An analysis of contractors' approaches to risk identification in New South Wales, Australia

Abstract

This study addresses the process of risk identification at the tendering and estimating stage, which is the first stage of the risk management process, and for the risk management process be of benefit and for the project objectives to be achieved, the risk identification stage should be very detailed and thorough. The aim of this study is to identify, investigate and evaluate the process of risk identification at the tendering and estimating stage for construction contractors in the NSW region. The data for this were collected during the months of December '94 and January '95 using a sample survey of a cross-section of 19 construction contractors, and the results were analysed using frequency distribution. The results show that the most frequently used methods of risk identification are the top-down approach techniques, where the project is analysed from an overall point of view. Techniques based on top-down approach lead to guesswork in terms of contingency for risks accepted by the construction contractors. Bottom-up risk identification techniques are not popular except for a questionnaire and check-list approach. Also, it was unlikely that the contractors would discuss risk allocation with the clients. All the contractors interviewed agreed that when a risk identification process is followed it improves the accuracy of their estimates.