ASSESSING BUILDING CONTRACTOR'S CONTRACT RISKS: THE

CASE OF GRADE ONE TO GRADE THREE CONTRACTORS

By
ZELALEM BERHANU

A Thesis Submitted to the Department of Architectural and Civil Engineering

for the Partial Fulfillment of the Requirements of the Degree of Masters of
Science in Civil Engineering (Construction Technology and Management)

ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY

MAY 2018
 Declaration

I hereby declare that this thesis entitled "Assessing Building Contractor's Contract Risks:
The Case of Grade One to Grade Three Contractors" is composed by myself, with the
guidance of my advisor, that the work contained herein is my own except where explicitly
stated otherwise in the text, and that this work has not been submitted, in whole or in part, for
any other degree or professional qualification.

Name: Zelalem Berhanu ________________________ May- 2018

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 Certification

This is to certify that the thesis prepared by Mr. Zelalem Berhanu entitled "Assessing

Building Contractor's Contract Risks: The Case of Grade One to Grade Three

Contractors" and submitted for the partial fulfillment of the requirements for the Degree of

Master of Science complies with the regulations of the University and meets the accepted

standards with respect to originality and quality.

Singed by Examining Board:

External Examiner: Signature, Date:

Dr. Wubishet Jekale Mengesha ______________________ _____________________

Internal Examiner: Signature, Date:

Dr. Kasi Rekha ______________________ _____________________

Thesis advisor: Signature, Date:

Solomon Sertse (Ass.Prof.) _______________________ _____________________

Head Civil Eng. Dept.: Signature, Date:

Mr. Simon G/Egezihabere _______________________ _____________________

ERA PG Coordinator: Signature, Date:

Dr. Melaku Sisay _______________________ _____________________

Dean, School of Arch. Civil Eng: Signature, Date:

Dr. Brook Abate _______________________ ______________________

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 Dedication

This study is dedicated to my late mom, Kebebush, who gave me faith and unconditional

love. May her soul rest in peace. I also dedicate it to my lovely wife, Betty, for her patience,

understanding, and unlimited support.

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 ABSTRACT
Construction projects are subjected to several risks driven from multiple risk factors. For
example, projects are often delivered by several parties (stakeholders) under different
circumstances which by itself induces risk on each other. Among the various stakeholders,
the contractor has been identified to be the party that carries the highest number of risks,
including many which originate from parties other than him/herself. In this regard the
contractor is exposed to contractual risks which occur as a function of contract provision and
clauses. This research study seeks to identify and evaluate potential risk factors contractors
are exposed to while executing a contract. Using a questionnaire based survey research
methodology; the study identifies major risks and determines their likelihood of occurrence
as well as their impact. Further to this, the study also investigates the allocation of each
identified risk factors from contractors perspective, and the risk management approach as
perceived by local contractors. Based on their likely of occurrence, the research identified
inadequacy of time or finance, late supply of information/ design data/ drawing, defective
design, financial constraint, delay in payment, and inflation risk factors as the most common
contract risks in the local construction industry. Key risk factors are also identified based on
the level of impact, inadequacy of time or finance, exchange rate, delay in settling claim on
overall performance, time and cost performance. Defective design, financial constraints,
inflation on overall, time, cost and quality performance. Similarly, delay in payment and
mistakes in document on time, cost, and quality performance, and time and cost performance
respectively. In addition, the result shows that the allocation of risk to the parties to the
contract is different to what is recommended in the literature. Regarding management
practice in the industry, the study shows that contractors in the study do not conduct formal
risk identification and analysis in their project management activities. The research concluded
that to solve identified risks, as most of identified risk factors cannot be controlled or
managed by grade one to three contractors. In addition, contractors working in this contract is
expected to accept some of the risks. It is important to put additional conditions within the
construction contract which is designed to solve the problem. Risk allocation should be done
based on accepted principles. The risk management approach (identification, analysis, and
response) being employed by the contractor is below average or not up to the accepted
practice.
Key words: Risk, Risk management, Contract risk, Construction contract, Contractor.

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 Acknowledgements

I would like to express my sincere gratitude to my advisor Solomon Sertse (Ass. Prof.) for

his unlimited and wonderful constructive comments, continued guidance and great support

for the successful accomplishment of this research. I would also like to thank him for not

giving up on me when the research took longer than expected.

I am deeply grateful to my family and friends (Tesfaye, Betty, Yinager and Kassahun) for

encouraging and pushing me to finish the research. Last but not least, I would like to thank all

who have given assistance in obtaining the information and data related to this work

especially the people who took time from their busy schedule to fill my questionnaire.

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 TABLE OF CONTENTS
DECLARATION .................................................................................................................................................. I
CERTIFICATION............................................................................................................................................... II
DEDICATION ................................................................................................................................................... III
ABSTRACT ........................................................................................................................................................IV
ACKNOWLEDGEMENTS ................................................................................................................................ V
LIST OF TABLES ...........................................................................................................................................VIII
LIST OF FIGURES ............................................................................................................................................. X
LIST OF ABBREVIATIONS ............................................................................................................................XI
1. INTRODUCTION ............................................................................................................................................ 2
1.1 BACKGROUND OF THE STUDY ............................................................................................................. 2
1.2 STATEMENT OF PROBLEM ..................................................................................................................... 7
1.3 AIMS AND OBJECTIVES.......................................................................................................................... 9
1.4 RESEARCH QUESTIONS .......................................................................................................................... 9
1.5 SCOPE AND LIMITATION OF THE STUDY.......................................................................................... 10
1.6 SIGNIFICANCE OF THE STUDY ............................................................................................................ 10
1.7 ORGANIZATION OF THE STUDY ......................................................................................................... 11
2. LITRATURE REVIEW ................................................................................................................................. 12
2.1 INTRODUCTION ...................................................................................................................................... 12
2.2 CONCEPT OF RISK .................................................................................................................................. 12
2.3 RISK ON CONSTRUCTION PROJECT .................................................................................................. 16
2.4 PROCUREMENT METHOD .................................................................................................................... 21
2.5 CONTRACT AND RISK .......................................................................................................................... 23
2.6 RISK MANAGEMENT PROCESS ........................................................................................................... 29
2.6.1 PLAN RISK MANAGEMENT .......................................................................................................... 35
2.6.2 IDENTIFY RISKS .............................................................................................................................. 38
2.6.3 PERFORM QUALITATIVE RISK ANALYSIS ............................................................................... 43
2.6.4 PERFORM QUANTITATIVE RISK ANALYSIS............................................................................. 47
2.6.5 PLAN RISK RESPONSES ................................................................................................................ 52
2.6.6 CONTROL RISKS ............................................................................................................................. 60
2.7 RISK CLASSIFICATION ......................................................................................................................... 62
2.8 OBJECTIVE OF RISK MANAGEMENT ................................................................................................. 66
2.9 FACTORS LIMITING THE APPLICATION OF RISK MANAGEMENT TECHNIQUE ...................... 66
2.10 TYPES OF PROJECT DELIVERY .......................................................................................................... 67
2.10.1 DESIGN- BID- BUILD (DBB) ........................................................................................................ 68
2.10.2 DESIGN-BUILD (DB) ..................................................................................................................... 69
2.10.3 CONSTRUCTION MANAGEMENT (CM) ................................................................................... 72
2.11 SUGGESTED METHODOLOGY FOR SYSTEMATICALLY ADDRESSING RISK ALLOCATION 74

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3. RESEARCH DESIGN AND METHODOLOGY ........................................................................................ 77
3.1 INTRODUCTION ...................................................................................................................................... 77
3.2 RESEARCH DESIGN ................................................................................................................................ 77
3.3 RESEARCH APPROACH ......................................................................................................................... 77
3.4 RESEARCH STRATEGIES / DESIGNS (METHODOLOGIES) .............................................................. 78
3.5 RESEARCH METHODS CHOICE ............................................................................................................ 79
3.6 TIME HORIZON ....................................................................................................................................... 81
3.7 SAMPLING................................................................................................................................................ 82
3.8 DESIGN OF THE QUESTIONNAIRE ...................................................................................................... 83
3.9 RELIABILITY OF THE QUESTIONNAIRE ............................................................................................ 84
3.10 DATA COLLECTION AND ANALYSIS TECHNIQUE ........................................................................ 84
4. ANALYSIS AND DISCUSSION ................................................................................................................... 89
4.1 INTRODUCTION ...................................................................................................................................... 89
4.2 QUESTIONNAIRES RESPONSE RATE .................................................................................................. 89
4.3 GENERAL INFORMATION OF RESPONDENT ................................................................................... 90
4.4 POTENTIAL RISK FACTORS ................................................................................................................. 92
4.5 THE PROBABILITY OF OCCURRENCE OF THE RISK FACTORS .................................................... 93
4.6 THE IMPACT OF THE RISK FACTORS ................................................................................................. 96
4.7 ALLOCATION OF IDENTIFIED RISK FACTORS FROM CONTRACTORS PERSPECTIVE .......... 106
4.8 RISK MANAGEMENT APPROACH ..................................................................................................... 113
4.9 RISK MANAGEMENT PRACTICE PROMOTION ............................................................................... 118
5. CONCLUSION AND RECOMMENDATION .......................................................................................... 120
5.1 CONCLUSION ........................................................................................................................................ 120
5.2 RECOMMENDATION ............................................................................................................................ 121
REFERENCES: ................................................................................................................................................ 123
APPENDIX A: QUESTIONNAIRE................................................................................................................ 136
APPENDIX B: PROBABILITY OF OCCURRENCE OF POTENTIAL RISK FACTORS .................... 150
APPENDIX C: POTENTIAL RISK FACTORS IMPACT ON PERFORMANCE ................................... 153
APPENDIX D: ALLOCATION OF RISK IN BUILDING CONTRACT UNDER FIDIC AND PPPAA 165
APPENDIX E: SPEARMAN'S CORRELATION TABLE ......................................................................... 180

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 LIST OF TABLES

TABLE 1.1 PREVIOUS STUDIES DONE ON RISK MANAGEMENT IN ETHIOPIA AND THERE KEY FINDINGS.................................... 3
TABLE 2.1 THE CHARACTERISTICS OF RISK AND UNCERTAINTY IN THE CONTEXT OF PROJECT MANAGEMENT ..................... 14
TABLE 2.2 SOME OF THE MAJOR RISKS AND KEY RISKS OF A CONTRACTOR ON A CONSTRUCTION PROJECT. ......................... 16
TABLE 2.3 SUMMARY OF SOURCE OF RISK AND THE MOST SERIOUS EFFECTS IN CONSTRUCTION PROJECT ............................ 19
TABLE 2.4 TYPE OF RISK IN CONSTRUCTION CONTRACT ........................................................................................................ 26
TABLE 2.5 SUMMARY OF STANDARDS AND PMBOK RELATED TO PROJECT RISK MANAGEMENT ......................................... 32
TABLE 2.6 COMPARISON OF RISK MANAGEMENT PROCESS IN STANDARD AND PMBOK ....................................................... 34
TABLE 2.7 RISK MANAGEMENT PLAN OUT PUTS .................................................................................................................... 37
TABLE 2.8 RISK IDENTIFICATION TOOLS AND TECHNIQUES .................................................................................................. 41
TABLE 2.9 INPUTS OF QUALITATIVE ANALYSES ..................................................................................................................... 44
TABLE 2.10 QUANTITATIVE RISK ANALYSIS INPUT ................................................................................................................ 48
TABLE 2.11 TOOLS AND TECHNIQUES OF QUANTITATIVE ANALYSIS ..................................................................................... 49
TABLE 2.12 RISK RESPONSE INPUT ........................................................................................................................................ 52
TABLE 2.13 SUMMARY OF RESPONSE OPTIONS FOR RISKS (TREATIES) AND OPPORTUNITIES .................................................. 53
TABLE 2.14 RISK CLASSIFICATION COMPILED BY THE RESEARCHER. ..................................................................................... 63
TABLE 2.15 ALLOCATING OUTSIDE INFLUENCE-TYPE RISKS. ............................................................................................... 75
TABLE 2.16 ALLOCATING RESOURCE AND PROJECT PRE-REQUISITE RISKS. ......................................................................... 75
TABLE 2.17 ALLOCATING PERFORMANCE RELATED RISKS. .................................................................................................. 76
TABLE 3.1 DISTINCTIONS BETWEEN QUANTITATIVE AND QUALITATIVE DATA ...................................................................... 80
TABLE 3.2 SAMPLE SIZE DETERMINATION TABLE .................................................................................................................. 83
TABLE 3.3 LIKELIHOOD OF RISK EVENTS ............................................................................................................................... 86
TABLE 3.4 IMPACT OF RISK.................................................................................................................................................... 86
TABLE 3.5 GRADING FOR THE RISK ANALYSIS TABLE ............................................................................................................ 87
TABLE 4.1 THE RESPONDENT RESPONSE AND ITS RATE .......................................................................................................... 90
TABLE 4. 2 COMPANY WORK EXPERIENCE IN THE CONSTRUCTION INDUSTRY........................................................................ 90
TABLE 4. 3 COMPANY LICENSING GRADE .............................................................................................................................. 91
TABLE 4. 4 TYPE OF PROJECTS UNDER TAKEN BY THE RESPONDENTS COMPANY ................................................................... 91
TABLE 4. 5 RESPONDENTS POSITION OR RESPONSIBILITY ...................................................................................................... 92
TABLE 4. 6 RESPONDENTS WORK EXPERIENCE ...................................................................................................................... 92
TABLE 4. 7 THE LIKELY OCCURRENCE OF TOP RISK FACTORS FROM EACH GROUP IDENTIFIED BY THE RESPONDENT ............ 94
TABLE 4.8 THE TOP RISK FACTORS IDENTIFIED HAVING AN IMPACT ON OVERALL PERFORMANCE ......................................... 98
TABLE 4.9 TOP RISK FACTORS IDENTIFIED BY THE RESPONDENT HAVING AN IMPACT ON TIME ............................................ 100
TABLE 4.10 TOP RISK FACTOR IDENTIFIED BY THE RESPONDENT HAVING AN IMPACT ON PROJECT COST ............................. 102
TABLE 4.11 TOP RISK FACTOR IDENTIFIED BY THE RESPONDENT HAVING AN IMPACT ON QUALITY ..................................... 104
TABLE 4.12 RISK ALLOCATION ON IDENTIFIED HIGH IMPACT RISK FACTORS ....................................................................... 109
TABLE 4.13 ALLOCATION OF IDENTIFIED RISK FACTOR BY RESPONDENT AND RESEARCHER ............................................... 110

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TABLE 4.14 RISK IDENTIFICATION ON PROJECT ................................................................................................................... 113
TABLE 4.15 TECHNIQUES EMPLOYED TO IDENTIFY A CONTRACT RISK ................................................................................. 114
TABLE 4.16 RISK ANALYSIS ON PROJECT ............................................................................................................................. 115
TABLE 4.17 TECHNIQUES EMPLOYED TO ANALYZE CONTRACT RISK ................................................................................... 116
TABLE 4.18 RISK RESPONSE APPROACH............................................................................................................................... 117
TABLE 4.19 OPINION OF THE RESPONDENT ON PROMOTION OF RISK MANAGEMENT PRACTICE ............................................ 119

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 LIST OF FIGURES

FIGURE 2.1 RISK RELATIONSHIP BETWEEN INFORMATION AND UNCERTAINTY. ..................................................................... 13

FIGURE 2.2 CAUSE AND EFFECT DIAGRAM ............................................................................................................................. 15
FIGURE 2.3 GRAPHIC MODEL OF THE RISK MANAGEMENT CHALLENGE WITHIN THE PROJECT LIFE........................................ 30
FIGURE 2.4 PROBABILITY AND IMPACT MATRIX ..................................................................................................................... 46
FIGURE 2.5 PROJECT ORGANIZATION STRUCTURE FOR DBB METHOD. .................................................................................. 68
FIGURE 2.6 DESIGN BID BUILD LINEAR APPROACH. ............................................................................................................... 68
FIGURE 2.7 PROJECT ORGANIZATION STRUCTURE FOR DB PROCUREMENT METHOD. ............................................................. 70
FIGURE 2.8 DESIGN BUILD INTEGRATED APPROACH. ............................................................................................................. 70
FIGURE 2.9 CM MANAGEMENT ORIENTED. ............................................................................................................................ 73
FIGURE 3.1 RESEARCH CHOICE .............................................................................................................................................. 81

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 List of Abbreviations

AACRA Addis Ababa City Road Authority

AB General Conditions of Contract for Building, Civil Engineering, and
Installation Works (Allmänna Bestämmelser) (Sweden)
ABT General Conditions of Contract for Building, Civil Engineering, and
Installation Work Performed on Package Deal Bases (Allmänna
Bestämmelser för Totalentreprenader) (Sweden)
BaTCoDA Building and Transport Construction Design Authority
BOT Build Operate Transfer
CM Construction Management
COTM Construction Technology and Management
DB Design Build
DBB Design Bid Build
DBFO Design Build Finance Operate
E.C. Ethiopian Calendar
EMV Expected Monitoring Value
ERA Ethiopian Road Authority
MoFED Ministry of Finance and Economic Development
MoWUD Ministry of Works and Urban Development
MUDHo Ministry of Urban Development and Housing
NCB National Competitive Bidding
OPMPI Office of Project Management Process Improvement
PDRI Project Definition Rating Index
PI Probability and Impact
PMBOK Project Management Body of Knowledge
PMI Project Management Institute
PPPAA Public Procurement and Property Administration Agency
PRAM Program Risk Analysis and Management
RAMP Risk Analysis and Management for Project
RBS Risk Breakdown Structures

xi
RMP Risk Management Process
RMS Risk Management Standards
ROW Right of Way
SBD Standard Bidding Document
SME Subject Matter Experts
SWOT Strength Weakness Opportunity and Treats
UK United Kingdom
UNESCO United Nations Educational Scientific and Cultural Organization
WAS Weighted Average Score
WBS Work Breakdown Structure
WSDOT Washington State Department of Transport

xii
 1. INTRODUCTION

1.1 BACKGROUND OF THE STUDY

As stated by Ayalew et al.(2016), the construction industry in Ethiopia, like many other
developing countries, faces many challenges in its practice. Some of these challenges are
project overruns, poor quality, inappropriate procurement systems, and a failure to cope with
project requirements and the inability to adopt best practices, Zewdu and Aregaw (2015),
Mengesha (2004) and Assefa (2008) cited by Ayalew et al.(2016). In addition based on
Ayalew et al.(2016) paper the Ethiopian construction industry is characterized as poor in
meeting project requirements such as cost, time and quality. As noted by the writers (ibid),
the management challenges of the industry are time, cost, risk, safety, and resource
management. Further to this, these writers found out in their assessment that the overall
performance of the Ethiopian construction industry is more likely on the side of the " lower
level".
One of the areas the Ethiopian construction industry is identified to be performing poorly is
construction project risks management. To this end, Table 1.1 provides previous studies done
on risk management in Ethiopia by different researchers. from the tabulated research works,
it can be observed that the risk management practice in Ethiopian construction industry is low
which is in agreement with Ayalew et al.(2016).
However, the country has been implementing significant number of programs and projects
like housing development program and university capacity building projects. The number of
contractors joining the Ethiopian construction industry is increasing thereby making a
systematic approach towards risks management as one of the area the country ought to
improve in order to improve the sector's overall performances. In this regard, it is observed in
the Table 1.1 and other papers by Desta (2015) and Asaminew (2013) even the few studies
conducted in risks management in Ethiopian context focus on Ethiopian road construction
projects. Conversely, there are few studies on building construction project specially on the
building contractor's risk source associated with the standard bidding document for the
procurement of works in Ethiopia.

2
 Table 1.1 Previous studies done on risk management in Ethiopia and there key findings

No Author Title Key Findings

Design risks particularly design errors and omissions contribute to time
and cost overruns of projects.
Road construction risks are not managed with formal risk management
Design risk management in system which involves risk management planning, identifications,
1 Tsegaye Ethiopia federal road assessment, response planning, and monitoring.
2009 projects. Design review, and design and construction supervision by consultants
are the mechanisms currently in place to mitigate design risks.
Design risks are among the major risks in road construction projects,
and has an impact on cost, time and quality of projects.

On knowledge of risk management contractors and consultants

The practice of construction understand risk management through reading and practice than the
risk management through client and insurance companies.
2 Yilma
insurance in the Ethiopian Majority of participants in the road construction industry use “past
2014
federal road projects. experience/Analysis of prior projects” in the identification of risk
factors in the road construction industry.
Client (ERA) mainly use opinion of external consultant (design and

3
 supervision consultant) as no one method for risk identification. On
the other hand consultant and contractor use site visit and past
experience / analysis of prior projects as the first two top risk
identification methods.
The contracting parties mainly provide insurance coverage to road
projects to meet the demand of the client rather than to avoid possible
risks.
No proper risk allocation practice among contracting parties in the
Federal road construction project due to lack of knowledge in the
importance of proper risk management of construction projects.
Contractors mainly conduct risk analysis at the time of tendering. Most
of contracting groups just add a percentage to budget / cost to cope up
with uncertainties rather than implementing mathematical tools to
quantify risks.

Right of way (ROW) risk

The major problems for non achieving project objectives of Addis
management of road
Ababa City Roads Authority (AACRA) are the slow clearance of
3 Tegabu construction project in urban
obstructions from the ROW limit, due to lack of alignment among the
2015 areas: A case study of Addis
stakeholders, there is no formal risk management entertained by any of
Ababa.
the parties.

4
 Out of the major factors selected, ROW related risks are found to be
with high probability of occurrence and high impact on time and cost
on urban road projects.
The concept of the Project Definition Rating Index (PDRI) modified to
AACRA, its correlation with project success and its use as a risk
management tool provide wide ranging benefits when utilized at the
recommended process points.
Due to lack of skill, awareness and knowledge no financial
compensation was entertained so far to the local contractors, the client
was losing extra cost due to payment for the supervision consultants
and price escalation for some selected work items as a result the
domestic contractors are less interested in participating in AACRA
projects.
97% of parties involved in Ethiopian building construction are aware of
the concept of risk management through study and training but only
Construction contract risk
15.4% of the parties are confident enough to implement their
management practice in
4 Mesfin knowledge of risk management principle &technique to make their
Ethiopia building
2014 projects successful.
construction project.
84.6% of parties involved in Ethiopian building construction projects
don’t use risk management techniques in their projects because of lack

5
of awareness about their significance and some don’t use them fearing
they need to hire additional staff and acquire more resources.
The parties involved in the building construction project, design bid
build (DBB) contract have least level of risk while design build (DB)
and force account involve high risk.
The parties involved in the building construction project, financial
difficulty and poor contract management have high level of impact and
occurrence on project objectives.
The methods and techniques mostly used in the building project to
identify, asses, allocate and mitigate the risks are individual judgment
and past experience.

6
Further to this, risk has significant impact on a performance of any construction project.
That is its uncertainty that significantly affects project objectives. As stated by Ayalew et
al. (2016) the performance of construction projects against what was planned can be
measured and evaluated using a large number of performance indicators that could be
related to various dimensions (groups) such as time, cost, quality, client satisfaction,
business performance, health and safety. However, cost, time and quality are the three basic
and leading performance indicators in construction projects because of their dependence on
each other. In this regard the Ethiopian construction industry is characterized as poor in
meeting these three project requirement.

1.2 STATEMENT OF PROBLEM

Contractual risks have the greatest effect on projects because the actions of parties to
contract in responding to duties and obligations dictate the speed of the project execution
and eventual completion Nathaniel (2012). Nevertheless, according to Mesfin (2014) 84.6%
of parties involved in Ethiopian building construction projects don’t use risk management
techniques in their projects because of lack of awareness about their significance and some
don’t use them fearing they need to hire additional staff and acquire more resources.
Related with the above study, according to Ayalew et al.(2016), one of the most challenging
issue for professionals in managing their day to day activity in terms of project management
practice in Ethiopian construction industry is risk.
Risk and uncertainty occurs in every construction project. The size of the project being
small or large, factors such as location, complexity, build ability, and type of building can
all contribute to risk. According to Banaitiene and Banaitis (2012) risk and uncertainties,
involved in construction projects, can cause cost overrun, schedule delay, and lack of
quality during the progression of the projects to ends.
To this, it is argued that the application of sound project risk management practice provides
construction project stakeholders with the means to meet their objectives. Lack of sound
project risk management by owner or contractor on project leads to construction delay, extra
cost for parties. In addition to the problem that occur during construction, poor project risk
management can also result in completed facility that fails to meet the specified quality,
suitability of material, fails to produce the intended products, and cannot be operated for its
intended life which usually results in claim from contractors and counter claim from owner
and vice versa King (2017).
7
Therefore, the risk analysis and management to be a major features of the project
management of construction projects in an attempt to deal effectively with uncertainty and
unexpected events to achieve project success. In addition it helps the key project
participants client, contractor, and suppliers to meet their commitments and minimize
negative impact on construction project performance in relating to cost, time, and quality
objectives.
Further to these, risk management in construction project is to be a large extent governed
by the choice of the contractual forms and what is stated in the related contractual
documents Osipova and Apleberger (2007). In Ethiopia, DBB project delivery system is
commonly applied. In this type of delivery system the most common means of selecting the
general contractor is by the least evaluated bidder techniques.
In this regard, several competing contractors estimate the project based upon the contract
documents and the builder with lowest price that satisfied the qualification criteria gets the
contract. According to Jackson (2004) DBB delivery method is a very linear in nature and
contractor does not have any input regarding the design of the project. The contractor is
only responsible for carrying out the works spelled out in the plans and specifications and
will utilize the various construction management functions to accomplish his task.
However, even though, risk associated with design stage are mostly related to clients,
designers, and government body. Some risks in design stage also extend their occurrence
and influence to the tendering and construction stage. Such as tight project schedule,
insufficient site information, insufficient project schedule, high performance/ quality
information, lack of coordination between project participants, excessive approval
procedures in administrative government department, bureaucracy of government and price
inflation of construction materials have an influence on project objectives Zou et al.
(2007).
On the DBB contract, at the time of bidding, the contractor is expected to understand all the
information in the short period of time and to provide the client with unintelligent but
profitable bid. Low bid award is extremely competitive by their very nature, with this
competition return bids having extremely tight margins of error or none at all, which is
difficult. If the contractor properly considers the contract, specification, drawing and all the
necessary information from his past experience, and given data, will significantly increases
the risk of the contractor during bidding , construction and end of the project.

8
Therefore, it is necessary to consider the building contractors risk source associated with the
standard bidding document , and this study intended to identify common contract provisions
that form as risks to contractor. In addition, the study tries to briefly explore in literature
review the risk management process, risk classification, and project delivery methods and
others with a view to enlighten on building contractors risk sources within the Standard
Bidding Document (SBD) for the procurement of works in Ethiopia, issued by Public
Procurement and Property Administration Agency (PPPAA) National Competitive Bidding
NCB (2011).

1.3 AIMS AND OBJECTIVES

This study aims, to explore common contract provisions that form as risks to contractor and
to explore risks that building contractors are exposed to the SBD for the procurement of
works, issued by PPPAA NCB (2011).
In order to achieve the aim of this research the following objectives are listed:
To identify and evaluate potential risk factors contractors are exposed to while
executing a contract;
To determine the likelihood of occurrence as well as impact of these risks;
To investigate the allocation of each identified risk factors from contractor's
perspective;
To identify and evaluate their risk management approach (preventive and
mitigation measures) as perceived by local contractor in the current period.

1.4 RESEARCH QUESTIONS

From the above listed objectives the following questions are raised in relation to the SBD
from the procurement of works issued by PPPAA (2011) to answer the objectives of the
research:
What kinds of contractual risks affect performance of building construction
projects administered under the PPPAA conditions of contract?
How are building construction risks managed by Ethiopian building
contractors?
Who are the sources of those potential risks in building construction projects
from contractor's perspective?
How can the negative impacts of these risks be mitigated?

9
1.5 SCOPE AND LIMITATION OF THE STUDY
As discussed in the subsequent chapter, there are a number of standard forms of
construction contracts that have been formulated and put in use in Ethiopian construction
industry. But the SBD for the Procurement of Works, issued by PPPAA (2011) form of
contract is selected for this study because it is widely in use in the current stage. In addition
to this, the study is intended to explore common contract provisions that form as risks to
contractor. Hence, this study focuses to risks that building contractors are exposed; to
evaluate those identified, classified risk factors from its own perspective to develop
strategies, to meet project objectives, and understand risk management process. As a result;
only risks within the SBD for the Procurement of Works, issued by PPPAA (2011) form of
contract will be considered and not any other form of contract. There are of course other
stakeholders involved within the PPPAA based contract. However, due to time limitations
to address all stakeholders risk source; this study is limited to the building contractor's risk
sources associated with this SBD and those contractors who have at least one PPPAA based
project. In line with this, only grade one to three local contractors are considered in this
study. Although, this research is done in Addis Ababa, the result and conclusions can be
applied to the construction industry in the other areas of the country because of the
similarity of the rules and regulations.

1.6 SIGNIFICANCE OF THE STUDY

The study finding may help contractors, professionals, and parties involved in the building
construction project; and based on standards and other countries practice mentioned on the
reviewed literature it may help contractors to improve their risk management approaches
to achieve project objectives and understand the risk management process. In addition to
this it gives awareness to the contractors on their obligations and the risk associated with
their contract. Furthermore; the identified and classified potential risk factors within the
SBD will enable contractors to consider the roles of project stakeholders when developing
project risk management plan.

10
1.7 ORGANIZATION OF THE STUDY
This thesis contains five chapters as described below;
Chapter one is an introductory part containing discussions on background, research
problems, aim and objective of the research, significance of the research, scope and
limitation of the research and organization or layout of the research.
Chapter Two presents literature review with general descriptions by different researchers
on concept of risk, risk on construction project, procurement method, contract and risk,
project risk management process, tools and techniques, risk classification, project delivery
methods and others.
Chapter Three discusses about research design and methodology. This section reflects the
underlying assumptions about the research methodology employed and discusses the
research methods used. The section address issues like, research design, research approach,
research strategies, research method choice, time horizon, sampling, design of the
questionnaire, reliability of the questionnaire, data collection and analysis techniques.
Chapter Four presents the results of the data obtained from the questionnaire survey and
discussion of the research findings. Consequently, questionnaires response rate, general
information of the respondent, potential risk factors, the probability of occurrence and
impact of the risk factors from contractors perspective, risk management approach, and risk
management practice promotion are addressed subsequently.
Chapter Five Contains conclusions and recommendations based on what is discussed on
the previous chapters including the research questions, objectives and the findings of the
research.

11
 2. LITRATURE REVIEW

2.1 INTRODUCTION
As stated in previous chapter risk management is one of the knowledge areas of project
management. The application of sound project management practice and effective risk
management techniques to manage risks associated with various construction activities has
become very important for the successful delivery of a project. Therefore, risk management
process is a basic principle of understanding and managing risk in a construction project. It
consists of different steps. All steps in the process should be included when dealing with
risks in order to efficiently implement the process in the project. In addition, risk
management in construction project is to be a large extent governed by the choice of the
contractual forms and what is stated in the related contractual documents. Furthermore, how
risks are shared among the actors in a construction project is to a large extent governed by
the choice of project delivery option. There are advantages and disadvantages to each type
of project delivery methods. It's the owners job to select the best project delivery method
relative to the requirements for the project.
Accordingly, in this section concept of risk, risk on construction project, procurement
method, contract and risk, risk management process, risk classification, objective of risk
management, the three basic type of project delivery system and others are discussed.

2.2 CONCEPT OF RISK

The concept of risk is multi dimensional. According to Goncalves and Heda (2014) the core
concept of risk is that it is the probability of occurrence of an unfavorable outcome and the
consequence of that outcome. This implies that, if either the probability of occurrence or the
impact or consequence of the occurrence increase, the risk increases. However, there is not
a one to one relationship between the increase in probability and/or consequence and risk.
In other words, the relationship is nonlinear.
Based on project risk management, uncertainty is defined as an absence of information,
knowledge, or understanding regarding the outcome of an action, decision, or event. Project
managers constantly suffer from an absence of information, knowledge, or understanding.
Risk is actually a measure of the amount of uncertainty that exists. It’s directly tied to
information, as Figure 2-1 illustrates. In the world of project management, risk relates

12
primarily to the extent of someone’s ability to predict a particular outcome with certainty
Heerkens (2002).

Complete information Some information No information

Amount of Risk

Total Certainty Relative uncertainty Total uncertainty

adapted from Heerkens (2002), page 142.

Figure 2.1 Risk relationship between information and uncertainty.
According to Jon Tapping and Rob Stott (2012) the concept of risk can include positive and
negative impacts. This means that the word “risk” can be used to describe uncertainties that,
if they occurred, would have a negative or harmful effect. The same word can also describe
uncertainties that, if they occurred, would be helpful. In short, there are two sides to risk:
threats and opportunities. As stated by Heerkens (2002) threats are the negative or
“downside” effects of risk and opportunities are often referred to as positive effects of risk.
Threats are specific events that drive your project in the direction of outcomes viewed as
unfavorable (e.g., schedule delays, cost overruns, and inferior product performance). In the
context of construction industry, the probability of a definite factor detrimental (harmful) to
the overall project occurs is always present. A lack of predictability related to the
consequence that results can either be better than expected or can be worse Ehsan et al.
(2010).
Smith et al. (2006) defined risk and uncertainty as: risk exists when a decision is expressed
in terms of a range of possible outcomes and when known probabilities can be attached to
the outcomes; uncertainty exists when there is more than one possible outcome of a course
of action but the probability of each outcome is not known (frequently termed estimating
uncertainty). In other word as stated by Chia (2006) cited in Morote and Vila (2011) risk is
the probability of the future event occurring must be greater than 0% but less than 100%.
Future events that have a zero or 100% chance of occurrence are not risks. To mean that an
event is assumed to be certain if the probability of its occurrence is 100% or totally
uncertain if the probability of its occurrence is 0%.

13
As stated in Saunders (2016) paper by considering the definition of the term risk and
uncertainty summarized their characteristics in the context of project management as shown
in the Table below.
Table 2.1 The characteristics of risk and uncertainty in the context of project
management

Risk characteristics Uncertainty characteristics

Occurrence or event based; State of unknowing;
Quantifiable , often estimable (valuable) Lack of information;
probabilities of occurrence;
Are the consequence of uncertainty; Less susceptible to analysis, involving
variability and ambiguity;
Socially constructed; The consequences are project risk;
An impact on project if they occur. Subjective phenomenon;
Can be positive or negative
adapted from Saunders (2016), page 2-7.

In a project context, risk is a chance of something that will have an impact upon objectives.
It includes the possibility of loss or gain, or variation from a desired planned outcome, as a
consequence of the uncertainty associated with following a particular course of action.
Similarly, concerning about potential impacts on project objectives; project risk is an
uncertain event or condition that, if it occurs, has a positive or negative effect on one or
more project objectives such as scope, schedule, cost, and quality. A risk may have one or
more causes and, if it occurs, it may have one or more impacts OPMPI (2003) and PMBOK
(2013).The uncertainty may be about a future event that may or may not happen and the
unknown magnitude of the impact on project objectives if it does happen Jackson (2004). A
cause may be a given or potential requirement, assumption, constraint, or condition that
creates the possibility of negative or positive outcomes PMBOK (2013). Thus, a “risk” is
characterized by its probability of occurrence and its uncertain impact on project objectives
Jackson (2004). It has two elements: the likelihood or probability of something happening,
and the consequences or impacts if it does Cooper et al.(2005).

14
As stated in UNESCO (2010) risks are expressed as a cause and effect relationship.
Understanding the most important cause helps formulate the best possible actions to manage
an uncertainty (i.e. treating the root cause instead of the symptom). Understanding the most
important effect helps formulate the best possible contingency plan in case an uncertainty
does happen with negative impact. The author further states that the key word in the
definition of risk is uncertain event. Clearly the term uncertain event needs to be interpreted
broadly to cover many different situations but it needs to be sharp enough to allow the
identification of the causes leading to the event, their effect or consequence (as illustrated in
the cause-and-effect diagram below) and thus the measures that can be taken to manage the
risk.
Accordingly, this paper conceptualize risks based on cause and effect relationship in
agreement with UNESCO (2010). Since risk has three components i.e. a cause for an
event, the event, and the consequence of the happening of the event.

Causes Event Consequences

adopted from UNESCO (2010).

Figure 2.2 Cause and effect diagram

15
2.3 RISK ON CONSTRUCTION PROJECT
No construction project is risk free. Risk can be managed, minimized, shared, transferred, or
accepted. It cannot be ignored Latham (1994) cited by Othman and Harinarain (2009). The
size of the project being small or large, factors such as location, complexity, build-ability,
and type of building can all contribute to the risk. Khumpaisal (2007), Zou et al.(2007) and
El-karim et al.(2015) stated and identified in their research paper some of the major risks
usually found in construction projects and key risks of a contractor on a construction project
respectively as shown in the Table 2.2 below.
Table 2.2 Some of the major risks and key risks of a contractor on a construction
project.

Item Author Title Risk type

no
Some of the major risks usually found in
construction projects includes:
delay in letting contract;
obtaining appropriate approvals;
poor tenders;
technological improvements;
Risks in the
construction material delays;
construction project
Khumpaisal construction equipment delays;
1 procurement process
(2007) material quality and
and the mitigation
specifications;
methods.
industrial action;
inclement weather;
occupational, health, welfare and
safety.

Zou et Identifying key risks The key risks of a contractor on a

2
al.(2007) in construction construction project includes:

16
 projects: life cycle "unsuitable construction program
and stakeholder planning" may result from
perspectives. inadequate program scheduling,
innovative design or contractors’
lack of knowledge in planning
construction programs.
variation of construction
program;
"lack of coordination from
project participant" may lead to
confusion in the management of
construction team and programs.
unavailability of sufficient
professionals and managers;
unavailability of sufficient
amount of skilled labour;
"occurrence of dispute" exists in
most construction projects, on
account of the discrepancy and
variations in the design and
construction.
serious noise pollution caused by
construction;
general safety accident
occurrence.

Identification and The key risks of a contractor on a

assessment of risk construction project includes:
El-karim et
3 factors affecting different site condition;
al.(2015)
construction labour skill level and drop
projects. productivity;

17
 equipment productivity and
break down;
material delivery;
storage, theft, damage,
monopoly;
design error;
defective work;
prequalification;
quality control process;
fluctuation in price;
delayed payment;
bureaucracy of the government;
change in law and regulation.

Further to this the key areas of risk for a principal (the client/ employer) is different to those
applying to a contractor and different again from those applying to a financier (financial
institution/client itself). According to Mead (2007) the client/ employer is generally
concerned that the project will be: feasible, in the sense that the project will “stack up”
financially; able to proceed, in the sense of having obtained requisite site, planning and
other approvals; able to be completed within budget (or allowed contingency) and on time
having regard to the timing of end user requirements; able to satisfy end user requirements;
fit for purpose, in the sense of it meeting design, construction and performance criteria.
On the other hand, the contractors’ key concerns are generally: to be paid in accordance
with the terms of the contract including any additional amounts owing because of variation,
etc; to achieve its aimed for margin; to complete in accordance with its program; to have
had the contract fairly administered; to have avoided liability to third parties or the
principal, e.g. liquidated damages, etc Mead (2007). At the end the author states that a
financier of the project considers other key areas of risk which include: completion risk;
resource or reserves risk; security of tenure and political risk; raw materials and supplies
risk; operating risk; market risk; financial risk; force majeure risk.

18
Other heads of risk in the construction industry which may be of concern (to varying
degrees) for all stakeholders include: damage to persons; property or works; contractual;
design/construction; operating; financial and funding; construction performance; design;
compliance with legislative requirements; workplace health and safety; environmental;
cultural heritage; taxation; currency; change in government; political; site conditions (e.g.
latent conditions); site access; technology; supply; force majeure; interface; inclement
weather; industrial relations; legal (change of legislation); insurance; disputation;
insolvency; consumption; safety; escalation; interpretation Mead (2007).
In this regard it is important to distinguish the sources of risk from their effects. Table 2.3
below summarizes the source of risk in construction projects and the most serious effect.

Table 2.3 Summary of source of risk and the most serious effects in construction
project

Sources of risk The most serious effects of risk

Flanagan and Norman (1993); Flanagan and Norman (1993);
inflation rising above the failure to keep within the cost
allowance in the estimate; estimate;
unforeseen adverse ground failure to achieve the required
conditions; completion date;
exceptionally inclement weather; failure to achieve the required
late delivery of crucial materials, quality;
for instance after a fire at a failure of the project to meet the
suppliers' works; required operation needs;
incorrect design details, such as damage to the property as a
the wrong size beams being result of fire or flood;
shown on the architect's injury to a worker due to an
drawings; inadequate system of working.
insolvency of the main contractor;
no co-ordination, for instance
between the mechanical services
contractor's drawings and the

19
 suspended ceiling specialist's
drawings.
Ehsan et al.(2010);
changes in project scope and
requirements;
design errors and omissions;
inadequately defined roles and
responsibilities;
insufficiently skilled staff;
subcontractors;
inadequate contractor experience;
uncertainty about the fundamental
relationships between project
participants;
new technology;
unfamiliarity with local
conditions;
force majeure.
adapted from Flanagan and Norman (1993) and Ehsan et al.(2010).
Ultimately, all risk encountered on a project is related to one or more of the following:
failure to keep within the cost budget/forecast/estimate/tender; the time stipulated for the
approvals, design, construction and occupancy; the required technical standards for quality,
function, fitness for purpose, safety and environment preservation Flanagan and Norman
(1993).
As stated by Chege and Rwelamile (2000) in the construction industry projects frequently
run into problems and fail to meet the desired objectives. Risk management seeks to ensure
that all goes according to plan and the project objectives are achieved. Several different
types of procurement systems have evolved over the years from the traditional procurement
model with the aim of facilitating the achievement of the project objectives. As different
procurement options imply different ranges of responsibilities and liabilities in the project,
selecting an appropriate project procurement option is a key issue for project actors Osipova
(2008). In addition, different procurement strategies are also being used as techniques for

20
risk allocation, management, and control the likelihood of risk events such as time and cost
overruns from occurring. Further to this one of the main objectives of any procurement
system/ method is to secure an optimum level of risk transfer between the client and the
contractor Chege and Rwelamile (2000). In view of that, it is necessary to discuss
procurement method in relation to risk and this will be dealt in the next section (section
2.4).

2.4 PROCUREMENT METHOD

A project may be regarded as successful if the building is delivered at the right time, at the
appropriate price and quality standards, and provides the client with a high level of
satisfaction. One important influence on this is the type of procurement method
implemented Love et al.(1998). Molenaar et al. (2009) cited by Ghadamsi and Braimah
(2010) defined procurement method as a comprehensive process by which designers,
contractors, and various consultants provide services for design and construction to deliver
a complete project to the client. As this definition suggests, different processes such as:
project brief, feasibility study, concept design, tender and contract, construction and
commission and hand over Rashid et al.(2006); are involved in a procurement strategy.
These processes are often interrelated and sequential in nature and their effectiveness and
efficiency impact considerably on the success or failure of projects.
As stated by Chege and Rwelamile (2000) one of the main objectives of any procurement
system ( or sometimes known as delivery system Love et al. (1998)) is to secure an
optimum level of risk transfer between the client and the contractor. This is one of the
reasons why alternative forms of procurement, for example, management contracting,
design and build, build operate and transfer (BOT), design build finance operate (DBFO),
prime contracting and hybrids of these procurement systems have been used in lieu of the
traditional procurement model. The main aim of utilizing these other procurement models is
to transfer the risk to the party that is best able to deal with it. Some projects involve a
higher level of risk than other projects. It is therefore very important that the client chooses
the procurement system that is best suited for the particular project after analyzing the risks
involved.

In dealing which procurement system to apply, various factors have to be taken into
consideration before any informed decision can be made on the right procurement choice.

21
According to Love et al. (2008), Ghadamsi and Braimah (2010), and Ratnasabapathy et al.
(2006) the factors can be classified into two groups:
External environment such as economics, politics, finance, legal, nature
disasters, technology factors, and;
Internal environment which can be divided under three main factors; project
characteristics, client’s characteristics and client’s requirement. Client
requirements can be sub-divided into cost related factors, time related factors
and quality related factors.
By considering these factors the selection of suitable procurement method is important to
the successes of any project. Because, the wrong selection of construction procurement
approach usually leads to project failure or general client’s dissatisfaction Ratnasabapathy
et al. (2006). Also it increases the probability of risk events occurring within the project
Chege and Rwelamile (2000). On contrary, selecting an appropriate procurement system/
method can be effective in mitigating the risk inherent in a project Love et al.(2008).
Therefore, a systematic approach for the selection of the most appropriate system is
essential to aid the clients to achieve their ultimate project goals, thus to ensure best value
for their money.
In addition to this project performance is highly influenced by the type of construction
procurement method used to deliver the project. By virtue of this relationship, project
clients often seek to select the best method that will help achieve better project performance
Ratnasabapathy et al.(2006). Moreover, there are some criteria to establish a profile of the
client requirement and 'experts' preferences for the performance of each procurement
methods such as: speed (during design and construction), certainty, flexibility in
accommodating design changes, quality, complexity, risk allocation/avoidance,
responsibility, price competition and dispute and arbitration Love et al.(1998), Ghadamsi
and Braimah (2010) and Lin et al. (2014).
As this paper focuses on building contractors risk sources associated with the contract's
delivered through the PPPAA's (2011) standard bidding document for the procurement of
works in Ethiopia Harinarain et al.(2008) cites Harinarain et al. (2007) states that risk
sources to the contractor could be defined as the person, authority or event that either reduce
the strength of the company, increase its weakness, reduce its opportunities and increase its

22
treats, which eventually affects the achievement of the project objectives and client
satisfaction.

2.5 CONTRACT AND RISK

Project risk management is beneficial if it is implemented in a systematic manner from
planning stage through the project completion. The unsystematic and arbitrary risk
management can endanger the success of the project since most of the risks are very
dynamic throughout the project life time Morote and Vila (2011). Several risk management
approaches are proposed on the subject of risk management. Some of the most important
approaches are: PRAM (program risk analysis and management) Chapman (1997), RAMP
(risk analysis and management for project) Institution of Civil Engineering (2002), PMBOK
(PMI)(2008), RMS (risk management standards) Institute of Risk Management (2002) cited
by Morote and Vila (2011). All of these approaches may be summarized in to a six phase
processes for effective project risk management. That is, planning risk management,
identifying risks, perform qualitative risk analysis, perform quantitative risk analysis, plan
risk responses, and control risk. The detail of these processes will be discussed in the next
section.
According to Jardine (2007) and Gunn (2009) integrating risk with other project
management functions, project risks include:
Cost management;
Time management (Schedule/Program)
Scope and change management;
Quality and safety;
Procurement and contracts;
People management,
information management; and
external influence.
Therefore, by considering a contract, it can be used as a risk managing tool by allocating
risks to the various agencies through the various contracts between them Pawar et al.
(2015). In addition, it establishes the rights, duties, obligations, and responsibilities of the
parties and to allocate risk Flanagan and Norman (1993). Risk allocation strategy in
construction projects is defined through the contractual arrangements Osipova (2008).The
building contract is an agreement between two parties, one of whom, the building
23
contractor, agrees to erect a building, the other, the employer, agrees to pay for it. Personal
rights and obligations are created by the agreement, and the right of one party is the
obligation of the other Harinarain et al.(2008).
Construction project is a very risky business, for both the owner and the contractor because
of the complexity in coordinating various processes. Besides, many parties are involved
such as owner, consultant, contractor, subcontractor, and supplier Banaitiene and Banaitis
(2012). Each project is unique and often incorporated with new techniques and procedures
Karim et al.(2012). Also, it is a time consuming process involving a multitude of
organizations with different objectives and skills. Moreover, increasing client expectations
coupled with the technological development of materials and equipment Othman and
Harinarain (2009).
Part of the challenge is trying to place the risk in the hands of the party that can best manage
that risk. That’s why an owner hires a contractor to begin with to shift the risks for the
construction cost, time, quality, and safety over to someone trained to manage them. Once
the risks are identified, understood, and analyzed, proper allocations can be made for
reasonable schedules, estimates, and management plans Jackson (2004).
Almost every construction project carry with them enormous risks and therefore the
construction industry is subject to more risk and uncertainty than most other industries
Dutta (2014) and Tadayon et al.(2012) such as: textile and steel manufacturing. Since,
construction activity involves a number of agencies like the owner; consultant and the
contractor may have conflicting interests. In order to establish the duties, obligations, rights,
responsibilities amongst the agencies, a contract is required to be made between them which
will establish a mutual relationship to do a work Pawar et al.(2015).
As a result, one of the purpose of the contract is to allocate the risk and to minimize risks
and their consequence if utilized well Mesfin (2014) and Flanagan and Norman (1993). The
acceptance of an obligation or duty brings with it the acceptance of a commensurate risk,
which is the risk of being unable to fulfill the obligation or duty because of one's own
inadequacy, incapacity, inadvertence, or error, or because of interference from outside
source or events. But with any contractual agreement the contract defines only the ground
rules, the execution of the contract rests on goodwill, intent and the relationship between the
parties Flanagan and Norman (1993).

24
The parties to contract should understand that risk management is not the responsibility of
one party but the combined effort of all those involved. Each one should know the quantum
(amount) of risk they are exposed to and prepare themselves for the risk. Risk is to be
redirected or avoided or transferred to a particular project participant is a question that
needs to be answered Kalkhoran et al.(2014) and Tapping and Stott ( 2012). According to
Shuibo et al. (2006) a contract is used to allocate risks, in the contracts, among the parties in
such a way as to enable risks to be managed efficiently and effectively throughout the
construction process. Risk in contractual work involves the possibility of gain or loss that
may occur during the course of a project. In determining contract strategy, both the parties
should strive to understand and recognize each other's responsibility Kalkhoran et
al.(2014).The issue of the way to effectively handle the risks which are inherent in any
construction contract depends on different factors. As stated by Taylor and Mbachu (2014)
factors due to the nature of the work, current workload / the desire of the company to have the
project, the need for work, reliability or unreliability of a company’s pricing approach, and risks
based on the perceived competitiveness of other bids. The handling of risk in construction
contracts varies significantly. This depends on the nature and location of the work, the
owner/client and contractor involved and the prevailing (existing) contracting climate Dutta
(2014).
The contract for construction is made up of much more than just a simple agreement form.
Although an agreement form is eventually executed between the owner and the contractor,
there are many more documents such as: general conditions, supplementary conditions,
drawings, bills of quantities and addendums that direct the construction of the project and
responsibilities of the parties Jackson (2004). In a contract between owner and contractor,
there is an implied warranty that the contractor undertakes: to do work with care and skill in
a workmanlike manner; to use materials of good quality; and that both the work and
materials will be reasonably fit for the purpose for which they are required Bunni
(2003).Contracts of all size and for all purposes are intended to transfer risks, allocating
them to an individual or an organization to be managed for the duration of the arrangement
Cooper et al.(2005).
In building or construction contracts whenever someone holds himself out to be specially
qualified to do a particular type of work, there is an implied warranty that the work will be
done in a workmanlike manner and that the resulting building, product, etc., will be

25
reasonably fit for its intended use. Thus, the contractor is required to bring his expertise into
play and to notify even an architect (expert) of reasonably discovered defects Bunni (2003).
According to Dutta (2014) one of the major risks faced by construction industry is
“CONTRACT RISK”. Accordingly, as shown in Table below type of risks in a construction
contract are: physical works, delay and disputes, direction and supervision, damage and
injury to persons and property, external factors, payment, and law and arbitration
Abrahamson (1984), and Bunni (1985) cited by Murdoch and Hughes (2002). Since, it is
difficult to remove all potential risks in a construction project, thus it is crucial to allocate
risks among parties in the project through a contract. If not, project performance in terms of
cost, quality and time is often affected. Moreover, disputes and misunderstandings are often
the end result between clients and contractors when the distribution of risk is not well
allocated Olamiwale (2014). Therefore, proper risk allocations in construction contracts can
help reduce such impacts and achieve management efficiency Shuibo et al.(2006).
Table 2.4 Type of risk in construction contract
Nº Type of risk in construction contract
ground conditions; artificial obstructions; defective materials or
1 Physical works workmanship; tests and samples; weather; site preparation;
inadequacy of staff, labour, plant, materials, time or finance.
possession of site; late supply of information; inefficient execution
2 Delay and disputes
of work; delay outside both parties’ control; layout disputes.
greed (insatiability); incompetence; inefficiency; unreasonableness;
Direction and partiality; poor communication; mistakes in documents; defective
3
supervision designs; compliance with requirements; unclear requirements;
inappropriate consultants or contractors; changes in requirements.

Damage and negligence or breach of warranty; uninsurable matters; accidents;

4 injury to persons uninsurable risks; consequential losses; exclusions, gaps and time
and property limits in insurance cover.

government policy on taxes, labour, safety or other laws; planning

approvals; financial constraints; energy or pay restraints; cost of
5 External factors
war or civil commotion; malicious damage; intimidation; industrial
disputes.

26
 delay in settling claims and certifying; delay in payment; legal
limits on recovery of interest; insolvency; funding constraints;
6 Payment
shortcomings in the measure and value process; exchange rates;
inflation.
delay in resolving disputes; injustice; uncertainty due to lack of
Law and
7 records or ambiguity of contract; cost of obtaining decision;
arbitration
enforcing decisions; changes in statutes.
adopted from Murdoch and Hughes (2002),page 83.
The owner's/client’s primary objective when planning construction is entirely a complete
and serviceable facility in a well-timed manner. Every contract, project and client/contractor
relationship is exclusive. Contract document does not give a preconceived single solution or
recommendation for or against contract styles such as Engineering Procurement Installation
and Construction or ‘lump sum’. It aims at commenting on some of the problems that may
need to be addressed in varied contracting situations Dutta (2014).
There are different risk management techniques used in different stages of the construction
in the outside world; Risk management in the contractual stage, i.e. before signing the
contract is used very frequently Mesfin (2014). According to Akintoye and MacLeod
(1997) on the UK construction industry the general contractor and project management
practice mostly rely on professional judgment, intuition and experience. In addition to this
Baker et al.(1999) cited by Osipova (2008) found that risk reduction is the most frequently
used technique within the construction industry in the UK. The results of the study
conducted by Simu (2006)show that the Swedish contractors rely on their own gut-feeling
and traditional ways of controlling the project rather than on established risk management
systems.
In developing countries such as: Pakistan most common risk management technique
practiced in its construction industry are preventive techniques and remedial technique.
Preventive techniques; which can be used before the start of a project to manage risks that
are anticipated during project execution. Remedial techniques that are used during project
the execution phase once a risk has already occurred Iqbal et al. (2015). Similarly, the risk
identification techniques more frequently applied in construction in Rio de Janeiro State
(Brazil) are checklist, flowchart and brainstorming Garrido et al.(2011).According to the
Chinese construction industry most frequently applied management techniques are
27
“brainstorming” for identifying risks, “joint evaluation by key participants” in risk analysis,
“reducing risks” within risk response strategies, and “periodic document reviews” in risk
monitoring Tang et al.(2007). The author further states that the qualitative techniques are
used much more often than quantitative techniques in the industry.
Lithuanian construction companies use qualitative method of risk assessment most
frequently a head of quantitative method Banaitiene and Banaitis (2012). In Iran, "brain-
storming sessions" is the most popular method used frequently to identify the risks in large
construction projects Tadayon et al.(2012). In the Malaysian construction industry, financial
risk and time risk are found to be the major risks in terms of the occurrence frequency and
the impacts Goh and Abdul-Rahman (2013). In Iran, the most considerable types of risk in
construction projects are financial risks, construction risks, and demand or product risks
Tadayon et al.(2012). The unique risk associated in the Chinese construction project are
project funding problem, contractors poor management ability, difficulty to reimbursement
(payment or compensation), unwillingness to buy insurance and lack of awareness of
construction safety. These recognized risks are mainly related to contractor followed by
client, designers, subcontractors or suppliers and governmental agencies Zou et al.(2007).
If risks are identified and allocated to the contracting parties in the contract document, it
makes dealing with the risks if and when they arise very easy. A construction contract risk
management approach that uses a team of experienced construction professionals or experts
will lead to better achievement of project objectives. According to the parties involved in
Ethiopian building construction projects, most projects are not completed in conformity to
the original plan i.e. they face various problems and changes that lead to delay, cost overrun
or lower quality. The risks involved throughout the life of a building project might be
causes for variations in project objectives if they are not managed well Mesfin (2014).
How risks are shared among the actors in a construction project is to a large extent governed
by the choice of project delivery option (the detail will be discussed in section 2.10). There
are advantages and disadvantages to each type of project delivery methods. It's the owners
job to select the best project delivery method relative to the requirements for the project.
Some of the factors that influence an owner's project delivery selection include cost,
schedule, quality, design, risk tolerance, and construction experts Jackson (2004). As
different project delivery options imply different ranges of responsibilities and liabilities in

28
the project, selecting an appropriate project delivery option is a key issue for project actors
Tsegaye (2009).
Many countries have developed standardized conditions of contract that are intended to be
used in construction projects. For example , in Sweden, “General Conditions of Contract for
Building, Civil Engineering and Installation Work” (AB) are used in DBB projects.
”General Conditions of Contract for Building, Civil Engineering and Installation Work
performed on a package deal basis” (ABT) are used in design-build projects. AB and ABT
assign responsibilities and liabilities of each contracting party regarding job performance,
organization, time frames, guarantees, insurances, errors and payment Osipova (2008).In
Ethiopia a traditional project delivery method that is DBB contract is widely applied. In this
type of contract the client/ owner holds two separate contracts for design and construction.
This implies that the client is responsible for the design and the contractor for the
execution. In addition to this we can observe that a number of standard forms of
construction contracts have been formulated and put in use. The well known ones are: The
Standard Conditions of Contract for Construction of Civil Work Projects that was authored
by the Ministry of Works and Urban Development (MoWUD) in May 1994; Building and
Transport Construction Design Authority (BATCoDA) Standard Conditions of Consulting
Services for Design and Supervision of Construction Works, January 1990; and The
Standard Bidding Document (SBD) for the Procurement of Works, issued by the Public
Procurement and Property Administration Agency (PPPAA), January 2006 and 2011. The
PPPAA is established under the Ministry of Finance and Economic Development (MoFED)
by virtue of the Federal Public Procurement Proclamation No.430/1997.

2.6 RISK MANAGEMENT PROCESS

According to Larson et al. (2011) the chances of a risk event occurring (e.g., an error in
time estimates, cost estimates, or design technology) are greatest in the concept, planning,
and start up phases of the project. The cost impact of a risk event in the project is less if the
event occurs earlier rather than later. The early stages of the project represent the period
when the opportunity for minimizing the impact or working around a potential risk exists.
Conversely, as the project passes the halfway implementation mark, the cost of a risk event
occurring increases rapidly. For example, consider the process of building a new home. It
would be economical to decide to add extra electrical and sanitary outlets during the
structural framing stage than it would be to make that decision after the structural framing
29
and the drywall was up and the walls were painted. It would be even more cost effective to
make that decision while the plans were still on the drawing board. Figure 2.3 below
presents a graphic model of the risk management challenge within the project life.

Risk Cost
Changes of
risks occurring High
High

Cost to fix
risk event

Low
Low

Defining Planning Executing Delivering

Project life cycle

adopted from Larson et al. (2011) p.212.
Figure 2.3 Graphic model of the risk management challenge within the project life
In this regard, the risk management process can be defined as a logically consistent
framework used to develop the process of finding and understanding alternative risks,
assessing their risk and uncertainties, identifying the resources needed and choosing
appropriate courses of action to address these risk factors and achieve the desired results.
Since, as mentioned in the previous chapter the construction industry is subject to more risk
and uncertainty than many other industries Dutta (2014) and Tadayon et al.(2012). In
addition to this several risk management approaches are proposed on the subject of risk
management. Furthermore a number of variations risk management process have been
proposed in literature.
As stated by Smith et al.(2006) the risk management cycle that includes the identification,
analysis and control of risks to be applied at corporate, strategic business and project levels.
The risk management cycle is dynamic and must be continuous over the project investment

30
life cycle. Cooper et al. (2005) defines risk management process in seven steps;
communicate and consult, establish the context, identify risks, analyze risks, evaluate risks
,Treat risks and monitor and review. According to Kerzner (2009) it is important that a risk
management strategy be established early in a project and that risk be continually addressed
throughout the project life cycle. Risk management includes several related actions,
including risk: planning, identification, analysis, response (handling), and monitoring and
control.
PMBOK (2013) defines risk management process as six processes as follow : plan risk
management, identify risks, perform qualitative risk analysis, perform quantitative risk
analysis , plan risk responses and control risks. Meredith and Mantel (2009) added the
seventh sub process on PMBOK which is, create and maintain a risk management data bank
a permanent record of identified risks, methods used to mitigate or resolve them, and the
results of all risk management activities. Mhetre et al. (2016) states risk management is the
process which consists of identification, assessment, response and review. Similarly,
Porananond et al. (2014) summaries the key steps of project risk management process as
scope and context planning, risk identification, risk analysis, risk treatment and risk
control. These authors further stated the comparison between the process steps for risk
management in relation to the standards and PMBOK as shown in the Tables 2.5 and 2.6.
The first Table summarizes the standards and PMBOK related to Project Risk Management.
The second Table compares the process steps for risk management in relation to the
standards and PMBOK.
According to Goh and Abdul-Rahman (2013) an effective implementation of a risk
management system not only brings a higher level of awareness of the consequences of risk
but also focuses on a more structured approach, more effective centralized control and
better transfer of risk information between parties. This author further states that successful
risk management should convert uncertainty to risk and convert risk to opportunity. The
project and organization would hence achieve more gains by maximizing opportunity,
minimizing risk and reducing uncertainty. Accordingly, a risk management process (RMP)
described by PMBOK (2013) has been chosen for the purpose of this paper. This section
will further explain the RMP, its six stages with inputs, tools and techniques and outputs
respectively.

31
 Table 2.5 Summary of standards and PMBOK related to Project Risk Management

Standard Relation to Project Management Risk Management Process

Defines risk management process as
1) Communicate and consult; 2) Establish the context;3) Identify risks;
AS/NZS 4360:2004 Included but not specific to project risks 4) Analyze risks,5) Evaluate risks; 6) Treat risks; 7) Monitor and review
Risk Management

Defines risk management process as

Included but not specific to project risks 1) Communication and consultation;2) Establishing the context; 3) Risk
ISO31000:2009 assessment; 4) Risk treatment; 5) Monitoring and review
Risk management

Defines project management to 7 process grouping for Defines risk-related processes group as 4 processes
ISO10006:2003 1) Inter dependency-related processes,2) Scope-related 1) Risk identification; 2) Risk assessment; 3) Risk treatment; 4) Risk
Guidelines for quality processes,3) Time-related processes,4) Cost-related control
management in processes,5) Communication-related processes,6) Risk-
projects related processes, and7) Purchasing-related processes

32
 Defines project management to 10 subject groups for Defines risk subject group into 4 processes
ISO21500:2012 1) Integration, 2) Stakeholder,3) Scope, 4) Resource,5) 1) Identify risks,2) Assess risk, 3) Treat risk, and 4) Control risks
Guidance on project Time, 6) Cost ,7) Risk , 8) Quality,9) Procurement and10)
management Communication.

Defines 10 knowledge area for

1) Project integration management, Defines risk management process as 6 processes as following
2) Project scope management, 1) Plan risk management,2) Identify risks, 3) Perform qualitative risk
PMBOK 5th Edition 3) Project time management, analysis, 4) Perform quantitative risk analysis,5) Plan risk responses
PMI, (2013) 4) Project cost management, and 6) Control risks
5) Project quality management,
6) Project human resource management ,
7) Project communication management ,
8) Project risk management,
9) Project procurement management and
10) Project stakeholder management.

adopted Porananond et al.(2014).

33
 Table 2.6 Comparison of risk management process in standard and PMBOK

AS/NZS 4360 ISO 31000 ISO 10006 ISO 21500 PMBOK

(2004) (2009) (2003) (2012) (2013)

Communicate Communicate
Scope and and consult and consult Plan risk
context planning Establish the Establish the Management
context context
Risk Risk Risk
Identify risk Identify risk
Identification identification identification
Risk assessment
Perform
Analyze (ISO 31000)
qualitative
Risk -Identification
analysis
Risk Analysis -Analysis Risk assessment Assess risk
Perform
Evaluate -Evaluation
quantitative
Risk
analysis
Treat Plan risk
Risk treatment Risk treatment Risk treatment Treat risks
Risk responses
Monitoring and
Risk control Risk control Control risk Control risk
review

adopted Porananond et al.(2014) and Cooper et al. (2005) .

34
2.6.1 PLAN RISK MANAGEMENT
According to PMBOK (2013) it is the process of defining how to conduct risk management
activities for a project. According to WSDOT(2014) it is the systematic process of deciding
how to approach, plan, and execute risk management activities throughout the life of a
project. It is intended to maximize the beneficial outcome of the opportunities and minimize
or eliminate the consequences of adverse risk events. Similarly; according to OPMPI (2003)
and PMBOK (2013)project risk management is the systematic process of planning for project
risk. It involves processes, tools, and techniques that will help the project manager maximize
the probability and consequences of positive events and minimize the probability and
consequences of adverse events. And thus, the system must be practical, realistic and must be
cost effective.
Smith et al. (2006) developing a project plan has three benefits; these are:
1. Planning reduces uncertainty even though you would never expect the project work to
occur exactly as planned, planning the work enables you to consider the likely
outcomes and to put the necessary corrective measures in place when things don’t
happen according to plan.
2. The mere (simple) act of planning gives you a better understanding of the goals and
objectives of the project. Even if you were to discard the plan, you would still benefit
from having done the exercise.
3. Planning improves your efficiency that is, after you have defined the project plan and
the necessary resources to carry out the plan, you can schedule the work to take
advantage of resource availability. You also can schedule work in parallel that is, you
can do tasks concurrently, rather than in series. By doing tasks concurrently, you can
shorten the total duration of the project. You can maximize your use of resources and
complete the project work in less time than by taking other approaches. Not knowing
the parameters of a project prevents measurement of progress and results in never
knowing when the project is complete. The plan also provides a basis for measuring
work planned against work performed.
Similarly PMBOK (2013) describes; the key benefit of this process is that it ensures that the
degree, type, and visibility of risk management are commensurate (appropriate) with both
the risks and the importance of the project to the organization. According to; PMI (2009) the
objective of this process are to develop the overall risk management strategy for the project,

35
to decide how the risk management process will be executed, and to integrate project risk
management with all other project activities. In addition to this PMBOK (2013); Careful and
explicit (clear) planning enhances the probability of success for other risk management
processes. Planning is also important to provide sufficient resources and time for risk
management activities and to establish an agreed upon basis for evaluating risks. The Plan
Risk Management process should begin when a project is conceived (imagined) and should
be completed early during project planning.
2.6.1.1 RISK MANAGEMENT PLAN INPUTS
According to PMBOK(2013) and Mubin and Mubin (2008) the project management plan,
provides baseline or current state of risk affected areas including scope, schedule, and cost.
The enterprise environmental factors include, but are not limited to, risk attitudes, thresholds,
and tolerances that describe the degree of risk that an organization will withstand. The
organizational process include, but are not limited to: risk categories, common definitions of
concepts and terms ,risk statement formats, standard templates, roles and responsibilities,
authority levels for decision making, and lessons learned. PMBOK (2013) the project charter
can provide various inputs such as high-level risks, high-level project descriptions, and high-
level requirements. The stakeholder register, which contains all details related to the project’s
stakeholders, provides an overview of their roles.
2.6.1.2 RISK MANAGEMENT PLAN TOOLS AND TECHNIQUES
According to PMBOK(2013) & Mubin and Mubin (2008) it is analytical techniques; which
are used to understand and define the overall risk management context of the project.
Meetings; project teams hold planning meetings. Attendees at these meetings may include the
project manager, selected project team members and stakeholders, anyone in the organization
with responsibility to manage the risk planning and execution activities, and others, as
needed. Risk contingency reserve application approaches may be established or reviewed.
Risk management responsibilities should be assigned. General organizational templates for
risk categories and definitions of terms such as levels of risk, probability by type of risk,
impact by type of objectives, and the probability and impact matrix will be tailored to the
specific project. If templates for other steps in the process do not exist, they may be generated
in these meetings.
The outputs of these activities are summarized in the risk management plan. According to
PMBOK (2013) expert judgment; judgment, and expertise should be considered from groups

36
or individuals with specialized training or knowledge on the subject area, such as: Senior
management, Project stakeholders, Project managers who have worked on projects in the
same area (directly or through lessons learned),Subject matter experts (SMEs) in business or
project area, Industry groups and consultants, and Professional and technical associations.
2.6.1.3 RISK MANAGEMENT PLAN OUT PUTS
According to PMBOK (2013) the risk management plan is a component of the project
management plan and describes how risk management activities will be structured and
performed. The risk management plan out puts includes the following: PMBOK (2013) and
Newton (2015).
Table 2.7 Risk management plan Out puts
No Out puts Scope
1 Methodology defines the approaches, tools, and data sources that will be
used to perform risk management on the project.
2 Roles and defines the lead, support, and risk management team members
responsibilities for each type of activity in the risk management plan, and
clarifies their responsibilities.
3 Budgeting estimates funds needed, based on assigned resources, for
inclusion in the cost baseline and establishes protocols for
application of contingency and management reserves.

4 Timing defines when and how often the risk management processes
will be performed throughout the project life cycle, establishes
protocols for application of schedule contingency reserves, and
establishes risk management activities for inclusion in the
project schedule.
5 Risk categories -provide a means for grouping potential causes of risk.
-It provides a structure that ensures a comprehensive process
of systematically identified risks to a consistent level of detail.
-An organization can use a previously used categorization
frame work, which might take the form of the simple list of
categories or might structured in to risk break down structure

37
 (RBS).
6 A probability and is a grid for mapping the probability of each risk occurrence
impact matrix and its impact on project objectives if that risk occurs. The
specific combination of probability and impact that lead to a
risk being rated as 'extreme,' 'high,' 'moderate,' 'low,' or
'nominal' importance, with the corresponding importance for
planning response to the risk, are usually set by the
organization.
7 Revised as they apply to the specific project, may be revised in the Plan
stakeholders’ Risk Management process then this should be documented.
tolerances
8 Reporting formats -describes how the outcomes of the risk management process
will be documented, analyzed, and communicated.
-it describes the content and format of the risk register as well
as any other risk reports required.
9 Tracking documents how risk activities will be recorded for the benefit of the
current project and as well as for future needs and lesson
learned. And how risk management processes will be audited.
adapted from PMBOK (2013) and Newton (2015).
2.6.2 IDENTIFY RISKS
The second step in risk management process is to identify risks (risk identification).This may
result from a survey of the project, customer, and users for potential concerns Kerzner (2009).
The purpose of risk identification is to identify risks to the maximum extent that is
practicable. The fact that some risks are unknown-able or emergent requires the identify risk
process to be iterative, repeating the identify risks process to find new risks which have
became knowable since the previous iteration of the process PMI(2009). According to
PMBOK(2013) the process of determining which risks may affect the project and
documenting their characteristics. The key benefit of this process is the documentation of
existing risks and the knowledge and ability it provides to the project team to anticipate
events. WSDOT (2014) risk identification occurs throughout each phase of project
development: planning ; scoping, design/Plans, specifications, and estimate (engineer’s
estimate), construction. As projects evolve (change) through project development, the risk
38
profile evolves (changes) and understanding grows. Therefore, previously identified risks
may change and new risks may be identified throughout the life of the project.
In addition to this, PMBOK (2013) identify risks is an iterative (repetitive) process, because
new risks may evolve (change)or become known as the project progresses through its life
cycle. The frequency of iteration and participation in each cycle will vary by situation. The
format of the risk statements should be consistent to ensure that each risk is understood
clearly and unambiguously in order to support effective analysis and response development.
The risk statement should support the ability to compare the relative effect of one risk against
others on the project. According to OPMPI (2003) and PMBOK(2013)risk management is the
systematic process of identifying project risk. As mentioned on previous section it involves
processes, tools, and techniques that will help the project manager.
2.6.2.1 INPUTS OF THE IDENTIFY RISKS PROCESS
The first and most important input is a defined project. In order to fully understand and assess
the risks that our projects are exposed to, we must first ensure there is a mutual understanding
of the project under evaluation. Projects tend to develop in small steps. This incremental
process of project development is sometimes develop in steps, and continuing by increments
WSDOT (2014).
2.6.2.2 TOOLS & TECHNIQUES OF THE IDENTIFY RISKS PROCESS
The risk identification process or the risk information gathering process can be achieved with
the aid of different tools and techniques Rostami (2016). According to, PMI (2009) a range of
tools & techniques is available for risk identification. These fall into the following three
categories. The first category; the project historical review based on what occurred in the
past, either on this project, or other similar projects in the same organization, or comparable
projects in other organization. These review approaches rely on careful selection of
comparable situation which are genuinely similar to the current project, and filtering of date
to ensure that only relevant previous risk are considered. The second category; current
(present) assessment rely on detailed consideration of the current project, analyze its
characteristics against given frame works and models in order to expose areas of uncertainty.
In addition this techniques do not rely on outside reference points. The last category; creative
techniques (future), A wide range of creative techniques can be used for risk identification,
which encourage project stake holders to use their imagination to find risks which might
affect the project. These techniques can be used either singly or in groups, and employ

39
varying degrees of structure. According PMBOK (2013) the risk identification tools and
techniques are shown in Table below.

40
 Table 2.8 Risk identification Tools and Techniques

Nº Tools and Techniques Scope

Documentation reviews
1 PMBOK (2013) & Peer-level reviews of project documentation, studies, reports, preliminary plans, estimates, and
Mubin and Mubin schedules are a common and early method to help identify risks that may affect project objectives.
(2008)
2 Information gathering techniques PMBOK (2013) &Mubin and Mubin(2008)
-Brain storming The objective of brainstorming to obtain a comprehensive list of project risks, and it is performed with a
project team members, specialty groups, stakeholders, and regulatory agency representatives
(multidisciplinary set of experts).Effective brain storming requires a skill facilitator, working together
with the project team and specialists who can bring additional expertise.

-Delphi Technique The Delphi technique is a way to reach a consensus of experts. It helps to reduce bias in the data and
keeps any one person from having undue influence on the outcome.

-Interview Interview with experienced project participants, stakeholders and subject matter experts to identify
risks.
-Root cause Analysis a specific technique used to identify a problem, discover the underlying causes that lead to it, and
develop preventive action.
3 Check list Analysis Risk identification checklists can be developed based on historical information and knowledge that has

41
 PMBOK (2013) & been accumulated from previous similar projects and from other sources of information.
Mubin and Mubin
(2008)
4 Assumption Analysis It is a tool that explores the validity of assumptions as they apply to the project. It identifies risks to the
PMBOK (2013) & project from inaccuracy, inconsistency, or incompleteness of assumptions.
Mubin and Mubin
(2008)
5 Diagramming PMBOK (2013) & Mubin and Mubin (2008)
- Cause and effect These are also known as Ishikawa or fishbone diagrams, and are useful for identifying causes of risks.
diagram
-System or process flow These show how various elements of a system interrelate and the mechanism of causation.
chart
-Influence diagram These are graphical representations of situations showing causal influences, time ordering of events, and
other relationships among variables and outcomes.
6 SWOT analysis This technique examines the project from each of the strengths, weaknesses, opportunities, and threats
(SWOT) perspectives to increase the breadth of identified risks by including internally generated risks.
7 Expert Judgment Risks may be identified directly by experts with relevant experience with similar projects or business
areas. The experts’ bias should be taken into account in this process.
adapted from Mubin and Mubin (2008) and PMBOK (2013).

42
2.6.2.3 OUTPUT OF IDENTIFY RISKS PROCESS
According to PMBOK (2013) the primary output from Identify Risks is the initial entry into
the risk register. The risk register is a document in which the results of risk analysis and risk
response planning are recorded. This includes a properly structured risk description and the
nominated risk owner for each risk, and may also include information on the causes and
effects of the risk, trigger condition and preliminary response PMI (2009). List of identified
risks should be recorded and used to support future risk identification for this and other
projects. List of potential responses to a risk may sometimes be identified during the Identify
Risks process. These responses, if identified in this process, should be used as inputs to the
Plan Risk Responses process PMBOK (2013).

2.6.3 PERFORM QUALITATIVE RISK ANALYSIS

It is the process of prioritizing risks for further analysis or action by assessing and combining
their probability of occurrence and impact. The key benefit of this process is that it enables
project managers to reduce the level of uncertainty and to focus on high-priority risks
PMBOK (2013).It assesses the impact and likelihood of the identified risks and develops
prioritized lists of these risks for further analysis or direct mitigation. The project team
assesses each identified risk for its probability of occurrence and its impact on project
objectives. Project teams may draw out (extract) assistance from subject matter experts or
functional units to assess the risks in their respective fields WSDOT(2014).
According to Smith et al.(2006) a typical qualitative risk assessment usually includes the
following issues: a brief description of the risk; the stages of the project when it may occur;
the elements of the project that could be affected; the factors that influence it to occur; the
relationship with other risks; the likelihood of it occurring; how it could affect the project.
This analysis can be used by project teams: as an initial screening or review of project risks;
when a quick assessment is desired; as the preferred approach for some simpler and smaller
projects where robust and/or lengthy quantitative analysis is not necessary
WSDOT(2014).These relatively simple techniques apply when quick assessment is required
in small and medium size projects. Also, this method is often used in case of inadequate,
limited or unavailable numerical data as well as limited resources of time and money Mhetre
et al. (2016).
Moreover, it is a rapid and cost effective means of establishing priorities for plan risk
responses and lays the foundation for Perform Quantitative Risk Analysis, if required. The
43
perform qualitative risk analysis process is performed regularly throughout the project life
cycle, as defined in the project’s risk management plan PMBOK (2013).
2.6.3.1 INPUTS OF QUALITATIVE ANALYSES
The following Table describes the inputs of qualitative analyses.
Table 2.9 inputs of qualitative analyses

Nº Inputs Scope
used in the perform qualitative risk analysis process include
1 Risk management roles and responsibilities for conducting risk management,
plan budgets, schedule activities for risk management, risk
categories, definitions of probability and impact, the
probability and impact matrix, and revised stakeholders’
risk tolerances.
projects of a common or recurrent type tend to have more
2 Scope base line well understood risks. Projects using state of the art or first
of its kind technology, and highly complex projects, tend to
have more uncertainty. This can be evaluated by examining
the scope baseline.
3 Risk register contains the information that will be used to assess and
prioritize risks.
4 Enterprise may provide insight and context to the risk assessment, such
environmental factor as:
-industry studies of similar projects by risk specialists, and
-risk databases that may be available from industry or
proprietary sources.
5 Organizational that can influence the qualitative risk analysis process
process asset include information on prior, similar completed projects.
adapted from PMBOK (2013).

44
2.6.3.2 TOOLS AND TECHNIQUES OF QUALITATIVE RISK ANALYSES
For this analysis the tools and techniques are:
Risk probability and impact assessment method; according to PMBOK (2013) and
Mhetre et al. (2016) by applying this method the likelihood of a specific risk to occur
is evaluated. Furthermore, risk impact on a project’s objectives; such as schedule,
cost, quality, or performance, is assessed regarding its positive effects for
opportunities, as well as negative effects which result from threats. For the purpose of
this assessment, probability and impact should be defined and tailored to a particular
project. This means that clear definitions of scale should be drawn up and its scope
depends on the project's nature, criteria and objectives.
Probability and impact risk rating matrix: Probability and impact, which were
assessed in the previous step, are used as a basis for quantitative analysis. Evaluation
of each risk’s importance and priority for attention is typically conducted using a
look-up table or a probability and impact matrix. Such a matrix specifies
combinations of probability and impact that lead to rating the risks as low, moderate,
or high priority. Descriptive terms or numeric values can be used depending on
organizational preference. Each risk is rated on its probability of occurrence and
impact on an objective if it does occur. The organization should determine which
combinations of probability and impact result in a classification of high risk, moderate
risk, and low risk. The range of priority score, the rating and color are assigned to
indicate the importance of each risk. Threats with high impact and likelihood are
identified as high-risk and may require immediate response, while low priority score
threats can be monitored with action being taken only if, or when, needed PMBOK
(2013) and Mhetre et al. (2016).
The Figure 2.4 by Mahendra et al.(2013) explains the above definitions. There are 4
categories defined in this diagram. Category 1 - PI (Probability and impact of risk)
factor 9, which requires maximum attention Category 2 - PI Factor 6, which requires a
good amount of attention Category 3 - PI Factor 3 and 4, which requires
comparatively less attention to be paid Category 4 - PI Factors of 1 and 2, requires
less attention to be paid.

45
 PI=6 PI=9 High (3)
PI=3
Category 3 Category 2 Category 1
Impact of Risk

PI=2 PI=4 PI=6 Medium (2)

Category 4 Category 3 Category 2

PI=1 PI=2 PI=3 Low (1)

Category 4 Category 4 Category 3

Low (1) Medium (2) High (3)

Probability of Risk
adapted from Mahendra et al. (2013).
Figure 2.4 probability and impact matrix

Risk data quality assessment is a technique to evaluate the degree to which the data
about risks is useful for risk management. It involves examining the degree to which
the risk is understood and the accuracy, quality, reliability, and integrity of the data
about the risk PMBOK (2013). In addition the book explains that the use of low-
quality risk data may lead to a qualitative risk analysis of little use to the project. If
data quality is unacceptable, it may be necessary to gather better data. Often, the
collection of information about risks is difficult, and consumes more time and
resources than originally planned.
Risk categorization is a way of systematizing project threats. Risk to the project can
be categorized by their sources, the area of project affected, project phase and
common root causes. In order to identify areas of the project that are most exposed to
those risks we can use risk break down structure (RBS) or work break down structure
(WBS); and their role is to develop effective risk response. This technique helps
determine work packages, activities, project phases or even roles in the project, which
can lead to the development of effective risk responses PMBOK(2013) and Mhetre et
al.(2016).

46
 Risk Urgency Assessment risks requiring near-term responses may be considered
more urgent to address. Indicators of priority may include probability of detecting the
risk, time to affect a risk response, symptoms and warning signs, and the risk rating.
The role of risk urgency assessment is to prioritize risks according to how quick
response they require PMBOK(2013) and Mhetre et al.(2016).
Expert judgment is required to assess the probability and impact of each risk to
determine its location in the matrix. Experts generally are those having experience
with similar, recent projects. Gathering expert judgment is often accomplished with
the use of risk facilitation workshops or interviews. The experts’ bias should be taken
into account in this process PMBOK(2013).
2.6.3.3 OUTPUTS OF QUALITATIVE RISK ANALYSES
The outputs for this analysis is project documents updates; PMBOK (2013) includes.
Risk register updates:-As new information becomes available through the
qualitative risk assessment, the risk register is updated. Updates to the risk register
may include assessments of probability and impacts for each risk, risk ranking or
scores, risk urgency information or risk categorization, and a watch list for low
probability risks or risks requiring further analysis.
Assumptions log updates:-As new information becomes available through the
qualitative risk assessment, assumptions could change. The assumptions log needs to
be revisited to accommodate this new information. Assumptions may be incorporated
into the project scope statement or in a separate assumptions log.
Prioritized list:-Listing of risks in priority order or in priority groups like high,
moderate; and low PMI (2009).

2.6.4 PERFORM QUANTITATIVE RISK ANALYSIS

It is the process of numerically analyzing the effect of identified risks on overall project
objectives. The key benefit of this process is that it produces quantitative risk information to
support decision making in order to reduce project uncertainty PMBOK (2013). According to
Smith et al.(2006) the probability of a risk arising is a key factor in the decision making
process. Possible consequences of risk occurring are defined and quantified in terms of:
increased cost that is additional cost above the estimate of the final cost of the
project;

47
 increased time that is additional time beyond the completion date of the project
through delays in construction;
reduced quality and performance that is the extent to which the project would fail
to meet the user performance based on quality, standards and specification.
These may be analyzed using sensitivity and probability analysis.
Perform Quantitative Risk Analysis generally follows the Perform Qualitative Risk Analysis
process. In some cases, it may not be possible to execute the Perform Quantitative Risk
Analysis process due to lack of sufficient data to develop appropriate models. The project
manager should exercise expert judgment to determine the need for and the viability of
quantitative risk analysis. The availability of time and budget, and the need for qualitative or
quantitative statements about risk and impacts, will determine which method(s) to use on any
particular project PMBOK (2013).Quantitative Risk Analysis numerically estimates the
probability that a project will meet its cost and time objectives. Quantitative analysis is based
on a simultaneous evaluation of the impacts of all identified and quantified risks WSDOT
(2014).
2.6.4.1 INPUTS FOR QUANTITATIVE RISK ANALYSIS
The inputs for quantitative risk analysis are indicated in the following Table:
Table 2.10 Quantitative risk analysis input

Nº Inputs Scope
1 Risk Management As describe previously in RMP outputs provides
Plan guidelines, methods, and tools to be used in quantitative risk
analysis.
2 Cost Management The cost management plan provides guidelines on
Plan establishing and managing risk reserves.
3 Schedule The schedule management plan provides guidelines on
Management Plan establishing and managing risk reserves.
4 Risk Register As describe previously in identify risk outputs The risk
register is used as a reference point for performing
quantitative risk analysis.

48
5 Enterprise may provide insight and context to the risk analysis, such
Environmental as:
Factors • Industry studies of similar projects by risk specialists, and
• Risk databases that may be available from industry or
proprietary sources.
6 Organizational The organizational process assets that can influence the
Process Assets Perform Quantitative Risk Analysis process include
information from prior, similar completed projects.
adapted PMBOK; (2013).

2.6.4.2 TOOLS AND TECHNIQUES FOR QUANTITATIVE RISK ANALYSIS

According to WSDOT (2014)in order to fully understand our projects, we must determine
what we know and what we do not know about a project. Just as important is to devote some
energy and resources to assess what is not known and/or is uncertain about a project. One
tool for accomplishing this is intentional, thoughtful, and deliberate project risk management,
as part of an overall Project Management Plan. The tools and techniques of quantitative risk
analysis are presented in the following Table:
Table 2.11 Tools and Techniques of quantitative analysis
No Tools and Techniques Scope
1 Data gathering and representation techniques
-draw on experience and historical data to quantify the
1.1 Interviewing/
probability and impact of risks on project objectives. The
surveys
information needed depends upon the type of probability
(questionnaires)
distributions that will be used.
- Can be formal or informal settings, such as smaller group
meetings or larger formal workshops.
which are used extensively in modeling and simulation,
1.2 Probability
represent the uncertainty in values such as durations of
distributions (beta or
schedule activities and costs of project components. Discrete
Triangulation
distributions can be used to represent uncertain events, such
distribution)
as the outcome of a test or a possible scenario in a decision
tree.

49
2 Quantitative risk analysis and modeling techniques
helps to determine which risks have the most potential impact
2.1 Sensitivity analysis
on the project. It helps to understand how the variations in

( the tornado project’s objectives correlate with variations in different

diagram) uncertainties. Conversely, it examines the extent to which the
uncertainty of each project element affects the objective being
studied when all other uncertain elements are held at their
baseline values.
is a statistical concept that calculates the average outcome
2.2 Expected monetary
when the future includes scenarios that may or may not
value analysis (a
happen (i.e., analysis under uncertainty). The EMV of
decision tree analysis)
opportunities are generally expressed as positive values, while
those of threats are expressed as negative values.
uses a model that translates the specified detailed
2.3 Modeling and
uncertainties of the project into their potential impact on
simulation (Monte
project objectives. In a simulation, the project model is
Carlo simulation)
computed many times (iterated), with the input values (e.g.,
cost estimates or activity durations) chosen at random for
each iteration from the probability distributions of these
variables. It uses three point estimates like most likely, worst
case and best case duration for each task in time management.
-is required to identify potential cost and schedule impacts, to
3 Expert Judgment
evaluate probability, and to define inputs such as probability
(ideally using experts
distributions into the tools.
with relevant, recent
- also comes into play in the interpretation of the data. Experts
experience)
should be able to identify the weaknesses of the tools as well
as their strengths. Experts may determine when a specific tool
may or may not be more appropriate given the organization’s
capabilities and culture.
adapted from PMBOK (2013), WSDOT (2014) , Mahendra et al.(2013) and Mheter et al.(2016).

50
2.6.4.3 OUT PUTS OF QUANTITATIVE RISK ANALYSIS
The out puts of this analysis are risk register and informal work shop meeting: Paul (2015),
WSDOT (2014) and PMBOK(2013).
Risk register
The risk register begins during risk identification and is further developed during analysis.
The risk register is a key component of the Project Management Plan WSDOT (2014). It is
further updated to include a quantitative risk report detailing contingency approaches, out
puts, and recommendations Paul (2015). Updates include the following:
Prioritized list of quantified risks: Those risks that have the most significant impact
(threats or opportunities) to project objectives WSDOT (2014) and PMBOK (2013).
These include the risks that may have the greatest effect on cost contingency and
those that are most likely to influence the critical path PMBOK (2013). These risks
may be evaluated through tornado diagrams, expected values, decision trees.
Probabilistic analysis of the project: According to WSDOT(2014) and PMBOK
(2013)estimates are made of potential project schedule and cost outcomes listing the
possible completion dates and costs with their associated confidence levels. This
output, often expressed as a cumulative frequency distribution, is used with
stakeholder risk tolerances to permit quantification of the cost and time contingency
reserves. Such contingency reserves are needed to bring the risk of overrunning stated
project objectives to a level acceptable to the organization PMBOK (2013).
Probability of achieving cost and time objectives. With the risks facing the project,
the probability of achieving project objectives under the current plan can be estimated
using quantitative risk analysis results PMBOK(2013).
Trends in quantitative risk analysis results. As the analysis is repeated, a trend may
become apparent that leads to conclusions affecting risk responses. Organizational
historical information on project schedule, cost, quality, and performance should
reflect new insights gained through the Perform Quantitative Risk Analysis process.
Such history may take the form of a quantitative risk analysis report. This report may
be separate from, or linked to, the risk register WSDOT (2014) and PMBOK (2013).
INFORMAL WORK SHOP MEETING
According to WSDOT(2014) for smaller projects, it may be sufficient to have an informal
workshop composed of the project team and/or key project team members and other

51
participants (such as specialty groups involved with critical items). WSDOT further states
that risk management is ongoing and iterative; periodically, workshop members can regroup
to evaluate the project and associated uncertainty and risks. Workshops typically occur for a
project every 12 to 24 months or at key project milestones.

2.6.5 PLAN RISK RESPONSES

Once risks have been identified and their significance has been assessed, the next phase of the
typical risk process seeks to formulate realistic and effective responses. Responses must be
appropriate, affordable, and achievable, taking the significance of each risk into account
Hillson (2004).
According to PMI (2009) and PMBOK (2013);it is the process of developing options and
actions to enhance opportunities and to reduce threats to project objectives. The key benefit
of this process is that it addresses the risks by their priority, inserting resources and activities
into the budget, schedule and project management plan as needed.
This process follows the perform quantitative risk analysis process (if used). Each risk
response requires an understanding of the mechanism by which it will address the risk. Risk
responses should be appropriate for the significance of the risk, cost-effective in meeting the
challenge, realistic within the project context, agreed upon by all parties involved, and owned
by a responsible person. Selecting the optimum risk response from several options is often
required PMBOK (2013).The project manager should develop risk response strategies for
individual risks, and project level risks. The affected stakeholders should be involved in
determining the strategies. Once the strategies have been selected, they need to be agreed up
on by the entity (individual) that approves those strategies PMI (2009).
2.6.5.1 RISK RESPONSE INPUTS
As stated on PMBOK (2013) the main input is the updated risk register where are listed the
all known risks with information about them. Other inputs are the further information about
the project, the company and the external conditions. Accordingly, risk response inputs are
shown in the following Table:
Table 2.12 Risk response input

No Inputs Scope
include roles and responsibilities, risk analysis definitions,
1 Risk management
timing for reviews (and for eliminating risks from review),

52
 plan and risk thresholds for low, moderate, and high risks. Risk
thresholds help identify those risks for which specific
responses are needed.
refers to identified risks, root causes of risks, lists of potential
2 Risk register
responses, risk owners, symptoms and warning signs, the
relative rating or priority list of project risks, risks requiring
responses in the near term, risks for additional analysis and
response, trends in qualitative analysis results, and a watch
list, which is a list of low priority risks within the risk
register.

adapted from PMBOK (2013).

2.6.5.2 RISK RESPONSE TOOLS AND TECHNIQUES
According to WSDOT (2014) following identification and analysis of project risks, Project
Managers and project teams must act. Accountability demands a response to identified
project risks. Focus should be directed toward risks of most significance. Effective project
risk management can shift the odds (chances/probability) in favor of project success. Kerzner
(2009) and WSDOT (2014) described actions in response to risks in to three which deal with
treat and opportunity and one which deals with both as shown in the following Table.
Table 2.13 Summary of response options for risks (treaties) and opportunities

Type of Use for Description

Response Treat or
Opportunity
Avoidance Treat Eliminate risk by accepting another alternative, changing the
design, or changing a requirement. Can affect the probability
and/or impact.
Mitigation Treat Reduce probability and/or impact through active measures.
(control)
Transfer Treat Risk Reduce probability and/or impact by transferring
ownership of all or part of the risk to another party, or by

53
 redesign across hardware/software or other interfaces, etc.
Exploit Opportunity Take advantage of opportunities.
Share Opportunity Share with another party who can increase the probability
and/or impact of opportunities.
Enhance Opportunity Increase probability and/or impact of opportunity.
Acceptance Treat and Adopt a wait-and-see attitude and take action when triggers
Opportunity are met. Budget, schedule, and other resources must be held
in reserve in case the risk occurs or opportunity is selected.
adapted from Kerzner (2009) and WSDOT(2014).
A strategic approach to risk response planning is adopted in many risk management
processes, with a set of high-level strategies identified. The aim is to select the most
appropriate strategy for each risk, depending on its nature, severity, and manageability, and
then to design specific actions to implement the chosen strategy Hillison (2004).
Accordingly, as stated in PMBOK (2013) typical response strategies available during the risk
response planning phase include: strategies for negative risks or treats, strategies for positive
risks or opportunities, contingent response strategies and expert judgment.
Strategies for negative risks or treats
Three strategies, which typically deal with threats or risks that may have negative impacts on
project objectives if they occur are: avoid, transfer, and mitigate. The fourth strategy, accept,
can be used for negative risks or threats as well as positive risks or opportunities. Each of
these risk response strategies have varied and unique influence on the risk condition. These
strategies should be chosen to match the risk’s probability and impact on the project’s overall
objectives PMBOK (2013).
AVOID (threats) action taken to ensure the probability or impact of a threat is
eliminated WSDOT (2014). Avoidance actions include: changing the project scope to
eliminate a threat; clarifying requirements, obtaining information, improving
communication, or acquiring expertise PMBOK (2013), WSDOT (2014) and Paul
(2015).The project manager says, “I will not accept this option because of the
potentially unfavorable results. I will either change the design to preclude (prevent)
the issue or requirements that lead to the issue.” Kerzner (2009).
According to Hillson (2004) the avoid response seeks to eliminate the treat, aims to
reduce probability of occurrence to zero and remove uncertainty. There are two types
54
of action: The first one removing the uncertainty over whether or not it might be
achieved by ensuring that the potential opportunity is definitely locked into the
project, rather than leaving it to chance or the second involve doing the project in a
different way to allow the opportunity to be achieved while still meeting the project
objectives.
TRANSFER (threats) action to allocate ownership for more effective management
of a threat WSDOT (2014). Transferring a threat does not eliminate it the threat still
exists; however, it is owned and managed by another party. Transferring risk can be
an effective way to deal with financial risk exposure. Transferring project risk
involves payment of a risk premium to the party taking the risk; for example,
insurance, performance bonds, or warranties. Contracts may be used to transfer
specified risks to another party PMBOK (2013), WSDOT (2014) and Paul (2015).The
project manager says, “I will share this risk with others through insurance or a
warranty or transfer the entire risk to them. I may also consider partitioning the risk
across hardware and/or software interfaces or using other approaches that share the
risk.”Kerzner (2009).
Transferring risk involves finding another party who is willing to take responsibility
for its management, and who will bear the liability of the risk should it occur. The aim
is to ensure that the risk is owned and managed by the party best able to deal with it
effectively. Risk transfer usually involves payment of a premium, and the cost-
effectiveness of this must be considered when deciding whether to adopt a transfer
strategy Hillson (2004).
MITIGATE – or reduce (threats) action taken to reduce the probability and/or
impact of a threat WSDOT (2014). Risk mitigation implies a reduction in the
probability and/or impact of an adverse risk event to an acceptable threshold. Taking
early action is often more effective to repair than trying to repair the damage after the
risk has occurred. Examples of mitigation strategies include: adopting less complex
processes, conducting more tests and/or field investigations, developing a prototype.
Measures to address impacts include: targeting linkages that determine the severity,
such as designing redundancy into a subsystem, may reduce the impact from a failure
of the original component PMBOK (2013), WSDOT (2014) and Paul (2015).The
project manager says, “I will take the necessary measures required to control this risk

55
 by continuously reevaluating it and developing contingency plans or fall-back
positions. I will do what is expected.”Kerzner (2009).
Mitigation or reduction responses aim to modify the size of the risk, by tackling its
probability of occurrence and/or its severity of impact. Making a risk less likely or
less severe reduces the overall risk exposure of the project. Preventive actions can be
designed to reduce the likelihood of a risk occurring, or steps can be taken in advance
to protect the project against the effect of a risk should it occur Hillson (2004).
ACCEPT Action taken to document acceptance of the risk WSDOT (2014). Some
threats will remain after avoidance, transfer, or mitigation responses have been taken,
and others will be identified that cannot be tackled proactively within the scope of the
project or the capability of the organization. These are known as residual risks.
Accepting a risk involves either actively making plans for actions to be taken if the
risk occurs (i.e., contingency), or passively doing nothing where that is considered
appropriate or where no other cost-effective or feasible option exists Hillson
(2004).The project manager says, “I know the risk exists and am aware of the possible
consequences. I am willing to wait and see what happens. I accept the risk should it
occur.”Kerzner (2009).
Ultimately, it is not possible to eliminate all threats or take advantage of all
opportunities PMBOK (2013), WSDOT (2014) and Paul (2015). In some cases, in
some industries, a contingency reserve, including amount of time ,money, or
resources are established to deal with the aggregate residual risk that has been
accepted; we can document them and at least provide awareness that these exist and
have been identified; Hillson (2004) term this “passive acceptance.” In some cases, in
some industries, a contingency reserve, including amount of time ,money, or
resources are established to deal with the aggregate residual risk that has been
accepted; Hillson (2004) term this “active acceptance.”
Strategies for Positive Risks or Opportunities
Three of the four responses are suggested to deal with risks with potentially positive impacts
on project objectives. The fourth strategy, accept, can be used for negative risks or threats as
well as positive risks or opportunities. These strategies, described below, are to exploit, share,
enhance, and accept PMBOK (2013).

56
EXPLOIT action taken to ensure the benefit of an opportunity is realized WSDOT
(2014). The opposite of avoid, this strategy is to ensure a positive impact, or realize an
opportunity. Take action to make the opportunity happen; such response actions
include: assigning more talented resources to a project to reduce time to completion
and/or providing better quality than originally planned PMBOK (2013), WSDOT
(2014) and Paul (2015).The project manager says, “This is an opportunity. How can
we make the most of it? Will assigning more talented resources allow us to get to the
marketplace quicker?”Kerzner (2009).
The aim of this risk response strategy is to eliminate the uncertainty associated with a
particular upside risk. An opportunity is defined as a risk event that, if it occurs, will
have a positive effect on achievement of project objectives. The goal of the exploit
strategy for opportunities is to raise the probability to 100% the uncertainty is
removed. Exploit is the most aggressive of the response strategies and should be
reserved for those “golden opportunities” with high probability and impacts Hillson
(2014).
ENHANCE (Action to enhance opportunity) this response modifies the “size” of an
opportunity by increasing probability and/or impact. Seeking to facilitate or
strengthen the cause of the opportunity, and proactively targeting and reinforcing its
trigger conditions. Impact drivers can also be targeted, seeking to increase the
project’s susceptibility (weakness) to the opportunity PMBOK (2013), WSDOT
(2014) and Paul (2015). The project manager says, “This is an opportunity. What can
we do to increase the probability of occurrence of the opportunity, such as by using
more aggressive advertising?”Kerzner (2009). This response aims to modify the
“size” of the risk to make it more acceptable. Opportunities can be enhanced by
increasing probability and/or impact, by identifying and maximizing key risk drivers.
If the probability can be increased to 100%, this is effectively an exploit response
Hillson (2014).
SHARE (opportunities) action to share with a third party; enhance/ exploit
opportunity WSDOT (2014). Sharing a positive risk involves allocating ownership to
a third party who is best able to capture the opportunity for the benefit of the project.
Examples of sharing actions include forming risk-sharing partnerships, teams, or joint
ventures, which can be established with the express purpose of managing

57
 opportunities PMBOK (2013), WSDOT (2014) and Paul (2015). The project manager
says, “This is an opportunity, but we cannot maximize the benefits alone. We should
consider sharing the opportunity with a partner.”Kerzner (2009).
Allocating risk ownership for an opportunity to another party who is best able to
handle it, in terms of maximizing probability of occurrence and increasing potential
benefits if it does occur. Transferring threats and sharing opportunities are similar in
that a third party is used; those to whom threats are transferred take on the liability
and those to whom opportunities are allocated should also be allowed to share in the
potential benefits Hillson (2004).
ACCEPT (opportunities) action taken to document acceptance of the risk WSDOT
(2014). Accepting an opportunity is being willing to take advantage of the opportunity
if it arises, but not actively pursuing it PMBOK (2013). The project manager says, “I
know an opportunity exists and am aware of the possible benefits. I am willing to wait
and see what happens. I accept the opportunity should it occur.”Kerzner (2009).
Contingent Response strategies
According to PMBOK (2013) some responses are designed for use only if certain events
occur. For some risks, it is appropriate for the project team to make a response plan that will
only be executed under certain predefined conditions, if it is believed that there will be
sufficient warning to implement the plan. This book further states that events that trigger the
contingency response, such as missing intermediate milestones or gaining higher priority with
a supplier, should be defined and tracked. Risk responses identified using this technique are
often called contingency plans or fallback plans and include identified triggering events that
set the plans in effect.
Expert Judgment
Expert judgment is input from knowledgeable parties pertaining to the actions to be taken on
a specific and defined risk. Expertise may be provided by any group or person with
specialized education, knowledge, skill, experience, or training in establishing risk responses
PMBOK (2013).

58
2.6.5.3 RESPONSE PLAN OUTPUTS
Based on PMBOK (2013) the response plan outputs are project plan updates and Project
documents updates.
Project plan updates: Elements of the project management plan that may be up dated as a
result of carrying out this process include, but are not limited to:
Schedule management plan: This may include changes in tolerance or behavior
related to resource loading and leveling, as well as updates to the schedule strategy.
Cost management plan: This may include changes in tolerance or behavior related to
cost accounting, tracking, and reports, as well as updates to the budget strategy and
how contingency reserves are consumed.
Quality management plan: This may include changes in tolerance or behavior
related to requirements, quality assurance, or quality control, as well as updates to the
requirements documentation.
Procurement management plan: may be updated to reflect changes in strategy, such
as alterations in the make-or-buy decision or contract type(s) driven by the risk
responses.
Human resource management plan: This may include changes in tolerance or
behavior related to staff allocation, as well as updates to the resource loading.
Scope baseline: Because of new, modified or omitted work generated by the risk
responses, the scope baseline may be updated to reflect those changes.
Schedule baseline: Because of new work (or omitted work) generated by the risk
responses, the schedule baseline may be updated to reflect those changes.
Cost baseline: Because of new work (or omitted work) generated by the risk
responses, the cost baseline may be updated to reflect those changes.
Project Documents Updates: In the Plan Risk Responses process, several project documents
are updated as needed. For example, when appropriate risk responses are chosen and agreed
upon, they are included in the risk register. The risk register should be written to a level of
detail that corresponds with the priority ranking and the planned response. Often, the high
and moderate risks are addressed in detail PMBOK (2013).
According to Hillson (2014) once the responses have been developed, it is important to
select the right owner for each risk response. This is defined as " the party best placed to
manage the risk effectively." Some risks could be to the customer, client, or users. Others

59
may be best placed with suppliers, contractors, or subcontractors who possess specialist
expertise or have responsibility for particular elements of the project. The key consideration
is to determine who can make a difference to the risk. This author further states that when
allocating owners, it is important to build and retain cooperation and consensus, seeking to
avoid contractual power struggle or the placing of blame. The necessary resources should be
provided to enable the response to be implemented, and the project manager should monitor
the status of risk responses regularly, not abdicating responsibility to the response owner.

2.6.6 CONTROL RISKS

According to Office of PMPI (2003) and PMBOK (2013) it is the process of implementing
risk response plans, tracking identified risks, monitoring residual risks, identifying new risks,
and evaluating risk process effectiveness throughout the project. The key benefit of this
process is that it improves efficiency of the risk approach throughout the project life cycle to
continuously optimize risk responses PMBOK (2013).The list of project risks changes as the
project matures, new risks develop, or anticipated risks disappear OPMPI (2003). Similarly,
as we continue through project development, the project risk profile will change. As we
successfully respond to risks and our project knowledge increases, our risk exposure will
diminish WSDOT (2014).According to PMBOK (2013) planned risk responses that are
included in the risk register are executed during the life cycle of the project, but the project
work should be continuously monitored for new, changing, and outdated risks.
Control Risks can involve choosing alternative strategies, executing a contingency or fallback
plan, taking corrective action, and modifying the project management plan. The risk response
owner reports periodically to the project manager on the effectiveness of the plan, any
unanticipated effects, and any correction needed to handle the risk appropriately. Control
Risks also includes updating the organizational process assets, including project lessons
learned databases and risk management templates, for the benefit of future projects PMBOK
(2013).
2.6.6.1 INPUTS OF RISK CONTROL
According to PMBOK (2013)The inputs of risk control are Project Management Plan, Risk
register, work performance data and work performance report. This book further explained
that, The project management plan, which includes the risk management plan, provides
guidance for risk monitoring and controlling. The risk register has key inputs that include
identified risks and risk owners, agreed-upon risk responses, control actions for assessing the
60
effectiveness of response plans, risk responses, specific implementation actions, symptoms
and warning signs of risk, residual and secondary risks, a watch list of low-priority risks, and
the time and cost contingency reserves. The watch list is within the risk register and provides
a list of low-priority risks. Work performance data related to various performance results
possibly impacted by risks includes, but is not limited to: Deliverable status, Schedule
progress, and Costs incurred. Work performance reports take information from
performance measurements and analyze it to provide project work performance information
including variance analysis, earned value data, and forecasting data. These data points could
be impactful in controlling performance related risks.
2.6.6.2 TOOLS AND TECHNIQUES OF RISK CONTROL
As stated in PMBOK (2013), the tools and techniques of monitor and control risk process are
: risk assessment, Risk audit, Variance and trend analysis, Technical performance
measurement, reserve analysis and statues meetings.
Risk reassessment :-The project should be controlled throughout the life cycle; the
reassessment usually identifies new risks, revaluate the current risks and close the
outdated.
Risk audits :- This is a method of examining and documenting the effectiveness of
risk responses in dealing with known risks and their root causes, as well as the
effectiveness of the risk management process.
Variance and trend analysis:-Is a method used for monitoring overall project
performance. variance analysis a controlling process to compare the planned results
to the actual results. For the purposes of controlling risks, trends in the project’s
execution should be reviewed using performance information.
Technical performance measurement:-This method is used to compare technical
accomplishments during project execution to the schedule of technical achievement.
Deviation, such as demonstrating more or less functionality than planned at a
milestone, can help to forecast the degree of success in achieving the project’s scope.
Reserve analysis:-This analysis compares the amount of contingency reserves
remaining to the amount of risk remaining at any time in the project.
Statues meetings:-It is a frequent discussions about risk that have been identified,
their priority, and difficulty of response.

61
2.6.6.3 OUTPUTS OF RISK CONTROL
As stated on PMBOK (2013) the outputs of risk control are updated documents, such as:
Project management plan with approved changes,
Work performance information:- to provide a mechanism to communicate and
support project decision making.
Change requests with recommended corrective or prevention actions.
Project Documents Updates; outcomes of risk reassessments, risk audits, and
periodic risk reviews and actual outcomes of the project’s risks and of the risk
responses.
The organizational process assets include, but are not limited to: templates for the
risk management plan, including the probability and impact matrix and risk register,
risk breakdown structure, and lessons learned from the project risk management
activities.

2.7 RISK CLASSIFICATION

Risk classification is a significant step in the risk management process, as it attempts to
structure the devices risks affecting a construction project. In order to manage risks
effectively, many approaches have been suggested in literature for classifying risk. According
to Chitkara (2003) classified depending upon the nature of environment in to two categories
manageable and non manageable. Cooper et al. (2005) grouped it in to two internal risk,
which fall with the control of the clients, consultants and contractors and external risk, which
include risk elements that are not in the control of key stake holders. Similarly, Eshan et
al.(2010) categorized in to technical, logistical, management related , environmental,
financial. Mhetre et al.(2016) categorized in to technical, construction, physical,
organizational, financial, environmental and socio-political risks.
The Table 2.14 provides different researchers risk classification from different country in
relation with construction industries, project risk, project objectives, building projects and so
on.

62
 Table 2.14 Risk classification compiled by the researcher.

Number of
No Authors Type of risk Risk categorization/ Classification risk factors
identified
1 Ehsan et al., Risk associated with the Natural, Political and social, economic and legal, behaviors 29
(2010) construction industry Technical, Logistical, Management related, Environmental,
Financial, and socio political risks

2 Mhetre (2016) Risk associated with Technical, construction, physical, organizational, financial, >37
construction industry socio-political, and Environmental risks
3 Shuibo Z .et Project risk Under project risks: Natural, Political and social, economic >19
al.(2006) and legal, behaviors
4 Zavadskas et Risk in construction Under External, Project and internal group: political, -
al.(2010) economic, social, weather, Cost, time, quality, technological,
construction, site, project member, resource, document and
information respectively.
5 Mahendra et al. Risk associated with the Technical , construction , physical, organizational, Financial, 37
(2013) construction industry Socio political, and environmental risks
6 Kerzner (2009) Risk on construction projects External-Unpredictable, External-predictable, Internal (non 19

63
 technical), technical and Legal.
7 Augustine et al. Establishing of the Risk Financial, Management, Market, Technical , Legal, 34
(2013) Management Index construction, political, and environmental risks

8 AbdKarim et al. Building construction project Physical, environmental, Design, Logistic, Financial, Legal, >52
(2012) construction, political, Management risks
9 Zou et al. Risk influencing project Client, Designer, contractor, subcontractor/supplier, Out of 85
(2007) objectives(cost, time, quality, government agencies, and external issues risk factors
safety and environment. identified 25.
10 Mubin and Risk associated with pipe line political, socio economical, organizational, investment, 32
Mubin (2008) production technological, security, Natural and climate, and
environmental risks
11 Renuka et al. Risk Sources affecting the -client, design, project execution, construction management,
(2014) Project Success(Non Tendering and resource risks
Engineering and Engineering -country, political, environmental and geological, natural
source) hazard, and statutory compliance risks
Bodicha (2015) Risk categorization in act of God, physical, financial and economical, political and 32
12 cited Al-Bahar, construction projects environmental, design, and construction related risks
1990

64
13 Tsai and Yang Project risk structure natural phenomenon, economics/finance, politics/society, >63
(2010) safety/environment, client, designer, and contractor risks

14 Jayasudha and Major risk in construction Technical, Time, Construction, Design, Legal, Market, 90
Vidivelli (2016) projects Management, Financial, Policy and Political, Environmental,
Social, Safety, and Physical Risks
15 Enshassi et Risk in Building Projects Physical, Environmental, Design, Logistic, Financial, Legal, 44
al.(2008) Construction, Political, and Management Risk.

16 Abd El-Karim Risk factors affecting Environmental, subsurface, site location, labour, equipment, 71
et al.(2015) construction projects based on material, owner, engineering and design, contractor, project
site condition, resource, project manager, financial, political and schedule.
parties, project features

65
All steps in the process should be included to deal with risks, in order to implement the
process of the project Mahandra et al. (2013). It need not be complicated nor require the
collection of vast amounts of data. It is a matter of common sense, analysis, judgment,
intuition, experience, gut feel and a willingness to operate a disciplined approach to one of
the most critical features of any business or project in which risk is generated Flanagan and
Norman (1993).
The riskier the activity is, the costlier will be the consequences in case a wrong decision is
made. Proper evaluation and analysis of risks will help decide justification of costly measures
to reduce the level of risk. It can also help to decide if sharing the risk with an insurance
company is justified. Some risks such as natural disasters are virtually unavoidable and effect
many people. In fact, all choices in life involve risks. Risks cannot be totally avoided but with
proper management these can be minimized Eshan et al.(2010).

2.8 OBJECTIVE OF RISK MANAGEMENT

The main objective of risk management is to reduce uncertainty and thus improve decision
making. The main types of uncertainty include error, imprecision, variability, vagueness,
ambiguity and ignorance Baloi et al.(2003). Based on Goh and Abdul-Rahman (2013)
successful risk management should convert uncertainty to risk and convert risk to
opportunity. The project and organization would hence achieve more gains by maximizing
opportunity, minimizing risk and reducing uncertainty. And thus encourages the project team
to take appropriate measures to minimize: Adverse impacts to project scope, cost, and
schedule and management by crisis OPMPI(2003). Based on Cooper et el.(2005) managing
risk in projects is important to managers, project staff, end users and insurers. Of the benefits,
it is applicable for all scales of projects and procurement activity. It can be applied at all
stages in project cycle, from the earliest assessment of strategy to the supply, operation,
maintenance and disposal of individual items facilities or assets.

2.9 FACTORS LIMITING THE APPLICATION OF RISK MANAGEMENT

TECHNIQUE
Risk management techniques are essentially management techniques used to handle risky
situations. According to Olamiwale (2014) cited Khalafallah and Azhar (2004) identified the
following obstacles to the practical application of risk management in the construction
industry:

66
 Deficiency in the knowledge of risk management techniques.
Highly sophisticated techniques that are available are unwarranted compared with the
size of the project.
Reservations about the relevance of the available techniques to the construction
industry.
Most of the risks surfaced during the process of construction, and are quite
subjective; therefore, they are best handled with experience from past contracts.
Risk analyses of construction projects are rarely demanded by clients.
Unavailability of quality data required poses a loss of confidence in risk management
techniques.

2.10 TYPES OF PROJECT DELIVERY

As mentioned on previous sections 2-4 and 4-5 one of the main objective of any
procurement system/ delivery system is to secure an optimum level of risk transfer between
the client and the contractor. In addition to this it establish the rights, duties, obligations, and
responsibilities of the parties and to allocate risk. There are different type of project delivery
system are mentioned in different literature such as: traditional (separated and cooperative
approach), design-build (integrated and holistic approach), management oriented (packaged)
Love et al. (1998), Rashid et al. (2006), Osipova (2008) and Davis et al. (2008). And
included collaborative (relational) system Rashid et al. (2006), Osipova (2008) and Davis et
al. (2008). However, in this section only the three project delivery methods: DBB, DB, and
construction management (CM) are discussed.
As stated in Jackson (2004) these three project delivery methods differ in five fundamental
ways:
The number of contracts the owner executes;
The relationship and roles of each party to the contract;
The point at which the contractor gets involved in the project;
The ability to overlap design and construction; and
Who warrants the sufficiency of the plans and specifications. Regardless of the
project delivery method chosen, the three primary players the owner, the owner,
the designer (architect and/ or engineer), and the contractor are always involved.

67
2.10.1 DESIGN- BID- BUILD (DBB)
Design-bid-build is commonly referred to as the traditional method and the oldest form of
delivery system. It can be defined as a project delivery strategy in which two separate
organizations (design team and contractor) do carry out all project processes and are
individually responsible directly to the client ( see Figure 2.5 and 2.6) Jackson (2004) and
Ghadamsi and Braimah (2010). This is a common method used and is found to suit clients of
all types, particularly government institutions. Due to the feature of linear progression as
shown in Figure below, this system provides better management for the client, but gives little
considerations to the designing, information communication and construction delivery Tsai
and Yang (2010).

Owner

Contractor Design/
Consultant
Sub
contractors

Suppliers

Figure 2.5 Project organization structure for DBB method.

Design Bid Build No overlap between

design and construction

No Contractor

Figure 2.6 Design bid build linear approach.

According to Davis et al. (2008) the main advantages of using a DBB approach are:
accountability due to a competitive selection;
competitive equity as all tendering contractors bid on the same basis;
design lead and the client is able to have a direct influence which can facilitate a
high level of functionality and improve the quality in the overall design;
price certainty at the award of the contract;
variations (changes) to the contract are relatively easy to arrange and manage; and
a tried and test method of procurement which the market is very familiar with.
And the main disadvantages of using this approach are:
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 can be a timely process to produce the full contract documentation. Tenders
documents from an incomplete design can be produced but can lead to less cost
and time certainty, and may lead to disputes;
overall project duration may be longer than other procurement methods as the
strategy is sequential and construction cannot be commenced prior to the
completion of the design;
and no input into the design or planning of the project by the contractor as they are
not appointed during the design stage.
Davis et al. (2008) further states citing Turner (1990) that this method should be used when:
a program allows sufficient time;
consultant design is warranted;
a client wishes to appoint designers and contractors separately;
price certainty is wanted (required) before the start of construction;
product quality is required; and
a balance of risk is to be placed between the client and constructor.
Ghadamsi and Braimah (2010) the circumstances in which this method is generally
considered appropriate include the following:
The service of a designer has already been procured;
The designer is experienced enough to oversee both the design and construction;
The design is substantially complete by the time the contractor is selected;
Contractor is selected on the basis of price with a general acceptance that the price
may be wrong;
It is important for client to use a contract form with fair and familiar distribution
of risk;
When neither the employer or his advisers raise this as an issue;
Full tender documentation exist to ensure price certainty;
The bill of quantities can be used for valuing variations;
Client desires competitive tendering;
Scope of work is clear and well defined to facilitate detailed design.

2.10.2 DESIGN-BUILD (DB)

It is classified as one of the integrated form of procurement method, whereby the client
provides
69
his/her requirements and needs for the specified project and signed contract with only one
organization namely the contractor. This organization is responsible for the design,
supervision and construction services of the project as shown in Figure 2.7 Jackson (2004)
and Ghadamsi and Braimah (2010). The popularity of DB contracts has increased in recent
years, because a single point of responsibility is attractive to clients Osipova (2008). In
addition to this one of the greatest advantages to this is the possibility for early contractor
involvement (see Figure 2.8). Under this method, all of the team players (the designers, the
contractors, the material suppliers and manufacturers) have an opportunity to be in
continuous communication throughout the project Jackson (2004).

Client

Design/Builder
Contractor

Consultant Sub contractors Suppliers

Figure 2.7 project organization structure for DB procurement method.

Design

Build

Overlapped design and construction

Figure 2.8 Design build integrated approach.

According to Davis et al. (2008) the main advantages of using a DB approach are:
client has to deal with one firm and reduces the need to commit resources and time to
contracting designers and contractors separately;

70
 price certainty is obtained before construction commences as client’s requirements are
specified and changes are not introduced;
use of a guaranteed maximum price with a savings option split can stimulate
innovation and reduce time and cost;
overlap of design and construction activities can reduce project time; and
improved constructability due to contractor’s input into the design.
And the main disadvantages of using this approach are:
difficulties can be experienced by clients in preparing an adequate and sufficiently
comprehensive brief;
client changes to project scope can be expensive;
difficulty in comparing bids since each design will be different, project program will
vary between bidders, and prices for the project will be different for each design;
client is required to commit to a concept design at an early stage and often before the
detailed designs are complete; and
design liability is limited to the standard contracts that are available.
Davis et al. (2008) further states citing Turner (1990) that this method should be used when:
building is functional rather than prestigious;
building is simple rather than complex, is not highly serviced and does not require
technical innovation;
brief for scope design is likely to change;
program can be accelerated by overlapping design and construction activities; and
single organization is required to take responsibility and risk for design and
construction.
Ghadamsi and Braimah (2010) the circumstances in which this method is generally
considered appropriate include the following :
Client not familiar with the construction process;
Project is technically complexity;
There is a low likelihood of variations to the project;
Client desires a single point of responsibility;
The employer desires a quick start to work on site;
Client desires to prioritize either time, quality, price or value for money etc.

71
 Client desires an opportunity for effective direct communication/interaction with
contractors; and
Client desires for an integration of the design and construction process.

2.10.3 CONSTRUCTION MANAGEMENT (CM)

Under this method, construction management services are provided to the owner
independent of the construction work itself (Figure 2.9) Jackson (2004). The management
contractor is selected after a careful selection process and is paid a management fee to
professionally manage, develop a program and coordinate the design and construction
activities, and to facilitate collaboration to improve the project’s constructability Davis et al.
(2008) . As stated by Jackson (2004) there are two options for the owner to consider under
this method. This are Agency CM and at risk CM.
Agency CM as a fee-based service in which the construction manager is responsible
exclusively to the owner and acts in the owner’s best interests at every stage of the
project. In this case, the construction manager offers advice uncolored by any
conflicting interest because he or she does not perform any of the actual construction
work and is not financially at risk for it.
At-risk CM project delivery method as an option that entails a commitment by the
construction manager to deliver the project within a guaranteed maximum price. The
construction manager acts as consultant to the owner in the development and design
phases, but does the work of a general contractor during the construction phase.
The author further states that the former arrangement involves three contracts: one between
the owner and the designer, one between the owner and the contractor, and one between the
owner and the construction manager. The owner hires a designer and a contractor exactly as
described under the design-bid-build scenario. In addition, the owner also contracts with a
third party, a construction management firm that provides construction management
functions but as an independent agent or representative of the owner. In the latter scenario,
there are only two contracts, one between the owner and designer and one between the owner
and the at-risk CM. Although this might seem like a tricky relationship to manage, owners
are comfortable with it because the at-risk CM is also responsible for performing the
construction and carries financial liability for bringing the project in on time and within
budget. By contrast, under the agency CM model, the construction manager is not at risk for
the budget, the schedule, or the performance of the work.
72
 Client

Project
manager(advisor)

Architect Design quantity Construction

consultant surveyor manager

Work package
contractor and
suppliers

Agency CM managerial link

Direct CM contractual link

Figure 2.9 CM management oriented.

A number of advantages have been identified that can be offered by the CM approach Walker
et al. (1999) cited by Davis et al. (2008).This is summarized as follows:
Reduced confrontation between the design teams and the team responsible for
supervising construction;
early involvement of construction management expertise;
overlap of design and construction;
increased competition for construction work on large projects due to work packaging
and splitting the construction activities into more digestible 'large piece';
more even development of documentation;
fewer contract variations;
no need for nominated trade contractors; and
public accountability
In addition to this Davis et al. (2008) included the main advantages of using a CM
approach. These are:

73
 the client deals with only one firm, which enables improved coordination and
collaboration between designers and constructors;
potential for time savings for the overall project as design and construction activities
are overlapped;
improved constructability through constructor input into the design;
roles, risks and responsibilities for all parties are clear; and
flexibility for changes in design.
Further to this the main disadvantages of using this approach are:
price certainty is not achieved until the final works package has been let;
informed and proactive client is required;
poor price certainty;
close time and information control required; and
client must provide a good quality brief to the design team as the design will not be
complete until resources have been committed to the project.

2.11 SUGGESTED METHODOLOGY FOR SYSTEMATICALLY ADDRESSING

RISK ALLOCATION
According to Dutta (2014), one of the major risks faced by construction industry is contract
risk. Since, it is difficult to remove all potential risks in a construction project, thus it is
crucial to allocate risks among parties in the project through a contract. If not, project
performance in terms of cost, quality and time is often affected. Moreover, disputes and
misunderstandings are often the end result between clients and contractors when the
distribution of risk is not well allocated. Therefore, proper risk allocations in construction
contracts can help reduce such impacts and achieve management efficiency. Accordingly,
Groton and Smith (2010) suggested the following examples of risk in the tables below (Table
2.15, 2.16 and 2.17) during the course of negotiating and drafting a construction contract;
indicating to whom they are to be allocated and why, and how they are allocated and
mitigated. In addition based on construction contract risk factors mentioned on Table 2-4 the
researcher presented in the appendix IV by referring FIDIC 1999 and PPPAA 2011common
allocation of risk in building construction contract for the parties having an effect on
building contractors.

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 Table 2.15 Allocating Outside Influence-Type Risks.

Allocating Outside Influence-Type Risks

Risk To whom allocated & why How allocated/mitigated

Governmental Acts Shared—not foreseeable or Include a suspension of work clause

controllable
Adverse Weather Shared—not foreseeable or Include a time extension clause
controllable
Acts of God Shared—not foreseeable or Include a time extension clause
controllable
Cost Escalation Shared—not foreseeable or Provide a contractual formula to pay
controllable escalation on long term contracts

Table 2.16 Allocating Resource and Project Pre-requisite Risks.

Allocating Resource and Project Pre-requisite Risks

Risk To whom allocated & why How allocated/mitigated

Adequacy of Owner—it’s the owner’s Include contract language giving the contractor the right to confirm
Project project availability of funds
Funding

Adequacy of Contractor—can best assess Owner should consider known labor shortage in a particular trade (e.g.,
Labor Force at time of bidding ironworkers) in making decisions on alternate materials; owner should
consider projected surplus/ shortage in determining project performance
time
Permits and Shared—both parties have Owner should identify all requirements to extent possible; contractor
Licenses some has some lead role in compliance
ability to control
Site Access Owner—it’s the owner’s site Owner should identify requirements early and then delineate site
availability/ constraints in bidding documents

75
 Table 2.17 Allocating Performance Related Risks.

Allocating Performance Related Risks

Risk To whom allocated How allocated/mitigated
& why
Inadequate Plans Owner-funds design Retain a qualified design professional;
fund adequate design
Underestimation of Costs Contractor - Use a competent estimating staff
controllable
Owner-furnished Material Owner-elects to use Preplan for purchases, expediting;
and Equipment this method include contractual remedies for quality
or delay problems
Contractor-furnished Contractor-typical Preplan for purchases, expediting; use
Material and Equipment scenario remedies from vendors
Means and Methods of Contractor-area of Use/follow “standard” language
Construction expertise
Delay in Presenting Claiming party- Use/follow/enforce notice provisions
Problems controls ability to
give notice
Delay in Addressing and Party receiving Delegate decision-making authority;
Solving Problems claim -has obligation Empowerment
to respond
Subsurface Conditions Owner-owns site Use a differing site conditions
clause; eliminate disclaimers on
geotechnical data
Worker and Site Safety Contractor-controls Use clear contract language assigning
means/methods responsibility

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 3. RESEARCH DESIGN AND METHODOLOGY

3.1 INTRODUCTION
This chapter addresses the research design and methodology adapted for capturing the data
needed to achieve the aim and objectives of the research, conduct the analysis and draw the
conclusions and recommendations. It is organized in sections covering research design,
research approach, research strategies/ design (methodology), research method choice, time
horizon, sampling, design of questionnaire, reliability of questionnaire, and data collection
and analysis techniques.

3.2 RESEARCH DESIGN

Research, from a broader perspective relates to set of activities undertaken with the purpose
of providing solution(s) to a problem Sanda et al.(2016). A research design is the logic that
links the data to be collected and the conclusions to be drawn to the initial questions of a
study Malalgoda et al. (2013). Further to this, a research design focuses on the end-product
and all the steps in the process to achieve that outcome. In this sense, a research design is
viewed as the functional plan in which certain research methods and procedures are linked
together to acquire a reliable and valid body of data for empirically grounded analyses,
conclusions and theory formulation Vosloo (2014). The research design thus provides the
researcher with a clear research framework; it guides the methods, decisions and sets the
basis for interpretation.
For the purposes of this study, as this research focuses on the building contractors risk source
associated with the contracts. Initially it consists of literature survey which was carried out to
provide the back ground information of risk in construction contract. After that the
questionnaire was designed and developed based on the objectives of the study determined
during the early stage of the research and the information found in the literature reviewed.
Then distributed and collected for analysis from the randomly selected respondents comprise
of contractors of Class one to three. Finally, conclusion and recommendation is made from
the results of the analysis.

3.3 RESEARCH APPROACH

According to Hakansson (2013) research approaches are used for drawing conclusions and
establishing what is true or false. The most common approaches are deductive and inductive
but there is also a mixed approach, called abductive Hakansson (2013) and Saunders et
77
al.(2015). According to Saunders et al.(2009) the deductive approach, in which someone
develop a theory and hypothesis (or hypotheses) and design a research strategy to test the
hypothesis. This author more described that deduction owes much to what we would think of
as scientific research. It involves the development of a theory that is subjected to a rigorous
test. In addition this approach derives conclusions from known premises (ground) Hakansson
(2013). Similarly Saunders et al.(2009) stated that in the inductive approach, in which
someone would collect data and develop theory as a result of his/her data analysis. The
purpose of this approach is to get a feel of what was going on, so as to understand better the
nature of the problem. In addition, this approach establishes a general proposition from
particular facts Hakansson (2013). The abductive approach uses both deductive and inductive
approaches to establish conclusions Hakansson (2013) and Saunders et al.(2015). In this
method, the hypothesis, that best explain the relevant evidence, is chosen. The approach starts
with an incomplete set of data or observations and uses preconditions to infer or explain
conclusions Hakansson (2013). According to Saunders et al. (2015) data are used to explore
a phenomenon, identify themes and explain patterns, to generate a new or modify an existing
theory which is subsequently tested, often through additional data collection.
In the case of this research, abductive approach is better. Hence, the research carried out is
cross sectional method, quantitative data is collected, and the data analysis is done based on
data collection through survey method using questionnaire.

3.4 RESEARCH STRATEGIES / DESIGNS (METHODOLOGIES)

The research strategies and designs are the guidelines, or the methodologies, for carrying out
the research. The guidelines (methodologies) for the research, which includes organizing,
planning, designing and conducting research Hakansson (2013).
Saunders et al.(2009) describes research strategy as a strategy which will allow you to
answer your particular research question(s) and meet your objectives. In addition to this the
authors emphasize that your choice of research strategy will be guided by your research
question(s) and objectives, the extent of existing knowledge, the amount of time and other
resources you have available, as well as your own philosophical underpinnings. In line with
this authors grouped the research strategy in to:
survey;
case study;
experiment;
78
 action research;
grounded theory;
ethnography;
archival research.
According to Creswell (2009) cited Babbie (1990) survey provides a quantitative or numeric
description of trends, attitudes, or opinions of a population by studying a sample of that
population. In addition, the survey strategy allows someone to collect quantitative data
which he/she can analyze quantitatively using descriptive and inferential (deductive)
statistics Saunders et al.(2009). Furthermore, it includes cross sectional and longitudinal
studies using questionnaires or structured interviews for data collection, with the intent of
generalizing from a sample to a population Creswell (2009) cited Babbie (1990). As state by
Hakansson (2013) it is a descriptive research method, which examines the frequency and
relationships between variables and describes phenomenon that are not directly observed.
In this regard, this research apply survey from above mentioned strategies. Since, this
strategy enables the researcher to organize the questions and receive replies without actually
having to talk to every respondent. As a method of data collection, it is a very flexible tool,
that has the advantages of having a structured format, is easy and convenient for respondents,
and is cheap and quick to administer to a large number of cases covering large geographical
areas. In addition this strategy is usually associated with deductive approach. It is a popular
and common strategy in business and management research and is most frequently used to
answer who, what, where, how much and how many questions Saunders et al. (2009).

3.5 RESEARCH METHODS CHOICE

According to Hakansson (2013) the basic categories of research methods are, commonly,
quantitative research method and qualitative research method. These two methods apply on
projects that are either numerical or non-numerical. One of the research methods must be
selected, which decides whether the project is of quantitative character or qualitative
character. This is the first choice of scientific standpoint and will affect the choice of research
methods, strategies, data collection and analysis. As stated by Saunders et al.(2009)
quantitative is predominantly used as a synonym for any data collection technique (such as a
questionnaire) or data analysis procedure (such as graphs or statistics) that generates or uses
numerical data. In contrast, qualitative is used predominantly as a synonym for any data
collection technique (such as an interview) or data analysis procedure (such as categorizing
79
data) that generates or use non-numerical data. Qualitative therefore can refer to data other
than words, such as pictures and video clips. Table below provides difference between the
two methods.

Table 3.1 Distinctions between quantitative and qualitative data

Qualitative data
Quantitative data

Based on meanings derived from numbers Based on meanings expressed through words

Collection results in numerical and Collection results in non-standardized data

standardized data requiring classification into categories

Analysis conducted through the use Analysis conducted through the use of
of diagrams and statistics Conceptualization
Saunders et al.(2009), p.482.
According to Hakansson (2013) quantitative research method supports experiments and
testing by measuring variables to verify or falsify theories and hypothesis. The formation of
the hypothesis is that it has to be measureable with quantifications. On the other hand the
qualitative research method concerns understanding meanings, opinions and behaviors to
reach tentative hypotheses and theories. The method commonly uses smaller data sets that are
sufficient enough to reach reliable results, where the data collection continues until saturation
is reached. According to Saunders et al.(2009) individual quantitative and qualitative
techniques and procedures do not exist in isolation. In choosing the research methods it will
therefore either use a single data collection technique and corresponding analysis procedures
(mono method) or use more than one data collection technique and analysis procedures to
answer the research question (multiple methods). This author, further stated that: in the
research if someone choose to use a mono method he/she will combine either a single
quantitative data collection technique, such as questionnaires, with quantitative data analysis
procedures; or a single qualitative data collection technique, such as in depth interviews, with
qualitative data analysis procedures. In contrast, if he/she choose to combine data collection
techniques and procedures using some form of multiple methods design, there are four
different possibilities that are available as indicated in the Figure 3.1 below. Accordingly, this
80
research adopt a mono method research choices. In this regard, a questionnaire (quantitative
method) will be in use as a research instrument. In addition random stratified sampling
technique with paper based survey, and statistical analysis are used as a sampling technique,
data collection, and data analysis to answer the research question.

Research choices

Mono method Multiple methods

Multi-method Mixed-methods

Multi-method Multi-method Mixed-method Mixed-model

quantitative qualitative research research
studies studies
Adapted from Saunders et al.(2009) , page 152.
Figure 3.1 Research choice
3.6 TIME HORIZON
According to Saunders et al. (2009) there are two methods to lead a study concerning time
horizons; cross sectional study and longitudinal study. The author further distinguished them
by speaking of “snapshot” for cross- sectional study and “diary” for longitudinal study.
According to Hakansson (2013) cross-sectional surveys collect information on a population,
at a single point of time on contrary longitudinal surveys collect data over a period of time.
Consequently, the study strategy adopted here will be a cross sectional method. As stated by
Saunders et al.(2009) a cross sectional research is a study of particular phenomenon at a
particular time. Most research projects are undertaken for academic courses which are time
constrained and the researchers follow the cross sectional study method. This research is done
for academic purpose and the research carried out is cross sectional approach. The
questionnaires were directed to engineers, contractors and project managers who have
different years of experience in the building construction and participated at least on one

81
PPPAA(2011) based construction project . In addition they are having different views and
beliefs from different construction firms on the building contractor's risk sources associated
with the contract's delivered through the PPPAA's standard bidding document.

3.7 SAMPLING
There are three main justifications for using sampling: Sampling can provide reliable
information at far less cost than a census (survey). Data can be collected more quickly, and
estimates can be published in a timely fashion. Finally, and less well known, estimates based
on sample surveys are often more accurate than those based on a census because investigators
can be more careful when collecting data Sharon (2010).
According to Saunders et al.(2009) and Walliman (2011) there are two types of sampling
methods: probability sampling and non probability sampling. Saunders et al.(2009)
probability sampling or representative sampling is most commonly associated with survey
based research strategies where someone need to make inferences from his/her sample about
a population to answer his/her research question(s) or to meet his/her objectives. Saunders et
al.(2009) and Lohr (2010) further divides probability sampling method in to four parts. These
are simple random, stratified, cluster, and systematic sampling method and Saunders et
al.(2009) included the fifth one multistage sampling. Since, the population from which a
sample is to be drawn does not constitute a homogeneous group; this study used stratified
sampling techniques to obtain a representative sample. Under this method the population is
divided in to several sub populations that are individually more homogeneous than the total
population. The sub population are called strata. The following procedure is observed for
stratification.
The writer has obtained the list of contractors from ministry of urban development and
housing (MUDHo) website those registered on the budget year 2009 E.C. (from July 1-2008
E.C to May 10-2009 E.C.). Accordingly the samples were selected from the stratum target
population of grade first to three contracting companies. A total population of 438 with each
licensing grade having a population of 164,75 and 199 respectively.
Then representative random sample was taken, based on J. Carvalho (1984) sample size
determination Table 3.2 shown below.

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 Table 3.2 Sample size determination table

No Population size Small Medium Large

1 51-90 5 13 20
2 91-150 8 20 32
3 151-280 13 32 50
4 281-500 20 50 80
5 501-1,200 32 80 125
6 1,201-3,200 50 125 200
7 3,201-10,000 80 200 315
8 10,001-35,000 125 315 500
9 35,001-150,000 200 500 800
J. Carvalho (1984), page 61.
Accordingly, the required sample size for this research is 77. This assumes that 50 percent
return rate of the questionnaire results in a minimum returned sample size or data to be
analyzed. Therefore, the total questionnaire distributed to grade one - three contracting
companies were 154.

3.8 DESIGN OF THE QUESTIONNAIRE

According to Saunders et al.(2009) cites Bourque and Clark (1994) when designing
individual questions researchers do one of three things: adopt questions; or adapt questions
used in other questionnaires; or develop their own questions. Accordingly, in order to answer
the question raised based on the aim and objective of this research the researcher identified
different risk factors from reviewed literature. Then the questionnaire was developed
following the comment given by the advisor. Thus, it gather information from professionals
working in the construction industry in Ethiopia and those participated at least on one PPPAA
(2011) based construction project (this is done by including a note for the respondents that
states to consider only those projects delivered using the PPPAA's SBD). Also to get
potential answers from respondents in relation to the aim of the study. Respondents record
their own responses in the spaces provided on the questionnaire, according to set instructions.
Closed-ended questions were used and the respondents marked the category that best
described their opinion regarding the question on the building contractors risk sources

83
associated with the standard bidding document for the procurement of works in Ethiopia. The
questionnaires were divided into two parts, as presented in Appendix I , to gather the
following information:
Part I: Personal data about the respondents and the company’s profile.
Part II: To explore common contract provisions that form as risks to contractor and to
explore risks that building contractors are exposed to the SBD for the procurement of
works, issued by PPPAA NCB(2011). And raises a question those mentioned on
section 1.7 based on the listed objectives on section 1.6.
Drawn from the literature, Appendix I also provides the justifications for each questions
raised as well as the selection of potential ranges.

3.9 RELIABILITY OF THE QUESTIONNAIRE

The researcher made the following assumptions when designing the questionnaire:
That the respondents would provide honest answers to the questions;
That the respondents are aware of the building contractors risk sources associated
with the standard bidding document for the procurement of works in Ethiopia;
That the questions are straightforward, simple and unambiguous and of relevance to
the respondents, thus facilitating the respondents understanding of the questions; and
That the relevant information required by the researcher would be provided by the
respondents.

3.10 DATA COLLECTION AND ANALYSIS TECHNIQUE

The method for collecting research data is often determined by the research strategy. This
research adopt the survey strategy in line with the research question. Techniques for
collecting data in this strategies includes questionnaire, structured observation and structured
interviews Saunders et al.(2009). In line with the research questions and purpose of the study,
this research adopt questionnaires as techniques for data collection for the research.
Questionnaire were provided for primary data collection, while journals, books, published
and unpublished research papers were provided as secondary data for this research.
The data collected from the research were subjected to quantitative analysis. This analysis is
based on describing and interpreting objects statistically and with numbers. It aims to
interpret the data collected for the phenomenon through numeric variables and statistics. It
also includes computational and statistical methods of analysis. Accordingly, in this research

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the first section (general information) as part of the data is presented using tables, percentage
proportion method. The second section (section B) part of the data in question one probability
of occurrence and impact part, since the qualitative risk analysis is used in this research to
describe and understand each risk factor, so as to know the more significant risks.
Quantitative analysis is further employed to compute the weighted average score (WAS) of
ranking of each risk factor. A two dimensional scale is employed as shown in Tables below
(Table 3.3 and Table 3.4); respondents were requested to score or rate on a likert type scale of
1-5, the likelihood of occurrence and Impact of the risk factors on contractors.
Using the responses obtained from the questionnaires, weighted average score (WAS) for
each risk factor was calculated for the likelihood of occurrence and the consequence and
ranked. The formula of the weighted average score (WAS) adopted from El-Sayegh (2014) is
presented in Equation 1.
∑
Weighted average score, WAS = …………. Equation (1)
∑

Where:
wi= weight assigned to ith response
xi= frequency of the response
i= response category index = 1, 2, 3, 4 and 5 for Rare /very low, Unlikely / low, Possible /
Moderate, Likely / high and Most likely / very high respectively.
The result of WAS ranges between 1-5 and these results were then used to assign the level of
risk on the likelihood of occurrence and impact into risk matrix analysis. The results assigned
in the matrix analysis is shown in Table below (Table 3.5).
Risk Analysis Matrix is one of tools and techniques of qualitative risk analysis method using
a subjective assessment table of very low, low, moderate, high and very high indicators to
show the level of each type of risk factor discussed. Risk analysis matrix was used to provide
an indicative level of risks to reflect the degree of risks in each category.

85
 Table 3.3 Likelihood of risk events

Score Description Explanation

1 Very low Not expected to happen
2 Low Small likelihood but could will happen
3 Moderate 50-50 chance
4 High More than 50-50 chance
5 Very high Almost certain that it will happen
Source PMBOK (2013).
Table 3.4 Impact of risk

Project Very low Low Moderate High Very high

objective
1 2 3 4 5
s score

Insignificant < 10% cost 10 – 15% cost 15 – 30% cost >30% cost
Cost
cost increase increase increase increase increase

< 5%
Insignificant 5-10% 10-20%
Time/ Time/Schedule Time/schedule
Time/Schedule Time/Schedule Time/Schedule
Schedule increase Increase >20%
increase increase increase

Quality Only very Quality Project end

Quality reduction
degradation demanding reduction item
Quality Requires client
barely applications unacceptable effectively
Approval
noticeable are affected to the client unusable
adapted PMBOK (2013).

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 Table 3.5 Grading for the risk analysis table

Grading Likelihood of Occurrence Impact

1.0 =< 1.5 Rare Very low
1.5 =< 2.5 Unlikely Low
2.5 =< 3.5 Possible Moderate
3.5 =< 4.5 Likely High
4.5 =<5.0 Most likely Very high
Nathaniel (2012) cites Alkali (2010).
Then a statistical test, Spearman's rank correlation coefficient (rho) (r) method is used to
know grade one to three contractors understanding on building construction contract risks
based on their probability of occurrence and impacts on a project delivered by the PPPAA's
2011 SBD. Where, the Spearman's rank correlation coefficient is a nonparametric measure of
rank correlation (statistical dependence between the rankings of two variables). It is a
technique used to assess how well the relationship between two variables. For this research
between class 1 and class 2, class 1 and class 3, and class 2 and class3 contractors
correlations are tested a correlation coefficient of +1 means perfect positive correlation
(agreement), a correlation coefficient near to zero means no correlation, and a correlation
coefficient of -1 means perfect negative correlation (disagreement). In addition to these C.
Undan (2005) states correlation coefficients between -.20 and +.20 indicate a weak relation
between two variables, those between .20 and .50 (either positive or negative) represent a
moderate relationship, and those larger than .50 (either positive or negative) represent a
strong relationship.
This correlation coefficient (rho) (r) is calculated using the following formula as mentioned
by different researchers such as Zinabu Tebeje and Getachew Teka (2015), Desai Megha and
Bhatt Rajiv (2013).
rho(r)= 1−[(6 Σ d2) / (n3− n)]…………. Equation (2).
Where:
rho(r)is the Spearman rank correlation coefficient between two parties.

87
d is the difference between ranks assigned to variables for each factor.
and n is the number of subjects or data pairs of rank.
However, for the case of this research since the analysis of the data from the questionnaire is
done using excel the syntax for Spearman's rank correlation coefficient is
:CORREL(array1,array2), Where: Array1 is a cell range of values, and Array2 is a second
cell range of values.
Finally, question number two risk management approach section and question number three
how risk management practice can be promoted in Ethiopian's building construction, the
output of the analyzed data is presented using tables, graphs and simple percentage for further
interpretation and discussion.

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 4. ANALYSIS AND DISCUSSION

4.1 INTRODUCTION
The analysis and discussion below is devised in three parts in line with the objectives of this
research and also the sections of the questionnaire. As stated in the previous chapter a total of
154 questionnaire were distributed to the randomly selected class one to three general and
building contractors of Ethiopia. Of these 154 questionnaire 77 questionnaires were returned
at the proper time completed. Accordingly used as the bases of the analysis of the research.
The analysis and discussion are divided under several headings based on the objectives of
the study.

4.2 QUESTIONNAIRES RESPONSE RATE

The study has focused on the grade one to three contractors in Ethiopia. As mentioned on
previous chapter from 154 questionnaires distributed, a minimum returned sample size or
data to be analyzed is 77. As provided in, Table 3.2 in section 3.7 sample size determination
table, the medium sample size required were 32,13, and 32 for each category of contractors of
class one and three. In this regard, the result found from the respondent shows that both over
all response and individual response is statistically enough. In order to stick with good
statistical validity, the study made use of representative sample as discussed above. And the
validity of each response is checked by explaining each question to the respondent to avoid
bias they face. Following the questionnaire is delivered to the required (experienced)
respondent and checking the completeness of the response after the response was given by
the respondent. Thus, out of 80 returned questionnaire two response from GC/BC1
contractors and one response from GC/BC2 contractors were discarded because of their
incomplete or partial response. This responses are identified during data analysis period and
their validity is checked based on the number of answers given in the questionnaire. The
details of the respondent response and its rate are summarized in the Table below (Table 4.1).

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 Table 4.1 The respondent response and its rate
Valid
Questionnaire among
Respondents Valid distributed
class Distributed Returned response in %
GC/BC 1 64 34 32 50.00
GC/BC 2 26 14 13 50.00
GC/BC 3 64 32 32 50.00
Total 154 80 77

4.3 GENERAL INFORMATION OF RESPONDENT

The general information part of the questionnaire contains two sections that is, the company
and respondents profile. In the company profile section company work experience, licensing
grade, and proportion of projects under taken are included. It is important for the researcher
to get information about the company experience in the construction industry and to
categorize and examine their knowledge in contract risk management practice in the building
construction project. Hence, company work experience tells that the companies have been in
the industry long enough to furnish/ supply reliable responses in contract risk management
and the maturity of the company. In addition, company licensing grade to analyze the
knowledge of contract risk management practice in each class of contractor's grade one to
three as a result Table 4.2 and Table 4.3 shows the respondents company work experience in
the construction industry and their licensing grade. Since, the research deals with contract
risk management in the DBB contract and to identify the type of work most respondents do
under this type of delivery system proportion of project undertaken is included.

Table 4. 2 Company work experience in the construction industry

Work
Number of Percentage
No. experience Cumulative
respondents (%)
(years)
1 0-5 8 10.39 10.39
2 5-10 17 22.08 32.47
3 >10 52 67.53 100

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 Table 4. 3 Company licensing grade
Contractors Number of Percentage
No
Grade respondent (%) Cumulative
1 BC-1 28 36.4 36.4
2 BC-2 11 14.3 50.6
3 BC-3 30 39.0 89.6
4 GC-1 4 5.2 94.8
5 GC-2 2 2.6 97.4
6 GC-3 2 2.6 100.0

Thus, Table 4.4 shows the type of project under taken by respondent. This result revealed
that most of the respondent under take public/community building which is an advantage to
the findings of this research.
Table 4. 4 Type of projects under taken by the respondents company

Percentages of projects under taken Total

Type of projects under
percentage
taken 0-10% 10-30% 30-50% 50-70% 70-100% (%)

Commercial / industry 5 15 8 4 3 31.5

buildings
Public/ community 0 0 6 17 53 68.5
buildings

Similarly, as mentioned earlier it is important for the researcher to get information about the
respondent profile in the construction industry so as to categorize and examine their
knowledge in contract risk management practice in the building construction project those
administered under PPPAA's contract. As a result, the respondents profile section, position or
responsibility and total work experience are included in the questionnaire and Table 4.5 and
4.6 presents the respondents response respectively. Thus, the result obtained from the survey
shows that, most of the respondents are at the top management level and have quite a
reasonable working experience in the construction industry.

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 Table 4. 5 Respondents position or responsibility

Number of Percentage Cumulative

No. Position/Responsibility respondent (%)
1 General manager 4 0.05 0.05
2 Deputy manager 5 0.06 0.12
3 Project manager 34 0.44 0.56
4 Operation manager 5 0.06 0.62
5 Office engineer 29 0.38 1.00

Table 4. 6 Respondents work experience

Total work Percentage

Respondents work experience No of (%)
No. experience (years) respondents
0-5 16 0.21
In the construction
1 5-10 20 0.26
industry
>10 41 0.53
0-5 48 0.62
2 Within the company 5-10 23 0.30
>10 6 0.08

4.4 POTENTIAL RISK FACTORS

The first objective of this research is to identify and evaluate potential risk factors contractors
are exposed while executing a contract. In assessing risks contractors are exposed to within
the PPPAA's forms of contract, 59 potential risk factors were identified and grouped in to
seven main group from the literature reviewed as stated in chapter two Table 2.4. These
groups were: Physical works, delay and disputes, direction and supervision, damage and
injury to person and property, external factors, payment, and law and arbitration.
In addition, as the second objective of this research is to determine the likelihood of
occurrence and impact of the identified risk factors the next section presents this according to
the response given by the respondents.

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4.5 THE PROBABILITY OF OCCURRENCE OF THE RISK FACTORS

As stated by Jackson (2004) a risk is characterized by its probability of occurrence and its
uncertain impact on project objectives. It has two elements: the likelihood or probability of
something happening, and the consequences or impacts if it does Cooper et al.(2005). This
study sought to know the probability of occurrence of the identified risk factors contractors
are exposed while executing a contract in Ethiopian building construction project under
PPPAA's standard bidding document. Based on the respondent’s response class one to three
GC and BC contractors the combined weighted average score (WAS) and rank as indicated in
the Appendix II is calculated for each risk factor based on the likelihood of occurrence.
Then the important and top four ranked risk factor are selected as indicated in Table 4.7.
According to the ranking from the WAS, respondents identified inadequacy of time or
finance, late supply of information/ design data/ drawing, defective design, financial
constraint, delay in payment, and inflation as the highly occurring risk factor based on the
level of occurrence. According to similar study conducted by Nathaniel (2012) out of this
identified risk factors late supply of information/ design data/ drawing, defective design, and
delay in payment were ranked top on their probability of occurrence. Delay in payment,
inadequacy of finance, inflation, and exchange rate have been identified as highly occurring
risk factors on project in terms of time, cost and quality C. S. Goh and H. Abdul-Rahman
(2013). In line with this the agreement between the respondent in ranking the problem have
been calculated through spears man correlation coefficient. The spears man correlation in the
appendix V shows strong positive agreement between the contractors. These strong
correlation shows that most of the respondents have the same opinion about the probability of
occurrence of contract risk factors contractors exposed while executing a contract in
Ethiopian building construction project under PPPAA's standard bidding document. Thus,
great effort is required by the contractors to reduce these high occurring risks in to moderate
or low.

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 Table 4. 7 The likely occurrence of top risk factors from each group identified by the respondent

Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Level
Level of Level of Level of
Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank of W.A.S Rank
impact impact occurrence
impact

A) Physical works
11 Inadequacy of time or finance 3.50 1 Possible 3.77 2 Likely 3.75 1 Likely 3.67 1 likely
1 Change in ground condition 2.91 5 Possible 3.92 1 Likely 3.44 2 possible 3.42 2 possible
10 Inadequacy of material 3.28 2 Possible 3.15 4 possible 3.31 6 possible 3.25 3 possible
4 Tests and samples approval (materials
provided by contractor) 2.91 5 Possible 3.08 6 possible 3.38 4 possible 3.12 4 possible
B) Delay and disputes
2 Late supply of information/ design
data/drawing 3.41 1 Possible 3.69 1 Likely 3.69 1 likely 3.60 1 likely
1 Possession of site 2.91 2 Possible 3.38 2 possible 3.16 2 possible 3.15 2 possible
3 Inefficient execution of work 2.56 4 Possible 3.00 3 possible 2.94 4 possible 2.83 3 possible
5 Layout (design) dispute 2.63 3 Possible 2.62 5 possible 3.09 3 possible 2.78 4 possible
C) Direction and supervision
8 Defective designs 3.34 1 Possible 3.77 1 Likely 3.97 1 likely 3.69 1 likely
7 Mistakes in documents 3.09 2 Possible 3.62 2 Likely 3.75 2 likely 3.49 2 possible
1 Greed (insatiability) of supervisor 2.97 3 Possible 2.92 5 possible 3.47 3 possible 3.12 3 possible
2 Incompetence (luck of skill) 2.97 3 Possible 3.08 3 possible 3.16 4 possible 3.07 4 possible
D) Damage and injury to persons and
property
3 Accidents within the construction site 3.03 1 Possible 2.92 1 possible 2.84 1 possible 2.93 1 possible

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1 Negligence or breach of warranty 2.75 2 Possible 2.85 2 possible 2.47 2 unlikely 2.69 2 possible
7 Gaps and time limits in insurance cover 2.72 3 Possible 2.62 3 possible 2.22 3 unlikely 2.52 3 possible
2 Uninsurable matters 2.38 4 Unlikely 2.38 4 unlikely 2.22 3 unlikely 2.33 4 unlikely
E) External factors
5 Financial constraints 3.59 1 Likely 3.62 1 Likely 3.81 1 likely 3.67 1 likely
4 Planning approvals 2.97 3 Possible 3.08 2 possible 3.13 2 possible 3.06 2 possible
6 Energy or pay restraints 3.03 2 Possible 2.62 3 possible 2.63 3 possible 2.76 3 possible
1 Government policy on taxes 2.22 4 Unlikely 2.54 4 possible 2.22 4 unlikely 2.33 4 unlikely
F) Payment
2 Delay in payment 4.31 1 Likely 4.15 1 Likely 4.28 1 likely 4.25 1 likely
8 Inflation 3.88 2 Likely 3.92 2 Likely 3.94 2 likely 3.91 2 likely
1 Delay in settling claims and certifying 3.63 3 Likely 3.62 3 Likely 3.16 5 possible 3.47 3 possible
5 Funding constraints 3.34 4 Possible 3.31 4 possible 3.53 3 likely 3.39 4 possible
G) Law and arbitration
3 Uncertainty due to lack of records or
ambiguity of contract 2.88 1 Possible 3.31 1 possible 3.38 1 possible 3.19 1 possible
4 Cost of obtaining decision 2.38 2 Unlikely 2.77 2 possible 3.16 2 possible 2.77 2 possible
1 Delay in resolving disputes 2.38 2 Unlikely 2.77 2 possible 3.09 3 possible 2.75 3 possible
2 Injustice (unfairness) 2.28 4 Unlikely 2.77 2 possible 2.84 5 possible 2.63 4 possible

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4.6 THE IMPACT OF THE RISK FACTORS

Similarly, the results of the finding based on the response on the impact (over all, time, cost,
and quality) of potential risk factors from contractors perspective were presented in the
Appendix II. In addition to these the important and top four ranked risk factor are selected
from each group of risk factors based on the level of impact and are presented as indicated in
the Table 4.8, 4.9, 4.10, and 4.11. Among the top four risks found in each group, respondents
identified inadequacy of time or finance, exchange rate, delay in settling claim were
identified as the highest risk factor based on the level of impact on overall performance, time
and cost.
Defective design, financial constraints, inflation were also identified as the highest risk factor
based on the level of impact on overall performance, time, cost and quality. Similarly, delay
in payment and mistakes in document were identified as the highest risk factor based on the
level of impact on time, cost, and quality, and impact on time and cost respectively on a
project as delivered by the PPPAA's standard bidding document.
Then the agreement between the respondents (that is between grade one and two, grade one
and three, and grade two and three contractors) in ranking the impact of contract risk factors
of each group have been calculated through Spearman’s rank correlation coefficient as
indicated in Appendix V. The Spearman’s rank correlation coefficient shows that, except
class one and two contractors on group B risk factor, class one and three on group A, and
group B risk factors with positive moderate, positive moderate and negative moderate
correlation, there is a strong positive agreement between all contractors. These strong
correlation shows that most of the respondents have the same opinion about the impact (over
all, time, cost, and quality) of contract risk factors contractors exposed while executing a
contract in Ethiopian building construction project under PPPAA's standard bidding
document.
As stated on literature reviewed, the concept of risk in a project context is a chance of
something that will have an impact upon objectives. It includes the possibility of loss or gain,
or variation from a desired planned outcome, as a consequence of the uncertainty associated
with following a particular course of action. Also, concerning about potential impacts on
project objectives; project risk is an uncertain event or condition that, if it occurs, has a
positive or negative effect on one or more project objectives such as scope, schedule, cost,

96
and quality. In addition risk by nature has strong influence on the contractors depending on
the level of impact. According to similar study conducted by Nathaniel (2012) among these
identified risk factors delay in payment and defective design was the top risk factor based on
their level of impact on projects. Also Wiguna and Scott (2005) identified inflation, defective
design, and delay in payment top risk factors having an impact on project time and cost.
Delay in payment, inadequacy of finance, inflation, and exchange rate have been identified as
high negative impact on project performance in terms of time, cost and quality Goh and
Abdul-Rahman (2013).Therefore it is necessary for contractors to concentrate his efforts on
reducing these high degree risks to moderate risks that have negligible impact, moderate risks
to low level risk and also monitor low risks to ensure they do not increase in level.

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 Table 4.8 The top risk factors identified having an impact on overall performance

Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Level of Level of Level of Level of

Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank W.A.S Rank
impact impact impact impact

A) Physical works
11 Inadequacy of time or finance 3.81 1 Likely 3.85 1 Likely 3.97 1 Likely 3.88 1 likely
10 Inadequacy of material 3.31 2 Possible 3.54 2 Likely 3.59 2 Likely 3.48 2 possible
9 Inadequacy of plant/equipment 3.31 2 Possible 3.54 2 Likely 3.25 6 possible 3.37 3 possible
8 Inadequacy labor 3.16 5 Possible 3.38 4 Possible 3.31 4 possible 3.28 4 possible
B) Delay and disputes
2 Late supply of information/ design
data/drawing 3.22 2 Possible 3.31 3 Possible 3.69 1 Likely 3.40 1 possible
3 Inefficient execution of work 3.00 3 Possible 3.46 1 Possible 3.41 3 possible 3.29 2 possible
5 Layout (design) dispute 3.31 1 Possible 3.00 5 Possible 3.44 2 possible 3.25 3 possible
1 Possession of site 3.00 3 Possible 3.38 2 Possible 3.19 4 possible 3.19 4 possible
C) Direction and supervision
8 Defective designs 3.88 1 Likely 4.08 1 Likely 3.59 1 Likely 3.85 1 likely
7 Mistakes in documents 3.25 3 Possible 3.69 2 Likely 3.41 3 possible 3.45 2 possible
2 Incompetence (luck of skill) 3.50 2 Possible 3.31 4 Possible 3.38 4 possible 3.39 3 possible
1 Greed (insatiability) of supervisor 3.19 5 Possible 3.38 3 Possible 3.38 4 possible 3.32 4 possible
D) Damage and injury to persons and
property
3 Accidents within the construction site 3.19 2 Possible 2.77 1 Possible 2.97 1 possible 2.98 1 possible
1 Negligence or breach of warranty 3.25 1 Possible 2.77 1 Possible 2.59 2 possible 2.87 2 possible

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7 Gaps and time limits in insurance cover 2.81 3 Possible 2.69 3 Possible 2.59 2 possible 2.70 3 possible
2 Uninsurable matters 2.66 4 Possible 2.54 5 Possible 2.41 5 unlikely 2.53 4 possible
E) External factors
5 Financial constraints 3.81 1 Likely 4.00 1 Likely 4.03 1 Likely 3.95 1 likely
4 Planning approvals 3.19 2 Possible 3.23 2 Possible 3.22 2 possible 3.21 2 possible
1 Government policy on taxes 3.03 3 Possible 3.08 3 Possible 2.69 4 possible 2.93 3 possible
6 Energy or pay restraints 3.00 4 Possible 2.85 4 Possible 2.91 3 possible 2.92 4 possible
F) Payment
8 Inflation 4.31 1 Likely 4.15 1 Likely 4.16 1 Likely 4.21 1 likely
2 Delay in payment 4.03 3 Likely 4.08 2 Likely 4.09 2 Likely 4.07 2 likely
7 Exchange rates 4.25 2 Likely 4.08 2 Likely 3.84 3 Likely 4.06 3 likely
1 Delay in settling claims and certifying 4.03 3 Likely 3.92 4 Likely 3.53 4 Likely 3.83 4 likely
G) Law and arbitration
3 Uncertainty due to lack of records or
ambiguity of contract 3.03 1 Possible 3.54 1 Likely 3.28 3 possible 3.28 1 possible
1 Delay in resolving disputes 3.03 1 Possible 3.38 2 Possible 3.34 2 possible 3.25 2 possible
4 Cost of obtaining decision 2.91 3 Possible 3.23 3 Possible 3.47 1 possible 3.20 3 possible
2 Injustice (unfairness) 2.75 4 Possible 3.23 3 Possible 3.03 4 possible 3.00 4 possible

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 Table 4.9 Top risk factors identified by the respondent having an impact on time

Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Level
Level of Level of Level of
Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank of W.A.S Rank
impact impact impact
impact
A) Physical works
11 Inadequacy of time or finance 4.06 1 Likely 4.31 1 Likely 4.19 1 Likely 4.19 1 likely
1 Change in ground condition 3.59 2 Likely 3.69 3 Likely 3.81 2 Likely 3.70 2 likely
10 Inadequacy of material 3.47 3 possible 3.85 2 Likely 3.56 4 Likely 3.63 3 likely
8 Inadequacy labor 3.31 4 possible 3.54 4 Likely 3.72 3 Likely 3.52 4 likely
B) Delay and disputes
2 Late supply of information/ design
data/drawing 3.50 1 possible 3.62 1 Likely 3.84 1 Likely 3.65 1 likely
1 Possession of site 3.31 2 possible 3.62 1 Likely 3.44 3 possible 3.46 2 possible
5 Layout (design) dispute 3.31 2 possible 3.31 4 Possible 3.66 2 Likely 3.43 3 possible
3 Inefficient execution of work 3.09 4 possible 3.54 3 Likely 3.41 4 possible 3.35 4 possible
C) Direction and supervision
8 Defective designs 3.63 1 Likely 4.00 1 Likely 3.69 1 Likely 3.77 1 likely
7 Mistakes in documents 3.56 2 Likely 3.69 2 Likely 3.59 2 Likely 3.62 2 likely
2 Incompetence (luck of skill) 3.44 4 possible 3.31 3 Possible 3.44 3 possible 3.39 3 possible
11 Inappropriate consultants or contractors 3.50 3 possible 3.08 4 Possible 3.44 3 possible 3.34 4 possible
D) Damage and injury to persons and
property
3 Accidents within the construction site 3.06 1 possible 2.92 1 Possible 2.81 2 possible 2.93 1 possible
1 Negligence or breach of warranty 3.06 1 possible 2.69 2 Possible 2.84 1 possible 2.87 2 possible
7 Gaps and time limits in insurance cover 2.75 3 possible 2.62 3 Possible 2.75 3 possible 2.71 3 possible

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5 Consequential losses 2.66 4 possible 2.54 4 Possible 2.56 4 possible 2.59 4 possible
E) External factors
5 Financial constraints 3.91 1 Likely 4.15 1 Likely 4.06 1 Likely 4.04 1 likely
4 Planning approvals 3.09 2 possible 3.31 2 Possible 3.19 2 possible 3.20 2 possible
2 Labor strike 3.00 3 possible 2.69 3 Possible 2.91 3 possible 2.87 3 possible
6 Energy or pay restraints 3.00 3 possible 2.69 3 Possible 2.78 4 possible 2.82 4 possible
F) Payment
8 most
Inflation 4.56 1 likely 4.38 1 Likely 4.28 1 Likely 4.41 1 likely
2 Delay in payment 4.06 3 Likely 4.15 2 Likely 4.13 2 Likely 4.11 2 likely
7 Exchange rates 4.06 3 Likely 3.92 3 Likely 3.88 3 Likely 3.95 3 likely
1 Delay in settling claims and certifying 4.28 2 Likely 3.92 3 Likely 3.47 4 possible 3.89 4 likely
G) Law and arbitration
1 Delay in resolving disputes 3.34 1 possible 3.46 1 Possible 3.66 1 Likely 3.49 1 possible
4 Cost of obtaining decision 3.31 2 possible 3.31 2 Possible 3.41 2 possible 3.34 2 possible
3 Uncertainty due to lack of records or
ambiguity of contract 3.06 3 possible 3.31 2 Possible 3.34 3 possible 3.24 3 possible
2 Injustice (unfairness) 3.00 4 possible 3.15 4 Possible 3.03 4 possible 3.06 4 possible

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 Table 4.10 Top risk factor identified by the respondent having an impact on project cost

Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Level of Level of Level of Level of

Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank W.A.S Rank
impact impact impact impact

A) Physical works
11 Inadequacy of time or finance 3.88 1 Likely 3.69 1 Likely 4.09 1 Likely 3.89 1 likely
1 Change in ground condition 3.53 2 Likely 3.31 3 Possible 3.50 3 possible 3.45 2 possible
10 Inadequacy of material 3.41 4 possible 3.38 2 Possible 3.41 5 possible 3.40 3 possible
9 Inadequacy of plant/equipment 3.44 3 possible 2.92 5 Possible 3.41 5 possible 3.26 4 possible
B) Delay and disputes
2 Late supply of information/ design
data/drawing 3.31 1 possible 3.23 3 Possible 3.53 1 likely 3.36 1 possible
3 Inefficient execution of work 3.00 3 possible 3.38 2 Possible 3.44 2 possible 3.27 2 possible
1 Possession of site 2.88 5 possible 3.46 1 Possible 3.16 4 possible 3.16 3 possible
5 Layout (design) dispute 3.06 2 possible 3.00 4 Possible 3.38 3 possible 3.15 4 possible
C) Direction and supervision
8 Defective designs 3.88 1 Likely 4.00 1 Likely 3.66 1 likely 3.84 1 likely
7 Mistakes in documents 3.81 2 likely 3.77 2 Likely 3.56 2 likely 3.71 2 likely
2 Incompetence (luck of skill) 3.47 3 possible 3.08 4 Possible 3.44 4 possible 3.33 3 possible
11 Inappropriate consultants or contractors 3.38 4 possible 3.00 6 Possible 3.34 5 possible 3.24 4 possible
D) Damage and injury to persons and
property
3 Accidents within the construction site 3.19 1 possible 2.77 1 Possible 2.84 1 possible 2.93 1 possible
1 Negligence or breach of warranty 3.16 2 possible 2.62 3 Possible 2.81 2 possible 2.86 2 possible
7 Gaps and time limits in insurance cover 2.88 3 possible 2.69 2 Possible 2.78 3 possible 2.78 3 possible

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5 Consequential losses 2.84 4 possible 2.46 4 Unlikely 2.72 4 possible 2.67 4 possible
E) External factors
5 Financial constraints 3.88 1 likely 3.77 1 Likely 4.00 1 likely 3.88 1 likely
4 Planning approvals 2.94 3 possible 3.00 2 Possible 3.06 2 possible 3.00 2 possible
6 Energy or pay restraints 3.06 2 possible 2.85 3 Possible 2.72 5 possible 2.88 3 possible
2 Labor strike 2.94 3 possible 2.54 4 Possible 2.84 3 possible 2.77 4 possible
F) Payment
8 Inflation 4.38 1 likely 4.08 1 Likely 4.44 1 likely 4.30 1 likely
2 Delay in payment 4.09 2 likely 3.92 2 Likely 4.06 2 likely 4.03 2 likely
7 Exchange rates 3.91 5 likely 3.77 3 Likely 3.97 3 likely 3.88 3 likely
1 Delay in settling claims and certifying 4.06 3 likely 3.77 3 Likely 3.41 5 possible 3.75 4 likely
G) Law and arbitration
4 Cost of obtaining decision 3.34 1 possible 3.23 1 Possible 3.53 1 likely 3.37 1 possible
1 Delay in resolving disputes 2.88 3 possible 3.23 1 Possible 3.53 1 likely 3.21 2 possible
3 Uncertainty due to lack of records or
ambiguity of contract 3.16 2 possible 3.15 3 Possible 3.28 3 possible 3.20 3 possible
2 Injustice (unfairness) 2.84 4 possible 3.15 3 Possible 3.00 5 possible 3.00 4 possible

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 Table 4.11 Top risk factor identified by the respondent having an impact on quality

Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Level of Level of Level of Level of

Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank W.A.S Rank
impact impact impact impact

A) Physical works
3 Defective materials or workman ship 3.50 1 Possible 3.38 4 possible 3.47 2 Possible 3.45 1 possible
9 Inadequacy of plant/equipment 3.44 2 Possible 3.31 5 possible 3.25 5 Possible 3.33 2 possible
8 Inadequacy labor 3.03 7 Possible 3.46 1 possible 3.38 3 Possible 3.29 3 possible
11 Inadequacy of time or finance 3.06 5 Possible 3.46 1 possible 3.28 4 possible 3.27 4 possible
B) Delay and disputes
3 Inefficient execution of work 2.88 1 Possible 3.54 1 Likely 3.22 1 possible 3.21 1 possible
5 Layout (design) dispute 2.50 3 Unlikely 2.92 2 possible 2.56 3 possible 2.66 2 possible
2 Late supply of information/ design
data/drawing 2.41 4 Unlikely 2.69 3 possible 2.63 2 possible 2.57 3 possible
4 Delay outside of both parties' control 2.53 2 Possible 2.46 4 unlikely 2.19 4 unlikely 2.39 4 unlikely
C) Direction and supervision
8 Defective designs 3.53 2 Likely 3.92 1 Likely 3.53 1 Likely 3.66 1 Likely
2 Incompetence (luck of skill) 3.59 1 Likely 3.31 3 possible 3.31 3 possible 3.40 2 Possible
11 Inappropriate consultants or contractors 3.47 3 Possible 3.00 4 possible 3.44 2 possible 3.30 3 Possible
7 Mistakes in documents 3.44 4 Possible 3.38 2 possible 3.06 5 possible 3.29 4 Possible
D) Damage and injury to persons and
property
1 Negligence or breach of warranty 2.34 2 Unlikely 2.31 1 unlikely 2.38 1 unlikely 2.34 1 Unlikely
5 Consequential losses 2.44 1 Unlikely 2.15 2 unlikely 1.97 5 unlikely 2.19 2 Unlikely
3 Accidents within the construction site 2.25 3 Unlikely 1.92 3 unlikely 2.25 2 unlikely 2.14 3 Unlikely

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7 Gaps and time limits in insurance cover 2.19 4 Unlikely 1.92 3 unlikely 2.03 3 unlikely 2.05 4 Unlikely
E) External factors
5 Financial constraints 3.44 1 Possible 3.69 1 Likely 3.44 1 possible 3.52 1 Likely
4 Planning approvals 2.38 2 Unlikely 2.46 2 unlikely 2.31 3 unlikely 2.38 2 Unlikely
2 Labor strike 2.25 6 Unlikely 2.38 3 unlikely 2.44 2 unlikely 2.36 3 Unlikely
10 Industrial disputes 2.34 3 Unlikely 2.23 4 unlikely 2.22 4 unlikely 2.26 4 Unlikely
F) Payment
8 Inflation 4.38 1 Likely 3.46 2 possible 3.53 1 Likely 3.79 1 Likely
2 Delay in payment 4.09 2 Likely 3.54 1 Likely 3.25 2 possible 3.63 2 Likely
7 Exchange rates 3.91 5 Likely 3.31 3 possible 2.94 4 possible 3.38 3 Possible
1 Delay in settling claims and certifying 4.06 3 Likely 3.31 3 possible 2.47 6 unlikely 3.28 4 Possible
G) Law and arbitration
1 Delay in resolving disputes 2.88 3 Possible 3.00 1 possible 2.34 4 unlikely 2.74 1 Possible
6 Changes in statutes 2.78 5 Possible 2.85 3 possible 2.50 1 unlikely 2.71 2 Possible
2 Injustice (unfairness) 2.84 4 Possible 2.92 2 possible 2.34 4 unlikely 2.70 3 Possible
4 Cost of obtaining decision 3.34 1 Possible 2.46 4 unlikely 2.19 6 unlikely 2.66 4 Possible

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4.7 ALLOCATION OF IDENTIFIED RISK FACTORS FROM CONTRACTORS
PERSPECTIVE

According to the third objective of the research allocation of identified risk factors from
contractor perspective is presented. The Table below (Table 4.13 on page 110) shows the
response of the respondent and its allocation based on FIDIC 1999 and PPPAA
2011compiled by the researcher.
As stated in section 2.5 and 2.11 since it is difficult to remove all potential risks in a
construction project, it is crucial to allocate risks among parties in the project through a
contract. If not, project performance in terms of cost, quality and time is often affected.
Moreover, disputes and misunderstandings are often the end result between clients and
contractors when the distribution of risk is not well allocated. Therefore, proper risk
allocations in construction contracts can help reduce such impacts and achieve management
efficiency.
When we compare the allocation presented by the respondent and the writer (me), the result
shows a shortage in knowledge and lack of experience in allocating the risk to the required
party. To explain this we can consider risk factors indicated in the previous discussion section
4.6 i.e. inadequacy of time or finance, mistakes in document, defective design, financial
constraint, delay in settling claim, delay in payment, exchange rate and inflation those having
high impact on the performance (overall, time, cost, and quality) of the project. It can be
observed from Table 4.12 on page 109, for example inadequacy of finance is allocated by the
writer from PPPAA's to contractor while the respondents allocated this risk factor to client,
contractor, and to small percent to force measure.
Similarly, from Table 4.13 on page 110, physical works risk factor group the first two risk
factors, change in ground condition and artificial obstacles. It can be observed that 64 and 57,
35 and 47, and 14 and 12 respondent allocated these risks to client, contractor and to force
measure respectively. However, PPPAA 2011 allocated these risks to the client and
contractor by stating that the engineer to take in to account any delay suffered by a
contractor as a result of artificial obstacle or physical condition (change in ground condition)
that could not reasonably have been for seen by an experienced contractor. The contractor to
claim for additional payment and extension of extended completion date when these risks
encountered (Appendix D).

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On contrary, based on Bunny (2002) cites Grove (2000) there are four criteria for allocation
of risks:
The fault standard: cost and time impacts of risks caused (or not avoided) through
the fault of a party should be borne by that party. In other words, he who makes
damage shall bear the risk;
The foresee-ability standard: He who is best able to foresee the risk is allocated that
risk;
The management standard: He who is best able to control and manage the risk is
allocated that risk;
The incentive standard: risks should be placed on the party most in need of
incentive (presumably already with the ability) to prevent and control them. This is
expected to motivate people to play their part. Compensation events or provisions of
construction conditions of contract should be examined if they demonstrate this
rationale (underlying principle) uniformly as contractors and employers are already
motivated to avoid and mitigate risk appearance. Both parties lose when a project is
impacted by cost, and time overruns regardless of risk allocation, although one may
lose more than the other.
In these regard, when the writer (me) compares FIDIC (1999) and PPPAA ( 2011), In FIDIC
forms of contract for example, where the design is performed by or on behalf of the
employer, the employer is bearing the risk of its own design, and of its own acts or omissions,
and the Contractor is entitled to a cost, time and profit relief in case of late drawings or
instructions (Sub clause 1.8). Similarly, issues with access to the site (Sub-Clause 2.1), wrong
setting out data (Sub clause 4.7) , or variations to the works (Clause 13) instructed by the
engineer.
Such practice of allocation of risk also found in PPPAA. The engineer orders a delay or does
not issue drawings, specifications, or instructions required for execution of the works on time
(Sub clause 47.c), Failure of the public body to fulfill his obligations under the contract
(73.1.e); The public body shall, in due time and in conformity with the progress of the works,
place the site and access thereto…. this will be a compensation event (Sub clause 31.1), If, at
any time during the execution of the works, any error appears in the position, levels,
dimensions or alignment of any part of the works…… unless such error is based on incorrect
data supplied by the engineer, in which case the public body shall be responsible for the cost

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of rectification (Sub clause 49.2) and modifications by change orders (Clause 15). This
satisfies the allocation criteria discussed above.
On the other hand for example, when we consider a risk factor such as, inflation (change in
law and legislation), FIDIC, (Sub clause 13.7) allow the contract price adjustment, and
PPPAA, (Sub clause 18.1) does not allow price adjustment, (Sub clause 62) adjustments of
contract prices shall be allowed after twelve (12) months from the effective date of the Contract if the
contract performance period is more than 18 months. This means that the criteria mentioned
above about allocation of risk is not properly applied in PPPAA. As a result, it is difficult to
generalize the knowledge of the respondent about risk allocation. Because PPPAA also
allocate inflation risk (price adjustment) wrongly to the contractors.

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 Table 4.12 Risk allocation on identified high impact risk factors

Allocation by percent from Allocation based on (1) FIDIC

total respondent 1999 and (2) PPPAA 2011

High impact risk factors identified by the Force Force

No respondent Client Contractor measure* Client Contractor measure*
1 Inadequacy of time or finance 0.70 0.88 0.03 1,2
2 Mistakes in documents 0.83 0.40 0.08 1 1,2
3 Defective designs 0.94 0.27 0.13 1,2
4 Financial constraints 0.84 0.83 0.09 1,2 1,2
5 Delay in settling claims and certifying 0.83 0.48 0.14 1,2 1,2
6 Delay in payment 0.83 0.42 0.01 1,2 1,2
7 Exchange rates 0.38 0.35 0.65 1,2 1,2
8 Inflation 0.32 0.49 0.69 1,2 1,2

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 Table 4.13 Allocation of identified risk factor by respondent and researcher

Allocation based on (1) FIDIC 1999 and

Allocation based on the respondent
(2) PPPAA 2011
Risk in a construction contract
Force Force
Client Contractor measure* Client Contractor measure*
A) Physical works
1 Change in ground condition 64 35 14 1,2 1,2
2 Artificial obstacles 57 47 12 1,2 1,2
3 Defective materials or workman ship 8 63 2 1,2
4 Tests and samples approval (materials provided by 33 56 3
contractor) 1,2
5 Exceptionally inclement weather 16 15 65 1,2
6 Site preparation 44 59 0 1,2
7 Inadequacy (insufficient) of staff 22 72 3 1,2
8 Inadequacy labor 3 70 5 1,2
9 Inadequacy of plant/ equipment 5 63 5 1,2
10 Inadequacy of material 13 71 7 1,2
11 Inadequacy of time or finance 54 68 2 1,2 1,2
B) Delay and disputes
1 Possession of site 70 24 6 1,2 1,2
2 Late supply of information/design data/drawings 71 23 3 1,2 1,2
3 Inefficient execution of work 13 67 5 1,2
4 Delay outside of both parties' control 19 15 62 1,2
5 Layout (design) dispute 64 36 6 1,2
C) Direction and supervision

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1 Greed (insatiability) of supervisor 63 22 5 1,2
2 Incompetence 63 43 5 1,2 1,2
3 Inefficiency 56 35 4 1,2 1,2
4 Unreasonableness 63 28 3 1,2 2
5 Partiality 62 31 4 1,2
6 Poor communication 66 54 3 2 1,2
7 Mistakes in documents 64 31 6 1 1,2
8 Defective designs 72 21 10 1,2
9 Compliance with requirements 57 57 14 1,2 1,2 2
10 Unclear requirements 62 44 16 1,2 1,2 2
11 Inappropriate consultants or contractors 67 52 8 1,2 1,2
12 Changes in requirements 55 38 19 1,2 1,2 2
D) Damage and injury to persons and property
1 Negligence or breach of warranty 37 63 5 1,2 1,2
2 Uninsurable matters 32 53 31 1 1,2
3 Accidents within the construction site 25 69 15 1 1,2
4 Uninsurable risks 35 45 21 1,2 1,2
5 Consequential losses 31 58 20 1,2 1,2
6 Exclusions (not covered by insurance) 38 47 23 1,2 1,2
7 Gaps and time limits in insurance cover 29 50 18 1,2 1,2
E) External factors
1 Government policy on taxes 18 27 52 1,2 1,2
2 Labor strike 13 47 32 1,2 1,2
3 Safety or other laws 19 48 29 1,2 1,2

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4 Planning approvals 55 32 9 1,2
5 Financial constraints 65 64 7 1,2 1,2
6 Energy or pay restraints 40 54 8 1,2
7 Cost of war or civil commotion 17 25 45 1,2
8 Malicious (hateful) damage 15 29 44 1,2
9 Intimidation (threats) 23 28 40 1,2
10 Industrial disputes 16 51 25 1,2
F) Payment
1 Delay in settling claims and certifying 64 37 11 1,2 1,2
2 Delay in payment 64 32 1 1,2 1,2
3 Legal limits on recovery of interest 35 26 29 1,2 2
4 Insolvency (bankruptcy) 52 65 8 1,2 1,2
5 Funding constraints 72 48 7 1,2 1,2
6 Shortcomings in the measure and value process 58 54 5 1,2
7 Exchange rates 29 27 50 1 2 1,2
8 Inflation 25 38 53 1 2 1,2
G) Law and arbitration
1 Delay in resolving disputes 59 41 16 1,2 1,2
2 Injustice (unfairness) 46 28 21 1,2
3 Uncertainty due to lack of records or ambiguity of 58 61 5 1,2
contract
4 Cost of obtaining decision 41 47 3 1,2 1,2
5 Enforcing decisions 44 38 18 1,2 1,2 1,2
6 Changes in statutes 44 33 25 1,2 1,2 1,2

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 4.8 RISK MANAGEMENT APPROACH

The final objective of this research is to identify and evaluate the risk management approach
practiced by local contractor in the current period. Thus the author raised the following
questions in the distributed questionnaire.
a) Does your company conduct a risk identification technique on project?
b) If your answer to "a" is other than "Never" what techniques do you employ to identify
contract risk?
c) Does your company conduct risk analysis on projects?
d) If your answer to question "c" is other than "Never" what techniques do you employ
to analyze contract risk on projects?
e) what risk response approach do you often employ on your project?
I. RISK IDENTIFICATION
In view of that, as shown in Table 4.14 the response of the respondent for the first question
states that from the total response given more than a half of the respondent (55% of the
respondent) conducted risk identification in 25-50% of their projects. This implies that the
risk identification technique applied by Ethiopian contractors of grade one to three are yet to
completely include risk identification technique in their project. In addition their
identification technique is below average.
According to the second question Table 4.15 presents the technique employed to identify
contract risk. As a result based on WAS the respondent ranked experienced person opinion or
judgment, document review, assumption analysis, and interview the top four techniques
following diagram analysis the last.

Table 4.14 Risk identification on project

Risk identification on Number of Percentage

Cumulative
No. project respondent (%)
1 Never 15 0.19 0.19
2 25% of the project 11 0.14 0.34
3 25-50% of the project 16 0.21 0.55
4 50-75% of the project 20 0.26 0.81
5 75-100% of the project 15 0.19 1.00

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 According to the Chinese construction industry most frequently applied management
techniques are “brainstorming” for identifying risks Tang et al.(2007). Brainstorming and
checklists are recognized as the most popular risk management tools used in the Malaysian
construction industry C. S. Goh and H. Abdul-Rahman (2013). In Nigeria the risk
identification techniques frequently used by local and foreign contractors and project
managers are brainstorming, checklist, Delphi technique, expert judgment O. M. Ogunbayo
(2014). Similarly in Iran, "brain-storming sessions" is the most popular method used
frequently to identify the risks in large construction projects Tadayon et al.(2012). This
implies that most of these countries use information gathering techniques (brainstorming),
risk register (checklist), and expert judgment in their project. When we compare this with our
country practice they have some techniques in common such as information gathering and
expert judgment techniques.
In general these result shows that most of the techniques applied, by these countries including
Ethiopia, for the identification of risk management issues that belong to construction projects
can be classified as subjective techniques. As they are based on perception and reliance on
years of experience in the industry rather than on more scientific and objective ways of
identifying and analyzing risk issues that are provided by risk management processes.
II. RISK ANALYSIS
Base on the third question regarding risk analysis, Table 4.16 presents the response given by
the respondent. As a result from the total response given cumulatively 71% of Ethiopian
contractors of class one to three conduct risk analysis on 25-50% of their projects. Thus as
discussed earlier the techniques applied by these contractors is below average.

Table 4.15 Techniques employed to identify a contract risk

Risk identification on project WAS Rank

No.
1 Document review Document review 3.16 2
Brain storming 2.42 7
Information Delphi technique 2.58 5
2
gathering techniques Interview 2.88 4
Root cause analysis 1.88 8
3 Risk register Risk register 2.45 6
4 Assumption analysis Assumption analysis 2.91 3

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 Diagramming
1.29 10
5 analysis Diagramming analysis
6 SWOT analysis SWOT analysis 1.54 9
Experienced person Experienced person 3.50 1
7 opinion or judgment opinion or judgment

Table 4.16 risk analysis on project

Risk analysis on Number of Percentage

Cumulative
No. project respondent (%)
1 Never 19 0.25 0.25
2 25% of the project 14 0.18 0.43
3 25-50% of the project 22 0.29 0.71
4 50-75% of the project 18 0.23 0.95
5 75-100% of the project 4 0.05 1.00

Similarly, Table 4.17 presents the response given on the techniques employed for analyzing
contract risk by the respondents. As a result most of the respondent use qualitative risk
analysis technique specially by project location, project type, tender document clarity, and
construction type. According to the study conducted by other researchers the Chinese
construction industry most frequently applied management techniques are “joint evaluation
by key participants” in risk analysis, “reducing risks” within risk response strategies, and
“periodic document reviews” in risk monitoring Tang et al.(2007). The author further states
that the qualitative techniques are used much more often than quantitative techniques in the
industry. Lithuanian construction companies use qualitative method of risk assessment most
frequently a head of quantitative method Banaitiene and Banaitis (2012). Although,
qualitative analysis technique is popular in these countries, it is common also in Ethiopia.
Thus this survey result aligns with those other studies conducted about risk analysis
technique described in the reviewed literature i.e. qualitative method most frequently than
quantitative method.

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 Table 4.17 Techniques employed to analyze contract risk

Techniques to analyze contract risk WAS Rank

No.
Project type 2.83 2
Project cost 2.38 6
Qualitative Project time/ schedule 2.04 7
1
analysis Construction type 2.62 4
Project location 3.14 1
Tender document clarity 2.78 3
Sensitivity analysis ( the tornado
diagram) 1.37 9
Quantitative Expected monitory analysis
2 1.43 8
analysis (decision tree analysis)
Modeling & simulation (Monte
1.37 9
Carlo simulation)
3 Fuzzy logic Fuzzy logic 2.44 5

III. RISK RESPONSE

Finally, Table 4.18 presents respondents response on risk response approach on the project.
According to previous sections this result also ranked based on WAS. As a result, accept the
risk by allocating contingency, transfer the risk through insurance, adjusting profit margin
and negotiation when and if the risk occurs to mitigate the risk are the top four risk response
approaches identified by the respondent. According to literature reviewed in section 2.6.5
following identification and analysis of project risks, it demands a response to identified
project risks. In this regard a strategic approach risk response planning is adopted in many
risk management processes. These are : strategies for negative risks or treats, strategies for
positive risks or opportunities, contingent response strategies and expert judgment. Thus if
we consider the negative strategy, four strategies, which typically deal with threats or risks.
that may have negative impacts on project objectives if they occur are: avoid, transfer,
mitigate, and accept.

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 Table 4.18 Risk response approach

Risk response approach WAS RANK

No
Negotiation when and if the risk
occurs. 3.12 4
Design review contract document
analysis before tendering. 2.58 8
Selecting contracting parties (including
consultants) in tender participation. 1.94 11
Selecting projects by project nature,
Mitigate the environment, etc. 2.94 6
1
risk:
Conducting more tests on a product or
service. 1.76 14
Choosing more stable supplier. 1.87 12
Adopting less complex
process/methodology. 2.05 9
Stocking supplies. 1.80 13
Adjusting profit margin. 3.18 3
Transfer the Through sub-contracting. 3.00 5
2
risk: Through insurance. 3.22 2
Allocating responsible person. 2.74 7
3 Accept the risk: Allocating contingency. 3.32 1
Extending or shortening the schedule. 2.03 10

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4.9 RISK MANAGEMENT PRACTICE PROMOTION

Olamiwale (2014) cited Khalafallah and Azhar (2004) stated risk management techniques are
essentially management techniques used to handle risky situations. On the other hand there
are factors limiting to the practical application of risk management in the construction
industry. Some of these are:
Deficiency in the knowledge of risk management techniques.
Highly sophisticated techniques that are available are unnecessary compared with the
size of the project.
Reservations about the relevance of the available techniques to the construction
industry.
Most of the risks surfaced during the process of construction, and are quite
subjective; therefore, they are best handled with experience from past contracts.
Risk analyses of construction projects are rarely demanded by clients.
Unavailability of quality data required poses a loss of confidence in risk management
techniques.
Thus, the respondent was requested to put their opinion how to improve the risk management
practice in the Ethiopian building construction project. As stated in Table 4.19 based on WAS the
respondent ranked, respecting the contract document both by the employer and contractor,
capacity building in the sector (for example: if low labor competence is a source of risk),
implementing proper (principled) risk allocation between contracting parties and others, and
improving the contract/tender document (including drawings and specifications) standard
(accuracy and intelligibility ).

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Table 4.19 Opinion of the respondent on promotion of risk management practice

Risk management practice WAS Rank

F Respecting the contract document both by the employer and
contractor. 4.12 1

E Capacity building in the sector (for example: if low labor

competence is a source of risk). 4.08 2

D Implementing proper (principled) risk allocation between

contracting parties and others. 4.01 3

C Improving the contract/tender document (including drawings

and specifications) standard (accuracy and intelligibility ). 3.91 4

G Encouraging collaboration culture environment among

involved parties. 3.86 5

I Incorporating implementation of risk management systems

among the strategic objectives of organizations involved in 3.65 6
projects.
H Request for implementation of risk management processes
(such as formal risk identification, analysis and response) in
projects by employer and contractors in tendering and contract 3.53 7
administration.
B Introduction of risk management standard (risk register,
analysis) by government or other agencies before floating 3.47 8
tender.
A Providing training and seminar on risk management. 3.44 9

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 5. CONCLUSION AND RECOMMENDATION

5.1 CONCLUSION
Based on the findings of the study, the following key conclusion is made;
1. The major risk factors identified by all contractors is almost similar.
2. Compared with the risk management standards all contractors have more work to do to
improve the implementation of risk management in their project.
3. When we compare FIDIC (1999) and PPPAA (2011) from contractors perspective,
PPPAA allocated price adjustment in the event change in legislation wrongly to the
contractor.
4. They need to increase the frequency of use of all risk management approach in their
project. ( For example, the application of quantitative risk analysis technique as it is lower
than that of qualitative risk analysis.)
In regards to the objectives of the study, the following key conclusions are made;
1. Major risks: based on the probability of occurrence, inadequacy of time or finance, late
supply of information/ design data/ drawing, defective design, financial constraint, delay
in payment, and inflation are identified as the highest ranking risks. In terms of impacts
on project performance, inadequacy of finance, exchange rate, delay in settling claim are
identified as the highest risk factor based on the level of impact on overall performance,
time and cost. Defective design, financial constraints, inflation are also identified as the
highest risk factor based on the level of impact on overall performance, time, cost and
quality. Similarly, delay in payment and mistakes in document are identified as the
highest risk factor based on the level of impact on time, cost, and quality, and impact on
time and cost respectively on a project as delivered by the PPPAA's standard bidding
document. It can be observed that most of these risk factors cannot be controlled or
managed by the contractors. In addition contractors working in this contract is expected to
accept inflation, delay in payment and financial constraint. Thus, there is a need of
including a reinforcing condition within the construction contract which is designed to
solve these risks in legal manner;
2. Allocation of risks amongst the contracting parties; According to the finding in the
allocation of risk factors it is observed that the allocation by the respondent and the
analysis of the contract documents by the writer is different. However, when we consider

120
 PPPAA it has a deficiency in risk allocation. Thus, this is not in general an indication of a
shortage in knowledge and lack of experience in allocating the risk to the required party;
3. Risk management practice: Based on the survey result, contractors investigated, yet to
completely include risk identification and analysis technique in their project. In addition,
when they conduct these risks management techniques, their risk identification and
analysis techniques are below average. The result also shows that most of the techniques
for the identification of risk management issues that belong to construction projects can
be classified as subjective techniques as they are based on perception and reliance on
years of experience in the industry rather than on more scientific and objective ways of
identifying and analyzing risk issues that are provided by risk management processes. In
addition, they use qualitative risk analysis technique specially by project location, project
type, tender document clarity and construction type which is in general a weaker analysis
technique as compared to the more rigorous quantitative analysis techniques
recommended.
4. Capacity improvement in risks management: Previous discussion indicates that
identification and analysis technique applied by the contractors is at low level. In line
with this, following identification and analysis of project risks, it demands a response to
identified project risks. In this regard, the risk response approach indicated in the findings
states that among many response approaches; allocating contingency (accepting), through
insurance (transferring), and adjusting profit margin (mitigating) are commonly used
approaches. This is an indication of the risk response strategy is at lower level in
Ethiopian contractors of class one to three. Therefore, there is a need to improve the
capacity of risk management in the industry.

5.2 RECOMMENDATION
From the findings and the conclusions made above, the following recommendations are
drawn:
1. Contracts are essential tools for organizing the relationship between different parties
involved in the construction project and managing associated risks. Thus, understanding
and respecting what is stated in the contract document both by the employer and
contractor is necessary. In regarding key risks identified, major finance inadequacy could
potentially be improved by increasing the liquidity of the contractors through access to
financial institutions (loans, on time payments, etc.), as significant risk factor, inflation
121
 needs to be looked by stakeholders and appropriate compensation mechanism to be put in
place to mitigate or compensate the impact of this risk on the financial safety of the
contractor, and payment for executed contracts should be organized/processed in a timely
manner to support financial stability to contractors. This can help contractors from
collapse of their financial resources by using strict and improve cash flow system and
reduce the option of reliance on financial institutions loans.
2. Implementing proper (principled) risk allocation between contracting parties and others is
important. Therefore, improving the contract/tender document (including drawings and
specifications) standard (accuracy and intelligibility ) and allocating risks in accordance
with accepted risks allocation philosophies is important for proper risks management. In
addition, PPPAA should be revised to include issue such as price adjustment in the event
change in legislation.
3. Contractors need to develop a risk culture where everybody is involved and understand
the importance of the proper implementation of project risk management processes.
Proper education and training is a must. Contractors should train their construction
professionals and managers, in order to advance risk management approach in the
companies and to improve their understanding of the techniques and methods which are
indicated in risk management standards. In addition, there is a need to improve the use of
both risk analysis techniques especially quantitative technique.
4. This study is limited to the contractors of class one to three, but future research on the topic
should take into consideration the client and the project consultant perspective. Such a study,
in addition to potentially revealing biases by the parties, might be used as across-analysis
purposes to synthesize the outs and draw a more comprehensive assessment of the practice.

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 APPENDIX A: QUESTIONNAIRE

QUESTIONNAIRE

Dear Respondents,
This questionnaire is a part of my M.Sc. degree research in Construction Technology and
Management at Addis Ababa Science and Technology University; and it is designed to obtain
relevant information on my research topic.
Evidence from around the world has shown that construction projects are subject to several
risks. Among the various stakeholders, the contractor has been identified to be the party that
carry the highest number of risks, including many which originate from parties other than
him/herself. However, these studies have not been stereotyped to Ethiopian context and the
risks the local contractors are exposed to when contracting is not thoroughly addressed.
Therefore, to partially fill this gap, this study aims to investigate "The building contractor's
risk sources associated with the contract's delivered through the PPPAA's standard
bidding document."
So it’s with great respect that I ask you to fill and return this questionnaire. I kindly implore
you to fill the questionnaire with your at most care and sincerity. I guarantee that your
identity will be kept confidential and the information you provide only be used for academic
purposes. I will be happy to share the findings of this research when it’s completed.
Thank you in advance for taking your precious time to fill this questionnaire. Since, your
response will greatly contribute to the growth and advancement of knowledge in the
construction industry.
If you have any questions or comments, please don’t hesitate to contact me. You can reach
me by; Mobile: 0911198946; E-mail: [email protected]

With Regards,
Zelalem Berhanu

136
 Justification for the research questions raised in the questionnaire

Research question Explanation

Section A (General information part)

Contains the company and respondents profile. It is important for the researcher to get information about the company experience in the
construction industry and to categorize and examine their knowledge in contract risk management practice in the building construction project.
1 Company profile: Work experience implies the companies
1.1. Work experience in the construction industry; have been in the industry long enough to
Companies experience 0-5 years 5-10 years >10 years furnish/ supply reliable responses in
contract risk management.
In the construction industry
Number of years tell us the maturity of
the company, researchers classification.
1.2. Category: Implies to analyze the knowledge of
contract risk management practice in
Contractor (BC) (GC) Grade 1 2 3 4 5 and 6
each category of contractor's grade 1-6.
Other grades are not included.

1.3. Type of work usually undertaken (note that the delivery system for the project is DBB). Since, the research deals with contract
risk management in the DBB contract
Percentage of the project
and to identify the type of work most
0-10% 10-30% 30-50% 50-70% 70-100%
respondents do under this type of
Commercial/industry buildings delivery system.

Public/community buildings

Others please specify

(________________)

137
2 Respondents profile:
Position/ responsibility implies to
2.1. Position/Responsibility in the company;
provide bias.
General Manager Deputy manager Project manager Operation manger Office-Engineer Other please
Informed position to provide
specify___________________________________.
sufficient/detail company experience.

2.2. Work experience.

Total work experience 0-5 years 5-10 years >10 years To categorize the respondents and their

In the construction industry familiarity with contract risk

management practice previously and
Within this company
within the company.
Number of years tell us the maturity of
the respondents on contract risk,
researchers classification.

Section B( research question)

As the aim of this research is to explore common contract provisions that form as risks to the contractor. And to explore risks that building contractors are exposed within the PPPAA's 2011 SBD/
under DBB delivery system. Accordingly, section B of the research question is designed to answer the question raised based on the aim of the research in line with the objective of the research. Under
this section five main questions are raised as follows.

1 Please tick the listed construction contract risk on the next table( on page 4) based on their probability of occurrence and impacts on a project.
This question is raised to answer the
Probability of occurrence on a project
first and second research questions; to
Rare Unlikely Possible Likely Almost certain
identify and evaluate potential risk
< 2% 2-10% 10-50% 50-80% >80% factors contractors are exposed to while
executing a contract under
PPPAA's(2011) and their probability of
Project Impact on project
occurrence and impact of contract risk

138
 objectives Very low Low Moderate High Very high on three major project objectives (time,

< 5% Insignificant < 10% 10-20% time/ > 20% cost and quality).
Time
Time/schedule time/schedule time/schedule schedule time/schedule Probability of occurrence, impact on

decrease increase increase increase increase project are preset in section 3.11 please
refer for detail.
List of contract risk are identified and
Cost 10% cost insignificant cost < 10% cost 10-30% cost > 30% cost
listed from the literature review section
decrease increase increase increase increase
2.5 please refer for detail.

Quality Quality Only very Quality Quality Project end item

degradation demanding reduction reduction effectively
barely noticeable applications are requires client unacceptable to unusable
affected approve the client

Impact on
Risk in a construction contract Probability of
occurrence over all project
project time Project cost Project quality
performance
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

A) Physical works
1 Change in ground condition
2 Artificial obstacles
3 Defective materials or workman ship
4 Tests and samples approval (materials provided by
contractor)
5 Exceptionally inclement weather
6 Site preparation
7 Inadequacy (insufficient) of staff
8 Inadequacy labour
9 Inadequacy of plant/equipment

139
10 Inadequacy of material
11 Inadequacy of time or finance
B) Delay and disputes
1 Possession of site
2 Late supply of information/ design data/drawing
3 Inefficient execution of work
4 Delay outside of both parties' control
5 Layout (design) dispute

C) Direction and supervision

1 Greed (insatiability) of supervisor

2 Incompetence
3 Inefficiency
4 Unreasonableness
5 Partiality
6 Poor communication
7 Mistakes in documents
8 Defective designs
9 Compliance with requirements
10 Unclear requirements
11 Inappropriate consultants or contractors
12 Changes in requirements

D) Damage and injury to persons and property

1 Negligence or breach of warranty

2 Uninsurable matters
3 Accidents within the construction site
4 Uninsurable risks
5 Consequential losses
6 Exclusion

140
7 Gaps and time limits in insurance cover
E) External factors
1 Government policy on taxes
2 Labour strike
3 Safety or other laws
4 Planning approvals
5 Financial constraints
6 Energy or pay restraints
7 Cost of war or civil commotion
8 Malicious (hateful) damage
9 Intimidation (threats)
10 Industrial disputes
F) Payment
1 Delay in settling claims and certifying
2 Delay in payment
3 Legal limits on recovery of interest
4 Insolvency (bankruptcy)
5 Funding constraints
6 Shortcomings in the measure and value process

7 Exchange rates
8 Inflation
G) Law and arbitration
1 Delay in resolving disputes
2 Injustice (unfairness)
3 Uncertainty due to lack of records or ambiguity of
contract
4 Cost of obtaining decision
5 Enforcing decisions

141
 6 Changes in statutes
7 New interpretations of common law

2 Risk management approaches: Implies to check the companies risk

2.1 Does your company conduct a risk identification technique on project? (For example: document, drawing, quantity, and price review). identification techniques.
The choose are given by researcher to
Never 25% of the project 25-50% of the project 50-75% of the project 75-100% of the project
evaluate the identification techniques in
the number of project.

142
 2.2 If your answer to the question 2.1 is "other than Never" what techniques do you employ to identify contract risk? ( please tick the
These questions are raised to the
actual technique you are using on space provided and multiple answers possible).
respondents to check the current stage
of risk identification practice of the local
0-25% of 25-50% of 50-75% of 75-100% of contractors; to relate with previous
Techniques to identify contract risk
the project the project the project the project studies conducted and also with the
1 Document review such as: tender document, drawing, quantity, literature reviewed.
and price checking). Techniques to identify contract risk is
2 Information gathering technique taken from literature review please refer
2.1 Brain storming section 2.6 for detail.
2.2 Delphi technique
2.3 Interview
2.4 Root cause analysis
2.5 Others please specify
3 Check list analysis (based on historical information and
knowledge from previous project).
4 Assumption analysis
5 Diagramming analysis like cause effect and system flow
6 SWOT (strength, weakness, opportunity and treat) analysis
7 Experienced person opinion or judgment
8 Others please specify_____________________________.

2.3 Does your company conduct risk analysis on projects? Implies to check the companies risk
analysis techniques.
Never 25% of the project 25-50% of the project 50-75% of the project 75-100% of the project
The choose are given by researcher to
evaluate the analysis technique in the
2.4 If your answer to the question 2.3 is "other than Never" what techniques do you employ to analyze contract risk on project? (please
number of project.
tick the actual technique you are using on space provided and multiple answers possible).

143
 0-25% of 25-50% of 50-75% of 75-100% of
Techniques to analyze contract risk the project the project the project the project
The analysis techniques are adapted from
1 Comparative analysis based on: literature review please refer section 2.6.3

1.1 Project type and 2.6.4.

1.2 Project cost

1.3 Project time/ schedule

1.4 Construction type

1.5 Project location

1.6 Tender document clarity

1.7 Other please specify____________________________.

2 Diagram analysis
2.1 Sensitivity analysis ( the tornado diagram)
2.2 Expected monitory analysis (decision tree analysis)
2.3 Modeling & simulation (Monte Carlo simulation)

2.4 Others please specify____________________________.

3 Fuzzy logic
for example: to model the relationships between the characteristics
of a project and the potential risk events that may occur, and the
associated cost overruns caused by combinations of the project
characteristics and risk events.
4 Others please specify ______________________________.

3 From the listed type of risk in a construction contract on the next table please tick appropriately the parties/ sources of these risks in building Since, the risk borne by the employer
construction project having an effect on a building contractor. ( you can tick on more than one party).

144
 * Beyond the control of both parties (for example if a suppliers did not deliver the agreed material for the contractor/client on the scheduled and contractor are not limited to those
date). allocated by the contract and also there
are some risks beyond the control of
Allocation both the contractor and the employer.
Accordingly, the this question is raised

Contracto

measure*
to the respondent to answer the third
Risk in a construction contract

Client

Force
research question. That is; the allocation

r
of each identified contract risk factors
A) Physical works from contractor's perspective.
1 change in ground condition
2 artificial obstacles
3 defective materials or workman ship
4 tests and samples approval (materials provided by contractor)
5 exceptionally inclement weather
6 site preparation
7 inadequacy (insufficient) of staff
8 inadequacy labour
9 inadequacy of plant/ equipment
10 inadequacy of material
11 inadequacy of time or finance
B) Delay and disputes
1 possession of site
2 late supply of information/design data/drawings
3 inefficient execution of work

4 delay outside of both parties' control

5 layout (design) dispute
C) Direction and supervision
1 greed (insatiability) of supervisor

145
2 Incompetence
3 Inefficiency
4 Unreasonableness
5 Partiality
6 poor communication
7 mistakes in documents
8 defective designs
9 compliance with requirements
10 unclear requirements
11 inappropriate consultants or contractors
12 changes in requirements
D) Damage and injury to persons and property
1 negligence or breach of warranty

2 uninsurable matters
3 accidents within the construction site
4 uninsurable risks
5 consequential losses
6 Exclusions
7 gaps and time limits in insurance cover

E) External factors
1 government policy on taxes

2 labour strike
3 safety or other laws

4 planning approvals
5 financial constraints
6 energy or pay restraints
7 cost of war or civil commotion

8 malicious (hateful) damage

146
 9 intimidation (threats)

10 industrial disputes
F) Payment
1 delay in settling claims and certifying

2 delay in payment
3 legal limits on recovery of interest
4 insolvency (bankruptcy)

5 funding constraints
6 shortcomings in the measure and value process

7 exchange rates

8 Inflation
G) Law and arbitration
1 delay in resolving disputes

2 injustice (unfairness)
3 uncertainty due to lack of records or ambiguity of contract

4 cost of obtaining decision

5 enforcing decisions

6 changes in statutes
7 new interpretations of common law

4
What risk response approach do you often employ on your project? Implies to check the companies risk
How do you prevent/ mitigate these risks to the parties involved in a project? (please tick appropriately on the space provided and multiple response approach.
answers possible). The choose are given by researcher to

147
 0-25% of 25-50% of 50-75% of 75-100% of evaluate risk response approach in the
Risk response approach
the project the project the project the project number of project.
The response approach are adapted from
1 Mitigate the risk:
literature review please refer section 2.6.5.
1.1 By negotiation when and if the risk occurs.
1.2 By design review.
1.3 By contract document analysis.
1.4 By conducting more tests on a product or service.
1.5 By choosing more stable supplier.
1.6 By adopting less complex process
1.7 Other please specify____________________________.
2 Transfer the risk:
2.1 Through sub-contracting to sub-contractor.
2.2 Through insurance to insurance companies.
2.3 Others please specify_________________________.

3 Accept the risk:

3.1 By allocating responsible person.
3.2 By allocating contingency.
3.3 By adjusting profit margin.
3.4 By stocking resource.
3.5 By extending or shortening the schedule.
3.6 Others please specify
______________________________.

148
How do you think risk management practice can be promoted in Ethiopian's building construction industry? ( please tick on space provided and It will be help full for the researcher to
multiple answers possible). Very low (1), Low (2), Moderate (3), High (4) and Very high (5). draw a conclusion and recommendation
on risk management practice in the
Risk management practice 1 2 3 4 5 building construction industry based on

A Providing training and seminar on risk management. the respondents opinion.

B Introducing courses and program related to/ Inclusion of risk management systems among education and
training subjects of construction practitioners.
C Introduction of risk management standard by government or other agencies.

D Improving the contract standard (accuracy).

E Implementing proper risk allocation.
F Improving design documents (assuming design is one of the causes).

G Capacity building in the sector ( for example if law labour competence is a source of risk).
H Respecting the contract document both by the employer and contractor.
I Encouraging collaboration culture environment among involved parties.
J Request for implementation of risk management systems in projects by employer and end users.
K Incorporating implementation of risk management systems among the strategic objectives of
organizations involved in projects.
L Awareness and knowledge of the process for implementing Risk Management
I Other please specify______________________________________.

149
APPENDIX B: PROBABILITY OF OCCURRENCE OF POTENTIAL RISK FACTORS

Probability of occurrence of potential risk

Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined
factor

Level of Level of Level of Level of

Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank W.A.S Rank
impact impact impact impact

A) Physical works
1 Change in ground condition 2.91 5 possible 3.92 1 likely 3.44 2 possible 3.42 2 Possible
2 Artificial obstacles 2.72 10 possible 3.00 7 possible 2.69 10 possible 2.80 10 Possible
3 Defective materials or workman ship 2.78 9 possible 3.00 7 possible 2.81 9 possible 2.86 9 Possible
4 Tests and samples approval (materials
provided by contractor) 2.91 5 possible 3.08 6 possible 3.38 4 possible 3.12 4 Possible
5 Exceptionally inclement weather 2.13 11 unlikely 2.23 11 unlikely 2.00 11 unlikely 2.12 11 Unlikely
6 Site preparation 2.88 8 possible 3.00 7 possible 3.34 5 possible 3.07 6 Possible
7 Inadequacy (insufficient) of staff 3.00 3 possible 2.69 10 possible 3.41 3 possible 3.03 8 Possible
8 Inadequacy labor 2.91 5 possible 3.30 3 possible 3.06 7 possible 3.09 5 Possible
9 Inadequacy of plant/equipment 2.97 4 possible 3.15 4 possible 3.06 7 possible 3.06 7 Possible
10 Inadequacy of material 3.28 2 possible 3.15 4 possible 3.31 6 possible 3.25 3 Possible
11 Inadequacy of time or finance 3.50 1 possible 3.77 2 likely 3.75 1 likely 3.67 1 Likely
B) Delay and disputes
1 Possession of site 2.91 2 possible 3.38 2 possible 3.16 2 possible 3.15 2 Possible
2 Late supply of information/ design
data/drawing 3.41 1 possible 3.69 1 likely 3.69 1 likely 3.60 1 Likely

150
3 Inefficient execution of work 2.56 4 possible 3.00 3 possible 2.94 4 possible 2.83 3 Possible
4 Delay outside of both parties' control 2.47 5 unlikely 3.00 3 possible 2.41 5 unlikely 2.63 5 Possible
5 Layout (design) dispute 2.63 3 possible 2.62 5 possible 3.09 3 possible 2.78 4 Possible
C) Direction and supervision
1 Greed (insatiability) of supervisor 2.97 3 possible 2.92 5 possible 3.47 3 possible 3.12 3 Possible
2 Incompetence (luck of skill) 2.97 3 possible 3.08 3 possible 3.16 4 possible 3.07 4 Possible
3 Inefficiency (wastefulness) 2.69 6 possible 2.85 6 possible 3.16 4 possible 2.90 6 Possible
4 Unreasonableness 2.41 11 unlikely 2.23 12 unlikely 2.91 10 possible 2.52 12 Possible
5 Partiality 2.28 12 unlikely 2.54 10 possible 2.91 11 possible 2.58 11 Possible
6 Poor communication 2.44 10 unlikely 2.46 11 unlikely 3.00 8 possible 2.63 9 Possible
7 Mistakes in documents 3.09 2 possible 3.62 2 likely 3.75 2 likely 3.49 2 Possible
8 Defective designs 3.34 1 possible 3.77 1 likely 3.97 1 likely 3.69 1 Likely
9 Compliance with requirements 2.63 7 possible 3.08 3 possible 3.16 4 possible 2.95 5 Possible
10 Unclear requirements 2.47 8 unlikely 2.62 9 possible 2.81 12 possible 2.63 10 Possible
11 Inappropriate consultants or contractors 2.47 8 unlikely 2.77 7 possible 3.09 7 possible 2.78 8 Possible
12 Changes in requirements 2.72 5 possible 2.69 8 possible 2.97 9 possible 2.79 7 Possible
D) Damage and injury to persons and
property
1 Negligence or breach of warranty 2.75 2 possible 2.85 2 possible 2.47 2 unlikely 2.69 2 Possible
2 Uninsurable matters 2.38 4 unlikely 2.38 4 unlikely 2.22 3 unlikely 2.33 4 Unlikely
3 Accidents within the construction site 3.03 1 possible 2.92 1 possible 2.84 1 possible 2.93 1 Possible
4 Uninsurable risks 2.31 7 unlikely 2.08 7 unlikely 2.22 3 unlikely 2.20 7 Unlikely
5 Consequential losses 2.38 4 unlikely 2.15 5 unlikely 2.16 6 unlikely 2.23 5 Unlikely
6 Exclusion (not covered by insurance) 2.34 6 unlikely 2.15 5 unlikely 2.16 6 unlikely 2.22 6 Unlikely
7 Gaps and time limits in insurance cover 2.72 3 possible 2.62 3 possible 2.22 3 unlikely 2.52 3 Possible
E) External factors
1 Government policy on taxes 2.22 4 unlikely 2.54 4 possible 2.22 4 unlikely 2.33 4 Unlikely
2 Labor strike 2.09 5 unlikely 2.23 5 unlikely 1.75 7 unlikely 2.02 6 Unlikely
151
3 Safety or other laws 2.09 5 unlikely 2.15 6 unlikely 2.09 5 unlikely 2.11 5 Unlikely
4 Planning approvals 2.97 3 possible 3.08 2 possible 3.13 2 possible 3.06 2 Possible
5 Financial constraints 3.59 1 likely 3.62 1 likely 3.81 1 likely 3.67 1 Likely
6 Energy or pay restraints 3.03 2 possible 2.62 3 possible 2.63 3 possible 2.76 3 Possible
7 Cost of war or civil commotion 1.47 10 rare 1.23 10 rare 1.78 6 unlikely 1.49 10 Rare
8 Malicious (hateful) damage 1.63 9 unlikely 1.46 9 rare 1.53 9 unlikely 1.54 9 Unlikely
9 Intimidation (threats) 1.94 7 unlikely 1.85 7 unlikely 1.53 9 unlikely 1.77 7 Unlikely
10 Industrial disputes 1.84 8 unlikely 1.62 8 unlikely 1.63 8 unlikely 1.69 8 Unlikely
F) Payment
1 Delay in settling claims and certifying 3.63 3 likely 3.62 3 likely 3.16 5 possible 3.47 3 Possible
2 Delay in payment 4.31 1 likely 4.15 1 likely 4.28 1 likely 4.25 1 Likely
3 Legal limits on recovery of interest 2.81 7 possible 2.85 7 possible 2.97 6 possible 2.88 7 Possible
4 Insolvency (bankruptcy) 2.63 8 possible 2.38 8 unlikely 2.09 8 unlikely 2.37 8 Unlikely
5 Funding constraints 3.34 4 possible 3.31 4 possible 3.53 3 likely 3.39 4 Possible
6 Shortcomings in the measure and value
process 2.88 6 possible 3.15 5 possible 2.88 7 possible 2.97 6 Possible
7 Exchange rates 3.03 5 possible 2.92 6 possible 3.38 4 possible 3.11 5 Possible
8 Inflation 3.88 2 likely 3.92 2 likely 3.94 2 likely 3.91 2 Likely
G) Law and arbitration
1 Delay in resolving disputes 2.38 2 unlikely 2.77 2 possible 3.09 3 possible 2.75 3 Possible
2 Injustice (unfairness) 2.28 4 unlikely 2.77 2 possible 2.84 5 possible 2.63 4 Possible
3 Uncertainty due to lack of records or
ambiguity of contract 2.88 1 possible 3.31 1 possible 3.38 1 possible 3.19 1 Possible
4 Cost of obtaining decision 2.38 2 unlikely 2.77 2 possible 3.16 2 possible 2.77 2 Possible
5 Enforcing decisions 2.19 5 unlikely 2.08 6 unlikely 2.94 4 possible 2.40 5 Unlikely
6 Changes in statutes 2.00 6 unlikely 2.15 5 unlikely 2.47 6 unlikely 2.21 6 Unlikely

152
APPENDIX C: POTENTIAL RISK FACTORS IMPACT ON PERFORMANCE
Impact on overall performance Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Level of Level of Level of Level of

Risk in a construction contract W.A.S Rank W.A.S Rank W.A.S Rank W.A.S Rank
impact impact impact impact

A) Physical works
1 Change in ground condition 3.03 6 possible 3.38 4 possible 3.28 5 possible 3.23 5 Possible
2 Artificial obstacles 2.84 8 possible 2.69 10 possible 2.91 9 possible 2.81 10 Possible
3 Defective materials or workman ship 2.78 10 possible 2.77 9 possible 2.84 11 possible 2.80 11 Possible
4 Tests and samples approval (materials
provided by contractor) 2.94 7 possible 2.92 6 possible 3.19 7 possible 3.02 7 Possible
5 Exceptionally inclement weather 2.72 11 possible 2.92 6 possible 2.91 9 possible 2.85 9 Possible
6 Site preparation 2.81 9 possible 2.92 6 possible 3.13 8 possible 2.95 8 Possible
7 Inadequacy (insufficient) of staff 3.31 2 possible 2.62 11 possible 3.38 3 possible 3.10 6 Possible
8 Inadequacy labor 3.16 5 possible 3.38 4 possible 3.31 4 possible 3.28 4 Possible
9 Inadequacy of plant/equipment 3.31 2 possible 3.54 2 likely 3.25 6 possible 3.37 3 Possible
10 Inadequacy of material 3.31 2 possible 3.54 2 likely 3.59 2 likely 3.48 2 Possible
11 Inadequacy of time or finance 3.81 1 likely 3.85 1 likely 3.97 1 likely 3.88 1 Likely
B) Delay and disputes
1 Possession of site 3.00 3 possible 3.38 2 possible 3.19 4 possible 3.19 4 Possible
2 Late supply of information/ design
data/drawing 3.22 2 possible 3.31 3 possible 3.69 1 likely 3.40 1 Possible
3 Inefficient execution of work 3.00 3 possible 3.46 1 possible 3.41 3 possible 3.29 2 Possible
4 Delay outside of both parties' control 2.97 5 possible 3.15 4 possible 2.94 5 possible 3.02 5 Possible
5 Layout (design) dispute 3.31 1 possible 3.00 5 possible 3.44 2 possible 3.25 3 Possible
C) Direction and supervision

153
1 Greed (insatiability) of supervisor 3.19 5 possible 3.38 3 possible 3.38 4 possible 3.32 4 Possible
2 Incompetence (luck of skill) 3.50 2 possible 3.31 4 possible 3.38 4 possible 3.39 3 Possible
3 Inefficiency (wastefulness) 2.69 11 possible 3.31 4 possible 3.09 8 possible 3.03 8 Possible
4 Unreasonableness 2.75 10 possible 2.46 12 unlikely 2.81 12 possible 2.67 12 Possible
5 Partiality 2.69 11 possible 2.54 11 possible 2.91 11 possible 2.71 11 Possible
6 Poor communication 2.84 9 possible 2.85 10 possible 3.13 6 possible 2.94 10 Possible
7 Mistakes in documents 3.25 3 possible 3.69 2 likely 3.41 3 possible 3.45 2 Possible
8 Defective designs 3.88 1 likely 4.08 1 likely 3.59 1 likely 3.85 1 Likely
9 Compliance with requirements 2.97 7 possible 3.31 4 possible 3.13 6 possible 3.13 6 Possible
10 Unclear requirements 3.22 4 possible 3.08 7 possible 2.97 10 possible 3.09 7 Possible
11 Inappropriate consultants or contractors 3.16 6 possible 3.08 7 possible 3.47 2 possible 3.23 5 Possible
12 Changes in requirements 2.94 8 possible 3.00 9 possible 3.00 9 possible 2.98 9 Possible
D) Damage and injury to persons and
property
1 Negligence or breach of warranty 3.25 1 possible 2.77 1 possible 2.59 2 possible 2.87 2 Possible
2 Uninsurable matters 2.66 4 possible 2.54 5 possible 2.41 5 unlikely 2.53 4 Possible
3 Accidents within the construction site 3.19 2 possible 2.77 1 possible 2.97 1 possible 2.98 1 Possible
4 Uninsurable risks 2.41 6 unlikely 2.38 6 unlikely 2.41 5 unlikely 2.40 6 Unlikely
5 Consequential losses 2.44 5 unlikely 2.62 4 possible 2.47 4 unlikely 2.51 5 Possible
6 Exclusion (not covered by insurance) 2.31 7 unlikely 2.38 6 unlikely 2.38 7 unlikely 2.36 7 Unlikely
7 Gaps and time limits in insurance cover 2.81 3 possible 2.69 3 possible 2.59 2 possible 2.70 3 Possible
E) External factors
1 Government policy on taxes 3.03 3 possible 3.08 3 possible 2.69 4 possible 2.93 3 Possible
2 Labor strike 2.63 5 possible 2.62 5 possible 2.66 5 possible 2.63 5 Possible
3 Safety or other laws 2.59 6 possible 2.54 6 possible 2.53 6 possible 2.55 6 Possible
4 Planning approvals 3.19 2 possible 3.23 2 possible 3.22 2 possible 3.21 2 Possible
154
5 Financial constraints 3.81 1 likely 4.00 1 likely 4.03 1 likely 3.95 1 Likely
6 Energy or pay restraints 3.00 4 possible 2.85 4 possible 2.91 3 possible 2.92 4 Possible
7 Cost of war or civil commotion 2.09 10 unlikely 2.08 10 unlikely 2.13 9 unlikely 2.10 10 Unlikely
8 Malicious (hateful) damage 2.59 6 possible 2.15 8 unlikely 1.88 10 unlikely 2.21 9 Unlikely
9 Intimidation (threats) 2.47 8 unlikely 2.15 8 unlikely 2.16 8 unlikely 2.26 8 Unlikely
10 Industrial disputes 2.47 8 unlikely 2.23 7 unlikely 2.28 7 unlikely 2.33 7 Unlikely
F) Payment
1 Delay in settling claims and certifying 4.03 3 likely 3.92 4 likely 3.53 4 likely 3.83 4 Likely
2 Delay in payment 4.03 3 likely 4.08 2 likely 4.09 2 likely 4.07 2 Likely
3 Legal limits on recovery of interest 2.81 8 possible 2.77 8 possible 3.03 7 possible 2.87 8 Possible
4 Insolvency (bankruptcy) 3.97 5 likely 3.31 6 possible 3.00 8 possible 3.43 6 Possible
5 Funding constraints 3.84 6 likely 3.69 5 likely 3.53 4 likely 3.69 5 Likely
6 Shortcomings in the measure and value
process 3.03 7 possible 3.23 7 possible 3.09 6 possible 3.12 7 Possible
7 Exchange rates 4.25 2 likely 4.08 2 likely 3.84 3 likely 4.06 3 Likely
8 Inflation 4.31 1 likely 4.15 1 likely 4.16 1 likely 4.21 1 Likely
G) Law and arbitration
1 Delay in resolving disputes 3.03 1 possible 3.38 2 possible 3.34 2 possible 3.25 2 Possible
2 Injustice (unfairness) 2.75 4 possible 3.23 3 possible 3.03 4 possible 3.00 4 Possible
3 Uncertainty due to lack of records or
ambiguity of contract 3.03 1 possible 3.54 1 likely 3.28 3 possible 3.28 1 Possible
4 Cost of obtaining decision 2.91 3 possible 3.23 3 possible 3.47 1 possible 3.20 3 Possible
5 Enforcing decisions 2.34 6 unlikely 2.69 6 possible 3.00 5 possible 2.68 6 Possible
6 Changes in statutes 2.63 5 possible 3.00 5 possible 2.84 6 possible 2.82 5 Possible

155
 Impact on Time Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

W.A. Ran Level of W.A. Ran Level of Ran Level of Ran Level of
Risk in a construction contract W.A.S W.A.S
S k impact S k impact k impact k impact

A) Physical works
1 Change in ground condition 3.59 2 likely 3.69 3 likely 3.81 3 likely 3.70 2 Likely
2 Artificial obstacles 3.03 8 possible 2.77 8 possible 3.03 11 possible 2.94 9 Possible
3 Defective materials or workman ship 3.00 9 possible 2.62 10 possible 3.16 10 possible 2.92 10 Possible
4 Tests and samples approval (materials
provided by contractor) 2.84 11 possible 2.46 11 unlikely 3.34 8 possible 2.88 11 Possible
5 Exceptionally inclement weather 3.19 7 possible 2.92 6 possible 3.25 9 possible 3.12 7 Possible
6 Site preparation 2.88 10 possible 2.85 7 possible 3.38 7 possible 3.03 8 Possible
7 Inadequacy (insufficient) of staff 3.50 4 possible 2.69 9 possible 3.84 2 likely 3.35 6 Possible
8 Inadequacy labor 3.31 6 possible 3.54 4 likely 3.72 4 likely 3.52 4 Likely
9 Inadequacy of plant/equipment 3.59 2 likely 3.31 5 possible 3.44 6 possible 3.45 5 Possible
10 Inadequacy of material 3.47 5 possible 3.85 2 likely 3.56 5 likely 3.63 3 Likely
11 Inadequacy of time or finance 4.06 1 likely 4.31 1 likely 4.19 1 likely 4.19 1 Likely
B) Delay and disputes
1 Possession of site 3.31 2 possible 3.62 1 likely 3.44 3 possible 3.46 2 Possible
2 Late supply of information/ design
data/drawing 3.50 1 possible 3.62 1 likely 3.84 1 likely 3.65 1 Likely
3 Inefficient execution of work 3.09 5 possible 3.54 3 likely 3.41 4 possible 3.35 4 Possible
4 Delay outside of both parties' control 3.16 4 possible 3.15 5 possible 3.06 5 possible 3.12 5 Possible
5 Layout (design) dispute 3.31 2 possible 3.31 4 possible 3.66 2 likely 3.43 3 Possible
C) Direction and supervision
1 Greed (insatiability) of supervisor 1.00 12 rare 1.00 12 rare 1.00 12 rare 1.00 12 Rare
2 Incompetence (luck of skill) 3.44 4 possible 3.31 3 possible 3.44 3 possible 3.39 3 Possible

156
3 Inefficiency (wastefulness) 2.88 10 possible 3.15 4 possible 3.13 6 possible 3.05 8 Possible
4 Unreasonableness 2.75 11 possible 2.54 11 possible 3.09 7 possible 2.79 11 Possible
5 Partiality 2.94 9 possible 2.77 10 possible 3.09 7 possible 2.93 10 Possible
6 Poor communication 3.06 5 possible 2.92 9 possible 3.25 5 possible 3.08 6 Possible
7 Mistakes in documents 3.56 2 likely 3.69 2 likely 3.59 2 likely 3.62 2 Likely
8 Defective designs 3.63 1 likely 4.00 1 likely 3.69 1 likely 3.77 1 Likely
9 Compliance with requirements 3.03 7 possible 3.15 4 possible 3.03 11 possible 3.07 7 possible
10 Unclear requirements 3.00 8 possible 3.00 8 possible 3.06 9 possible 3.02 9 possible
11 Inappropriate consultants or contractors 3.50 3 possible 3.08 7 possible 3.44 3 possible 3.34 4 possible
12 Changes in requirements 3.06 5 possible 3.15 4 possible 3.06 9 possible 3.09 5 possible
D) Damage and injury to persons and
property
1 Negligence or breach of warranty 3.06 1 possible 2.69 2 possible 2.84 1 possible 2.87 2 possible
2 Uninsurable matters 2.63 5 possible 2.23 7 unlikely 2.56 4 possible 2.47 5 unlikely
3 Accidents within the construction site 3.06 1 possible 2.92 1 possible 2.81 2 possible 2.93 1 possible
4 Uninsurable risks 2.34 7 unlikely 2.31 5 unlikely 2.56 4 possible 2.40 6 unlikely
5 Consequential losses 2.66 4 possible 2.54 4 possible 2.56 4 possible 2.59 4 possible
6 Exclusion (not covered by insurance) 2.41 6 unlikely 2.31 5 unlikely 2.34 7 unlikely 2.35 7 unlikely
7 Gaps and time limits in insurance cover 2.75 3 possible 2.62 3 possible 2.75 3 possible 2.71 3 possible
E) External factors
1 Government policy on taxes 2.56 6 possible 2.77 3 possible 2.63 6 possible 2.65 6 possible
2 Labor strike 3.00 3 possible 2.69 4 possible 2.91 3 possible 2.87 3 possible
3 Safety or other laws 2.78 5 possible 2.62 6 possible 2.81 4 possible 2.74 5 possible
4 Planning approvals 3.09 2 possible 3.31 2 possible 3.19 2 possible 3.20 2 possible
5 Financial constraints 3.91 1 likely 4.15 1 likely 4.06 1 likely 4.04 1 likely
6 Energy or pay restraints 3.00 3 possible 2.69 4 possible 2.78 5 possible 2.82 4 possible
7 Cost of war or civil commotion 2.53 8 possible 2.31 8 unlikely 2.28 9 unlikely 2.37 9 unlikely
8 Malicious (hateful) damage 2.56 6 possible 2.38 7 unlikely 2.25 10 unlikely 2.40 8 unlikely
157
9 Intimidation (threats) 2.47 9 unlikely 2.31 8 unlikely 2.34 8 unlikely 2.37 9 unlikely
10 Industrial disputes 2.47 9 unlikely 2.23 10 unlikely 2.56 7 possible 2.42 7 unlikely
F) Payment
1 Delay in settling claims and certifying 4.28 2 likely 3.92 3 likely 3.47 5 possible 3.89 4 likely
2 Delay in payment 4.06 3 likely 4.15 2 likely 4.13 2 likely 4.11 2 likely
3 Legal limits on recovery of interest 3.19 8 possible 3.00 8 possible 2.84 8 possible 3.01 8 possible
4 Insolvency (bankruptcy) 3.75 5 likely 3.31 6 possible 3.22 6 possible 3.43 6 possible
5 Funding constraints 3.63 6 likely 3.62 5 likely 3.59 4 likely 3.61 5 likely
6 Shortcomings in the measure and value
process 3.28 7 possible 3.31 6 possible 3.13 7 possible 3.24 7 possible
7 Exchange rates 4.06 3 likely 3.92 3 likely 3.88 3 likely 3.95 3 likely
8 most
Inflation 4.56 1 likely 4.38 1 likely 4.28 1 likely 4.41 1 likely
G) Law and arbitration
1 Delay in resolving disputes 3.34 1 possible 3.46 1 possible 3.66 1 likely 3.49 1 possible
2 Injustice (unfairness) 3.00 4 possible 3.15 4 possible 3.03 4 possible 3.06 4 possible
3 Uncertainty due to lack of records or
ambiguity of contract 3.06 3 possible 3.31 2 possible 3.34 3 possible 3.24 3 possible
4 Cost of obtaining decision 3.31 2 possible 3.31 2 possible 3.41 2 possible 3.34 2 possible
5 Enforcing decisions 2.38 6 unlikely 2.62 6 possible 2.94 5 possible 2.64 6 possible
6 Changes in statutes 2.69 5 possible 2.92 5 possible 2.72 6 possible 2.78 5 possible

158
 Impact on Cost Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Ran Level of Ran Level of Ran Level of Ran Level of

Risk in a construction contract W.A.S W.A.S W.A.S W.A.S
k impact k impact k impact k impact

A) Physical works
1 Change in ground condition 3.53 2 likely 3.31 3 possible 3.50 3 possible 3.45 2 possible
2 Artificial obstacles 2.84 9 possible 2.54 8 possible 2.84 10 possible 2.74 9 possible
3 Defective materials or workman ship 3.06 7 possible 2.77 6 possible 3.25 7 possible 3.03 7 possible
4 Tests and samples approval (materials
provided by contractor) 2.66 10 possible 2.54 8 possible 3.03 8 possible 2.74 9 possible
5 Exceptionally inclement weather 2.38 11 unlikely 2.38 11 unlikely 2.72 11 possible 2.49 11 unlikely
6 Site preparation 2.94 8 possible 2.62 7 possible 2.97 9 possible 2.84 8 possible
7 Inadequacy (insufficient) of staff 3.22 5 possible 2.54 8 possible 3.66 2 likely 3.14 6 possible
8 Inadequacy labor 3.19 6 possible 3.08 4 possible 3.44 4 possible 3.23 5 possible
9 Inadequacy of plant/equipment 3.44 3 possible 2.92 5 possible 3.41 5 possible 3.26 4 possible
10 Inadequacy of material 3.41 4 possible 3.38 2 possible 3.41 5 possible 3.40 3 possible
11 Inadequacy of time or finance 3.88 1 likely 3.69 1 likely 4.09 1 likely 3.89 1 likely
B) Delay and disputes
1 Possession of site 2.88 5 possible 3.46 1 possible 3.16 4 possible 3.16 3 possible
2 Late supply of information/ design
data/drawing 3.31 1 possible 3.23 3 possible 3.53 1 likely 3.36 1 possible
3 Inefficient execution of work 3.00 3 possible 3.38 2 possible 3.44 2 possible 3.27 2 possible
4 Delay outside of both parties' control 2.91 4 possible 3.00 4 possible 2.78 5 possible 2.90 5 possible
5 Layout (design) dispute 3.06 2 possible 3.00 4 possible 3.38 3 possible 3.15 4 possible
C) Direction and supervision
1 Greed (insatiability) of supervisor 2.84 10 possible 2.85 9 possible 3.47 3 possible 3.05 7 possible
2 Incompetence (luck of skill) 3.47 3 possible 3.08 4 possible 3.44 4 possible 3.33 3 possible

159
3 Inefficiency (wastefulness) 2.94 9 possible 3.23 3 possible 3.19 7 possible 3.12 6 possible
4 Unreasonableness 2.69 12 possible 2.46 12 unlikely 3.09 9 possible 2.75 12 possible
5 Partiality 2.75 11 possible 2.62 11 possible 2.91 12 possible 2.76 11 possible
6 Poor communication 3.19 5 possible 2.69 10 possible 3.19 7 possible 3.02 8 possible
7 Mistakes in documents 3.81 2 likely 3.77 2 likely 3.56 2 likely 3.71 2 likely
8 Defective designs 3.88 1 likely 4.00 1 likely 3.66 1 likely 3.84 1 likely
9 Compliance with requirements 3.06 6 possible 3.08 4 possible 3.22 6 possible 3.12 5 possible
10 Unclear requirements 3.00 7 possible 2.92 7 possible 2.94 11 possible 2.95 10 possible
11 Inappropriate consultants or contractors 3.38 4 possible 3.00 6 possible 3.34 5 possible 3.24 4 possible
12 Changes in requirements 3.00 7 possible 2.92 7 possible 3.06 10 possible 3.00 9 possible
D) Damage and injury to persons and
property
1 Negligence or breach of warranty 3.16 2 possible 2.62 3 possible 2.81 2 possible 2.86 2 possible
2 Uninsurable matters 2.66 6 possible 2.31 6 unlikely 2.63 6 possible 2.53 6 possible
3 Accidents within the construction site 3.19 1 possible 2.77 1 possible 2.84 1 possible 2.93 1 possible
4 Uninsurable risks 2.56 7 possible 2.31 6 unlikely 2.69 5 possible 2.52 7 possible
5 Consequential losses 2.84 4 possible 2.46 4 unlikely 2.72 4 possible 2.67 4 possible
6 Exclusion (not covered by insurance) 2.81 5 possible 2.38 5 unlikely 2.47 7 unlikely 2.56 5 possible
7 Gaps and time limits in insurance cover 2.88 3 possible 2.69 2 possible 2.78 3 possible 2.78 3 possible
E) External factors
1 Government policy on taxes 2.69 8 possible 2.46 8 unlikely 2.84 3 possible 2.66 5 possible
2 Labor strike 2.94 3 possible 2.54 4 possible 2.84 3 possible 2.77 4 possible
3 Safety or other laws 2.75 7 possible 2.54 4 possible 2.63 6 possible 2.64 6 possible
4 Planning approvals 2.94 3 possible 3.00 2 possible 3.06 2 possible 3.00 2 possible
5 Financial constraints 3.88 1 likely 3.77 1 likely 4.00 1 likely 3.88 1 likely
6 Energy or pay restraints 3.06 2 possible 2.85 3 possible 2.72 5 possible 2.88 3 possible
7 Cost of war or civil commotion 2.69 8 possible 2.31 9 unlikely 2.25 9 unlikely 2.42 10 unlikely
8 Malicious (hateful) damage 2.88 5 possible 2.54 4 possible 2.22 10 unlikely 2.54 8 possible
160
9 Intimidation (threats) 2.88 5 possible 2.54 4 possible 2.31 8 unlikely 2.58 7 possible
10 Industrial disputes 2.56 10 possible 2.23 10 unlikely 2.63 6 possible 2.47 9 unlikely
F) Payment
1 Delay in settling claims and certifying 4.06 3 likely 3.77 3 likely 3.41 5 possible 3.75 4 likely
2 Delay in payment 4.09 2 likely 3.92 2 likely 4.06 2 likely 4.03 2 likely
3 Legal limits on recovery of interest 3.13 8 possible 2.77 8 possible 2.97 8 possible 2.95 8 possible
4 Insolvency (bankruptcy) 3.94 4 likely 3.38 5 possible 3.13 7 possible 3.48 6 possible
5 Funding constraints 3.47 6 possible 3.38 5 possible 3.72 4 likely 3.52 5 likely
6 Shortcomings in the measure and value
process 3.47 6 possible 3.38 5 possible 3.25 6 possible 3.37 7 possible
7 Exchange rates 3.91 5 likely 3.77 3 likely 3.97 3 likely 3.88 3 likely
8 Inflation 4.38 1 likely 4.08 1 likely 4.44 1 likely 4.30 1 likely
G) Law and arbitration
1 Delay in resolving disputes 2.88 3 possible 3.23 1 possible 3.53 1 likely 3.21 2 possible
2 Injustice (unfairness) 2.84 4 possible 3.15 3 possible 3.00 5 possible 3.00 4 possible
3 Uncertainty due to lack of records or
ambiguity of contract 3.16 2 possible 3.15 3 possible 3.28 3 possible 3.20 3 possible
4 Cost of obtaining decision 3.34 1 possible 3.23 1 possible 3.53 1 likely 3.37 1 possible
5 Enforcing decisions 2.69 6 possible 2.77 6 possible 3.19 4 possible 2.88 5 possible
6 Changes in statutes 2.78 5 possible 2.92 5 possible 2.94 6 possible 2.88 6 possible

161
 Impact on quality Class 3 GC/BC Class 2 GC/BC Class 1 GC/BC Combined

Ran Level of Ran Level of Ran Level of Ran Level of

Risk in a construction contract W.A.S W.A.S W.A.S W.A.S
k impact k impact k impact k impact

A) Physical works
1 Change in ground condition 1.59 11 unlikely 2.62 7 possible 1.72 10 unlikely 1.98 10 unlikely
2 Artificial obstacles 1.66 10 unlikely 2.23 10 unlikely 1.53 11 unlikely 1.81 11 unlikely
3 Defective materials or workman ship 3.50 1 possible 3.38 4 possible 3.47 2 possible 3.45 1 possible
4 Tests and samples approval (materials
provided by contractor) 3.06 5 possible 2.54 9 possible 3.09 6 possible 2.90 7 possible
5 Exceptionally inclement weather 2.13 9 unlikely 2.08 11 unlikely 2.55 8 possible 2.25 9 unlikely
6 Site preparation 2.47 8 unlikely 2.62 7 possible 2.09 9 unlikely 2.39 8 unlikely
7 Inadequacy (insufficient) of staff 3.25 3 possible 2.85 6 possible 3.53 1 likely 3.21 6 possible
8 Inadequacy labor 3.03 7 possible 3.46 1 possible 3.38 3 possible 3.29 3 possible
9 Inadequacy of plant/equipment 3.44 2 possible 3.31 5 possible 3.25 5 possible 3.33 2 possible
10 Inadequacy of material 3.22 4 possible 3.46 1 possible 3.09 6 possible 3.26 5 possible
11 Inadequacy of time or finance 3.06 5 possible 3.46 1 possible 3.28 4 possible 3.27 4 possible
B) Delay and disputes
1 Possession of site 1.59 5 unlikely 2.46 4 unlikely 1.88 5 unlikely 1.98 5 unlikely
2 Late supply of information/ design
data/drawing 2.41 4 unlikely 2.69 3 possible 2.63 2 possible 2.57 3 possible
3 Inefficient execution of work 2.88 1 possible 3.54 1 likely 3.22 1 possible 3.21 1 possible
4 Delay outside of both parties' control 2.53 2 possible 2.46 4 unlikely 2.19 4 unlikely 2.39 4 unlikely
5 Layout (design) dispute 2.50 3 unlikely 2.92 2 possible 2.56 3 possible 2.66 2 possible
C) Direction and supervision
1 Greed (insatiability) of supervisor 3.00 6 possible 2.85 7 possible 3.00 6 possible 2.95 6 possible
2 Incompetence (luck of skill) 3.59 1 likely 3.31 3 possible 3.31 3 possible 3.40 2 possible

162
3 Inefficiency (wastefulness) 2.66 9 possible 2.85 7 possible 3.09 4 possible 2.87 7 possible
4 Unreasonableness 2.66 9 possible 2.31 11 unlikely 2.72 11 possible 2.56 11 possible
5 Partiality 2.63 11 possible 2.23 12 unlikely 2.53 12 possible 2.46 12 unlikely
6 Poor communication 2.94 7 possible 2.54 10 possible 2.78 10 possible 2.75 10 possible
7 Mistakes in documents 3.44 4 possible 3.38 2 possible 3.06 5 possible 3.29 4 possible
8 Defective designs 3.53 2 likely 3.92 1 likely 3.53 1 likely 3.66 1 likely
9 Compliance with requirements 3.06 5 possible 3.00 4 possible 3.00 6 possible 3.02 5 possible
10 Unclear requirements 2.91 8 possible 2.69 9 possible 2.84 8 possible 2.81 8 possible
11 Inappropriate consultants or contractors 3.47 3 possible 3.00 4 possible 3.44 2 possible 3.30 3 possible
12 Changes in requirements 2.59 12 possible 2.92 6 possible 2.84 8 possible 2.79 9 possible
D) Damage and injury to persons and
property
1 Negligence or breach of warranty 2.34 2 unlikely 2.31 1 unlikely 2.38 1 unlikely 2.34 1 unlikely
2 Uninsurable matters 2.09 5 unlikely 1.85 5 unlikely 2.00 4 unlikely 1.98 5 unlikely
3 Accidents within the construction site 2.25 3 unlikely 1.92 3 unlikely 2.25 2 unlikely 2.14 3 unlikely
4 Uninsurable risks 1.81 7 unlikely 1.77 7 unlikely 1.75 7 unlikely 1.78 7 unlikely
5 Consequential losses 2.44 1 unlikely 2.15 2 unlikely 1.97 5 unlikely 2.19 2 unlikely
6 Exclusion (not covered by insurance) 1.97 6 unlikely 1.85 5 unlikely 1.81 6 unlikely 1.88 6 unlikely
7 Gaps and time limits in insurance cover 2.19 4 unlikely 1.92 3 unlikely 2.03 3 unlikely 2.05 4 unlikely
E) External factors
1 Government policy on taxes 1.91 10 unlikely 2.23 4 unlikely 1.81 9 unlikely 1.98 9 unlikely
2 Labor strike 2.25 6 unlikely 2.38 3 unlikely 2.44 2 unlikely 2.36 3 unlikely
3 Safety or other laws 2.16 7 unlikely 2.00 8 unlikely 2.13 5 unlikely 2.09 6 unlikely
4 Planning approvals 2.38 2 unlikely 2.46 2 unlikely 2.31 3 unlikely 2.38 2 unlikely
5 Financial constraints 3.44 1 possible 3.69 1 likely 3.44 1 possible 3.52 1 likely
6 Energy or pay restraints 2.03 9 unlikely 1.92 10 unlikely 1.84 7 unlikely 1.93 10 unlikely
7 Cost of war or civil commotion 2.31 4 unlikely 2.15 6 unlikely 1.84 7 unlikely 2.10 5 unlikely
8 Malicious (hateful) damage 2.28 5 unlikely 2.08 7 unlikely 1.72 10 unlikely 2.03 7 unlikely
163
9 Intimidation (threats) 2.13 8 unlikely 2.00 8 unlikely 1.91 6 unlikely 2.01 8 unlikely
10 Industrial disputes 2.34 3 unlikely 2.23 4 unlikely 2.22 4 unlikely 2.26 4 unlikely
F) Payment
1 Delay in settling claims and certifying 4.06 3 likely 3.31 3 possible 2.47 6 unlikely 3.28 4 possible
2 Delay in payment 4.09 2 likely 3.54 1 likely 3.25 2 possible 3.63 2 likely
3 Legal limits on recovery of interest 3.13 8 possible 2.31 8 unlikely 2.31 7 unlikely 2.58 8 possible
4 Insolvency (bankruptcy) 3.94 4 likely 3.00 6 possible 2.66 5 possible 3.20 6 possible
5 Funding constraints 3.47 6 possible 3.31 3 possible 3.03 3 possible 3.27 5 possible
6 Shortcomings in the measure and value
process 3.47 6 possible 2.62 7 possible 2.13 8 unlikely 2.74 7 possible
7 Exchange rates 3.91 5 likely 3.31 3 possible 2.94 4 possible 3.38 3 possible
8 Inflation 4.38 1 likely 3.46 2 possible 3.53 1 likely 3.79 1 likely
G) Law and arbitration
1 Delay in resolving disputes 2.88 3 possible 3.00 1 possible 2.34 4 unlikely 2.74 1 possible
2 Injustice (unfairness) 2.84 4 possible 2.92 2 possible 2.34 4 unlikely 2.70 3 possible
3 Uncertainty due to lack of records or
ambiguity of contract 3.16 2 possible 2.23 5 unlikely 2.44 2 unlikely 2.61 5 possible
4 Cost of obtaining decision 3.34 1 possible 2.46 4 unlikely 2.19 6 unlikely 2.66 4 possible
5 Enforcing decisions 2.69 6 possible 2.23 5 unlikely 2.41 3 unlikely 2.44 6 unlikely
6 Changes in statutes 2.78 5 possible 2.85 3 possible 2.50 1 unlikely 2.71 2 possible

164
APPENDIX D: ALLOCATION OF RISK IN BUILDING CONTRACT UNDER FIDIC AND PPPAA

Common allocation of risks in building

construction contract for the parties having an
Contract clauses addressed under
Risk in a effect on building contractors under FIDIC
construction 1999 and PPPAA 2011
contract Force
FIDIC 1999 PPPAA's 2011 Client Contractor
majeure
A) Physical works
4.12 Unforeseeable physical 15.Modifications by change orders,
Change in condition, 44. Exceptional risks, FIDIC 1999/ FIDIC 1999/
1 ground 13.1 Right to vary. 65. Final statement of account, PPPAA'S 2011 PPPAA'S
2011
condition 69.Claims for additional payment,
73. Extension of intended completion date.
4.12 Unforeseeable physical 44.Exceptional risks,
condition, 48.Cables and conduits, FIDIC 1999/ FIDIC 1999/
Artificial 4.13 Rights of way facilities, 65. Final statement of account, PPPAA'S 2011 PPPAA'S
2 2011
obstacles 4.14 Avoidance of interference, 69.Claims for additional
4.23 Contractor's operation on site, payment,
4.24 Fossils. 73. Extension of intended completion date.
4.1 Contractor's general obligation, 34. General obligations (contractor),
7.1 Manner of execution, 38. Personnel,
7.2 Samples, 42.Contractor's drawings, FIDIC 1999/
Defective
7.5 Rejection, 65. Final statement of account, PPPAA'S
3 materials or
7.6 Remedial work, 80. Origin and quality of works and materials, 2011
workman ship
15.1 Notice to correct. 81. Inspection and testing,
82. Rejection,
85. Tests on completion.
4 Tests and 4.1 Contractor's general obligation, 34. General obligations (contractor),

165
 samples 7.2 Samples, 42. Contractor's drawings,
approval 7.3 Inspection, 80. Origin and quality of works and materials, FIDIC 1999/
(materials 7.4 Testing, 81. Inspection and testing, PPPAA'S
provided by 7.5 Rejection, 82. Rejection. 2011
contractor) 7.6 Remedial work.

8.4 Extension of time for 18. Force Majeure,

Exceptionally FIDIC 1999/
completion, 44. Exceptional Risks,
5 inclement PPPAA'S
19.4 Consequence of force majeure. 69.Claims for Additional Payment,
weather 2011
73. Extension of Intended Completion Date.
4.1 Contractor's general obligation, 34. General obligations (contractor),
4.7 Setting out, 41. Program of implementation of tasks, FIDIC 1999/
Site
6 4.15 Accesses route, 46. Safeguarding adjacent properties, PPPAA'S
preparation
4.22 Security of the site. 49. Setting-out of the works, 2011
70. Scope of the work.
4.1 Contractor's general obligation, 27. Liquidated damages,
5.2 Objection of nomination, 34. General obligations (contractor),
6.1 Engagement of staff and labour. 37. Control and supervision of the works,
Inadequacy 7.3 Inspection, 38. Personnel, FIDIC 1999/
7 (insufficient) 8.6 Rate of progress, 70. Scope of the work, PPPAA'S
of staff 8.7 Delay damage, 78. Delays in implementation of tasks. 2011
11.2 Cost of remedying defect,
14.6 Issue of interim payment
certificate.
4.1 Contractor's general obligation, 27. Liquidated damages,
5.2 Objection of nomination, 34. General obligations (contractor),
Inadequacy 6.1 Engagement of staff and labour. 37. Control and supervision of the works,
8
labor 7.3 Inspection, 38. Personnel, FIDIC 1999/
8.6 Rate of progress, 70. Scope of the work, PPPAA'S
8.7 Delay damage, 78. Delays in implementation of tasks. 2011

166
 11.2 Cost of remedying defect,
14.6 Issue of interim payment
certificate.
4.1 Contractor's general obligation, 27. Liquidated damages,
5.2 Objection of nomination, 34. General obligations (contractor),
7.3 Inspection, 37. Control and supervision of the works,
Inadequacy of 8.6 Rate of progress, 38. Personnel, FIDIC 1999/
9 plant/ 8.7 Delay damage, 70. Scope of the work, PPPAA'S
equipment 11.2 Cost of remedying defect, 78. Delays in implementation of tasks. 2011
14.6 Issue of interim payment
certificate.

4.1 Contractor's general obligation, 27. Liquidated damages,

5.2 Objection of nomination, 34. General obligations (contractor),
7.3 Inspection, 37. Control and supervision of the works,
8.6 Rate of progress, 38. Personnel, FIDIC 1999/
Inadequacy of
10 8.7 Delay damage, 70. Scope of the work, PPPAA'S
material
11.2 Cost of remedying defect, 78. Delays in implementation of tasks. 2011
14.6 Issue of interim payment
certificate.

2.4 Employer's financial 27. Liquidated Damages,

arrangement, 34. General Obligations (contractor), FIDIC 1999/ FIDIC 1999/
4.1 Contractor's general obligation, 38. Personnel, PPPAA'S 2011 PPPAA'S
2011
4.2 Performance security, 41. Program of Implementation of Tasks,
Inadequacy of
5.2 Objection of nomination, 58. Performance Security,
11 time or
8.6 Rate of progress, 70. Scope of the work,
finance
8.7 Delay damage, 78. Delays in Implementation of Tasks.
11.2 Cost of remedying defect,
14.6 Issue of interim payment
certificate.

167
B) Delay and disputes
2.1 Right of access to the site, 31. Access to the site (obligation of the public
4.13 Rights of way and facilities, body),
4.15 Access route, 69. Claims for additional payment, FIDIC 1999/ FIDIC 1999/
Possession of PPPAA'S 2011 PPPAA'S
1 8.1 Commencement of the work. 71. Commencement of works,
site 2011
73. Extension of intended completion date,
74. Compensation events for allowing time
extension.
1.9 Delayed drawings and 41. Program of implementation of tasks,
Late supply of instructions, 42. Contractor's drawings,
information/ 4.1 Contractor's general obligation, 69. Claims for additional payment, FIDIC 1999/ FIDIC 1999/
2 PPPAA'S 2011 PPPAA'S
design 4.10 Site data, 73. Extension of intended completion date,
2011
data/drawings 7.3 inspection. 74. Compensation events for allowing time
extension.
4.1 Contractor's general obligation, 14. Subcontracting,
4.4 Subcontractors, 19. Breach of contract,
7.1 Manner of execution, 27. Liquidated damages,
Inefficient
7.5 Rejection. 34. General obligations(contractor), FIDIC 1999/
3 execution of
49. Setting-out of the works, PPPAA'S
work
70. Scope of works, 2011
78. Delays in implementation of tasks.

8.5 Delay caused by Authorities, 18. Force majeure,

Delay outside
13.7 Adjustments for changes in 21. Termination,
of both
4 legislation, 44. Exceptional risks, FIDIC 1999/
parties'
19.1 Definition of force majeure, 73. Extension of intended completion date. PPPAA'S
control
19.4 Consequence of force measure. 2011
4.7 Setting out, 15. Modifications by change orders,
Layout
4.10 Site data, 49. Setting-out of the works, FIDIC 1999/
5 (design)
20.1 Contractor's claim 73. Extension of intended completion date. PPPAA'S 2011
dispute

168
C) Direction and supervision
3.1 Engineer's duties and authority, 12. Engineer and engineer's representative,
3.3 Instruction of the engineer, 34. General obligations (contractor), FIDIC 1999/
Greed 4.1 Contractor's general obligation, 64. Interim payment, PPPAA'S
2011
1 (insatiability) 8.9 Consequence of suspension. 73. Extension of intended completion date,
of supervisor 74. Compensation events for allowing time
extension,
82. Rejection.
3.2 Delegation by the engineer, 12. Engineer and engineer's representative,
3.4 Replacement of the engineer, 14. Subcontracting, FIDIC 1999/ FIDIC 1999/
6.9 Contractor's personnel, 37.Control and supervision of the works, PPPAA'S 2011 PPPAA'S
2011
2 Incompetence 7.4 Testing. 38. Personnel,
74. Compensation events for allowing time
extension,
82. Rejection.
1.9 Delayed drawings and 4. Due diligence,
instructions, 12. Engineer and engineer's representative, FIDIC 1999/ FIDIC 1999/
3.3 Instruction of the engineer, 14. Subcontracting, PPPAA'S 2011 PPPAA'S
2011
3 Inefficiency 3.4 Replacement of the engineer, 37.Control and supervision of the works,
6.9 Contractor's personnel. 38. Personnel,
74. Compensation events for allowing time
extension.
3.2 Delegation by the engineer, 12. Engineer and engineer's representative,
3.3 Instruction of the engineer, 20. Suspension,
3.4 Replacement of the engineer, 37.Control and supervision of the works,
Unreasonable 3.5 Determination. 54. Overlapping contracts, FIDIC 1999/ PPPAA'S
4
ness 65. Final statement of account, PPPAA'S 2011 2011
69. Claims for additional payment,
74. Compensation events for allowing time
extension,
169
 82. Rejection.
3.1 Engineer's duties and authority, 12. Engineer and engineer's representative,
3.5 Determination. 20. Suspension,
5 Partiality
54. Overlapping contracts , FIDIC 1999/
69. Claims for additional payment. PPPAA'S 2011
1.3 Communication, 3. Relationship between the parties
3.4 Replacement of the engineer, 12. Engineer and engineer's representative, PPPAA'S2011 FIDIC 1999/
Poor 4.3 Contractor's representative, 74. Compensation events for allowing time PPPAA'S
6 communicatio 6.10 Recorders of contractor's extension, 2011
n personnel and equipment, 76. Management meetings,
7.4 Testing. 79. Work register,
81. Inspection and testing.
1.5 Priority of documents, 59. General principles (payment to the
Mistakes in 1.9 Delayed drawings and contractor) , FIDIC1999 FIDIC 1999/
7
documents instructions. 63. Valuation of works. PPPAA'S
2011
8.4 Extension of time for 69. Claims for additional payment,
Defective completion, 73. Extension of intended completion date, FIDIC 1999/
8 PPPAA'S 2011
designs 20.1 Contractor's claim, 74. Compensation events for allowing time
extension.
3.1 Engineer's duties and authority, 4. Due Diligence,
3.4 Replacement of the engineer, 5. Fraud and Corruption,
4.1 Contractor's general obligation, 6. Interpretation, FIDIC 1999/ FIDIC 1999/ PPPAA'S
PPPAA'S 2011 PPPAA'S
4.3 Contractor's representative, 14. Subcontracting, 2011
2011
Compliance 4.9 Quality assurance, 16. Change in Laws and Regulations,
9 with 7.4 Testing. 21. Termination,
requirements 7.6 Remedial works, 28. Confidentiality,
13.1 Right to vary. 37. Control and Supervision of the Works,
55. Patents and Licenses,
69. Claims for additional payment,
78. Delays in Implementation of Tasks.

170
 3.1 Engineer's duties and authority, 6. Interpretation,
3.4 Replacement of the engineer, 12. Engineer and engineer's representative,
4.1 Contractor's general obligation, 16. Change in Laws and Regulations, FIDIC 1999/ FIDIC 1999/ PPPAA'S
Unclear PPPAA'S 2011 PPPAA'S
10 4.3 Contractor's representative, 21. Termination, 2011
requirements 2011
4.9 Quality assurance, 29. Miscellaneous,
7.6 Remedial works, 37. Control and Supervision of the Works,
13.1 Right to vary. 78. Delays in Implementation of Tasks.
3.1 Engineer's duties and authority, 12. Engineer and engineer's representative,
3.4 Replacement of the engineer, 14. Subcontracting,
Inappropriate FIDIC 1999/ FIDIC 1999/
4.1 Contractor's general obligation, 38. Personnel,
11 consultants or PPPAA'S 2011 PPPAA'S
4.3 Contractor's representative, 73. Extension of intended completion date,
contractors 2011
5.2 Objection to nomination, 78. Delays in Implementation of Tasks,
6.9 Contractor's personnel. 82. Rejection.
1.5 Priority of documents, 6. Interpretation,
3.1 Engineer's duties and authority, 16. Change in Laws and Regulations,
3.4 Replacement of the engineer, 21. Termination, FIDIC 1999/ FIDIC 1999/
PPPAA'S 2011 PPPAA'S
4.1 Contractor's general obligation, 28. Confidentiality,
2011
4.3 Contractor's representative, 34. General Obligations(contractor's),
Changes in
12 4.9 Quality assurance, 37. Control and Supervision of the Works, PPPAA'S
requirements
7.4 Testing. 69. Claims for additional payment, 2011
7.6 Remedial works, 78. Delays in Implementation of Tasks.
13.1 Right to vary,
13.7 Adjustments for changes in
legislation.
D) Damage and injury to persons and property
2.3 Employer's personnel, 19. Breach of contract,
4.1 Contractor's general obligation, 20. Suspension,
Negligence or FIDIC 1999/ FIDIC 1999/
4.8 Safety procedures, 21. Termination,
1 breach of PPPAA'S 2011 PPPAA'S
6.7 Health and safety, 34. General obligations (contractor's),
warranty 2011
8.7 Delay and damages, 39. Indemnification and limitation of liability,
17.1 Indemnities, 40. Insurance to be taken out by the contractor,

171
 18.1 General requirements for 45. Health and safety on sites,
insurances, 64. Interim Payment.
18.2 Insurance for works and
contractor's equipment,
18.3 Insurance against injury to
persons and damage to property,
18.4 Insurance for contractors
personnel.
2.3 Employer's personnel, 34. General obligations(contractor's),
4.1 Contractor's general obligation, 39. Indemnification and limitation of liability,
17.1 Indemnities, 40. Insurance to be taken out by the contractor,
18.2 Insurance for works and 45. Health and safety on sites, FIDIC 1999 FIDIC 1999/
Uninsurable
2 contractor's equipment, 64. Interim payment. PPPAA'S
matters
18.3 Insurance against injury to 2011
persons and damage to property,
18.4 Insurance for contractors
personnel.
2.3 Employer's personnel, 34. General obligations (contractor's),
4.1 Contractor's general obligation, 39. Indemnification and limitation of liability,
4.8 Safety procedures, 40. Insurance to be taken out by the contractor,
6.4 Labour laws, 45. Health and safety on sites, FIDIC 1999 FIDIC 1999/
Accidents 6.7 Health and safety, PPPAA'S
within the 17.1 Indemnities, 2011
3
construction 18.2 Insurance for works and
site contractor's equipment,
18.3 Insurance against injury to
persons and damage to property,
18.4 Insurance for contractors
personnel.
Uninsurable 4.1 Contractor's general obligation, 15. Modifications by change orders,
4 FIDIC 1999/ FIDIC 1999/
risks 4.8 Safety procedures, 18. Force majeure,

172
 4.16 Transport of goods, 34. General obligations (contractor's), PPPAA'S 2011 PPPAA'S
18.2 Insurance for works and 39. Indemnification and limitation of liability, 2011
contractor's equipment, 40. Insurance to be taken out by the contractor,
18.3 Insurance against injury to 45. Health and safety on sites,
persons and damage to property, 64. Interim payment.
18.4 Insurance for contractors
personnel.

4.1 Contractor's general obligation, 18. Force majeure,

4.8 Safety procedures, 34. General obligations (contractor's), FIDIC 1999/ FIDIC 1999/
6.7 Health and safety, 39. Indemnification and limitation of liability, PPPAA'S 2011 PPPAA'S
2011
18.2 Insurance for works and 40. Insurance to be taken out by the contractor,
Consequential
5 contractor's equipment, 45. Health and safety on sites,
losses
18.3 Insurance against injury to 64. Interim payment.
persons and damage to property,
18.4 Insurance for contractors
personnel.
4.1 Contractor's general obligation, 18. Force majeure,
4.8 Safety procedures, 34. General obligations (contractor's), FIDIC 1999/ FIDIC 1999/
4.16 Transport of goods, 39. Indemnification and limitation of liability, PPPAA'S 2011 PPPAA'S
2011
6.7 Health and safety, 40. Insurance to be taken out by the contractor,
Exclusions 17.2 Contractor's care of the works, 45. Health and safety on sites,
6 (not covered 18.2 Insurance for works and 64. Interim payment.
by insurance) contractor's equipment,
18.3 Insurance against injury to
persons and damage to property,
18.4 Insurance for contractors
personnel.
Gaps and time 2.3 Employer's personnel, 21. Termination,
7 limits in 4.1 Contractor's general obligation, 34. General obligations (contractor's),
17.2 Contractor's care of the works, 39. Indemnification and limitation of liability, FIDIC 1999/ FIDIC 1999/
insurance PPPAA'S 2011 PPPAA'S
173
 cover 18.2 Insurance for works and 40. Insurance to be taken out by the contractor, 2011
contractor's equipment, 45. Health and safety on sites,
18.3 Insurance against injury to 58. Performance security
persons and damage to property, 64. Interim payment.
18.4 Insurance for contractors
personnel.
E) External factors
Government 4.16 Transport of goods, 16. Change in laws and regulations,
policy on 13.7 Adjustments for changes in 17. Taxes and duties, FIDIC 1999/ FIDIC 1999/
1
legislation. PPPAA'S PPPAA'S
taxes 2011 2011
6.11 Disorderly conduct, 73. Extension of intended completion date,
Labour strike 19.1 Definition of force majeure. 74. Compensation events for allowing time FIDIC 1999/ FIDIC 1999/
2
extension. PPPAA'S 2011 PPPAA'S
2011
1.13 Compliance with laws, 5. Fraud and corruption,
2.3 Employer's personnel, 8. Governing law, FIDIC 1999/ FIDIC 1999/
4.8 Safety procedures, 34. General obligations (contractor), PPPAA'S 2011 PPPAA'S
2011
4.18 Protection of the environment, 38. Personnel,
Safety or
3 6.4 Labour laws, 45. Health and safety on sites,
other laws
6.5 Working hours, 46. Safeguarding adjacent properties,
13.7 Adjustments for changes in 51. Discoveries,
legislation. 56. Accounting, inspection and auditing,
57. Data protection.
7.4 Testing, 15. Modifications by change orders,
8.3 Program, 41. Program of implementation of tasks, FIDIC 1999/
Planning
4 8.5 Delay caused by Authorities, 73. Extension of intended completion date, PPPAA'S 2011
approvals
8.6 Rate of progress. 74. Compensation events for allowing time
extension.
5.2 Objection of nomination, 18. Force majeure,
Financial FIDIC 1999/ FIDIC 1999/
5 8.6 Rate of progress, 21. Termination,
constraints PPPAA'S 2011 PPPAA'S
15.2 Termination by employer, 73. Extension of intended completion date,
174
 16.2 Termination by contractor. 2011
2.5 Employer's claim, 17. Taxes and duties,
Energy or pay 4.19 Electricity, water and gas, 65. Final statement of account. FIDIC 1999/
6
restraints 4.20 Employer's equipment and free PPPAA'S
issue material, 2011
17.3 Employer's risks, 18. Force majeure,
17.4 Consequences of employer's 73. Extension of intended completion date, FIDIC 1999/
Cost of war or
risk, 74. Compensation events for allowing time PPPAA'S 2011
7 civil
19.1 Definition of force majeure, extension.
commotion
19.4 Consequences of force
majeure.
4.22 Security of the site, 18. Force majeure,
6.11 Disorderly conduct, 73. Extension of intended completion date,
Malicious 17.3 Employer's risks, 74. Compensation events for allowing time FIDIC 1999/
8 (hateful) 17.4 Consequences of employer's extension. PPPAA'S 2011
damage risk,
19.4 Consequences of force
majeure.
6.11 Disorderly conduct, 18. Force majeure,
17.3 Employer's risks, 73. Extension of intended completion date, FIDIC 1999/
Intimidation
9 19.1 Definition of force majeure, 74. Compensation events for allowing time PPPAA'S 2011
(threats)
19.4 Consequences of force extension.
majeure.
6.11 Disorderly conduct, 55. Patents and licenses,
Industrial 17.5 Intellectual and industrial 66. Direct payments to sub-contractors. FIDIC 1999/
10
disputes property right. PPPAA'S
2011
F) Payment
Delay in 4.7 Setting out, 15. Modifications by change orders,
1
settling claims 4.12 Unforeseeable physical 59. General principles (payment to the

175
 and certifying conditions, contractor),
7.6 Remedial works, 65. Final statement of account, FIDIC 1999/ FIDIC 1999/
8.6 Rate of progress, 66. Direct payments to sub-contractors, PPPAA'S 2011 PPPAA'S
10.2 Taking over of parts of the 69. Claims for additional payment. 2011
works,
10.3 Interference with tests on
completion,
12.4 Omissions.
5.3 Payment to nominated 21. Termination,
subcontractors, 32. Payment (obligation of the public body),
5.4 Evidence of payments, 59. General principles (payment to the general
8.6 Rate of progress, contractor), FIDIC 1999/ FIDIC 1999/
10.2 Taking over of parts of the 65. Final statement of account, PPPAA'S 2011 PPPAA'S
Delay in works, 66. Direct payments to sub-contractors, 2011
2
payment 10.3 Interference with tests on 67. Delayed payments,
completion, 69. Claims for additional payment,
14.8 Delayed payment, 73. Extension of intended completion date,
14.9 Payment of retention money, 74. Compensation events for allowing time
16.1 Contractor's entitlement to extension.
suspend work.
14.8 Delayed payment. 59. General Principles (payment to the general
Legal limits
contractor), FIDIC 1999/
3 on recovery
67. Delayed Payments. PPPAA'S 2011 PPPAA'S
of interest
2011
15.2 Termination by employer, 21. Termination,
16.2 Termination by contractor. 27. Liquidated damages,
Insolvency
4 69. Claims for additional payment, FIDIC 1999/ FIDIC 1999/
(bankruptcy)
73. Extension of intended completion date. PPPAA'S 2011 PPPAA'S
2011
Funding 2.4 Employer's financial 21. Termination,
5
constraints arrangement, 27. Liquidated damages,

176
 15.2 Termination by employer, 73. Extension of intended completion date. FIDIC 1999/ FIDIC 1999/
16.2 Termination by contractor. PPPAA'S 2011 PPPAA'S
2011
4.12 Unforeseeable physical 15. Modifications by change orders,
conditions, 63. Valuation of works, FIDIC 1999/
7.4 Testing, 65. Final statement of account. PPPAA'S
Shortcomings
12.2 Method of measurement, 2011
in the
6 12.3 Evaluation,
measure and
13.1 Right to vary,
value process
13.2 Value engineering,
14.11 Application of final payment
certificate.
13.7 Adjustments for changes in 16. Change in laws and regulations,
legislation, 59. General principles (payment to the general
Exchange 13.8 Adjustments for changes in contractor), FIDIC 1999 PPPAA'S FIDIC 1999/
7
rates cost, 62. Price adjustments. 2011 PPPAA'S
14.5 Plants and materials intended 2011
for the works.
13.7 Adjustments for changes in 16. Change in laws and regulations,
legislation, 62. Price adjustments,
13.8 Adjustments for changes in 65. Final statement of account, FIDIC 1999 PPPAA'S FIDIC 1999/
8 Inflation
cost, 69. Claims for additional payment. 2011 PPPAA'S
14.5 Plants and materials intended 2011
for the works.
G) Law and arbitration
4.7 Setting out, 4. Due diligence,
7.4 Testing, 20.Suspension,
Delay in
8.4 Extension of time for 26. Settlement of disputes,
1 resolving
completion, 73. Extension of intended completion date,
disputes
10.2 Taking over of parts of the 74. Compensation events for allowing time FIDIC 1999/ FIDIC 1999/
works, extension. PPPAA'S 2011 PPPAA'S
177
 10.3 Interference with tests on 2011
completion,
16.1 Contractor's entitlement to
suspend work.
20.6 Arbitration. 20.Suspension,
21. Termination, FIDIC 1999/
Injustice
2 64. Interim payment, PPPAA'S
(unfairness)
65.Final statement of account. 2011

4.1 Contractor's general obligation, 15.Modifications by change orders,

Uncertainty
4.7 Setting out, 25. Cessation of works,
due to lack of
14.11 Application of final payment 63. Valuation of works, FIDIC 1999/
3 records or
certificate. 65.Final statement of account. PPPAA'S
ambiguity of
2011
contract

4.7 Setting out, 19. Breach of contract,

4.12 Unforeseeable physical 20. Suspension,
conditions, 39. Indemnification and limitation of liability. FIDIC 1999/ FIDIC 1999/
7.4 Testing, PPPAA'S 2011 PPPAA'S
Cost of
8.4 Extension of time for 2011
4 obtaining
completion,
decision
10.2 Taking over of parts of the
works,
10.3 Interference with tests on
completion.
13.7 Adjustments for changes in 5. Fraud and corruption,
legislation, 16. Change in laws and regulations,
Enforcing 15.2 Termination by employer, 58. Performance security, FIDIC 1999/ FIDIC 1999/ FIDIC 1999/
5
decisions 16.2 Termination by contractor. 59. General principles (payment to the general PPPAA'S 2011 PPPAA'S PPPAA'S
contractor), 2011 2011
62. Price adjustments,

178
 66. Direct payments to sub-contractors,
72. Period of execution of works,
85. Tests on completion.
7.4 Testing, 16. Change in laws and regulations,
8.4 Extension of time for 62. Price adjustments,
completion, 73. Extension of intended completion date, FIDIC 1999/ FIDIC 1999/ FIDIC 1999/
Changes in 13.7 Adjustments for changes in 75. Acceleration. PPPAA'S 2011 PPPAA'S PPPAA'S
6
statutes legislation, 2011 2011
13.8 Adjustments for changes in
cost,
14.15 Currencies of payment.
Common allocation of risk in building construction contract for the parties having an effect on building contractors under FIDIC 1999
and PPPAA's 2011. (Source; compiled by the researcher.)

179
Appendix E: SPEARMAN'S CORRELATION TABLE
Risk Spearman’s rank correlation coefficient (r’s) on probability of occurrence
Respondents
Group BC/GC 1 Correlation BC/GC 2 Correlation BC/GC 3 Correlation
A 1 - 0.827 Strong 0.781 Strong
B 1 - 0.746 Strong 1.000 Strong
C 1 - 0.942 Strong 0.822 Strong
BC/GC 1 D 1 - 0.986 Strong 0.597 Strong
E 1 - 0.988 Strong 0.835 Strong
F 1 - 0.976 Strong 0.905 Strong
G 1 - 0.855 Strong 0.924 Strong
A 0.827 Strong 1 - 0.579 Strong
B 0.746 Strong 1 - 0.533 Strong
C 0.942 Strong 1 - 0.874 Strong
BC/GC 2 D 0.986 Strong 1 - 0.962 Strong
E 0.988 Strong 1 - 0.982 Strong
F 0.976 Strong 1 - 0.976 Strong
G 0.855 Strong 1 - 0.865 Strong
A 0.781 Strong 0.579 Strong 1 -
B 1.000 Strong 0.533 Strong 1 -
C 0.822 Strong 0.874 Strong 1 -
BC/GC 3 D 0.597 Strong 0.962 Strong 1 -
E 0.835 Strong 0.982 Strong 1 -
F 0.905 Strong 0.976 Strong 1 -
G 0.924 Strong 0.865 Strong 1 -

180
 Risk Spearman’s rank correlation coefficient (r’s) impact on time
Respondents
Group BC/GC 1 Correlation BC/GC 2 Correlation BC/GC 3 Correlation
A 1 - 0.929 Strong 0.643 Strong
B 1 - 0.884 Strong 0.606 Strong
C 1 - 0.748 Strong 0.489 Moderate
BC/GC 1 D 1 - 0.933 Strong 0.409 Moderate
E 1 - 0.963 Strong 0.806 Strong
F 1 - 0.976 Strong 0.914 Strong
G 1 - 0.961 Strong 0.549 Strong
A 0.929 Strong 1 - 0.549 Strong
B 0.884 Strong 1 - 0.729 Strong
C 0.748 Strong 1 - 0.247 Moderate
BC/GC 2 D 0.933 Strong 1 - 0.509 Strong
E 0.963 Strong 1 - 0.768 Strong
F 0.976 Strong 1 - 0.970 Strong
G 0.961 Strong 1 - 0.913 Strong
A 0.643 Strong 0.549 Strong 1 -
B 0.606 Strong 0.729 Strong 1 -
C 0.489 Moderate 0.247 Moderate 1 -
BC/GC 3 D 0.409 Moderate 0.509 Strong 1 -
E 0.806 Strong 0.768 Strong 1 -
F 0.914 Strong 0.970 Strong 1 -
G 0.549 Strong 0.913 Strong 1 -

181
 Risk Spearman’s rank correlation coefficient (r’s) impact on cost
Respondents
Group BC/GC 1 Correlation BC/GC 2 Correlation BC/GC 3 Correlation
A 1 - 0.960 Strong 0.817 Strong
B 1 - 0.567 Strong 0.900 Strong
C 1 - 0.574 Strong 0.380 Moderate
BC/GC 1 D 1 - 0.944 Strong 0.062 Weak
E 1 - 0.922 Strong 0.449 Moderate
F 1 - 0.881 Strong 0.390 Moderate
G 1 - 0.903 Strong -0.191 Weak
A 0.960 Strong 1 - 0.901 Strong
B 0.567 Strong 1 - 0.000 Weak
C 0.574 Strong 1 - 0.433 Moderate
BC/GC 2 D 0.944 Strong 1 - 0.740 Strong
E 0.922 Strong 1 - 0.789 Strong
F 0.881 Strong 1 - 0.535 Strong
G 0.903 Strong 1 - 0.156 Weak
A 0.817 Strong 0.901 Strong 1 -
B 0.900 Strong 0.000 Weak 1 -
C 0.380 Moderate 0.433 Moderate 1 -
BC/GC 3 D 0.062 Weak 0.740 Strong 1 -
E 0.449 Moderate 0.789 Strong 1 -
F 0.390 Moderate 0.535 Strong 1 -
G -0.191 Weak 0.156 Weak 1 -

182
 Risk Spearman’s rank correlation coefficient (r’s) impact on quality
Respondents
Group BC/GC 1 Correlation BC/GC 2 Correlation BC/GC 3 Correlation
A 1 - 0.815 Strong 0.790 Strong
B 1 - 0.866 Strong 0.700 Strong
C 1 - 0.946 Strong 0.463 Moderate
BC/GC 1 D 1 - 0.457 Moderate 0.617 Strong
E 1 - 0.766 Strong 0.237 Moderate
F 1 - 0.816 Strong 0.457 Moderate
G 1 - 0.903 Strong -0.230 Moderate
A 0.815 Strong 1 - 0.513 Strong
B 0.866 Strong 1 - 0.770 Strong
C 0.946 Strong 1 - 0.407 Moderate
BC/GC 2 D 0.457 Moderate 1 - 0.378 Moderate
E 0.766 Strong 1 - 0.424 Moderate
F 0.816 Strong 1 - 0.424 Moderate
G 0.903 Strong 1 - -0.312 Moderate
A 0.790 Strong 0.513 Strong 1 -
B 0.700 Strong 0.770 Strong 1 -
C 0.463 Moderate 0.407 Moderate 1 -
BC/GC 3 D 0.617 Strong 0.378 Moderate 1 -
E 0.237 Moderate 0.424 Moderate 1 -
F 0.457 Moderate 0.424 Moderate 1 -
G -0.230 Moderate -0.312 Moderate 1 -

183
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