1. Evaluate the risks associated with projects and how the project baseline sche
ID: 1763461 • Letter: 1
Question
1. Evaluate the risks associated with projects and how the project baseline schedule can be adjusted or developed to accommodate the potential of those risks.
2. Discuss which risks are greater to a project, those from subcontractor failures or those from supplier failures?
3. How can a construction manager build risk prevention into the project schedule development process?
4. Should the architect or design team be included in the process, why or why not?
5. What are the variables which can influence procurement decision-making?
Explanation / Answer
Managing risks on projects is a process that includes risk assessment and a mitigation strategy for those risks. Risk assessmentincludes both the identification of potential risk and the evaluation of the potential impact of the risk. A risk mitigation plan is designed to eliminate or minimize the impact of the risk events—occurrences that have a negative impact on the project. Identifying risk is both a creative and a disciplined process. The creative process includes brainstorming sessions where the team is asked to create a list of everything that could go wrong. All ideas are welcome at this stage with the evaluation of the ideas coming later.
Risk Identification
A more disciplined process involves using checklists of potential risks and evaluating the likelihood that those events might happen on the project. Some companies and industries develop risk checklists based on experience from past projects. These checklists can be helpful to the project manager and project team in identifying both specific risks on the checklist and expanding the thinking of the team. The past experience of the project team, project experience within the company, and experts in the industry can be valuable resources for identifying potential risk on a project.
Identifying the sources of risk by category is another method for exploring potential risk on a project. Some examples of categories for potential risks include the following:
Risk Evaluation
After the potential risks have been identified, the project team then evaluates the risk based on the probability that the risk event will occur and the potential loss associated with the event. Not all risks are equal. Some risk events are more likely to happen than others, and the cost of a risk event can vary greatly. Evaluating the risk for probability of occurrence and the severity or the potential loss to the project is the next step in the risk management process.
Having criteria to determine high impact risks can help narrow the focus on a few critical risks that require mitigation. For example, suppose high-impact risks are those that could increase the project costs by 5% of the conceptual budget or 2% of the detailed budget. Only a few potential risk events met these criteria. These are the critical few potential risk events that the project management team should focus on when developing a project risk mitigation or management plan. Risk evaluation is about developing an understanding of which potential risks have the greatest possibility of occurring and can have the greatest negative impact on the project. These become the critical few.
Sub contractors risks are greater risks to project, they are
When a general contractor enters into a construction contract with an owner, it
explicitly assumes the risk of timely and complete performance of the work. It will
often furnish bonds guaranteeing that performance. The general contractor may then
subcontract a substantial percentage1
of the work to various subcontractors in the
particular trades. The success or failure, and the profit or loss, on a project may
ultimately depend on whether those subcontractors timely and properly perform their
work. Some don’t. Some fail.
Most general contractors have developed practices and procedures to screen
out unqualified subcontractors, monitor subcontractor performance, and protect
against subcontractor failure. Some of the common practices used by general
contractors are worth noting:
• Prequalification of subcontractors, through reference checking and select bid
lists
• Caution when dealing with high percentage bid spreads
• Verification of subcontract scope
• Use of well written subcontracts and purchase orders
• Requirements for adequate insurance coverages
• Monitoring of payments to the subcontractors’ vendors through periodic lien
releases, joint checks, and bills paid affidavits
• Contractual retainage on progress payments
• Good safety programs
• Attention to draw schedules of values to avoid unbalanced or front end loaded
payment terms
• Management of the subcontract draw process through careful evaluation of
progress, percentage of completion, and remaining cost to complete
Project management is the art and discipline of planning, organizing, controlling, and managing human and material resources throughout the life of a project so as to achieve the successful completion of it. It involves dealing with constraints both organizational and human as well as uncertainty and complexity. The project manager also has to deal with the project requirements, the project team, as well as other stakeholders or interested parties. By their nature, projects are a temporary endeavor with definitive start and end dates. Directly or indirectly, the project manger is responsible to ensure that the project is a success. This entails motivating and working with the team members, as well as other stakeholders, to get the resources necessary for project success. This then also requires effective 360 degree communication.
Some basic functions the the prohect manager need to follow are:
The greatest risks are with the human elements!
Decision Making Models in Procurement
Based on extensive literature review and site visits, two basic
procurement decision making models have been identified-
centralized model and decentralized model. Centralized
procurement model is in which all the procurement activities
are handled by the central head office while in decentralized
model procurement decisions are handled by the project unit
itself. After the identification of factors influencing
procurement, their influence on the procurement models is
analyzed through site visits for comparison to find out the
merits and demerits of the models.
Centralized Procurement Model
Merits:
? Material rate discounts-Centralized purchasing enables
bulk quantity purchasing of materials needed for
multiple sites availing materials at discounted prices.
? Less impact by market fluctuation-Centralized model
helps to plan for storing of bulk quantity of required
materials when the price is low and this will save a
significant amount spent for materials when the price
goes up.
? Accountability on project heads are relieved-Presence
of a central procurement department to handle
procurement functions reduces the workload of the
project unit heads.
Demerits:
? Project specific requirement mismatch-Material
requirement for different projects varies which may
increase the complexity and create confusion.
? Time delay-Ordering and lead time increases with this
model which eventually increases the total procurement
time.
? Affects employee morale-Since the decision-making
power for procurement is not under the authority of
project unit employees, it will adversely affect their
leadership and morale.
Decentralized Procurement Model
Merits:
? Reduces burden on top management-Decentralized
model eases the burden of handling procurement
functions for the top management. Handling varied
procurement requirements of multiple sites can result in
confusion and delays and this model avoids it.
? Facilitates diversification-Identification andutilization
of local and diversified resources can be easily done.
? Provide product or market emphasis-In the case of a
material becomes obsolete due to the introduction of
new technologies or change in customer specifications,
decentralization will help to act accordingly without
many complications.
Demerits:
? Unable to follow uniform policies-Under
decentralization, it is not possible to follow uniform
policies or standard procedure for procurement.
Policies have to be framed at unit level as per project
requirements which will be unique for each project and
manpower handling the procurement functions.
? Lack of coordination-Procurement policies followed at
the project unit level may clash with the interests of the
company as a whole and affects planning of activities
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