An Assessment of Contractor’s Risks Exposure Within Some Standard Forms of Building Contract in Nigeria
CHAPTER ONE
Objectives of the Study
General Objective
- To assess and rank the critical risk factors that may generate possible risks;
- To identifythe major risks that may occur standard forms in building contract;
- To allocate risk response strategies for the identified critical risks;
- To examine recommendations for improved risk management associated with building contract;
- To assess the major challenges encountered in managing risk during implementation of building
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
This chapter deals with Review of Related Literature of numerous scholars and authors: paying particular attention on project risk management with specific reference to building contract. Theoretical concepts associated to projects, project management, project risk management process (risk identification, risk assessment, risk response strategies, risk monitoring) and risk management tools and techniques were presented from the viewpoint of several researchers’. Moreover, the empirical review of literature from the perspective of findings of the research and methods used presented. Construction industry & risk management in Nigeria and conceptual framework considered. The comprehensive review of related literature conducted with an aim to address the objectives of the research.
Review of Literature
Project and Project Management
In order to comprehend project management, one should begin with the definition of a project. In line with project management body of knowledge, the word project outlined in terms of its distinctive characteristics, as “a project is temporary endeavor undertaken to make a distinctive product, facility or outcome” (PMBOK Guide, 2017, p.4). Either a distinctive product, which will be a part of another unit, an improvement or rectification to a unit, or a first-hand finished a unit in itself. A distinctive facility is a capability to accomplish a facility. A distinctive outcome is like a product or a bit of record.
Projects carried out to attain goals by generating outputs. Constructing a building or facility can be a project among others. Momentary effort, the restricted period of projects shows that a project incorporates a definite begin and end. The limited period does not mean a project incorporates a small period.
On the opposite hand, (Hillson, 2009, p.11) illustrates what project means as “A project is launched so as to implement a facet of company strategy, to comprehend a business case, and to make a group of deliverables.” Finishing the project itself does not essentially mean the project motivate direct benefit to the participants and establishments at completion. Nonetheless, it generally produces ability that has to be functioned with the aim of creating the tangible profit that gained out of it. It associates the project with company strategy. Similarly, the British Standards Institution (BSI) also defined project as “A distinctive procedure, consisting of a group of coordinated and controlled activities with begin and end dates, undertaken to attain an objective orthodox to specific necessities, including constraints of time, cost and resources” (Ibid).
CHAPTER THREE
RESEARCH DESIGN AND APPROACH
Introduction
The purpose of this research is to study risk management related with building contract in Lagos. To achieve this objective, this chapter presents the approaches, methods, instruments, techniques, and procedures, etc. that used to collect and analyze data. It includes research design, sources of data, population, sample size, and sampling technique, instruments of data collection, procedures of data collection, methods of data analysis, and ethical considerations.
Research Design
The research design is the over-all blueprint of how the researcher will go about responding the research question (s). It will comprise clear objectives resulting from the research question(s), lay down the bases from which the researcher be going to gather data, plan how to gather and evaluate these, and talk over ethical subjects and the limitations that it will certainly come across (Saunders, et al. 2016). To achieve the objective mixed method research approach used in the study. It helped to capture the best of both quantitative (plays a dominant role) and qualitative (plays a supporting role) approaches which is a concurrent embedded research design that were used within a single phase of data collection and analysis (a single-phase research design).
This study; using mixed method approach, tried generally to identify, study, and explore the major variables (risk factors), and examine which risks possibly occur from the identified critical risk factors. It investigated those variables (factors) with a large sample of individuals and suggested risk response strategies to the identified critical risks towards a wide-ranging of risk management. It also leads to develop better conclusions from this particular study, explain and generalize the findings to a population of contractors and consultants.
The research implemented descriptive research design in order to describe the situations and facts to the research questions of this specific study. It allowed for the collecting of data, review, propose and comprehend it for achieving a precise profile of risk events.
CHAPTER FOUR
RESULTS AND DISCUSSION
Introduction
This section presents the research results and discussion of the collected data using survey questionnaire. The critical risk factors, the possible risks and response strategies identified in the survey results. Moreover, based on the qualitative analysis on open-ended questions, the recommendations for improved risk management and challenges encountered forwarded by participants.
Questionnaire
The questionnaire has three major parts. The first part contains the general profile of respondents. The second part presents about the findings of the question towards identifying the critical risk factors that may generate possible risks. It also presents to answer the questions of possible risks that might occur and their allocation of response strategies. The third part discusses about general recommendations of respondents and their challenges encountered in managing risk associated to building contract.
CHAPTER FIVE
SUMMARY, CONCLUSION, AND RECOMMENDATIONS
This chapter has four subdivisions. The first subdivision presents summary of main findings: the second subdivision presents conclusion of the study resulting from findings. The third subdivision deals with recommendation based on findings. The last subdivision is concerned with concepts that might require further studies.
Summary of Findings
The purpose of the underlying research is to assess building contract risk management in Lagos towards constructing and consulting firms. To achieve the intended objectives, mixed method research approach used in this study. The study also applied descriptive research design for describing situations and facts to the research questions.
From the review of related literature, 50 possible risk factors were identified that might occur standard forms in building contract in Lagos. Based on an assessment of probability of occurrence of risk factors, the research findings indicated that five most critical risk factors identified. These were “high inflation rate” RII 0.85, “delayed payment by clients” RII 0.836, “poor resource management” RII 0.822, “risk of corruption” RII 0.802, and “economic instability” RII 0.801. Each of the factors, according to the result, has frequent probability of occurrence and high level of importance.
The financial factor was the most significant risk category recognized by participants with an RII value of 0.771. Moreover, among the category risk factors, following to the financial, tender, construction works, and political and legal factors were the most significant factors identified with an overall RII value > 0.700.
The study revealed risks of time overrun RII, 0.904 and cost overrun RII, 0.872, with frequent probability of occurrence and high importance level as the first and second most possible risks. In this study, perception of risk response strategies by participants, allocated first and second were Risk Transfer (RII, 0.712) and Risk Reduction (RII, 0.608).
From the opinions recommended by participants about risk management, 22.68% acknowledged that the major operators in the industry should have knowledge of risk management related with building contract; whereas, 22.06% recommended practicing the knowledge of risk management accordingly. Furthermore, the most significant challenges faced by practitioners of consultants and contractors, were lack of knowledge of risk management (22.58%) standard forms in building contract in Lagos.
Conclusion
Due to unexpected nature and changes that occur during implementation of building contract, risk becomes one of the prevalent phenomena. Fifty risk factors identified from review of related literature and considered by consultants and contractors in Lagos.
Based on the assessment conducted to identify and rank critical risk factors, addressed by the first specific objective, 5critical risk factors identified. High inflation rate is the most critical risk factor that has effect on constructing projects. For the achievement of development objectives, this factor should draw extraordinary consideration from government bodies and other institutions responsible for preparation of policies and its implementation.
Following inflation, participants observed delayed payment by a client as the second most dominant risk factor among the variables examined. This factor needs special attention by financial institutions that are in charge for fixing collateral requirement to issue guarantees for project financing. In addition, clients should secure adequate budget before commencing any project. As a result, projects could get sufficient finance on due time that can facilitate availability of resources on specified schedules. This also increases efficiency of project operation that enables to achieve objectives.
1.1 Recommendations
Based on the findings of the study, it recommended that consultants, contractors, Government and other stakeholders consider the following areas of improvement in managing risk standard forms in building contract in Lagos.
- Practitioners of both consultants and contractors should have knowledge, skill, and practice of risk management to minimize building construction project risks early:
- Through organizing training and workshop programs on risk management of building contract for their employees;
- Facilitating continued development, education, and exchanging practices of managing risk for their employees;
- Both consultants and contractors should give attention to risk management so as to reduce/manage risk of time overrun and cost overrun to meet project objectives:
- Through developing risk management plan during the early stage of projects and embrace risk as their essential part of project management;
- Through developing and organizing separate teams who have knowledge and skill on risk management to identify, analyze risks and allocate response strategies correspondingly;
- Government should encourage local construction material manufacturers by formulating policies and strategies which facilitates to build their capacity and enables them to:
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