El-Gafy (2008) argues that risk analysis is needed in order to determine the potential impact of risks. Both qualitative and quantitative techniques are used for the risk analysis, however, qualitative approach consumes more information and there is a need to gather large amount of information compared to the quantitative approach that require lesser information. Typically, the quantitative risk analysis approach incorporates uncertainty in both numerical and graphical form. Some of the benefits of risk analysis are as follows:
Minimizing management crisis
Minimizing problems within the project lifecycle
Increase the likelihood of project success.
The case study in the next section demonstrates the importance of risk management within the construction industry.
1.8: Case Study: Sydney Opera House
Sidney Opera House is a construction project that cost the State government of New South Wales approximately $102 Million. The Opera House contains approximately 1000 rooms as well as the reception hall, four restaurants, extensive foyers and bars. Typically, many of the world best-known construction companies participated in the project, and it took the government 14 years to complete the project. Before the project was completed, several project risks emanated during the project lifecycle; one of the risks was the costs escalation that drove up the construction budget. Initial budget for the Sydney Opera House construction was $7.2 Million. However, with consistent cost escalation, the final costs used to complete the project were $102 Million. The government did not envisage that there could be increase in the costs during the project life cycle; however, the government used the state lotteries to cover the costs. Apart from the costs escalation that led to the increase in project budget, other risks identified in the project was design errors and omission. In the project design, the roof was too heavy to support the columns. The issues led some part of the building to be demolished and rebuilt. While the construction was initially planned to be completed within 5 years with the costs of $7.2 Million, however, risks associated with the project escalated the project costs to $102 Million and the project approximately took 14 years to complete. Total risks identified leading to the escalation of the project costs and elongation of the project due date are:
Poor cost estimate.
Incomplete design.
Failure to keep within the cost
Failure to stick to the required due date.
Changes in project requirements and scope.
Design changes.
Pressure from stakeholders to deliver project at quicker time.
Inaccurate contract time estimate
Lack of communication among project stakeholders.
Inadequately defined responsibilities.
Insufficient skilled manpower.
Political risks. (Eid, 2007).
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