Risks and risk management in construction projects : A product life cycle approach

Abstract: The construction industry often operates with important and expensive projects that should meet deadlines and various regulations and at the same time avoid risks associated with the phases of the construction projects. This thesis reviews risks by a project life cycle (PLC) and the risk management used in construction projects by interviewing different construction project stakeholders such as hotel owners in Belgium and construction specialists. Hence, this study aims to find what the different risks are in the different phases of the construction projects life cycles and how risks are managed in these construction projects. The project life cycle framework developed especially for construction projects and used in this study consists of the conceptualization phase, the planning and design phase, the contractor selection phase, the contractor mobilization phase, the operational phase, and finally the project closeout and termination phase. The results of this study indicate that there are many risks existing in the construction projects that were part of this study. During the planning phase of construction projects, some of the identified risks were communication-related risks, design risks, estimation risks, budgeting risks, financial risks, site conditions and unknown geological condition risks, socio-political risks, government relation risks, and economic risks. During the contractor selection phase, the main risks that were identified were owners appointing the wrong contractor responsible for the construction of the building. During the operational phase of the PLC, some of the risks existing were communication-related risks, risks of late deliveries of materials, risks of a shortage of materials, risks of poor quality of workmanship, cost related risks, site safety risks, risks of disagreements in the teams, delays risks, risks of unavailability of funds and financial failure, risks of inadequate managerial skills, risks of improper coordination between teams, risks of insufficiently skilled staff or subcontractors, weather, and seasonal implications risks, site conditions and unknown geological condition risks, theft risks, subcontractors don’t deliver materials in time and subcontractors bankruptcy. During the project closeout and termination phase, some of the risks were cost related risks, risks that the project end is delayed, quality concerns risks, and risks of scope and design changes. Further, this study shows that the owner/client of construction projects tend to mitigate different risks of the construction projects by transferring these risks to outside parties such as the contractors. Another finding from this study is that non-computerized risk management tools were preferred instead of tools that use computerised software. Examples of such non-computerized tools were risk matrices, brainstorming, use of past experiences of construction projects, expert interviews, divide and conquer method, and own judgement.