the risk management activities that will take place on this

project for the full Life cycle of the project, from the identification of the project requirements up to and including the operation of the facility

��Details on the roles, responsibilities, processes and procedures, standards, tools and documentation to be utilized during the course of the project in relation to the

Management of risk. ��Details on the context in which risks are to be managed, how they will be

identified, analyzed, evaluated, treated, monitored, reviewed, reported, and associated communication and consultation activities related to the risk management process.

The plan is consistent with current RDA policies and procedures, and has been developed by this study on behalf of the RDA and Ministry of Highways & Road Development.

The CAARP projects, which are implemented in North and East part of Sri Lanka, involves the provision of a road sections the mainline, access to access to the main cities of North & East part of Sri Lanka. In outline the project was proposed to include the construction and with rehabilitation of roads in the past in conflicts affected area. The proposed works include:

��Rehabilitation and reconstruction of National highways and bridge works, road furniture and geotechnical works

��widening of the sections where necessary involving the construction of new carriageway (partly on elevated structures) and reconstruction of existing carriageway; ��re-alignment of the Road at its junctions of the Road involving the replacement of the existing carriageway with new carriageway (partly on elevated structures).

The paper is organized as follows. In Chapter 2, I overview relevant Literature. In Chapter 3 the Research management methodology of the study is described. Chapter 4 presents the result of the questionnaire survey and analyses risk management process in the projects’ different phases. Concluding remarks and Recommendations for future work are presented in Chapter 5.

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CHAPTER 2. LITERATURE REVIEW The following literature will provide to the research dissertation to verify some specific terms and some existing facts and also the following theories and related information provide good understanding regarding the selected research problem. 2.1 Purpose of Literature Review Purpose of LR is to familiarize the study with any relevant information pertaining to my topic being studied and to give ideas to improve the study and enhance the dissertation report. LR is necessary in conducting this research in the sense that only through the knowledge available and accessible documents can determine in how so-called secondary data available to facilitate this study. 2.2 Introduction

Every contract has risks that must be reviewed from the perspective of protecting the state’s assets and interests. Risks management tools to help to manage those risks when the contract on behalf of the state. An inherent part of contract management is to:

1. Evaluate the risks involved; 2. Decide whether to avoid, transfer, or accept the risks; and 3. Implement appropriate risk transfer and/or risk financing mechanisms.

To read the contract thoroughly will help and anticipate events or situations that could happen within the scope of work outlined. Ask each actor, who involved in contract from:

1. Who are all the parties involved? 2. What kind of work is being done? 3. What type of accidents or losses could occur? 4. What is the worst-case scenario in terms of financial loss and/or injury to persons or

property? 5. Are the responsibilities for the risks appropriately placed with those in the best

position to control them? 6. What is each party’s ability to manage the risks and absorb the losses? 7. Is the contract legal and enforceable?

Within the contract, risk transfer is accomplished through a combination of indemnification, hold harmless, and waivers of subrogation clauses. Insurance is commonly required as a means of providing the financial support to back the indemnitor’s obligation to hold the indemnitee harmless.

The state’s goal is to establish contract guidelines for insurance coverage that can be consistently applied with few exceptions. To insure the continued success of the state’s contract review program, once insurance requirements have been set, they must be communicated in all bid proposals prior to awarding the contract. The program will not be successful if the insurance is negotiated after the contractor has been selected. Note that a change in bidding requirements, such as changing the insurance requirements, could result in a protest of the award by the unsuccessful bidders

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2.3 DEFINITION OF RISK

The following definitions of terms are usually used in Risk Management: Hazard a particular event which has the potential if it occurs of an adverse effect.

• Risk the probability of occurrence of a defined hazard and the magnitude of the consequences.

• Risk Assessment the estimation and evaluation of the risk; the magnitude of the consequences together with the probability of the consequences.

• Risk Identification an awareness of those risks which could adversely affect the outcome of the venture or project.

• Risk Management the identification, measurement and economic control of risks.

2.4. Risk Policy The risk management methodology that will be adopted on this project, and outlined in this plan, will be consistent with the policy requirements and guidelines set out under the following Environment, 2.5 Overview of Risk Management Risk is often ignored or dealt with simply by adding contingencies to estimated costs, time and performance. The development of non-traditional contract and funding arrangements, such as BOT, PPP and Target Cost Reimbursable arrangements has meant that a structured and logical approach has been necessary to deal with the new types of risk to the new types of project objectives. The Risk Management framework is as follows:

Figure 2.5 Overview of Risk Management The methodology used for the management of risk on this project will be consistent with the risk management process described in the as summarized in the flowchart below:

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FIGURE 2.5.1THE RISK MANAGEMENT PROCESS 2.6. Risk and risk management in construction Within project management context, this research defines the terms ‘risk’ and ‘uncertainty’ as follows. ‘Risk’ means the event/condition that its occurrence is identifiable and provides negative effect to project objective, probability distribution of outcome is quantifiable, and it is controllable by one party. ‘Uncertainty’ means the event/condition that its occurrence is unidentifiable and may provide positive or negative effect to project objective, probability distribution of outcome is unquantifiable, or it is uncontrollable by one party. In infrastructure projects, political and economical uncertainties are common ones in the external category. Unreasonable project objectives (e.g., time and cost), delay in awarding and contracting, unfair contract conditions, incapable executing agency, late land acquisition, delay in contractor’s mobilization, incapable and inexperienced contractor, financial problem of contractor, adversarial attitude, inefficient communication, cooperation and coordination, poor project and risk management, claim, conflict and dispute are those common source and consequential risks and uncertainties in the internal category. To cope with these risks, several Risk Management Processes (RMP) have been developed by many researchers (Al-Bahar and Crandall 1990; Wideman 1992; Flanagan and Norman 1993; Duncan 1996; Kahkonen and Huovila 1996; Chapman and Ward 1997; ICE 1998; PMI 2000, and Pipattanapiwong and Watanabe 2000). Generally, conventional Risk Management Processes consist of three main processes i.e., risk identification, risk assessing and analysis, and risk response. There are several definitions of the project risk in the literature. A formal definition is given in the international standard as a combination of the probability of an event occurring and its consequences for project objectives. The concept of risk in greater detail and suggest using the more general concept of uncertainty. A questionnaire survey conducted by this study shows that the majority of project actors perceive risk as a negative event. Project risk management is a formal process directed to identification, assessment and response to project risks. The process is defined differently in research literatures. However, all definitions agree that the aim of project risk management is to maximize opportunities and minimize the consequences of a risk event in the construction project.

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To obtain ‘reference’ is just the first step to manage risk in a project. To complete risk management, it is necessary to go through following processes: problem awareness from knowing what is different as reference, problem identification through communication among parties, and problem solving by integration of multiple parties’ views. The communication function is also an important step stipulated in problem solving process available in risk management manual proposed by FIDIC (FIDIC 1997); nevertheless, its explanation is very limited to only statements of importance in keeping communication. It does not provide how to communicate among parties and does not tell what information necessary in commutation. It is indispensable for all involved project parties to timely be aware of risks and uncertainties and efficiently communicate those perceived exposure of risks and uncertainties among all parties. Then, all parties’ views should be integrated, and they should cooperatively prepare both proactive and reactive measures in responding those prospective risks and uncertainties. In order to accomplish these tasks, tool, which can facilitate and assist all project parties in logically, systematically and efficiently managing risks and uncertainties by encouraging efficient communication, cooperation, and coordination among all parties throughout project implementation in a multi-party environment, is necessary. The Guide to the Project Management Body of Knowledge identifies five main steps in the risk management process:

Risk identification, Risk assessment, Development of risk Response and Management of risk response.

Some authors develop more detailed models the model of seven steps:

Risk management planning, Risk identification, Risk assessment, Risk analysis, Risk response, Risk monitoring and Risk communication.

Chapman and Ward (2003) introduce the SHAMPU model, which Consists of nine phases. Del Cano and de la Cruz (2002) present a generic project risk management process of eleven phases, which can be used in large and complex Projects.

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For the purpose of this research, I use a simplified risk management Process of three main steps:

Risk identification, Risk assessment and Risk response.

The reason for the simplification is that this model is well-known for the project actors and frequently used in practice. The goal of the risk identification process is to decide on potential risks that may affect the project. There are several approaches for classifying project risks and risk sources (Leung et al., 1998; Tah and Carr, 2000; Baloi and Price, 2003; Li et al., 2005). The main categories are financial, economic, managerial, legal, construction, design and environmental risks. During the risk assessment the identified risks are evaluated and ranked. The goal is to prioritize risks for management. The risk response process is directed to identifying a way of dealing with the project risks. Several surveys conducted among the construction industry actors show that Checklists and brainstorming are the most usable techniques in risk identification; subjective judgment, intuition and experience are used mostly in risk assessment; and transfer, reduction and avoidance are the most applied methods for risk response. 2.7 The roles of the project’s different phases in risk management Traditionally, a construction process is divided into four main phases:

Programme, Planning, Procurement and Construction.

In the programme phase the client has an idea about the project and analyses conditions for its execution. During the planning phase the architects produce construction drawings according to the client’s requirements. In the procurement phase the parties sign the contract. Finally, the contractor executes the job in the construction phase. Since it is impossible to foresee all project risks in the programme phase and due to the tendency of the identified risks to change during project implementation, joint and consistent risk management is required throughout all project’s phases. The results showed that risk management in the planning and construction phases was higher than in the programme phase. Risk identification and risk assessment were more often performed in the risk management processes than risk response.

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Research Frame work for Risk Management.

Traditional Contracting Procedure

Project Bid Construction Construction realization advertisement Awarding Signing commencement completion Planning Bidding Contracting Construction

Focused Application Period Figure 2.7 Research Frame work for Risk Management. (Rahman and Kumaraswamy, 2004). Motawa et al. (2006) propose a model, which helps in determining potential changes in the project based on available information in the early stages of the project. Baccarini and Archer (2001) introduce a methodology for a risk rating process in the procurement phase, which allows the effective and efficient allocation of resources for project risk management. Several authors highlighted the importance of the early phases in project risk management since the decisions taken in these phases often have a significant impact on the final result (Kähkönen, 2001). However, according to Uher and Toakley (1999), the actual usage of risk management techniques in the early phase is very low. Lyons and Skitmore (2004) conducted a survey where one of the aspects was the use of risk management in each of the project phases.

Application

Early stageof

construction

Pre-construction During construction

Executing agency & consultant

Executing agency, consultant & bidders

Executing agency, consultant & contractor

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CHAPTER 3 RISK MANAGEMENT METHODOLOGY 3.1 Risk Identification

Risk Identification requires the establishment of the risk profile and the frequency and severity of hazard together with the impact on the project operation and project finance. A hazard has the potential to have an adverse effect but the degree of risk from the hazard also depends upon the circumstances. These circumstances comprise not only the Existing Location Environment as generally understood, but also the Created Project Environment. The risk from the hazard is controlled by risk management which is intended to improve performance to an acceptable level. The assessment of the risk is the means of achieving this objective. The basic intent in this stage is to generate a comprehensive list of possible events and consider scenarios and causes.

Preliminary risk identification will be undertaken at an initial Risk Management to be attended with the representative by cross-examination and filling Questionnaires From:

The client team, Consultant project team and Team of contractors

Involved in CAARP project. In this regard, please note that it was in accordance with the activity schedule was proposed to hold these initial interviews in first week of January 2009. Within the briefing pack will be a feedback questionnaire, which will request targeted responses regarding their views on the objectives and concerns for the project - in their own words.

The feedback from the questionnaires were collated and selectively summarized for use at this study. For this initial study, I adopted a facilitated brainstorming approach for the identification of risks. This “brain storming” session will draw out the key potential risk exposure areas. All risks were recorded; no matter how trivial or seemingly irrelevant they might first appear. This documentation of all risks is a necessary part of the process of agreeing a set of the most important risk areas to be addressed in the next stage of the process. Highlighting and documenting learnt will go some way to managing their potential re-occurrence on this project. The essential technique is to obtain a detailed understanding of the project process and the environment in which it is to be constructed and in which it will operate. This requires all three processes to be adopted. The check list provides a starting point. Interviews allows past corporate experience to be used. Brain storming allows the new types of risk to be identified.

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3.2 Risk Categories (Heads of Risk) The following categories of risk area are proposed, and will be confirmed by the staff of the Project.

��Project identification Funds source Identification Project Appraisal Pre-feasibility studies Feasibility study ��Planning, Design, preparation of Bidding Documents, Program, Deliverables Project Initiation ��Environment & Sustainability ��Community & Social ��Health & Safety ��Political ��Financial & Economic ��Procurement in bidding Stage ��Contractual ��Construction & Contract Administration ��Operation ��Maintenance ��Human Factors ��Natural Events

3.3 Risk Analysis Risks will be analyzed against the identified risk analysis criteria using qualitative and quantitative techniques. Proposed Risk Analysis Matrix

Figure 3.3 Risk Analysis Matrix This form of risk analysis involves assessing the probability and consequences of each risk occurring to determine the relative level of risk. Where present, existing controls will be identified and their strengths and weaknesses taken account of in the analysis. The Project Objectives are always solely financial, timeliness, quality, Quantity and Value for Money.

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The most serious consequences to project objectives may include:

Construction cost overrun; Price Escalations Variations; Claims Construction time overrun; EOT Non-performance/Defective performance Inadequate performance (through-put or quality); Operating cost overrun. Administration Costs

Whether such consequences are acceptable depends upon the attitude to the risk and the importance to the project objective. The essential technique is to obtain a detailed understanding of the project process and the environment in which it is to be constructed and in which it will operate. This requires all three processes to be adopted. The check list provides a starting point. Interviews allows past corporate experience to be used. Brain storming allows the new types of risk to be identified. The main techniques for identifying risk are:

Risk register or check list; Interview of project experts and participants; Brain storming by Risk Team.

The essential technique is to obtain a detailed understanding of the project process and the environment in which it is to be constructed and in which it will operate. This requires all three processes to be adopted. The check list provides a starting point. Interviews allows past corporate experience to be used. Brain storming allows the new types of risk to be identified.

The following are simple examples of hazards which should be part of any checklist:

1. Client Team

• Political or economic changes • Revenue changes (market) • Price Escalations • Variations • Non/poor performance of consultants • Delays in Instructions • Improper Consultant instruction • Operability • Claims • Maintainability • Reliability • Health and Safety • Environment

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2. Project/Consultant/Engineer Team

• Delays in Possession of Sites • Delays in Designs from Client • Inadequate Design information • Delays in relocation of Utility Facilities • Cost increase • Variations • Price Escalations • Contractors Non/Poor -performance • Not compliant orders • Time over-run • Quality not compliant • Contractor’s Material source improper Identification • Weather • Build ability • Health and Safety • Environment

3. Team of Contractors

• Client performance • Consultants performance • Delays in Instructions • Variations • Change of Scope • Delays in obtaining approvals • Delays in Payments • Order of Instructions • Political Interferences • Security measures • Inadequate project definition • Inadequate project organization • Inadequate estimate • Subcontractor performance • Inflation • Exchange rates • Health and Safety • Environment

3.4 Risk Evaluation The purpose of the risk analysis phase is to gain an understanding of level of risk to make decisions about future actions and define priorities. The following risk evaluation criteria are proposed to provide a means by which decisions can be made, and resources allocated

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Figure 3.4 Risk Treatment For this project the following treatment hierarchy will be adopted for those risks that require treatment:

Avoiding the risk Reducing the likelihood of occurrence Reducing the consequences Transferring or sharing the risk and Retaining the risk.

Selection of preferred risk treatments will typically be a cost-benefit decision, with preference given to treatments that provide the best all round benefit to the project. In the majority of cases, the identification of which treatment provides the greatest benefit will be straightforward and will not require an in-depth analysis. Additionally, options for risk treatment will be assessed on the basis of the extent of any additional benefits or opportunities created. For any particular risk, a number of treatment options may be considered, and applied either individually or in combination. 3.6 Monitoring and Review Risk management is a dynamic process. The importance of identified risks will change, and new risks will emerge, as the project proceeds. Therefore, although the Risk Register that will be produced as a key outcome of the initial risk management workshop will represent an understanding of the significant risks associated with the project at this time; it should not be viewed as a ‘one-off’ exercise. It is essential to project success that the risk management process is kept relevant and alive throughout the duration of the project. Risks (consequence and likelihood) and the effectiveness of control measures need to be monitored, as they will change with time. Additionally, as the project proceeds through planning, design, procurement and construction phases, new (or previously overlooked) risks will emerge. As such, ongoing review of the process and monitoring is essential to ensure that risk and the controls/treatments for the management of them remains relevant and effective. It is therefore proposed to undertake regular risk reviews at key milestones during the course of the project. As a minimum it is suggested that risk reviews be undertaken to coincide with the following delivery milestones:

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At the start of preliminary feasibility study At the start of detailed investigations & Detailed feasibility study At the start of preparation of Project time schedule At the start of detailed design During finalization of tender documentation At commencement of construction

Additionally, the Risk Register and the effectiveness of Risk Treatment Action Plans should be reviewed as an agenda item in monthly Project Steering Committee meetings, and included in the monthly progress reporting to Ministry of Highways Department. 3.7 Communication and Consultation Communication and consultation are important considerations at each step of the risk management process. Internal stakeholders are involved in the risk management process either through direct involvement in the risk management workshops, or via information distribution by standard project communication protocols (such as meetings, minutes, progress reports etc). All internal stakeholders not directly involved in risk management workshops are encouraged to contribute to the risk management process, by proposing risks through their supervisor or direct to the Risk Manager. External stakeholders are also indirectly involved in the risk management process through consultation with Consultants and Clients. The Risk Management Plan, Risk Register and Risk Treatment Action Plans will be circulated to the Project Steering Committee, leaders within the project team and sub-consultants for the project team. 3.7.1 Project Steering Committee Meetings

Project Steering Committee meetings will be held monthly. Risk management will feature as a regular agenda item during these meetings. The meetings provide a regular opportunity to ensure that the risk management process is being implemented, reviewed and controlled. The meetings serve as a forum for reviewing risk management activity and determining what action is necessary. Newly identified risks, their treatment and the progress of risk issues will be discussed, as should any higher-level decisions that require action. This includes decisions on issues such as the adequacy of current risk activity, performance of stakeholders and problems being encountered. The Risk Manager should chair this section of the Project Steering Committee meeting.

3.8 Risk Management Documentation For this project three forms of risk management documentation will be utilized, being:

Risk Management Plan – this document will be updated to coincide with the key risk review key risk review milestones identified in Section 3.8

Risk Register – this will be the primary repository for all risk information, and will be updated monthly during the life of the project. The template for the Risk Register that we will use on this project is the same as that contained in the Risk Management User Manual

Risk Treatment Action Plans - the template for the Risk register that we will use on this project is the same as that contained in the Risk Management User Manual

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3.9 Risk Management Responsibilities 3.9.1 Strategic Management The strategic management of risk is the responsibility includes:

Ensuring that a risk management process is implemented on the project to comply with Risk management policy.

Ensuring that there are sufficient resources to undertake risk management activities.

Ensuring that business risks are identified assessed, treated and communicated to other levels of management where appropriate.

Making decisions on project risk issues that are escalated from tactical levels of management

3.9.2 Tactical Management Tactical risk management is the responsibility includes:

�Preparation of the risk management plan �Ensuring that the risk management plan is implemented in accordance with the

Risk Management User Manual The assignment of operational level responsibilities The co-ordination of all risk related project activity. Making risk based decisions that are passed up from operational levels Ensuring that project and operational risks are identified, assessed, treated and communicated to other levels of management Referring strategic level decisions to strategic management.

3.9.3 Operational Management The Risk Manager is responsible for ensuring that risk management activity is properly facilitated and administered. Responsibilities include:

Ensuring that all those involved understand the risk management process that is to be undertaken and their responsibilities to it.

Chairing risk management sessions Compliance with the risk management plan and the Risk Management User

Manual The assignment of risk management activity where appropriate. Making risk based decisions where appropriate Consultation with project team members, strategic and tactical management on

risk issues. Recording and updating risk information on the risk register Monitoring, control and review of risk management activity Communication of risk management issues Preparing and updating all risk management documentation

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3.10. Research Design I give briefly the research design, how I am going to carryout research on the above title and will explain under this research proposal. It includes sampling, data collection methods & techniques and method of data analysis. The method adopted in a research to study as explained the above problem. Under this section it is important to clarify the following.

I intended to adopt a questionnaire based survey method, based on draft questionnaire including all relevant questions with respect to problems experienced by the each teams. It is also desirable to pre-test the questionnaire before the survey is carried out. To identify and assess the risks involved with Project/Consultant/Engineer, Client and Contractors to find out the possibilities of identifying the Risks suggestions and opinions to counter measures to eliminate such risks, which are to well managed in each and every process of the Public Procurement in Road Construction Works in order to Manage Risks by achieving the RDA’s goals and objectives by deriving the Value for Money concept.

I have also decided to collect data through questionnaires and I propose to design a Questionnaire to suit the different type of people, to collect data in order to do research study and do detailed analysis in the area of

Programme, Planning, Procurement and Construction.

To suit the a. Contractors who involved in CAARP project to answer the questions. b. Consultants/Engineer/Project Manager who involved in CAARP project to

answer the questions. c. RDA/PMU staff, who are involving CAARP project in Programming Planning,

Procurement and Monitoring Unit and the Project Management unit. As the objective of the study is to get a picture of the risk management process from different actors’ perspectives, a questionnaire survey was chosen as the most appropriate research method. The survey sample comprised clients, contractors and consultants. Within each group, I identified those persons who worked with risk management in a particular project. The respondents from the client’s side are the representative signing the contract and project manager. From the contractor’s side the respondents are the representative signing the contract, site manager and estimator. Finally, the respondent from the consultant’s side is the resident engineers and the team leader and the manager.

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3.11 Questionnaire A draft questionnaire was developed consisting of

General questions about the respondent The aspects of the risk management process through the different phases of the

project were covered. Investigated relationships between the actors in the project. Focused on software management systems, which the company uses in the risk

management process. Concluding one for miscellaneous comments regarding the risk management

process in the project. Stipulated Questionnaire is annexed in Appendix -B I organized personnel interviews where I met prospective respondents and presented the research project and the objectives of the survey. The participants were given an opportunity to answer the draft questionnaire and give their comments on the content. 3.12 Activity Plan for study I give briefly the implementation programme, which is for my research problem, drawn –up in the Bar-Chart format in accordance with the time frame given to me and annexed in Appendix -C.

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Chapter 4. DATA PRESENTATION & DATA ANALYSIS. The results from a questionnaire survey of risk management in the different phases of a construction CAARP project are presented. The participants of the study were clients, contractors and consultants working in CAARP project. I analyzed the involvement of these actors in the project phases, their roles in the risk management process in particular and their influence on risk management. I show that the planning and construction phases of a construction project are the most important for risk management, wherein risk identification, assessment and response take place. Moreover, collaboration in terms of risk management between the actors is most intensive in these phases. Contractors participate more actively in the risk management process in comparison with other actors and have the largest influence on project risk management. Despite the recognized importance of the early phases in the project, my study shows a very low degree of risk management activity in the programme phase. Construction projects are usually characterized by many varying risks. Being able to manage risks throughout the construction process is an important and central element preventing unwanted consequences. Risk management is also decisive for achieving a good final result with secure economy and Value for Money. Many different actors are involved in a construction project and often they have no or limited experience of earlier collaboration with each other. In many projects there is an attempt by actors to try to avoid risks as far as possible and let somebody else in the value chain deal with them. Considering the effects that risk management and risk sharing have on project goals in the form of both quality and economy, these processes ought to take place in an open and conscious way. In each phase of a construction project, namely programme, planning, procurement and Construction, the management of a specific risk should be allocated to the party that has the best corresponding qualifications. One of the problems identified in the reports of CAARP project Construction Cost is that many actors are involved only in some of the project’s phases. They often focus on short-term economic results and protect their own interests rather than the project overall. This leads to a less effective risk management process. Little attention in the research community so far is paid to identifying the roles of individual actors in risk management through the project’s different phases. The objective of the paper is to analyze the risk management process in a construction project from the perspective of the client, the contractor and the consultant. In particular, I examine the ways and extent to which the actors are involved in risk management through the different phases of the project. The study is based on a literature review and the results of a questionnaire survey of construction project actors. Following the final version of the questionnaire was developed and sent in the electronic form to the respondents (Tested Questionnaire annexed in Annex-B). After the questionnaires were completed, the answers were analyzed using the statistical processing software, and Microsoft Excel. 4.1 Project Characteristics Summary The study involves nine construction projects recently performed in North and Eastern part of Srilanka (Table No.4.1) In order to obtain an accurate picture, the projects included in the study satisfy the following requirements:

The projects are located in large and small cities;

22

They use different forms of contract and collaboration, i.e. performance-based Contracts, design-build contracts and C0nstruction Contracts;

The different types of the road building projects All projects are medium-sized (between 5 and 15 million US$).

No.

Project & Location

Length of Project/km

Type of the Project

Contract Type

Contract Amount in million (US$)

1 Paranthan-Poonakary- (Small City- Kilinochchi)

26 km Stabilized Base with SBST

Performance based

3.0

2 Kandy-Jaffna – (Large City-Vavunia)

35 km ABC Based with Asphalt Overlay

Construction Type

8.0

3 Vavuniya –Horowapothana –(Large City-Vavunia)

10 km ABC Based with DBST

Construction Type

1.4

4 Vavuniya –Horowapothana –(Small City-Horowapothana)

11 km ABC Based with DBST

Construction Type

1.9

5 Madawachchiya –Thalaimannar (Small City-Cheddikulam)

10 km ABC Based with DBST

Construction Type

1.2

6 Puttalam-Trinco–(Small City-Horowapothana)

70 ABC Based with Asphalt Overlay

Construction Type

24.6

7 Boghawatta-Pulmoddai–(Small City-Pulmoddai)

14

Stabilized Base with DBST

Construction Type

2.3

8 Trinco-Pulmoddai –(Large City-Trinco)

56 Stabilized Base with DBST

Design -Build

11.5

9 Murunkan-Chilawathurai –(Small City-Murunkan)

16 Stabilized Base with DBST

Construction Type

2.6

Total 248 56.50

23

Table 4.1. Characteristics of construction projects included in the study

Figure 4.1.1 Showing National Roads Network in Sri Lanka

24

Figure 4.1.2 Showing Road Projects in North –East Part of Sri Lanka including CAARP Project Roads taken for study 4.2 RESULTS OF THE SURVEY In total, from the received responses, 36 were completed Questionnaires. A response rate of 100% was for those people who attended the interviews. This shows that the respondents who were aware of the survey objectives were more interested in taking part in the project. The sample composition aggregated according to actors’ roles in the project is shown in Figure 4.2.

contractors Client consultants

contractors, 18, 50%

Client, 10, 28%

consultants, 8, 22%

contractorsClientconsultants

Figure 4.2: Sample Collection.

25

4.3 Respondents Analysis of gender distribution confirms that the Srilankan construction industry is traditionally male-dominated sector. 34 survey participants are men and two participants are women. The age distribution shows that 89% are over 41 years old. Most of the respondents (92%) have more than ten years experience in construction industry, and 64% have more than 20 years of experience. 44% of survey respondents have a university degree in construction, 53% finished upper secondary school, and only one person has vocational training only. 33% respondents participated in risk management or project management courses within their organizations or during the period of university studies. Despite a relatively high education level and large experience, the majority of the respondents (75%) estimate their knowledge of risk management as fair.

Role Of the Project Client contractor Consultant Total Low 1 5 1 7 Fair 6 10 4 20 Advanced 3 3 3 9 Table 4.3 summarizes the risk management knowledge within each group of actors. 4.4 Risk management in the different phases of the project Figure 4.4 shows that the majority of the respondents (24) participated in the construction phase. For the contractors it is quite natural because they are always involved in the construction phase and very seldom in the programme phase. Therefore contractors’ participation increases as the project goes forward: 2 contractors participated in the programme phase and 16 in the construction phase. It was quite unexpected that only two clients participated in the programme and planning phase compared to 4 clients in the production phase and 4 participated in procurement phase. This may be partially explained by the types of the projects. All eight consultants participated in the planning phase and construction phase.

2 0 0

16

2 2 4 42 2 4 46 48

24

05

1015202530

Program

me

Plannin

g

Procu

remen

t

Constr

uctio

n

Type of Process

No

of A

nsw

ers

contractorConsultantclientTotal

Figure 4.4.1 Participation in the project phases

26

When the respondents were asked to estimate the importance of risk management in every phase of the construction project (figure 3), the estimates were similar in both the client and contractor groups. The construction and planning phases were identified as the most important for the management of risks. Then the procurement and programme phases follow. Consultants’ estimates differ from those of clients Overall; I observe that they underestimate the importance of all phases compared with the other actors. However, the planning and construction phases are identified by consultants as the most important. From this distribution I can conclude that many actors link risks to the construction phase.

3.143.12 3

3.643.72

3.25 3.293.56

2.75

3.643.76

3.25

0

0.5

1

1.5

2

2.5

3

3.5

4

Programme Planning Procurement Construction

contractorConsultantclient

Figure 4.4.2. Importance of risk management in the different phases Figure 4 illustrates how many actors carried out risk management processes systematically in their projects. The most active group is contractors, where all respondents identified and assessed project risks and 94% performed risk response systematically. In the client group 86% identified risks, 71% assessed them and only 57% systematically responded to project risks. The explanation of low risk response rate may be that the clients let other actors in the value chain deal with identified risks. Consultants are the most passive actors when it comes to project risk Scale is between 1 and 4, where 1 is unimportant, 2 – not so important, 3 – fairly important, 4 – very Important management. Among consultants only 33% identified risks and responded systematically, and none assessed project risks.

100%

33%

86%100%

0%

71%

94%

33%

57%

0%

20%

40%

60%

80%

100%

RiskIdentification

RiskAssessment

RiskResponse

Risk Management

The Risk Management Process systematically performed in the Project

contractorConsultantclient

Figure 4.4.3 The risk management processes systematically performed in the project

27

4.4.1 Risk identification process Risk identification (Figure 4.1.1) was mostly performed in the planning and construction phases. The earlier risks are identified, the less is the probability that they occur. Despite this only seven respondents answered that risk identification was performed in the programme phase. Most of the clients indicate that risk identification was carried out in the planning phase, whereas contractors mostly identify risks in the production phase.

2 14

7 8

3

11

22

12

0

5

1715

0

8

23

0

5

10

15

20

25

Programme Planning Procurement Construction

Different Phase

Risk Identification in the Different Phases

contractorConsultantclientTotal

Figure 4.4.1.1. Risk identification in the different phases In the programme phase 75% of the respondents answered that risks were identified by the client. In the planning phase 39% responded that risks identification was performed jointly by all actors and 25% responded it was performed by the client and the consultant. In the procurement phase the contractor plays the most important role in risk identification (52%). In the production phase risks were identified by the contractor (39%) or jointly by all actors (39%). 4.4.2 Risk assessment process Figure 4.4.2.1 shows that risk assessment has a similar tendency as the risk identification process: the majority of the respondents perform it in the production phase. However, the procurement phase is more important for the risk assessment process than for risk identification and risk response. This is because the risk premium is calculated in the procurement phase and therefore it is important to assess earlier identified risks.

28

1 1 24

8

2

7

17

13

1

5

19

15

1

9

25

0

5

10

15

20

25

Programme Planning Procurement Construction Different Procurement Phases

Risks Assesments in the Differenmt Phases

contractorConsultantclientTotal

Figure4.4.2.1 Risk assessment in the different phases Similarly to the risk identification process, the risk assessment in the programme phase is performed mostly by the client, in the planning phase jointly by all actors or by the client and consultant. However, the contractor’s involvement in the risk assessment in the planning phase was higher than in the risk identification. The procurement and construction phases do not differ much from the risk identification process: in both phases the contractor plays the most important role. 4.4.3 Risk response process Risk response (Figure 4.4.3.1) is also associated with the construction phase. Both the clients and the contractors mostly manage risks in this phase. This is due to the traditional approach in the construction industry: contractors do not put enough effort into preventing problems and solve them as they appear in the project.

17 8

17

03

0 026

39

3

1611

26

05

1015202530

Program

me

Plannin

g

Procure

ment

Constr

uctio

n

Type of Process

No

of A

nsw

ers

contractorConsultantclientTotal

Figure 4.4.3.1. Risk response in the different phases

29

In the programme phase, similarly to the risk identification and assessment processes, risk response is performed by the client. In the planning phase the client together with the consultant responded to the project risks. In the procurement phase risk response is performed mainly by the contractor. In the construction phase the role of the contractor is large and the degree of joint risk management is high. 4.4 Collaboration in managing risk and actors’ influence on the risk management process In the questionnaire, I define the term collaboration as joint work in risk management process. Almost all respondents had collaboration in risk management with other actors in the project: 07 clients, 15 contractors and 07 consultants. Seven respondents (three clients, three contractors and one consultant) answered that no collaboration in risk management existed in the project. Evaluations of collaboration (Table 4.4.1) vary from “fairly good” to “very good”. Scale is between 1 and 4, where 1 – very bad, 2 – fairly bad, 3 – fairly good, 4 – very good. Table 4.4.1 Evaluation of collaboration in risk management

Role in project Evaluation Client 3.55 Contractor 3.38 Consultant 3.33

The degrees of communication of known risks and opportunities between actors in the procurement phase are presented in Table 4.4.2 Overall evaluations are not high and vary between “little detailed” and “fairly detailed”. The contractors answered that the client communicated known risks moderately (2.06). On the contrary, the clients state that their communication of known risks is higher (2.73). Table 4.4.2. Degree of communication of known risks and opportunities between actors in the procurement phase Clients’ communication Contractors’

communication Client 2.73 2.69 Contractor 2.06 2.39 Consultant 3.00 3.00 Total 2.36 2.53 Figure 4.4.3.1presents the respondents’ judgment of their own and other actors influence on risk management in the project. The results show that the contractor has the largest influence on risk management from the perspective of all actors. It is interesting that even the clients estimate the contractors’ influence to be larger than their own. This can be linked to the Figure 4.4.2, where the actors connect risk management to the construction phase. The influence of the consultant is surprisingly low despite the fact that the planning phase is considered to be very important by all actors.

30

3.433.28

2.67

3.573.35 3.33

2.692.94

2.5

00.5

1

1.52

2.53

3.54

Influence of theClient

Influence of theContractor

Influence of theConsultant

contractorConsultantclient

Figure 4.4.3.1. Influence of the actors on the risk management process in the project The existence of collaboration in risk identification, risk assessment and risk response is shown in Figure 4.4.3.2. Risk identification (RI) is the process where collaboration existed according to most of the actors: 82% of clients, 92% of contractors and 67% of consultants answered that they collaborated identifying the project’s risks. During the risk assessment process (RA) both the clients and the contractors collaborated with each other, while only 33% of consultants answered that collaboration existed. The risk response process (RR) has a lower degree of collaboration according to the contractors: 62% of them had collaborated in taking care of risks. Scale is between 1 and 4, where 1 – not at all, 2 – little detailed, 3 – fairly detailed, 4 – very detailed. Scale is between 1 and 4, where 1 – very small, 2 – fairly small, 3 – fairly large, 4 – very large

62%67%

82%

92%33%

82%

92%67%

82%

0% 20% 40% 60% 80% 100%

RR

RA

RI

clientConsultantcontractor

Figure 4.4.3.2. Existence of collaboration in risk management processes

31

The existence of collaboration in the projects’ different phases is presented in Figure 4.4.3.3. It shows that in the programme phase there was minimum collaboration in risk management. Only 14% of clients, the most active participants of the programme phase, answered that collaboration existed in the phase. In the planning phase 70% of clients, 75% of contractors and 100% of consultants collaborated in risk management. This result can be linked to the importance of risk management in that phase, which was ranked high by the actors. In the procurement phase the collaboration between the clients and the contractors in risk management existed in half of the projects. In the production phase the collaboration between the actors is the most intensive because many risks appear in this phase and should be eliminated to achieve a good final result.

85%

56%

75%

50%

50%

100%

100%

50%

100%

55%

70%

14%

0% 20% 40% 60% 80% 100% 120%

Construction

Procurement

Planning

Programme

clientConsultantcontractor

Figure 4.4.3.3. Existence of collaboration in risk management in the project’s phases

32

4.5 Data Presentation of Real Problems during construction stage. I present here the real problems and analysis in implementation of road construction contracts in Sri Lanka such as time delays, quality of works, delays, variations, liabilities etc. The following Roads have been taken for the Rehabilitation under CAARP project by RDA

No.

Name of Roads

Length of Project/km

No of Packages

Total Contract Amount in million (US$)

1 Paranthan-Poonakary 0.00 -26.0 km

26 km 10 3.0

2 Kandy-Jaffna 158.00 -193.00 km

35 km 4 8.0

3 Vavuniya –Horowapothana 0.00- 10.00 km & 35.00- 46.00 km

21 km 2 3.4

4 Madawachchiya –Thalaimannar 14-24.0

10 km 1 1.2

5 Puttalam-Trinco– 108.00-178.00 km

70 1 24.6

6 Boghawatta-Pulmoddai 13.00 – 27.00 km

14

1 2.3

7 Trinco-Pulmoddai 0.00 -56.00

56 3 11.5

8 Murunkan-Chilawathurai 0.00 – 16.00km

16 2 2.5

Total 248 24 56.50 Figure 4.5 Summary of Roads taken for CAARP project 4.5.1 Paranthan –Poonakary Road Out of total 10 packages, 4 packages completed in 100% of total length of 12 km and 3 packages of total length 8km was in progress and suspended due to the internal war situation in northern part of Sri Lanka in later part of 2008 and balance 3 packages of total length 10 km section of road, unable to award to the successive substantially lowest responsive bidders due to the internal war situation in north part of Sri Lanka. The details are given in Table No.4.5.1

33

Table 4.5.1 Details of Paranthan-Poonakary Road

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision

Paranthan-Poonakary Road

No Contract No

Contractor Name

Section (Km) Road Length (Km)

Letter Acceptance date

Contract period Extension of Time Contra

ct Price

Value of Variation Orders Amended Contract Sum

Remarks From To Period

(month)

Commencement Date

Completion Date

Approved (days)

Completion Date No.

01 No. 02

No. 03

1 C 12 A Sudar Construction.

14.0 16.0 2.0 01.07.2005 15 17.09.

2005 16.12. 2006 183 17.06

.2006 0.41

0.02

0.43 Complet

ed

2 C 12 B K.T.Construction. 16.0 18.0 2.0 22.05.

2007 15 11.03.2008

10.05. 2009

0.76 0.76

Work Suspend

ed

3 C 12 C SMS Engineers. 18.0 20.0 2.0 01.07.

2005 15 20.10.2005

19.01. 2007 182 19.07.

2007 0.67

(0.13)

0.54 Complet

ed

4 C 12 D Kavitha Building Contractors

20.0 22.0 2.0 01.07.2005 15 09.09.

2005 08.12. 2006 182 08..06.

2007 0.48

0.11

(0.18)

0.41 Complet

ed

5 C 13 A Leading Crusher Works.

22.0 24.0 2.0 01.07.2005 15 26.09.

2005 25.12. 2006 182 25.06.

2007 0.35

0.05

0.40 Complet

ed

6 C 13 B J.J Civil Construction.

24.0 26.0 2.0 14.05.2007 15 24.10.

2007 23.01. 2009

0.47 0.47

Work Suspend

ed

7 C 14 A Road Engineering (Pvt) Ltd.

0.0 4.0 4.0 03.07.2006 18 30.10.

2006 29.04. 2008

1.18 0.02

(0.05)

(0.15)

1.00

Work Suspend

ed

8 C14 B Road Engineering (Pvt) Ltd.

4.0 8.0 4.0 12 0.16

Work Abandon

ed

9 C15 Sudar Construction.

8.0 12.0 4.0 12 0.13

Work Abandon

ed

10 C16 Leading Crusher Works.

12.0 14.0 2.0 12 0.15

Work Abandon

ed

4.5.2 Kandy –Jaffna Road Out of total 4 packages, 1 package nearing completion total length of 09 km and 2 packages of total length 18km is in progress and 1 package of total length 8 km was given -up due to the internal war situation in northern part of Sri Lanka in later part of 2008. The details are given in Table No.4.5.2

34

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision Kandy-Jaffna Road

Contract No

Contractor Name

Section (Km)

Road

Len

gth

(Km

)

Lette

r Acc

epta

nce d

ate

Contract period Extension of Time

Contract Price

Valu

e of V

ariat

ion

Orde

rs

Amen

ded

Cont

ract

Sum

Rem

arks

From To

Perio

d (m

onth

)

Com

men

cem

ent D

ate

Com

plet

ion

Date

Reco

mm

ende

d (d

ays)

Appr

oved

(day

s)

Com

plet

ion

Date

No. 01

No. 02

No.

03

C 03 A

Consulting Engineers & Contractors

176.0 185.0 9.0 06.07.2006 18 20.08.

2006 19.02. 2008 186 31 20.03.20

09 2.46

1.16

3.62

works Nearing

Completion

C 03 B

CML Edwards 185.0 193.0 8.0 06.07.2006 18 20.08

.2006 19.02. 2008

2.12 2.12

Work in Progress C

01 Consulting Engineers & Contractors.

158.0 167.0 9.0 23.10.2008 15 22.11.

2008 21.02. 2010

4.06 4.06

C 02

K.D.A Weerasighe & Co. (pvt) Ltd.

167.0 176.0 9.0 23.10.2008 15 22.11.

2008 21.02. 2010

4.64 4.64

Work in Progress

Table : 4.5.2 Details Kandy Jaffna Road

35

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision

Vavuniya –Horowopothan Road

Table 4.5.3 Details Vavuniya –Horowapothan Road

4.5.3 Vavuniya –Horowapothan Road Out of total 2 packages, both packages total length of 21 km is in progress.

Cont

ract

No

Cont

ract

or N

ame

Section (Km)

Road

Len

gth

(Km

)

Lette

r Acc

epta

nce d

ate

Contract period Extention of Time

Cont

ract

Pric

e

Valu

e of V

ariat

ion

Orde

rs

Amen

ded

Cont

ract

Sum

Rem

arks

From

To

Perio

d (m

onth

)

Com

men

cem

ent D

ate

Com

plet

ion

Date

Reco

mm

ende

d (d

ays)

Appr

oved

(day

s)

Com

plet

ion

Date

No. 01

No. 02

No. 03

C 04

A

Sier

ra C

onst

ruct

ion

Ltd.

0.0 10.0 10.0

23.10

.2008

15

22.11

.2008

21.02

.2010

- - - 3.82

3.82

Wor

k in

Prog

ress

C 04

B

KDA

Wee

rasin

ghe

35.0 46.0 11.0

23.10

.2008

15

06.10

.2008

06.10

.2009

- 3.95

3.95

Wor

k in

Prog

ress

36

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision

Madawachchiya –Thalaimannar Road

Cont

ract

No

Cont

ract

or N

ame

Section (Km) Ro

ad L

engt

h (K

m)

Lette

r Acc

epta

nce d

ate

Contract period Extention of Time

Cont

ract

Pric

e

Valu

e of V

ariat

ion

Orde

rs

Amen

ded

Cont

ract

Sum

Rem

arks

From

To

Perio

d (m

onth

)

Com

men

cem

ent D

ate

Com

plet

ion

Date

Reco

mm

ende

d (d

ays)

Appr

oved

(day

s)

Com

plet

ion

Date

No. 01

No. 02

No. 03

C 05

A

Cons

ultin

g En

gine

ers

& Co

ntra

ctor

s.

14.0 25.0 11.0

23.10

.2008

15

22.11

.2008

21.02

.2010

- - - 3.58

3.58

Wor

k in

Prog

ress

Table 4.5.4 Details Madawachchiya –Thalaimannar Road 4.5.4 Madawachchiya –Thalaimannar Road Out of one single one package total length of 11 km is in progress. The details are given in Table No.4.5.4 4.5.5 Puttalam –Trinco Road This is a ICB Package of total 70 km length of total Estimated cost 14.6 Million Us$ could not bid for implementation due to the shortage of funds from the Loan due to delays, price escalations and cost and time overruns in the overall project concerned .

37

4.5.6 Bogahawatte –Pulmoddai Road Out of one single one package total length of 14 km is in progress. The details are given in Table No.4.5.6 Details of Bogahawatte –Pulmoddai Road

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision

Bogahawatte –Pulmoddai Road

Cont

ract

No

Cont

ract

or N

ame

Section (Km)

Road

Len

gth

(Km

)

Lette

r Acc

epta

nce d

ate

Contract period Extension of Time

Cont

ract

Pric

e

Valu

e of V

ariat

ion

Orde

rs

Amen

ded

Cont

ract

Sum

Rem

arks

From

To

Perio

d (m

onth

)

Com

men

cem

ent D

ate

Com

plet

ion

Date

Reco

mm

ende

d (d

ays)

Appr

oved

(day

s)

Com

plet

ion

Date

No. 01 No. 02

No. 03

C 06

Cons

ultin

g En

gine

ers

& Co

ntra

ctor

s.

13.0 27.0 14.0

10.12

.2007

18

15.01

.2008

14.09

.2009

90 90

14.12

.2009

4.89

0.13

5.02

Wor

k in

Prog

ress

4.5.7 Trinomalee -Pulmoddai Road Out of four packages two packages of total length of 16 km have been completed and balance two packages of total length 40 km is in progress. The details are given in Table No.4.5.7

38

Table 4.5.7 Details of Trinomalee -Pulmoddai Road

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision

Trinomalee -Pulmoddai Road

Cont

ract

No

Cont

ract

or N

ame

Section (Km) Ro

ad L

engt

h (K

m)

Lette

r Acc

epta

nce d

ate

Contract period Extention of Time

Cont

ract

Pric

e

Valu

e of V

ariat

ion

Orde

rs

Amen

ded

Cont

ract

Sum

Rem

arks

From

To

Perio

d (m

onth

)

Com

men

cem

ent D

ate

Com

plet

ion

Date

Reco

mm

ende

d (d

ays)

Appr

oved

(day

s)

Com

plet

ion

Date

No. 01 No. 02 No. 03

C 24

Wak

achi

ku

Cons

truct

ion

& Co

. Ltd

.

0.0 7.0 7.0

01.07

.2005

18

01.08

.2005

31.03

.2007

375 357

23.03

.2008

1.01

0.54

0.20

0.40

2.15

Com

plet

ed

C 30

Wak

achi

ku C

onst

ruct

ion

& Co

. Ltd

.

47.0 56.0 9.0

01.07

.2005

18

01.08

.2005

31.03

.2007

455 427

3.06.2

008

1.02

0.30

0.45

0.02

1.79

Com

plet

ed

C 25

Chin

a Aut

o CA

IEC

7.0 27.0 20.0

10.02

.2008

20

10.03

.2008

9.011

.2009

0 -

9.011

.2009

6.65 - - -

6.65 W

ork i

n Pr

ogre

ss

C 26

Chin

a Aut

o CA

IEC

27.0 47.0 20.0

10.02

.2008

20

10.03

.2008

9.011

.2009

0 -

9.011

.2009

6.54 - - -

6.54

Wor

k in

Prog

ress

39

4.5.8 Murunkan –Silawathurai Road Out of two packages one package of total length of 6 km in progress and balance one package of total length 10 km is to be awarded. The details are given in Table No.4.5.8

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Component A - Road Rehabilitation Consulting Services for Construction Supervision

Murunkan –Silawathurai Road

Cont

ract

No

Cont

ract

or N

ame

Section (Km)

Road

Len

gth

(Km

)

Lette

r Acc

epta

nce d

ate

Contract period Extention of Time

Cont

ract

Pric

e

Valu

e of V

ariat

ion

Orde

rs

Amen

ded

Cont

ract

Sum

Rem

arks

From

To

Perio

d (m

onth

)

Com

men

cem

ent D

ate

Com

plet

ion

Date

Reco

mm

ende

d (d

ays)

Appr

oved

(day

s)

Com

plet

ion

Date

No. 01 No. 02 No. 03

C 19

Cons

ultin

g En

gine

ers

& Co

ntra

ctor

s.

0.0 6.0 6.0

08.09

.2008

12

06.10

.2008

06.10

.2009

--- ---

06.10

.2009

4.05

4.05

Wor

ks ar

e in

prog

ress

C 19

A

V.V

Karu

nara

tne C

o.Lt

d

6.0 16.0 10.0 12 3.85

3.85 Co

ntra

ct is

to b

e Awa

rded

ve

ry so

on

Table 4.5.8 Details of Murunkan –Silawathurai Road

40

4.6 Final Summary

ADB FUNDED CONFLICT AFFECTED AREA REHABILITATION PROJECT Loan No SF 2043 & 2044

Final Summary Sheet

No Name of Project Programmed For Rehabilitation /km

Actual Rehabilitation /km

Percentage /%

Programmed For Rehabilitation/Million Us$

Actual Rehabilitation/ Million Us$

Percentage /%

1 Paranthan-Poonakary

26.0 12.0 46.15% 3.0 2.78 92.67%

2 Kandy- Jaffna

35.0 27.0 77.14% 8.0 12.32 154.00%

3 Vavuniya –Horowapothana

21.0 21.0 100.00% 3.4 7.77 228.53%

4 Madawachchiya –Thalaimannar

10.0 10.0 100.00% 1.2 3.58 298.33%

5 Puttalam- Trinco–

70.0 0.0 0.00% 24.6 0.00 0.00%

6 Boghawatta-Pulmoddai

14.0 14.0 100.00% 2.3 5.02 218.26%

7 Trinco- Pulmoddai

56.0 56.0 100.00% 11.5 17.13 148.96%

8 Murunkan-Chilawathurai

16.0 16.0 100.00% 2.5 7.90 316.00%

TOTAL CAARP Project

248.0 156.0

62.90% 56.5 56.50 100.00%

Table No.4.6 Final Summary of CAARP Project 4.7 Final Summary of Data Presentation Under CAARP project, with the allocated loan funds to RDA could be able to perform only 156 km length of Road rehabilitation works against the programmed 248.0 km length of road rehabilitation works in the Conflicts affected areas of Northern and Eastern parts in Sri Lanka.

41

Comparison of Actual and Programmed

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Paranth

an-P

oona

kary

Kandy

-

Jaffn

a

Vavun

iya –H

orowap

othan

a

Madaw

achc

hiya –

Thalai

manna

r

Puttala

m-

Trin

co–

Bogha

watta-P

ulmod

dai

Trinco

-

Pulm

odda

i

Murunk

an-C

hilaw

athura

i

Name of Road Project

Leng

th o

f Roa

d /k

m

Programmed For Rehabilitation /km km Actual Rehabilitation /km km

Figure 4.6.1 Comparison of actual length of Road works performed road wise against work planned for CAARP

Comparison of Actual and Programmed

248.0

156.0

0.0

50.0

100.0

150.0

200.0

250.0

300.0

CAARP Project

Tota

l Len

gth

of C

AARP

Pro

ject

Programmed ForRehabilitation /km km Actual Rehabilitation /km km

Figure 4.6.2 Comparison of overall actual length of Road works performed against work planned for CAARP.

42

3.0

8.0

3.4

1.2

24.6

2.3

11.5

2.52.78

12.32

7.77

3.58

0.00

5.02

17.13

7.90

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Paranth

an-P

oona

kary

Kandy

-

Jaffn

a

Vavun

iya –H

orowap

othan

a

Madaw

achc

hiya –

Thalai

manna

r

Puttala

m-

Trin

co–

Bogha

watta-P

ulmod

dai

Trinco

-

Pulm

odda

i

Murunk

an-C

hilaw

athura

i

Programmed For Rehabilitation/Million Us$ Million Us$Actual Rehabilitation/ Million Us$ Million Us$

Figure 4.6.3. Summary of Comparison in Road wise

0.0

10.0

20.0

30.0

40.0

50.0

60.0

TOTAL CAARP Project

Programmed ForRehabilitation/MillionUs$ Million Us$Actual Rehabilitation/Million Us$ Million Us$

Figure 4.6.4 Summary of Total CAARP Project

43

Chapter 5: Conclusions & Recommendation 5.1 Conclusions From this time forth, development of infrastructure projects is expected to play more significant role in economic development and advancement in developing countries. Many large projects are being implemented and in plan to be launched in near future. It is desirable for all parties directly involved in a project, i.e., policy maker, lender, executing agency, consultant and contractor, to effectively and efficiently implement the project. Since failure to achieve project goals and failure to efficiently execute the project probably affect not only parties directly involved in the project but also other stakeholders such as tax payers. Problematically, many infrastructure projects in Southeast Asian countries still could not have achieved good project goals sufficiently. One of the most frequent failures is severe project delay. One of its major reasons is existence of common external and internal risks and uncertainties that are inherent in all stages of project i.e., from programming, planning, procurement and contracting to construction stage. A hazard has the potential to have an adverse effect but the degree of risk from the hazard also depends upon the circumstances. These circumstances comprise not only the Existing Location Environment as generally understood, but also the Created Project Environment. The risk from the hazard is controlled by risk management which is intended to improve performance to an acceptable level. The assessment of the risk is the means of achieving this objective. The probability of an event is usually expressed as the number of events expected in a year. This is not the only means, so for instance the probability of defects in materials is measured in terms of the production quantity. Events which have a low probability of occurrence may have such potentially serious consequences that they are unacceptable. These events must therefore be avoided. Within project management context, this research defines the terms ‘risk’ and ‘uncertainty’ as follows. ‘Risk’ means the event/condition that its occurrence is identifiable and provides negative effect to project objective, probability distribution of outcome is quantifiable, and it is controllable by one party. ‘Uncertainty’ means the event/condition that its occurrence is unidentifiable and may provide positive or negative effect to project objective, probability distribution of outcome is unquantifiable, or it is uncontrollable by one party. In infrastructure projects like my CAARP project, political and economical uncertainties are common ones in the external category. Unreasonable project objectives (e.g., time and cost), delay in awarding and contracting, unfair contract conditions, incapable executing agency, late land acquisition, delay in contractor’s mobilization, incapable and inexperienced contractor, financial problem of contractor, adversarial attitude, inefficient communication, cooperation and coordination, poor project and risk management, claim,

44

conflict and dispute are those common source and consequential risks and uncertainties in the internal category. The scope of risk and uncertainty management discussed in this research is bounded to construction project environment with traditional contracting. To discuss the scope of application clearly, this research divides project implementation of this type of project into three main stages i.e., pre-construction stage (planning, biding, and contracting), early construction stage (during construction preparation and during starting project after project commencement), and during construction stage. In this application study, the application is scoped to early and during construction stages. .In the previous section I presented the results of the questionnaire survey from three main parties involved in the project including executing agency, contractor, and consultant were focused as main players in the application study. Possible risks that are involved in construction environment include external risk such as economic risk, political risk, legal risk, weather risk, public risk, etc. and internal risk such as financial risk, contractual risk, construction design risk, technical risk, personal risk etc. The typical losses of these risks are generally relevant to project delay, project cost overrun, poor quality, loss of revenue, physical damage to project, physical harm to personnel, loss of reputation and business and so on. Thus, there is a considerable need to incorporate the risk management concepts into infrastructure construction practice in order to mitigate or eliminate risk consequence and enhance the performance of project. Here, the risk management is examined in the context of project management. Initially, the clarification of terms of risk, uncertainty, and opportunity, definition of risk in various fields and characteristics and measurement of risk are described. The risk identification, risk analysis and risk response in the risk management process are then explained, respectively. This research characterizes risk and uncertainty into three components i.e. 1) Risk/uncertainty event, 2) Probability of occurrence, and 3) Outcome: potential loss/gain. Practically, the definition of risk and uncertainty are basically different based on ‘position’ of parties in project. Since this research considers the importance of integration of multiple parties’ views in the scope, we also consider this issue in defining definition of risk and uncertainty here. Based on risk components and ‘position’ of parties, this research grounds on three characteristics of event/condition including; 1) Identifiable/unidentifiable, 2) Quantifiable /unquantifiable and 3) Controllable/uncontrollable in defining the terms ‘risk’ and ‘uncertainty.’ In particular I focused on the following issues: the actors’ participation in the project phases, importance of risk management in different phases, risk identification, analysis

45

and response through the phases, collaboration in managing risks and influence of the actors on the risk management process. This section aims at discussing the results and developing directions for future research. I found that participation in the different phases of a project was governed by the actors’ roles in the construction process. In particular all contractors participated in the construction phase and all consultants participated in the planning phase. Construction was the phase where the majority of respondents participated, while the participation in the programme phase was very low. Neither contractors nor clients were sufficiently involved in the programme phase. The planning and construction phases were identified by all actors as the most important for risk management. In these phases risk identification, risk assessment and risk response were mostly performed. An important question to investigate further is: what the actors can gain by participating in all phases of the project. I foresee that participation of the actor in all phases of the construction process leads to more effective risk management through more intensive information and knowledge exchange and earlier identification and assessment of potential project risks. The results of the survey show that the roles of the actors in risk management processes are strongly connected to their participation in the project’s phases. Thus risk identification, risk assessment and risk response were mostly performed: in the programme phase by the client; in the planning phase jointly by the client and the consultant; in the procurement and construction phases mostly by the contractor. The planning and construction phases are those where joint risk management was mainly used by the actors. For this purpose I conducted a questionnaire survey of clients, contractors and consultants. The overall conclusion is that, according to project actors, risk management is strongly linked to the construction phase. Most of risk processes are performed in that phase and contractors tend to be the most active group with a large influence on the risk management process. These findings confirm some results of previously conducted surveys. Despite of the recognized importance of the programme phase, this study showed that this phase does not play an important role in the risk management process.

5.2 Recommendations

I suggest that the procurement phase should play a more important role in joint risk management. The risk management in the project should be based on the actors shared view of what the risks are and who should carry them. One model might be that the client prepares its view on the risk aspects of the project and the tendering contractor responds with its respective risk analysis. The total picture of the client’s and the contractor’s risk analyses and a shared insight will then form the basis of a conscious risk management process and risk allocation in the contract. There is a clear indication that collaboration through all phases of the project increases the probability that a specific risk is managed by the actor who has the best corresponding qualification.

Collaboration in risk management was evaluated high by all actors and was most

intensive in the construction phase. On the contrary, evaluations of actors’ communication of known risks in the procurement phase are low. In particular the

46

contractors state that the client communicates the risks on a low level. Collaboration between actors was very strong in the risk identification and risk assessment processes. In the risk response process the degree of collaboration decreases significantly according to the contractors’ opinion.

This indicates that the project’s actors protect own interests and try to transfer the

identified risks to other actors. According to our studies contractors were most active in performing risk identification, assessment and response systematically in the project. Moreover, they had the largest influence on risk management in the project from the perspective of all actors.

Consultants had very low influence on project risk management. They were not familiar with risk identification, risk assessment and risk response. However, it is difficult to generalize the results because the consultant group is very small in the sample.

I suggest that the consultants should be involved more in risk management

because design is a very significant risk source in a construction Project. The goal of the interviews is to investigate deeper the possible changes in a traditional construction process, where risk management is performed in late phases.

Finally, it is important to understand the factors, which determine whether or not the actors consider an open discussion on risk management and risk sharing as beneficial. quality and cost, it should be an open and conscious process through all phases of the project. The aim of the paper was to examine the ways and extent to which the actors are involved in risk management through the different phases of the project.

End

47

6 EFERENCES

The following references have referred in order to prepare this Research Dissertation

report.

1. ADB guidelines on the use of Consultants by Asian Development Bank and its

Borrowers -April 2006.(pp 01-48)

2. Agreement for Consultancy Services in between RDA and PCI in associated with

RDC for CAARP Project - August 2005 (pp01-48).

3. Appendix –A Term of Reference for Construction Supervision Consultants

Assignment, CAARP -Nov 2003 (pp01-14)

4. General Condition of Contract /Particular Condition of Contract for Time based &

lump sum based for Consultants. (FIDIC-IV) International Federation of Consulting

Engineers Box 311 - CH-1215 Geneva 15 – Switzerland, SKYPE fidic. Secretariat -

Tele +41-22-799 49 00 - Fax +41-22-799 49 01 - fidic@fidic.org - FIDIC.org.

5. Project Performance Audit Report on the Second road improvement Project (Loan

864-SRI [SF]) in Sri Lanka -June 2000(pp 01-34).

6. Akintoye, A. S. & Macleod, M. J. (1997), Risk analysis and management in

construction. International Journal of Project Management, 15(1), 31-38.

7. Baccarini, D. & Archer, R. (2001), The risk ranking of projects: a methodology.

International Journal of Project Management, 19(3), 139-145.

8. Baloi, D. & Price, A. D. F. (2003), Modelling global risk factors affecting construction

cost performance. International Journal of Project Management, 21(4), 261-

269.

9. Barber, R. B. (2005), Understanding internally generated risks in projects.

International Journal of Project Management, 23(8), 584-590.

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management. Journal of Construction Engineering and Management, 128(6),

473-485.

11. Flanagan, R. & Norman, G. (1993), Risk management and construction. Oxford:

Blackwell Scientific Publications. IEC 62198:2001 (2001), Project risk management –

Application guidelines, International Standard. Genéve: IEC.

48

12. Kähkönen, K. (2001), Integration of risk and opportunity thinking in projects. 4th

European Project Management Conference, PMI Europe 2001. London, UK.

13. Leung, H.M., Chuah, K.B. & Rao Tummala, V.M. (1998), A knowledge-based system

for identifying potential project risks. Omega, 26, 623-638.

14. Li, B., Akintoye, A., Edwards, P. J. and Hardcastle, C. (2005), The allocation of risk

in PPP/PFI construction projects in the UK. International Journal of Project

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engineering construction industry: a survey. International Journal of Project

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P (1-16),

17. RISK MANAGEMENT IN THE DIFFERENT PHASES OF A CONSTRUCTION

PROJECT – A STUDY OF ACTORS’ INVOLVEMENT Ekaterina Osipova1

Department of Civil, Mining and Environmental Engineering

Luleå University of Technology, Luleå, Sweden pp (1-13)

18. Development of Multi-party Risk and Uncertainty Management Process for an

Infrastructure Project by Jirapong Pipattanapiwong P(1-261)

7. Appendices The following annexure are attached accordingly

1. Appendix –A RDA’s Organization Chart 2. Appendix- B Stipulated Questionnaire 3. Appendix-C Activity Plan for Study in Bar Chart