Construction Project Risk Assessment: Development of Model Based on Investigation of Opinion of Construction Project Experts from India

Abstract

Risk is involved in every business, and the construction industry is no exception. Most of the project management issues that impact a project arise from associated uncertainties. The Indian construction industry is worth about $120 billion and this could grow considerably, driven by major projects across the country. There are a number of problems in the construction industry in India that are attributed to various factors. The focus of the present research is to identify factors that influence the smooth completion of a project and develop a risk assessment model. The authors of the paper have made an attempt to analyze the present risk condition in the construction industry by meeting experts in the field to collect first-hand information as a first step towards risk assessment and suggest a risk response strategy. A total of 93 risk factors were identified and listed under various subgroups in this paper. A questionnaire was prepared on the basis of a literature review and was filled by six contractors, four owners, five project management experts, having more than 20 years of experience in the construction field in India. As the factors are represented in qualitative terms, fuzzy analytical hierarchy process (AHP) is used. The result of the study is listed, in which the percentage contribution of various factors to smooth completion is shown. Because the findings are based on a small cross section of experts, Student’s t-test, a significance test, has been applied to know the significance of test findings on the general construction industry. The study results are reduced further into two groups for simplification and better understanding. The first group covers owner-, contractor-, project manager-, finance-, and resource-specific risks; and the second group covers risk pertaining to project-, architect/consultant-, external environment-, and contract-clause-specific factors. The analysis results indicate that the risks specific to the first group are found to be 10.5 to 12.0% with a standard deviation less than 1.66, whereas the percent apportionment of second group ranges from 9.5 to 13%, a larger range than the first group of factors with standard deviation up to as high as 3.3, indicating wider variation, thus making it difficult to predict their occurrence in a project. The findings are also confirmed by the project disputes related to various projects discussed in the paper. The risk response strategy suggested in this paper will be useful in mitigating the adverse effects of risk in project completion in the Indian construction industry. A planned approach in handling a project-specific and external-environment-specific risk coupled with a proper contract administration can mitigate overall risk to a greater extent in the Indian construction industry.