Level of Risk for Each Risk Factor

4.3.2 Level of Risk for Each Risk Factor

All risks observed in the questionnaire can happen to any construction projects. The main purpose of this study is to identify the level of risk for each factor that can influence the delivery of building projects. The likelihood of the occurrence and level of impacts were sorted (highest to lowest importance) according to their means values (descending) and standard deviation values. Table 4.2 show the level of risk for each risk factor under study.

From the study, the writer concentrated on the top 10 risk factors that have the most important influenced on the project delivery. Among the 124 risk factors, the highest mean of 2.54 was the material factor which under the technical risk classification. Affordable material is more expensive than presented in bills of quantity (BQ) was found to have significant impact on the project particularly in construction stage that can be realistically predicted at the time. This happened due to the material price escalation when the unprecedented oil crisis was hit hardly all over the nation. As

a result many contractors could not complete their contracts on time. Invariably, most materials would increase in price due to inflation and other reasons.

Another risk factor that affected to the project performance was heavy rain under the physical risk classification which is ranked second with 2.34 mean. This problem was due to the projects awarded at end of 2007 whereby heavy rain occurred during the monsoon season and most of the contractors were given extension of time under that reason.

Material cost is higher than predicted under financial risk classification and sub contractors takes jobs in several project under personal risk – subcontractor classification received the third and forth highest rank, which was at 2.15 and 2.12. This factor related to the projects which executed simultaneously during 9MP when demand of materials especially steel reinforcement price began to rise. Steel fabricators generally were willing to commit to lump sum steel pricing required to participate in most lump sum construction projects even though they did not have the benefit of lump sum or guaranteed pricing from their suppliers. When steel prices began rising rapidly, many fabricators found themselves in a bind - locked into price commitments but facing rising prices from mills and wholesalers. Similar problems have arisen with other construction commodities such as cement and cement bricks. This has caused bad impact to the contractors where they had bought materials at higher price and subsequently delay the physical progress on site.

For sub contractors especially nominated sub-contractors (for electrical and mechanical works) the opportunity of many projects launched by the government had made them eager to have many contracts at a particular time. They tend to grab many projects because of limited nominated subcontractors throughout Malaysia. This has caused delayed to the project and certain works were not properly done by the workers. As a result repetitive works have to be done and these have negatively impact to the main contractor’s physical progress.

A retention fund is not returned factor received fifth ranking under financial risk category is also a critical risk factor in building projects. Another critical factor was late in material delivery, lack of funds to proceed with work and lack of skilled labour. It received the sixth, seventh and eight ranking followed by the subcontractor unable to afford adequate labour and unable to finish work on time which received less critical mean, ranking ninth and tenth respectively.

Table 4.2 : The level of risk for each risk factor

Rank Risk classification

Risk factor

Mean

Std. Deviation

1 Technical risk - material

Affordable material is more expensive than

presented in bills of quantity (BQ)

2 Physical risk

Heavy rain

3 Financial risk

Material cost is higher than predicted

4 Personal risk - subcontractor

Sub contractor takes jobs in several projects

5 Financial risk

Retention is not returned

6 Technical risk - material

Late in material delivery

7 Personal risk - subcontractor

Lack of funds to proceed with work

8 Personal risk – technician and labour Lack of skilled labour

9 Personal risk - subcontractor

Subcontractor unable to afford adequate labour

10 Personal risk - subcontractor

Unable to finish work on time

11 Financial risk

Adequate payment for variations

12 Technical risk - material

Material shortage

13 Personal risk – technician and labour Frequent job change by skilled labour

14 Technical risk – ground condition

Unforeseen problems

15 Financial risk

Payment risk of completed work

16 Technical risk - material

Quality of material below standard

17 Financial risk

Financial problems due to errors in estimating

18 Financial risk

Slow payment by clients due to dispute

Rank Risk classification

Risk factor

Mean

Std. Deviation

19 Construction design causes risk

Errors in drawing

20 Personal risk – technician and labour Poor workmanship

21 Technical risk – construction process Severe climate causes low productivity

22 Personal risk - subcontractor

Problems in coordination

23 Personal risk - subcontractor

Low productivity

24 Personal risk – technician and labour Low productivity

25 Technical risk – construction process Red tape in liaison with public services consumes

too much time

26 Personal risk - subcontractor

Lack of required technical skill

27 Technical risk – construction process Delay on information from designers / JKR / public

local authority

28 Technical risk – construction process Coordination problems

29 Technical risk – construction process Delay in possession of site

30 Technical risk – construction site

Construction site is adjacent

31 Financial risk

32 Political and regulation risk

Cost for corrupt government officials

33 Construction design causes risk

Non-standard details of drawing includes low qualiy

of work and error in estimate

34 Personal risk – technician and labour Unable to understand drawings

35 Personal risk – technician and labour Communication problems

36 Contractual risk

Misinterpretation

Rank Risk classification

Risk factor

Mean

Std. Deviation

37 Personal risk – technician and labour Strikes and labour disciplines

38 Physical risk

39 Technical risk - technique

New technique is required

40 Financial risk

Exchange rate fluctuation

41 Construction design causes risk

Likelihood of change

42 Personal risk – engineer

Lack of experienced staff and foreman

43 Technical risk - equipment

Low productivity and efficiency

44 Personal risk – staff, foremen

Incompetence and lack of responsibility

45 Construction design causes risk

Incompatibility between drawing and method

46 Technical risk – ground condition

Errors in information of site investigation

47 Technical risk – construction site

Access problems

48 Technical risk – equipment

Inappropriate equipment causes problems

39 Political and regulation risk

Customs and import restrictions

50 Safety-accident risk

There is no fire protection system on site

51 Technical risk – equipment

High maintenance cost

52 Technical risk – material

Proposed materials are not approved

53 Technical risk – construction process Insufficient time to prepare bids

54 Political and regulation risk

55 Personal risk – subcontractor

Subcontractor abandons projects

56 Technical risk – construction process Failure to construct as planned

Rank Risk classification

Risk factor

Mean

Std. Deviation

57 Contractual risk

Unfair or unreasonable stipulation

58 Personal risk – client

Change orders

59 Personal risk – staff, foremen

60 Financial risk

Labour cost is higher than predicted

61 Financial risk

Loss due to default of contractor, subcontractor,

supplier or client

62 Technical risk – equipment

Unavailability of spare parts or cost is high

63 Technical risk – equipment

Frequently out of order or damaged

64 Political and regulation risk

Long procedure for approval and permits

65 Personal risk – technician and labour Use of illegal foreign labour

66 Physical risk

67 Technical risk – construction process Communication problems

68 Technical risk – construction site

Work hours are limited

69 Construction design cause risk

Need innovative construction method

70 Technical risk – ground condition

Inadequate site investigation

71 Physical risk

72 Technical risk – construction process Irregularity of work load

73 Personal risk – client

Quality expected beyond standard and specs

74 Contractual risk

Ambiguous clauses that have several meanings

75 Personal risk – consultant / JKR

Delays in materials and shop drawings approval

Rank Risk classification

Risk factor

Mean

Std. Deviation

76 Financial risk

Liquidated damage for delay

77 Personal risk – consultant / JKR

Does not understand his role or duty

78 Technical risk - material

Material damage during storage

79 Safety-accident risk

Inappropriate machine includes accident

80 Safety-accident risk

Severe accidents occur

81 Personal risk – consultant / JKR

Poor construction method

82 Construction design cause risk

Need new materials and equipment

83 Financial risk

Local and national taxes are high

84 Personal risk – consultant / JKR

85 Financial risk

Insufficient insurance

86 Personal risk – client

Client lacks managerial capability

87 Contractual risk

Extent of work differs from contract

88 Personal risk – consultant / JKR

Communication and coordination problems

89 Environmental regulations cause risk Construction process causes pollution

90 Technical risk - technique

Quality criteria are difficult to achieve

91 Technical risk – construction site

Local regulations

92 Construction design cause risk

Inadequate or ambiguous specifications

93 Environmental regulations cause risk Waste treatment required by law

94 Construction design cause risk

Incomplete design scope

95 Safety-accident risk

There is no fence or protection net

Rank Risk classification

Risk factor

Mean

Std. Deviation

96 Personal risk – consultant / JKR

Does not understand his role or duty

97 Technical risk – construction process Errors or omissions in Bill of Quantities

98 Financial risk

Bid and construction bond are unfairly called

1.02133 100 Technical risk – construction site

99 Safety-accident risk

Machine is not checked before operating

0.94760 101 Technical risk – material

Theft

1.24609 102 Political and regulation risk

Material damage during transportation

1.10075 103 Technical risk – construction process Communication problems

Requirement to use local labour

1.16746 104 Physical risk

1.04704 105 Contractual risk

Fire

1.05055 106 Technical risk – equipment

Work conditions differ from contract

0.99679 107 Personal risk – staff, foremen

No reserve equipment

1.19221 108 Technical risk – construction site

Brawls

1.07043 109 Personal risk – consultant / JKR

Traffic congestion

1.13275 110 Personal risk – Engineer

Unaccountability of work

1.15477 111 Contractual risk

Brawls

1.06160 112 Personal risk – technician and labour Absenteeism

Red tape in litigation

1.06257 113 Political and regulation risk

1.04205 114 Personal risk – client

Unstable politics

0.98031 115 Technical risk – construction site

Interference

Project is threatened by hooligans

Rank Risk classification

Risk factor

Mean

Std. Deviation

116 Personal risk – consultant / JKR

0.98711 117 Political and regulation risk

Poor construction method

1.05216 118 Technical risk – ground condition

Frequent changes in law

1.00462 119 Personal risk – technician and labour Gambling on site

No site investigation or boring log

1.04330 120 Personal risk – consultant / JKR

1.06379 121 Environmental regulations cause risk Preserving historical finds

Delays in materials and shop drawings approval

0.75883 122 Political and regulation risk

1.10360 123 Technical risk - equipment

War, revolution and civil disorder

0.96617 124 Environmental regulations cause risk Local environment regulations obstruct construction

Need to import from other countries

process