Birmingham City University

School of Engineering and the Built Environment

MSc CPM

INVESTIGATING HOW EFFECTIVE RISK

MANAGEMENT PRACTICES CAN MINIMIZE
DELAYS IN SRI LANKAN CONSTRUCTION
PROJECTS

Submitted in 21 June

2018 By

H.M. Amith Anushke Hennayake

(Student ID – [BCU - 17107599] – [ICBT- CL/MQS/01/04])

This dissertation proposal is submitted in partial

fulfilment of the requirements for the degree of

Master of Science in Construction Project Management (MSc CPM)

 INVESTIGATING HOW EFFECTIVE
RISK MANAGEMENT PRACTICES CAN
MINIMIZE DELAYS IN SRI LANKAN
CONSTRUCTION PROJECTS
Table of Contents
Abstract ........................................................................................................................................... 1

Introduction ..................................................................................................................................... 2

Statement of the Problem ................................................................................................................ 3

Significance of the study................................................................................................................. 4

Aim ................................................................................................................................................. 4

Objectives ....................................................................................................................................... 4

Scope and Limitations..................................................................................................................... 5

Population Selection ................................................................................................................... 5

Sample Selection ......................................................................................................................... 7

Literature Review............................................................................................................................ 8

Developing Hypothesis and Null Hypothesis ............................................................................... 11

Finding Variables ...................................................................................................................... 11

Hypotheses ................................................................................................................................ 12

Null Hypotheses ........................................................................................................................ 12

Methodology ................................................................................................................................. 13

Objective 01, 02 & 03 ............................................................................................................... 13

Objective 04 .............................................................................................................................. 13

Research Timeline ........................................................................................................................ 14

Conclusion .................................................................................................................................... 15

Reference ...................................................................................................................................... 16

TABLE OF FIGURES

Figure 1: CIDA Grading system based on Financial capacity ........................................................ 5

Figure 2: Selection of Population ................................................................................................... 6
Figure 3:Determining sample size (https://www.surveysystem.com/sscalc.htm) .......................... 7
Figure 4: Selection of Sample ......................................................................................................... 7
 Abstract
Risk Management is a very known concept in the Construction industry and in many other
industries. The primary purposes of using Risk Management techniques in any industry is to
increase their profits and performances while maintaining quality within cost & in time delivering.

The Construction industry is highly prone to risks due to the influence of many stakeholders
involved and also due to natural disturbances as floods, earth slips, rain and Environmental
limitations hence the risks to be considered grows higher and higher. Failing to foresee the risks
can cause project delays and with project delays the output quality of work can be affected which
will increase cost of the project.

In the Sri Lankan construction industry project delays has become a very common occurrence in
the majority of the projects and most clients and contractors has accepted project delays as a natural
occurrence, rather than eliminating the factors that causes the problem.

Finding an effective risk management practice can be very challenging and among other major
factors resulting in project delays the purpose of this research is to evaluate whether the cost
overruns in the Construction industry of Sri Lanka is caused by poor practice or by lacking
knowledge of proper risk management practices.

[1]
 Introduction
For a Construction project to be successful the project should be completed within the estimated
time. In order to achieve the mentioned constraint, the management should identify, quantify and
cost each and every component required to successfully complete the project. It is where risk
management practices aid to identify the potential risks to minimize or to eliminate uncertainties
from the project.

A risk is an occurrence of a certain event which can result in a loss or a profit to the project. Risks
can be categorized as “known risks” and “unknown risks”, known risks can be always identified
at the beginning of the project therefore strategies can be developed to overcome them. However
unknown risks cannot be identified early, but the purpose of good Risk Management Practice is to
identify all the risks including ways to eliminate unknown risks. As Sir Micheal Latham said, “No
construction project is risk free. Risk can be managed, minimized, shared, transferred, or accepted
It cannot be ignored.” (Sir Michael Latham 1994)

As mentioned above primary objectives of any construction project is to complete the project
within the estimated time and cost, any external or internal factor changes the outcomes of these
objectives becomes a risk to the project. Facts as complexity, public limitations, government
limitations, financial intensity and time-consuming workmanship, construction projects naturally
tend to develop higher risks than other industries. But sadly, most companies hold a poor reputation
when managing risks because project delays has become a common occurrence in the industry and
they are unaware of the adverse effects they are bringing in to the industry.

Lack of risk management practices in the construction industry can directly impact the trust and
reliability among many Stakeholders within the industry. In the current industry extension of time
due to extra work & variations has become very common occurrences in local projects and these
are very basics reasons leading to project delays. Proper risk management practices play a vital
role in the Construction process, but it’s potentials has been undermined by giving very little
attention to the value of Risk Management Practices. Therefore, identifying the risks properly and
developing proper strategies to them at early construction stages can ensure that the project is
completed within the estimated cost, time and required quality while maintaining a healthy
relationship within the Stakeholders.

[2]
 Statement of the Problem
Project delays has become a very common occurrence in the construction sector. The most
common explanation for most delays are unforeseen events and because of those events the project
completion date will extend which can lead to poor quality & workmanship because of the loss of
profit due to cost overruns.

Occurrence of an unforeseen event is an unwanted risk, if the contractor has identified the risks at
early stages the risks could have been eliminated, minimized, shared with the client or transferred.
existing literature in relevance to Risk Management provides the available techniques, the level of
Risk Management knowledge in developed & developing countries and the different practices &
techniques followed in the construction industry. But research information is lacking in reference
to the relationship between Risk Management practices and project delays in the construction
industry.

By performing this study, the researcher seeks the answer to the question “Is poor Risk
management is one of the major reasons for the delays in construction projects? “

Through this research the researcher is expecting to prove that there is a direct link between Risk
Management and delays in Construction projects.

[3]
 Significance of the study
This study will be significance to any member in the construction industry, whether you are a
client, a contractor or a consultant identifying every cost element can aid any member in the
industry to increase the accuracy & reliability in the industry.

Identifying the Risk factors at early stages of the project and being prepared for those risks can
eliminate unwanted time wasted on construction claims and focus more on developing a quality
end product.

By proving the link between Risk management and cost overruns the researcher can provide
knowledge to the construction industry of the advantages in following proper Risk Management
practices. Since the success rate of any project is measured in terms of time, cost and quality with
this study the researcher can influence the public to follow proper Risk management practices and
to encourage to increase the success rate of any construction project.

Aim
To study and critically analyze how effective Risk management practices can ensure completion
of a construction project within the estimated time.

Objectives
1. Studying and understanding the Risks associated with project delays in the Construction
Industry of developing countries.

2. Identifying the risks causing project delays in the construction industry of developing
countries.

3. Identifying the relationship between Risk Management Practices and the facts causing
project delays in developing countries.

4. Analyzing whether effective Risk Management practices can ensure completion of a

Construction project within estimated time.

[4]
 Scope and Limitations

Population Selection
This research analyses the relationship between effective Risk management practices and delays
in construction projects. In order to gather the necessary primary data, the researcher performed a
simple survey to gather information on the performance capabilities of the available contractors
within the country. With the findings the researcher was able to determine that the Contractors
who performs projects valuing over 500,000,000.00 LKR (Five hundred million rupees) are the
ones who operates with a proper technical staff and proper financial capabilities to perform Risk
Management practices.

In the current government Contractor grading system, the Construction Industry Development
Authority(CIDA) has introduced a grading system based on the financial and the technical
resources of the organizations. Following figures shows the different gradings and the criteria to
reach each grading category.

Figure 1: CIDA Grading system based on Financial capacity

[5]
Therefore, to ensure the target group acquires sufficient financial and the technical capability the
researcher decided to limit the population to the Contractors who has acquired CIDA C1 grading
or above, and in order to diversify the target groups based on their specialized area of construction
the researcher decided to use different contractors involved in Building Construction,
Road/Highway Construction, Utility and Hydro Power Construction. As CIDA holds no grading
method for Hydro Power Construction the researcher has identified several Hydro Power
Construction contractors who has performed projects valuing over 600,000,000.00 LKR (Six
hundred million rupees) which is adequate to CIDA C1 grading or above.

The researcher has selected “Stratified Sampling technique” to select the sample size from the
population because among the selected population the population is divided in to 04 categories.

Category Population Remarks

(Nr of Contractors)
Road/Highway Construction 40 All Contractors are graded
Utility Construction 19 with CIDA C1 or above and

Building Construction 35 Hydro Power Contractors

holds the financial capability
Hydro Power Construction 18
similar to CIDA C1 grading
Total 112
or above
Figure 2: Selection of Population

[6]
Sample Selection
For a population of 112 Contractors the required sample size is calculated for each category as
follows,

Figure 3:Determining sample size (https://www.surveysystem.com/sscalc.htm)

Therefore, by using the “stratified sampling technique” the sample size for each stratum is
calculated as follows,

Category Population Sample Size

Road/Highway Construction 40 31
Utility Construction 19 15
Building Construction 35 27
Hydro Power Construction 18 14
Total 112 87
Figure 4: Selection of Sample

The researcher will use the “Simple random sampling method (The lotto method)” to select the
required no of samples of each stratum.

[7]
 Literature Review
The Project Management institute (PMI) has identified Project Risk management as one of the
nine major knowledge areas required for a better project Management. PMI has defined the process
of Risk management in to several sub categories as,

• Risk Management Planning

• Risk Identification

• Qualitative Risk analysis

• Quantitative Risk Analysis

• Risk Response Planning

• Risk Monitoring and Control

In order to manage a risk properly a project manager should be capable to identify the root causes
for the risk together with the consequences of the risks in a systematic way without harming the
project objectives (ICEAP 2005). Integrating Risk management at early stages is vital for the
project because it is where the use available resources, constructions methods and other major
decisions can be influenced (Eskesen et al. 2004).

The current Construction industry includes various infrastructures as residential houses, High
risers, Complex bridges, underground tunnels, Roads and utility projects. Whatever the complexity
of the project whether it is a simple single storey house or a complex high-rise building reaching
for the skies, the success rate of the project is measured by three main parameters which are,

• Time : The project should be completed on within the estimated time

• Cost/Budget : The project should be within the budget / estimated cost

• Quality : The project should meet specified technical and quality standards

Smaller scale projects are usually at minimum risk level and because of the lesser construction
period it would be an easy to task to reach the objectives. For larger scale projects with complex
designs and time-consuming construction works it is a major challenge to fulfill above parameters
(Dey PK 2011).

[8]
Project Risk management is a repetitive process should be implemented and followed throughout
the entire life cycle of the project (Zou, Zhang and Wang 2007). The most common risk
management process followed is, Risk identification, analyzing the risk and finally developing a
response for the risk. Risk identification can be done using various techniques as brainstorming,
Delphi method, interviews, cause analysis, SWOT analysis and presumption analysis but mostly
in developing countries the professionals are more prune to methods as checklists, Interviews with
experts and past experience which are common techniques suitable for smaller scaled projects (El
sayegh S M 2014, Rostami A 2016).

Risk analysis aids to identify the importance of the risk and the level of impact it has on the project
objectives. Risk analysis is a challenging process because it asses every outcome occurs from the
risks and how that outcome can affect the project objectives (Thomas D R 2006). Analyzing of
risks can be done in quantitative or qualitative manner but the primary objective is to evaluate the
risks and to eliminate, reduce manage or transfer the risks effects on project objectives (Goh C S
and Abdul Rahman H 2013).

There are many factors that creates risks within the project naturally, new developments are riskier
than repetitive developments because of the unavailability of historical data and less familiarity of
the project. The experience and the expertise of the management staff should be in an optimum
level or else the knowledge gaps can lead to inaccuracy which can lead to more risks Nadeem
Ehshan et el 2010).

There are many risks associated in the construction industry and they can be categorized in to,

1) Technical Risks: Risks arising due to lack of proper site investigations, incomplete or
inadequate designs, lack of specifications, lack of resources and lacking in constant material
supply.

2) Logistical Risks: Risks arising due to inadequate transport facilities and unavailability of
adequate spare parts, tools, fuel and labour.

3) Environmental Risks: Risks arising due to adverse weather, seasonal consequences and
Natural disasters.

4) Financial Risks: Risks rising due to fluctuation of foreign exchange, price inflations,
Government taxes and payment delays.

[9]
Identifying each risk associated in above categories can be very challenging a time-consuming
process but with common techniques as Risk Matrix, Monte carlo simulation, AHP, Fuzzy logic
assessment, FMEA, expected monetary value analysis and Expert judgment it is an achievable
challenge. But in most developing countries the management lacks on knowledge and because of
that majority of the risks goes undetected and unaware until it occurs at the project development
phase (Nadeem Ehshan et el 2010).

Many existing studies shows the poor knowledge in Risk Management on developing countries,
but the knowledge gap exists on whether the lack of knowledge in Risk Management it is the
reason for the less success rate of construction projects in developing countries in terms on time.

Xxx

The major categories mentioned above are consisted with number of different Risk factor which
causes delay in projects. The following table has identified the most common Risk factors falls
under the above mentioned categories.

# Risk Category Risk Factor

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 Developing Hypothesis and Null Hypothesis

Finding Variables
With the findings of the existing preliminary literature the “independent variables and the
dependent variable” can be identified as follows,

INDEPENDENT DEPENDENT
VARIABLES VARIABLE

TECHNICAL RISKS

LOGISTICAL RISKS
PROJECT
ENVIRONMENTAL DELAY
RISKS
FINANCIAL RISKS

[11]
Based on the developed independent variables and the dependent variable the “hypotheses and the
null hypotheses” can be produces as follows,

Hypotheses
H1a - There is a relationship between Technical Risks and Project Delay

H2a - There is a relationship between Logistical Risks and Project Delay

H3a - There is a relationship between Environmental Risks and Project Delay

H4a - There is a relationship between Financial Risks and Project Delay

Null Hypotheses
H1b - There is no relationship between Technical Risks and Project Delay

H2b - There is no relationship between Logistical Risks and Project Delay

H3b - There is no relationship between Environmental Risks and Project Delay

H4b - There is no relationship between Financial Risks and Project Delay

[12]
 Methodology

Objective 01, 02 & 03

Researcher achieves the first, second and the third objective using “Qualitative method”. The
researcher has used “Books, Journals and Research papers” to gather necessary information for
the study.

Objective 04
Researcher achieves the forth objective by “preparing, distributing, collecting and analyzing
the data obtained from the questionnaires” distributed among the scientifically selected sample
size as mentioned under scope and limitations.

The reliability and the consistency of the collected data is to be checked using the “Cronbach’s
Alpha” value of the collected data, if the “Cronbach’s alpha” value exceeds 0.7 it confirms the
collected data is reliable and consistence.

Once the reliability of the data is checked the relationship between the independent variables and
the dependent variable is to be determined using the “Karl Pearson co-relation coefficient” once
the data is analyzed the researcher would be able to determine whether the relationship between
independent variables and dependent variable is,

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1) A strong positive relationship

2) Strong positive relationship

3) Moderate positive relationship

4) Weak positive relationship

Or,

5) There is no relationship between the two variables.

Research Timeline

Week No. and approximate Tasks to be performed Remarks

Dates
Week 01 Gathering background data and 01st official meeting
(PRIOR TO 02 JUN 2018) finalizing the topic with the Supervisor
Week 02 Literature Search, further reading 02nd official meeting
(02 JUN 2018 – 08 JUN 2018) on topic and developing with the Supervisor
methodology
Week 03 Developing the Research Proposal Submission of
(09 JUN 2018 – 15 JUN 2018) Research Proposal
Week 04, 05 1)Developing the Dissertation Completing
(16 JUN 2018 – 29 JUN 2018) plan Dissertation Chapter
2)Developing the questionnaire 01
and distributing the questionnaire
among the selected Contractors.
Week 06, 07 Further developments and 03rd official meeting
(30 JUN 2018 – 06 JUL 2018 writings towards completion of with the Supervisor
Chapter 02 & 03
Week 08, 09, 10,11,12 1)Gathering the distributed 04th official meeting
(07 JUL 2018 – 10 AUG 2018 questionnaires and reviewing the with the Supervisor
data
2)Analyzing the gathered data
3)Completing 02nd & 03rd
Chapters

[14]
 Week 13 Complete the draft version of the 05th official meeting
(11 AUG 2018 – 17 AUG 2018) dissertation and submitting to to with the Supervisor
supervisor for reviewing
Week 14 Producing the final report. Obtain signature from
(18 AUG 2018 – 24 AUG 2018) Supervisor and
submission of the
Dissertation prior to
the deadline on 26th
AUG 2018

Conclusion
Proper Risk management practices ae rarely followed by developing countries like Sri Lanka due
to lack of experience and lack of knowledge on Risk management. Also, project delays has become
a common occurrence in most of the construction projects. But most undermine the advantages of
Risk management practices which can result in better decision making, increased productivity,
improved success rate and better financial savings.

Risk Management allows systematically identify the projects risks and from that it can provide a
route to improve the success rate of the project. The preliminary findings of existing literature
emphasize that Project risk management is directly linked with the success of the project in terms
of cost, time and quality. But it is yet to be found the situation among the Sri Lankan projects,
which is to be determined through the questionnaire survey and arrive to an agreeable conclusion
with the hypothesis or the null hypothesis.

[15]
 Reference
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in construction projects

2) Crnković D and Vukomanović M, 2016. Comparison of trends in risk management theory

and practices within the construction industry

3) PMI 2013, A Guide to The Project Management Body of Knowledge. (PMBOK guide)
(Newtown Square: Project Management Institute)

4) Taylan O, Bafail A O, Abdulaal R and Kabli M , 2014. Construction projects selection and
risk assessment

5) Tesfaye E, Berhan E and Kitaw D, 2016. A Comprehensive Literature Review on

Construction Project Risk Analysis

6) El-Sayegh S and Mansour M, 2015. Risk assessment and allocation in highway

construction projects in the UAE

7) Goh C and Abdul Rahman H, 2013. The identification and management of major risks in
the Malaysian construction industry

[16]
8) Wang S , Dulaimi M and Aguria M, 2004. Risk management framework for construction
projects in developing countries

9) Smith N, Merna T and Jobling P, 2009. Managing Risk: in Construction Project

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of New South Wales Press, 2004.

13) Eskesen SD, Tengborg P, Kampmann J, Veicherts TH. Guidelines for tunnelling risk
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management in projects. 2007.

19) Cavignac J. Managing risk in a construction company [Internet] 2009

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