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Engineering construction risks — A guide to project risk analysis and risk management
PUBLICATIONS formally presented works. It is also true that, in reality, projects are not neatly compartmentalized. Estimating, planning and managing are iterative processes, with the same issues needing to be addressed at different times during a project's life. Nevertheless, I would have preferred a more structured approach, together with diagrams, tables and lists to illustrate, clarify and summarize the text. There are too many reproductions of printouts from commercially available software that are too small, and do not relate fully to the text. The book varies from a basic 'how-to' guide to a more philosophical analysis of many facets of project management. This is both its strength and its weakness. It covers a lot of ground, but only superficially in some areas. For example, the book is written primarily from the viewpoint of contractors preparing tenders, planning, and then managing their work to meet their tendered prices and schedules. The
owner's view is rarely mentioned. At one point, however, Ward concludes that, since the owner does not have to worry about failing to win the work, and does not have to worry if his/her estimate exceeds the contractor's price, ' . . . t h e owner's anxieties should be far less than the contractor's'. How often do the tenders exceed the owner's estimate, even before variations are added and claims are settled? W h a t of the owner's anxieties then? The book would benefit significantly from sympathetic editing, greater use of diagrams to illustrate the text, the breaking up of the text into smaller sections by the use of headings and subheadings, lists, tables, bullet points and summaries, and a more comprehensive index. The book is not the definitive work on this subject, and, at £45.50, it is not cheap either, but it is worth perusal by anyone interested in managing projects, although some lateral thinking will be required by those
Engineering Construction Risks, A Guide to Project Risk Analysis and Risk Management P Thompson and J Perry (Eds.) Thomas Telford, UK (1992) £17, 56 pp, ISBN 0 7277 1665
This booklet is a report on the findings of two research studies on how risk analysis and risk management may be used to improve the financial success of engineering construction projects. The research work was supported by the U K Science and Engineering Research Council. The results of the first study were published in 1986 as Risk Management in Engineering Construction. This publication contains the findings arising from the second study, which was undertaken in 1990/91 as a follow-up to the previous work. Vol 11 No 3 August 1993
It spells out the importance of tackling project risks, and shows how this can be done. It also provides an introduction to the literature of the subject. The aim of the publication is to increase awareness of this vital issue among the industry and its clients, in both the public and private sectors. A principal conclusion of the report is that, all too often, risk is either ignored or dealt with in an arbitrary way through the use of overall percentage contingency allowances. The report provides a
without knowledge of the construction industry. Students should find it useful as an overview, and owners could find a useful insight into the problems that contractors face every day. Despite its faults, I enjoyed this book; it contains a lot of wisdom and distilled experience. On the last page, Ward says the following: The fundamental theme of planning is reductionof risks. It is virtuallyimpossible to prognosticatewhenand if specificproblems will crop up during the execution of a project but the wisdom acquired from the experience of completed projects should be utilised to effectuateintelligent decisions. This should be written on the first page of the book, not the last.
P E Jobling W S Atkins Project Management Epsom, Surrey UK
systematic means of progressively assessing and refining risk estimates throughout a project, from the early stages, when the work is ill defined and uncertainty is greatest, to the later stages, when any remaining risks can be closely identified and tackled. The report explains how the initial listing and qualitative analysis of risks can be developed as necessary by such quantitative techniques as sensitivity and probability analysis using specially prepared computer programs. The value obtained from risk-analysis modelling depends, of course, on the realism of the assumptions underlying it, the skill of the model builder, and the accuracy of the data used. When an appropriate degree of analysis has been conducted, risk management operates to provide responses and policies to reduce and control as far as possible the main risks identified in the analysis. Contract strategy is briefly covered, followed by a look at the risk implications of different procurement systems and methods of 187
PUBLICATIONS payment. It is in these areas that more research could usefully be undertaken to assist all the parties involved in construction projects to give a greater and more productive input, and thereby alleviate the problems of lack of performance and dispute escalation. The report introduces the concept that the client should consider setting a 'minimum acceptable risk' contract price, below which a bidder will not be awarded a contract. This idea may not gain favour in a free-market competitive economy
188
in which contractors thrive on their expertise and value their reputations. Careful vetting of tenderers and an open, collaborative attitude to the distribution of risk among contracting parties may create better conditions for successful projects. This booklet puts forward many well researched ideas, and offers a valuable contribution to the understanding of project risk for clients, consultants and contractors. The construction industry will benefit from the greater awareness of the
effect and handling of risk that the booklet provides.
B CurtL, Note In the Publications section of the May 1993 issue of the Internationa~ Journal of Project Management, the book 'Managing People (Including Yourself) for Project Success', by G Culp and A Smith, is published by Van Nostrand Reinhold of New York (imprint Chapman and Hall) and not as stated. We apologize to all concerned for this error.
International Journal of Project Management
owner's view is rarely mentioned. At one point, however, Ward concludes that, since the owner does not have to worry about failing to win the work, and does not have to worry if his/her estimate exceeds the contractor's price, ' . . . t h e owner's anxieties should be far less than the contractor's'. How often do the tenders exceed the owner's estimate, even before variations are added and claims are settled? W h a t of the owner's anxieties then? The book would benefit significantly from sympathetic editing, greater use of diagrams to illustrate the text, the breaking up of the text into smaller sections by the use of headings and subheadings, lists, tables, bullet points and summaries, and a more comprehensive index. The book is not the definitive work on this subject, and, at £45.50, it is not cheap either, but it is worth perusal by anyone interested in managing projects, although some lateral thinking will be required by those
Engineering Construction Risks, A Guide to Project Risk Analysis and Risk Management P Thompson and J Perry (Eds.) Thomas Telford, UK (1992) £17, 56 pp, ISBN 0 7277 1665
This booklet is a report on the findings of two research studies on how risk analysis and risk management may be used to improve the financial success of engineering construction projects. The research work was supported by the U K Science and Engineering Research Council. The results of the first study were published in 1986 as Risk Management in Engineering Construction. This publication contains the findings arising from the second study, which was undertaken in 1990/91 as a follow-up to the previous work. Vol 11 No 3 August 1993
It spells out the importance of tackling project risks, and shows how this can be done. It also provides an introduction to the literature of the subject. The aim of the publication is to increase awareness of this vital issue among the industry and its clients, in both the public and private sectors. A principal conclusion of the report is that, all too often, risk is either ignored or dealt with in an arbitrary way through the use of overall percentage contingency allowances. The report provides a
without knowledge of the construction industry. Students should find it useful as an overview, and owners could find a useful insight into the problems that contractors face every day. Despite its faults, I enjoyed this book; it contains a lot of wisdom and distilled experience. On the last page, Ward says the following: The fundamental theme of planning is reductionof risks. It is virtuallyimpossible to prognosticatewhenand if specificproblems will crop up during the execution of a project but the wisdom acquired from the experience of completed projects should be utilised to effectuateintelligent decisions. This should be written on the first page of the book, not the last.
P E Jobling W S Atkins Project Management Epsom, Surrey UK
systematic means of progressively assessing and refining risk estimates throughout a project, from the early stages, when the work is ill defined and uncertainty is greatest, to the later stages, when any remaining risks can be closely identified and tackled. The report explains how the initial listing and qualitative analysis of risks can be developed as necessary by such quantitative techniques as sensitivity and probability analysis using specially prepared computer programs. The value obtained from risk-analysis modelling depends, of course, on the realism of the assumptions underlying it, the skill of the model builder, and the accuracy of the data used. When an appropriate degree of analysis has been conducted, risk management operates to provide responses and policies to reduce and control as far as possible the main risks identified in the analysis. Contract strategy is briefly covered, followed by a look at the risk implications of different procurement systems and methods of 187
PUBLICATIONS payment. It is in these areas that more research could usefully be undertaken to assist all the parties involved in construction projects to give a greater and more productive input, and thereby alleviate the problems of lack of performance and dispute escalation. The report introduces the concept that the client should consider setting a 'minimum acceptable risk' contract price, below which a bidder will not be awarded a contract. This idea may not gain favour in a free-market competitive economy
188
in which contractors thrive on their expertise and value their reputations. Careful vetting of tenderers and an open, collaborative attitude to the distribution of risk among contracting parties may create better conditions for successful projects. This booklet puts forward many well researched ideas, and offers a valuable contribution to the understanding of project risk for clients, consultants and contractors. The construction industry will benefit from the greater awareness of the
effect and handling of risk that the booklet provides.
B CurtL, Note In the Publications section of the May 1993 issue of the Internationa~ Journal of Project Management, the book 'Managing People (Including Yourself) for Project Success', by G Culp and A Smith, is published by Van Nostrand Reinhold of New York (imprint Chapman and Hall) and not as stated. We apologize to all concerned for this error.
International Journal of Project Management