ECM 756 RISK MANAGEMENT FOR
CONSTRUCTION PROJECT
Risk Management Plan for a Bungalow House
2nd ASSIGNMENT
Name
: Ainul Yaqhin Mohamed Rethuan
ID Num
: 2015665846
Lecturers Name : Dr Intan Rohani Endut
Executive Summary of Ayana 2 Storey Bungalow
Project Title: The construction of Ayana 2-Storey Bungalow at Setia Eco Park, Setia Alam
Developer: S P Setia Sdn Bhd
Type: 2-Storey bungalow
Type of Contract: Cost plus Contract Cost plus a Fixed Fee
Contract Sum: RM 3,636,100
Contract Period: 6 months
Scope of Works: Phase 1 involving;
(i) Initial Excavation works, Concrete works, Masonry works, Floor & Wall
finishes, Painting & decoration works, Doors & Windows, Sewerage and
others
Phase 2 involving;
(ii) Completing, testing, commissioning and maintenance of the Phase 1
of Ayana bungalow
Introduction
The objective of Risk Management Plan is to identify possible risks happened and mitigation
measures for the development and construction of Ayana 2 Storey bungalow house project to
be completed and delivered in 6 months with the quality workmanship and exclusive that meet
the stakeholders requirements.
Purpose
A risk management plan is a document that a project manager prepares to foresee risks,
estimate impacts, and define responses to issues. It also contains a risk assessment matrix.
The ultimate goal of risk management is to increase the probability of project and activity
success by focusing attention on problem areas early and reducing the amount of costly rework
in the future. For each and every risk, there is the potential impact of cost overruns, schedule
delays and compromises in quality and safety if the risk occurs.
Hence, risk management will
be applied continuously throughout the project life cycle and will evolve and adapt to
accommodate the various project phases.
A risk is an event that has the potential to cause an unwanted change in the project. A risk is
as follow:
A definable event;
With a probability of occurrence; and
With a consequence or impact if it occurs.
A measure of risk is:
Risk = Likelihood x Impact.
For risks, we have a mitigation plan. A mitigation plan either lowers the probability and/or the
impact to reduce the severity to an acceptable level. Managing risk is a key element of the
project management process for both the planning and the performance phases of the
bungalow house project. As such, this Risk Management Plan develops a methodology to
identify and quantify specific risks to the bungalow house project, determines their
consequences and associated probability, and develops mitigation strategies.
Project Background
Ayana 2 Storey bungalow is located at Phase 8E-BG1, Setia Eco Park, Shah Alam. Setia Eco
Park is an exclusive guarded fence-less residential estate located in southern Shah Alam. It
spreads across 791 acres of freehold land. As the name suggests, it is a clean and safe
neighborhood situated far away from traffic congestion and the bustling cities.
The features of Ayana 2 Storey bungalows as stated below:
Type
: 2 Storey Bungalow
Standard land size
: 59' x 115'
Built-up
: Approx. 3,523 sf
No. of Bedrooms
: 4+1
No. of Baths
: 5+1
Figure 1 is a picture of Ayana 2 Storey Bungalow house in Setia Eco Park, Shah Alam.
Figure 1: Phase 8E-BG Ayana 2 Storey Bungalow
This Ayana 2 Storey bungalow house project is using cost plus type of contract. Cost plus
contract is a sum of contractor cost plus with contractor fee contract where the actual cost to
build your project plus a management and coordination fee for the general contractor.
Cost plus contract is a contract under which a contractor is reimbursed for the costs incurred,
and the percentage of such costs as contractor's profit is paid on agreed upon within the
contractor and the owner.
A cost plus contract refers to a contract when the contractor gets paid for all construction related
expenses as previously agreed with the owner. Some cost plus contract can be drafted to set a
limit that will be used to restraint the contractor on not to exceed that specified amount.
A cost plus contract provides a win-win situation for the contractor, because all risks are
basically covered, and all expenses are likely to be paid by the owner.
Contractors generally look for a cost plus contract when signing jobs, because in that case they
will
be
paid
for
the
job
and
the
supplies
come
at
no
cost
to
them
either.
Risk Identification
Risk identification is the first step in the risk management plan. Definition of risk identification is
the process of determining risks that could potentially prevent the program, enterprise, or
investment from achieving its objectives. It includes documenting and communicating the
concern.
This basic process reviewing the entire project of Ayana 2 Storey Bungalow to determine the
potential risks that would prevent the project to meet project objectives.
Risks in Ayana 2 Storey bungalow project were identified by the project team members,
including the contractors during the construction phase which allowed the identification of
significant concerns earlier than otherwise might be the case and the identification of those risks
in critical areas that need to be dealt with to avoid adverse consequences or impacts to the
project.
All identified risks were documented in Table 1 below.
Table 1: Risk Identification
ID
1
2
3
4
5
6
7
8
Type of Risk
The project's duration could be longer than expected.
Shortage of material.
Some costs cannot be irrecoverable, because of good record keeping is not enforced
Did not meet clients requirement
There is limited certainty to the project owners, because the final cost of the project could
not be easily determined
May lead to disputes when trying to recover construction related expenses
Low profit earned by the contractor
Adverse weather conditions
Risk Analysis
The objective of risk analysis is to prioritize the risks and describe the risk situation as
completely and precisely as possible. The identified risks are investigated with regard to the
probability of their occurrence and the impact on the project. After analyzing the risks, mitigation
measures will be implemented to reduce the probability to the project.
For this bungalow project, qualitative analysis was used to assess all identified risk. A numeric
scale of these two groups of data needs to be converted from a five-point scales. For both the
likelihood of occurrence and consequences of the risk, a numeric scale of (very low, low,
medium, high, very high) by using 1-5 is been converted. Risk score can be calculated by
multiplying the Risk Probability and Risk Impact.
Risk = Likelihood x Impact
The method for calculating the risk significance index score should overlook based on the high
level of consequences towards project objectives, eventhough the likelihood of occurrence is
low. Level of risk was prioritized using the matrix as shown in Figure 2. Green box represent
non-significant risk, yellow for minor risk and red box designated for major risk.
Figure 2: Risk Matrix
The following Table 2 shows the probability, impact and risk score calculated for every identified
risk for the bungalow house project.
Table 2: Risk score for each type of risks
ID
Type of risk
Probability
Impact
Risk Score
The project's duration could be longer than
expected.
12
Shortage of material.
15
Some costs cannot be irrecoverable,
because of good record keeping is not
enforced
Did not meet clients requirement
16
There is limited certainty to the project
owners, because the final cost of the
project could not be easily determined
May lead to disputes when trying to recover
construction related expenses
15
Low profit earned by the contractor
Adverse weather conditions
Based from the risk score, there are 4 highest risks that will require mitigation measures. The
highest risk only will be highlighted and to be focus for mitigation measures. Table 3 will show
the mitigation measures for each major risks of the bungalow house project.
Table 3: Mitigation measures
Probability
Impact
Risk
Score
ID
Type of risk
The project's duration could
be behind the schedule
12
Shortage of material
15
Did not meet clients
requirement
16
May lead to disputes when
trying to recover
construction related
expenses
15
Mitigation measures
Meet and have a discussion
with the owner to explain why
the project cannot complete
on the completion date.
Control the material usage.
A cost plus contract can lead
to misuse of construction
material, so it might end up
acquiring more material than
reasonably expected.
Start with a detailed scope of
work, with detailed plans and
specs, so both parties have a
clear understanding of the
work to be done.
Negotiate critical items that
could lead to disputes, such
as overhead expenses and
main office associated costs
and read carefully the
cost-plus-contract provisions
before start the project
Based on the Table 3 above, mitigation measures have been identified to minimize the
probability of the bungalow house project thus can avoid the unexpected things to be happened
to the project that can lead to project delay, contractor suffered from significant losses and
others.