A Study of Risk Management in Nigerian Construction Projects From Contactors and Owners Perspective. A Case Study of Alhairi Construction Group of Companies

1 INTRODUCTION
1.1.
BACKGROUND
Nigeria is unmistakably the most influential country in Africa; Strategically

positioned as the most populous nation in Africa popularly called the giant of
Africa with a continuously growing economy which mainly depends on its oil sector;
being ranked among the worlds top ten oil producing countries, the Nigerian oil
sector (which also depends on its construction sector) produces about 90% of its
export revenues and about 41% of its Gross Domestic Product (GDP) 1. Regardless of
its immense availability of natural resources, the growth of her oil sector has been
stagnated due to her outdated infrastructure as well as the rather slow passage of
goods across Nigerias recognized ports. Reflecting on the origin of the oil era, the
Nigerian economy which was mostly dependent on agricultural produce was
considerably diversified. Then, there was abundant in food cultivation even up to an
exportable quantity. All these changed with the first export of oil in 1958.
During the 1970, just like the oil and g industry, the construction industry has
turned out to be fundamental for wealth distribution in the Nigerian economy. The
Nigerian construction sector performs a significant function in guaranteeing the oil
and gas sector adds ample revenue as well as the foreign exchange earnings for the
country. The government aims to guarantee construction aids to cclrt th
pace of xplrtin nd production of ptrlum. Today, th oil nd g industry in
Nigeria h rin very ft nd tdy to ht th worlds 10th lrgt rrv at
but 25 billion brrl. Within th rgnitin of Ptrlum xprting Cuntri 2,
Nigeria is in th 6th pitin in terms of rrv nd daily production. Nigerias
daily vrg production is vr 2 million brrl nd h th capacity to xcd
her rrv to 30 billion brrl. Th pirtin of gvrnmnt is to accommodate
OPECs oil supply and demand outlook to 2035 3.
1.2. RESEARCH CONTEXT: THE CONSTRUCTION INDUSTRY

Nigeria is an inviting country for investment, along the lines of construction
projects; construction projects are swiftly growing in Nigeria along with other
investments. Furthermore, the construction sector revolutionized exponentially over
the last decade; organizations are confronted with increased risk and insecurity
1 World Bank, 2006: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
2 Organization of Petroleum Exporting Countries (OPEC)
3 World Oil Outlook (WOO 2013):
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/W
OO_2013.pdf
than any other time. Customers anticipate more, above all, they do not expect
surprises, which makes them prone to embark on litigation once projects fail, these
rules cause the project managers in Nigeria as well as globally to contemplate
additionally on the connection between the latest risks and challenges as well like
the fulfillment of the job that they are handling and compelled them to inquire
What are the risk factors in the construction industry in Nigeria and what is the
importance of each of these factors in terms of the projects success?
1.3. RESEARCH PROBLEM

Risks are an inseparable aspect of every phase of the construction operation (Makui,
et al 2009). Any time a construction project is embarked upon, there are some risk
elements present, for instance physical risk, environmental risk, logistics risk,
financial risk, legal risk and political risk, etc. (Perry and Hayes, 1985). With
construction projects growing ever more complex and dynamic in their nature and
also the emergence of new procurement methods, many contractors and owners
alike have been compelled to have a rethink regarding their view on the manner in
which risks are managed within their projects and organizations. This is because the
current economic crises presently experienced in the country as a result of declining
oil prices and arrival of new construction companies into the country as a result of
worldwide economic melt-down and the drive of foreign contractors to enter into
new markets have increased the competition in the sector.
The typical risks construction projects are faced with are changes in work, delayed
payment on contract, financial failure of owner (client), and labor disputes,
equipment and material availability, productivity of labor, defective materials,
productivity of equipment, safety, poor quality of work, unforeseen site conditions,
financial failure of contractor, political uncertainty, changes in legislation and
policies, permits and ordinances, delays in resolving litigation/arbitration disputes,
inflation , cost of legal process and force majeure (Zou et al 2007). Overall, there
are problems of recurring conflict, client and stakeholder dissatisfaction from
deserted projects, and huge accident rates. Much more, when Nigeria ought to
instantly deal with the infrastructural deficit currently upsetting its economic
development strategy. Basically, risk management therefore forms grounds for
important decision making in procurement of construction projects; and the need to
understand how construction contractors provide projects within its designed
targets of time, cost, quality and safety in a peculiar environment cannot be
overemphasized.
1.4. RESEARCH IMPORTANCE

The management of risks is a central issue in the planning and management of any
venture. Construction industry is subject to more risk and uncertainty than many
other industries. The process of taking a project from initial investment appraisal to
completion and into use is a complex process. Construction industry in Nigeria is
suffering from the misunderstanding of risk management including risk
identification, analysis and assessment, and that is why this research is important,
where it will showcase risk management as a critical success factor in the
construction industry in Nigeria.
1.5. BENEFITS AND CONTRIBUTION OF THE RESEARCH

The research will focus its contribution towards two areas that are:
1.5.1.ACADEMIA
Over time, Risk management has proven to be a major determinant for any project
success; nevertheless, there are no known studies that emphasis risk management
as a critical success factor in peculiar environments like Nigeria with exceedingly
long history of abandoned projects. Thus, this research should therefore be a
positive contribution to the body of knowledge. In particular, drive the attention to
the importance of a high level of awareness to risk management problems
associated with project delivery in the Nigerian construction industry. Furthermore,
this research output will encourage new ways of delivering the much anticipated
sustainable projects in Nigeria.
1.5.2.INDUSTRIES
The contribution to industry at a regional level is to enable providers of
infrastructure to learn from each other in terms of establishing reward systems that
motivate and incentivize those who deliver infrastructure. At a national level the
research may contribute to development of guidance and policy about how the
procurement of infrastructure in the oil and gas industry could or should be
arranged to incentivize risk management practices in the supply chain. At the
international level, the Nigerian national policy and guidance about the critical role
of risk management practices in the supply chains success which can serve as a
case study for African countries and other emerging economies in the developing
world.
1.6. AIM
This study aims at launching the risk management in construction projects from the
contractors and owners views and describes major risk factors and their impact on
the projects.
1.7. RESEARCH OBJECTIVES

The primary objective for this research is simply to study risk management
processes that are critical to construction projects success. The study equally
intends at:
Determining key risk factors that can hinder construction operations by going
over the literature and through the contributions that can be made by the
industry experts, i.e. contractors and owners.
Analyzing the seriousness and the distribution of each observed risk factor
based on the views of contractors and owners.
Studying the risk management steps practiced in the industry by each

category i.e. contractors and owners.
Assessing the intensity as well as the distribution of all observed risk factors
Offering reasonable recommendations and suggestions aiming toward

improving the risk management practice in construction and enhance the
performance of contracting companies within this industry.
1.8. ALHAIRI GROUP BASIC INFORMATION

Alhairi Construction Company was launched in august 1986 as part of Alhairi Group,
Nigeria. ALHAIRI Group is a world class engineering and construction group with a
reputation for technical excellence founded on more than 28 years of experience.
Alhairi Group on Tudun-Wada Road in Kano set the pace for the Group's rapid growth
which now stands at over 184 Completed Projects spanning a total developed area
of over 60.74 million Square Feet. It also has another 57 ongoing projects
comprising around 59.24 million Square Feet and 43 upcoming projects totaling
44.11 million Square Feet, which include Apartment Enclaves, Shopping Malls and
Corporate Structures, spread across all asset classes. Today, with a staff strength of
over 4,000 employees including over 80 Expatriates, Alhairi Group stands as a giant
and with aggressive growth plans across the Residential, Commercial, Retail and
Hospitality Sectors in Abuja, Lagos, Kano, Kaduna, Sokoto and Katsina.
The researcher has contacted the company for entry to carry out the research and
the head of Project department has promised that access will be given to carry out
the research as soon as the project manager is informed
1.9. METHODOLOGY AND SAMPLING TECHNIQUES

The qualitative method is used in this study for the description analysis of data. The
sources of data and influences and opinions from the researcher played an
important role in this study and in the description and analysis of data and results.
We used questionnaire survey and also conducted interviews for the collection of
qualitative data. Then the qualitative data was described and analyzed by
qualitative methods.
1.10. RESEARCH BOUNDARIES
Due to time limitation, this research is concerned with projects executed by

Alhairi Group only and will not take into account that there are other
construction companies in Nigeria.
Only contractors who are registered with Alhairi Group will be addressed by
the study due to time constraints.
2 LITERATURE REVIEW
2.1. INTRODUCTION
The Nigerian construction sector is evolving rapidly over the last 20 years;
organizations are confronted with greater risk and uncertainty than ever before.
Investors demand more, above all, they never expect surprises, so are prone to
embark on litigation if things go wrong. Risk management has become a critical
success factor for any project. Risk in construction has become the focus of
attention as a result of time and cost overruns incurred by construction projects.
This chapter reviews the literature that are related to relevance of risk management
in construction projects, with an analysis some techniques and risk response
practices.
2.2. DEFINITION OF RISK

Risk can be defined as an uncertain event or condition that, if it occurs, has a
positive or a negative effect on a project objective. A risk has a cause and, if it
occurs, a consequence4. Jaffari (2001) defined risk to be the subjection to either loss
or gain, or the possibility of experiencing loss or gain multiplied by its actual
magnitude. Actions are considered to be definite if the probability of their
occurrence is 100% or completely unsure if the probability of occurrence is 0%.
Between these extremes the uncertainty differs quite vastly. The Project
Management Institute (1996) presented an easy definition for risk as a discrete
event which may influence the project for better or worse. In an effort to focus on
the key objectives of study on risk management actions, risk is defined as the
likelihood of occurrence of a set of doubtful, spontaneous and even unwanted
occurrences that would alter the potential for the profitability on certain investment
(Farrel, 2002). Charles and Bates (cited in Baleen, 2000) present their definition of
what a risk components:
Risk = Hazard x Exposure
Here hazard is defined as the way in which a thing or a situation can cause harm,
and exposure as the extent to which the likely recipient of the harm can be
influenced by the hazard. Harm is considered to mean injury, damage, loss of
performance and finance, while exposure imbues the notions of frequency and
probability. Risk is the three-way attribute of any project decision in the scenario of
uncertainty. It can be defined as a trinity of risk event (A), risk probability (P) and
function of risk losses (u):
R = (A, P,u)
4 THE PROJECT MANAGEMENT BOOK OF KNOWLEDGE (PMBOK Guide) Fourth Edition
The risk event (A) is a sporadic event that is associated with any project decision
(Titarenko, 1997).
Uncertainty is a scenario wherein several prospects are present and which of them
has taken place, or will take place, is unspecified. Looking at all risks are uncertain
definitely not all uncertainty is risky (Flop, 2003). Risks and uncertainties depict
every event in production, services and exchange. They influence every the basic
elements that define planning, implementation, monitoring, adjustment, behavior
and specify choices, and create decisions (Mantoos, 2003). Any definition of risk will
possess a component of subjectivity, based on the nature of the risk as well as what
is used.
Guarantee is present only if one can identify precisely what will occur while the
period that covered by the decision. This is not commonplace in the construction
sector (Flanagan & Norman 1993). Other authors see no distinction between risk
and uncertainty; Education and Learning Wales (2001) defined risk and uncertainty
as follows: Dandon & Flenn, 2002
Risk is present once a decision is depicted with regards to selection of viable

results as soon as identified probabilities can be linked to the outcomes.
Uncertainty is present when there is multiple available outcome of a course

of action but the likelihood of each result is unknown.
In certain cases, the risk does not essentially denote the possibility of bad
outcomes. There may be the possibility of good outcomes, and it is essential that a
definition of risk contains some reference to this point.
Authors like Abassan & Orman (1996) differentiated between risk and uncertainty.
Risk has place in calculus of probability, and lends itself to quantitative term.
Uncertainty, by distinction, can be defined a scenario where there are no past data
or earlier record associated with the scenario that is evaluated by the decision
maker. ADB, (2002) stated that in essence, risk is a capacity susceptible to empirical
evaluation, and uncertainty is of a non-quantifiable form. Hence, in a risk scenario
one might point out the possibility of the accomplished value of a factor falling
within depicted limitstypically depicted by the variations around the average of a
probability calculus. However, in circumstances of uncertainty, the variations of a
factor are such that they cannot be depicted by a probability calculus.
The Royal Society (Baleen, 2000) considered risk as the probability that a specific
unfavorable activity happens in a stipulated time-frame, alternatively effects from a
specific problem. The Royal Society furthermore says that due to a probability in the
inclination toward statistical principles risk obeys all the basic laws merging
probabilities. The challenge with statistical theory therefore is; it is merely always a
presumption, or an approximation of what is to take place.
Risk may be viewed as an organized method of managing hazards. While it is

believed that there is uncertainty relevant to every forecast of hazard happening,
therefore there may be just uncertainty since there is primarily always a prediction
of possibly. Consequently for risk to occur there ought to be a hazard. The idea of
hazards is solely subjective. What one person detect hazardous, his neighbor may
not. This idea of hazard is based on past encounter, cultural beliefs as well as
certain degree the element of expert training in an area of niche of expertise to
which the hazard applies (Baleen, 2000).
2.2.1. DYNAMIC AND STATIC RISKS
Dynamic risk is focused on creating opportunities; for example it may relate to
building fresh and creative merchandise. Dynamic risk ensures that there are
prospective gains along with losses. Dynamic risk is putting at risk the loss of
something sure for gain of something unsure 5 (Abassan & Orman, 1996).
Static risk applies merely to potential losses in which individuals are focused on
reducing losses by risk aversion (Abassan & Orman, 1996). The unsystematic and
arbitrary management of risks could jeopardize the success of the project due to the
fact the majority of risks are quite dynamic all through the project life-span (Kaatom
& Norman, 2005).
2.3. CAUSES OF RISK AS THREATS

There is no exhaustive study discussing the causes of risks in construction projects,
however studies addressing the topic has tended to pinpoint the effects instead of
causes, several authors have sought in their research to determine the causes of
threats in the construction industry, Shakki ( cited in Rwelamila & Lobelo , 1997 )
ascribed the significant threats to :
A tremendously fragmented sector.
Industry tremendously susceptible to economic cycles.
Fierce competition due to an over-capacitated market.
Relative easy access.
Management issues.
Trading such as:

Competitive quoting.
Outsize projects.
5 National Audit Office (NAO, UK): http://www.nao.org.uk/
High gearing.
Resistance to change Accounting,
Accounting, due inconsistencies that emerge in the financial data collected

for administration.
Increase in project size.
Unfamiliarity with new geographic region.
Moving into new style of construction.
Change in crucial staff.
2.4. SOURCES OF RISKS

List of risk drivers6:
Commercial risk.
Financial risk.
Legal risks.
Political risks.
Social risks.
Environmental risks.
Communications risks.
Geographical risks.
Geotechnical risks.
Construction risks.
Technological risks.
Operational risks.
Demand/product risks.
Management risks.
6 Estate Management Manual, 2001: http://www.worldcat.org/title/estatemanagement-manual-2001/oclc/57566265
These sources of risk refer to project-specific and non-project-specific risks, because

either these risk ought to be taken into consideration while defining the risks in a
project. The company, supported by the project team, ought to outline the
limitations of these sources as well as split up these sources into comprehensive
risk factors. This will encourage a basic understanding amongst those trying to
detect the risks in a project.
The splitting of risks into source factors can be challenging. Moreover it generates
the opportunity for more individual subjectivity. It can also result in the chance of
"double-counting" certain risks by attributing the same risk to more than one
source. This may, nevertheless, help in comprehending the connections between
risk sources and factors7. The apparent challenge with categorizing risk, other than
the famous views observed by the royal society article, is that there is a threat of
mixed up sources, may result in, effects and fields of study for the risk domain. A
source method of risk categorizations is demonstrated in Figure (2 .1). It is
suggested that the risks can be regarded in relation to six categories: financial and
economic, political and environment, design, site construction, physical and
Environmental factors. Whilst the number of possible risks in each category is
neither comprehensive nor detailed, it may reflect the majority of standard project
risks and reflects the benefit of a practically designed description method (PAUL &
SUE, 2002Dandon & Flenn, 2002).
2.5. RISK MANAGEMENT PROCESS

Several forms of risk management process have been presented. Hagarri (cited in
Paul & Sue, 2002) proposed a routine made up of two major stages: risk
assessment, such as identification, analysis and prioritization, and risk control such
as risk management planning, risk resolution and risk monitoring planning, tracking
and corrective action. David and Grantt (cited in Richard & Telaman, 1996)
observed risk management process as a multiphase `risk analysis' which contains
identification, evaluation, control and management of risks. Brimstol (1995) offered
a definition for the risk management as the sum of all practical managementdirected routines, within a program which is meant to appropriately permit the likely
setbacks in elements of the program. "Acceptably" is as judged by the client in the
eventual survey, nonetheless from a firm's point of view a shortfall is something
achieved in less than an expert style and/or with less than-adequate outcome.
Faleem stated in (Baalif et al, 1998) defined the risk management as a proper
organized procedure for specifically locating, analyzing, and responding to risk
scenarios all through the life-span of a project to acquire the perfect or ideal amount
of risk eradication or control.
It really is prospects that are being taken care of. It is management's responsibility
to handle the preparation designed to support the prospects. The client is the
7 Estate Management Manual, 2001: http://www.worldcat.org/title/estatemanagement-manual-2001/oclc/57566265
ultimate judge, but indoor objectives ought to be to a greater level as against client
demands. Risk management as a collective or centralized process ought to achieve
the following goals (Brimstol, 1995):
Identity issues. Cheng, 2001
Identify risks & risk owners.
Evaluate the risks with regards to possibility and repercussions.
Assess the alternatives for accommodating the risks.
Prioritize the risk management attempts.
Develop risk management plans.
Authorize the use of the risk management plans.

Labor Productivity
Weather delays
Detective work
Site construction
Access denied by whatever
Design
Incomplete design scope

Design changes
Errors and omissions
Inadequate specifications
Defective design
Different site conditions
Changes in law and regulation

War and civil disorder
Requirements for permit and their approval
Political and environmental
Pollution and safety rules
k Identification List for Construction Project

Financial and economic
Inflation
Exchange rate fluctuations
Funds availability
Tenderers price
Physical
Equipment damage
Theft
Labor injuries
Material damage or theft
Acts of God
Earthquake
Flood
Landslide
Figure 2.1. Risk Categorization List, adapted from (Dandon & Flenn, 2002)
David and Grantt (1997) defined a risk management process made up of nine
stages:
1. Define the fundamental parts of the project;
2. Concentrate on an organize strategy to risk management;
3. Detect where risks may develop;
4. Design the details about risk assumption and relationships;
5. Allocate ownership of risks and responses;
6. Calculate the degree of uncertainty;
7. Determine the relative size of the various risks;

8. Plan response;
9. Manage by monitoring and regulating execution.
Based on the Project Management Body of Knowledge (PMI,1996), risk management
makes up the nine functions of project management (the other eight are
integration, communications, human resources, time, cost, scope, quality and
procurement management). The general opinion is that these functions ought to
build up the fundamental of planning so that each could be the center of
concentration in every stage of the project. In the PMBOK 8, PMI (1996) highlights
four stages of the risk management process: identification, quantification,
responses development and control. Risk Management includes the process of
identification, assessment, allocation, and management of every project risks (APM,
2000). Healy cited in (Flen, 1998) proposed a coordinated process such as risk
identification, risk analysis and risk response, where risk response is further broken
into the four actions: risk retention, risk reduction, risk transfer and risk avoidance.
Risk management is likewise regarded as a procedure that goes with the project
from its definition all through its planning, execution and control stages to its
conclusion and closure (Paul & Sue, 2002). Risk management is not associated with
insurance, nor will it undertake the management of every risks to which a project is
subjected. In practice, the fact can be found somewhere between the two extremes.
A risk management model ought to be practical, realistic and has to be economical.
The intensity to which you evaluate risk undoubtedly is determined by your
scenario. Only you can decide the value to be attached to an organized risk
analysis. Popular education does little to promote an consciousness of how unstable
reality often is (Abassan & Orman, 1996). Risk management calculates the possible
alterations in importance which might be encountered in a account due to
discrepancies in the scenery between now and some prospective period (Bosch &
Flonn, 1995).
2.5.1. CONSTRUCTION RISK MANAGEMENT APPROACH-CONCEPTUAL MODEL
This model put risk management in the perspective of project decision making
whilst contemplating the over-lapping contexts of behavioral responses,
organization structure, and technology. The objectives of project and construction
risk management ought to be plainly demonstrated within the perspective of project
decision-making, and will be governed mostly by the risk attitude of the project
proponent. In talking about human conclusions in judgment, recommends a
sociological and organizational perspective for risk analysis. The construction risk
management conceptual model presents an efficient step-by-step method for
quantitatively identifying, analyzing, and responding to risk in construction projects.
Using this model concentration is focused on how to identify and manage risks
8 Project Management Book of Knowledge
Project Decision-Making Context
before, instead of after, they develop into drawbacks or claims (Dandon & Flenn,
2002).
Techniques and Technology
Organizational
Structure
Figure 2.2. Conceptual Model of Construction Risk Management, (Dandon & Flenn,
2001)
2.5.2. RISK IDENTIFICATION
Behavioral Responses
This is the foremost phase in risk management also it involves garnering every the
possible risks that might develop within the project. It is generally known that of all
the phases of risk management process, risk identification phase carries the
greatest influence on the precision of any risk assessment (David, 1998). To aid risk
identification, risks could also be generally grouped to be manageable and
unmanageable risks (Flanagan and Norman, 1993). Moreover, manageable risks are
those risks which vendor undertakes consciously and whose result is, partially,
within our immediate influence; and unmanageable risks as those risks which we
cannot control (Charles & Renda, 2002). Risk identification involves deciding which
risks tend to influence the project and documenting the traits
of each. Risk identification is not a single activity; it ought to be carried out
consistently all through the project (PMI, 1996). The identification of risks involves
an approach employed to create risks, and tips on what those risks could consider
looking like whilst written down (Jacob, 1998). Risk identification ought to tackle
both in-house and outside risks. In-house risks are issues that the project team can
control, like staff responsibilities and price quotes. Outside risks are issues beyond
the influence or control of the project team, like government measures . In project
perspective, risk identification is also focused on prospects (positive outcomes)
along with threats (negative outcomes) (PMI, 1996). At this point, an extensive
perspective ought to be undertaken to determine with no limitation the risks which
are prone to thwart the project in achieving its cost goal. An inability to identify the
presence of any possibility risks can lead to a catastrophe or foregoing a prospect
for profit as a result of suitable corrective measures (Dandon & Flenn, 2002). While
endeavouring to identify risk, it is quite akin to aiming to plan the entire world. Maps
of the world are generally focused on the position of the map author. The vast
majority of the world is not observable from where you stand. Certain terrain that is
acquainted and apparent to you might not be apparent to everybody. Likewise,
viewing a huge project from the top, with numerous levels of planning, sophisticated
vertical and horizontal connections, and sequencing difficulties, looks like exploring
the world map using a fog. Management's potential to control the final result is
restricted to the things they can observe. The notable temptation will be to
concentration upon what ought to transpire, instead of what might transpire. A
definite opinion of the event is the first equipment, concentrating on the sources of
risk and effect of the event (Abassan & Orman, 1996). While comprehensive
publications of risk can be created, they are usually destined to be deficient thereby
limited. This may result in decision-makers inability to examine the entire scale of
possible risks for a project. Building groups of risk is another way of typifying risks
to ensure this threat could be reduced (Dandon & Flenn, 2002).
2.5.3. RISK ANALYSIS
Risk analysis, a part of the risk management process, focuses on the triggers and
impacts of actions which result into harm. The purpose behind this kind of analysis
is an accurate and purposeful measurement of risk. To the range that this is
achievable, it enables the decision making process to be more precise (Estate
Management Manual, 2002). The significance of risk analysis is that it endeavors to
obtain all viable alternatives and to evaluate the numerous results of any
evaluation. For building projects, customers are predominantly considering the
probably price, but projects do have cost over-runs and, too often, the 'what if'
question is not asked (Abassan & Orman, 1996).
Risk analysis requires analyzing the observed risks. This first entails that the risks
are quantified with regard to their impact on cost, time or revenue. They can be
analyzed by assessing their impact on the financial variables of the project or job.
With regards to risk response, three basic types of response are observed (Estate
Management Manual, 2002):
Risk avoidance or reduction .
Risk transfer .
Risk retention .
The application of risk analysis provides an understanding of what goes on when the
project does not carry on in line with plan. Once dynamic minds are used on the
ideal obtainable information in an organized and coordinated approach, there is a
better perspective of the risks than might have been attained by intuition solely
(Abassan & Orman, 1996).
Risk analysis
Identify risk options
Take risk attitude into account
Quantitative
Risk measurement
Probability
analysis
Objective or subjective
Sensitivity analysis
Single or multiple
Scenario
analysis
Breakdown or
combination
Simulation analysis
Types of distribution
Estimates
Number of simulations
relationships
Qualitative
Direct
judgment
Ranking options
Comparing options
Descriptive options
Linear or nonlinear
analysisSequence
FigureCorrelation
2.3. Risk Analysis
(Abassan & Ovman, 1996)
Single or multiple
Figure (2 .3), illustrated by Flanagan and Norman (1993), demonstrates the
sequence in risk analysis. The conventional method of predicting construction price
or construction timeframe at the design phase of a project is to use the obtainable
information and generate one point ideal estimate. The risk analysis alternative
clearly acknowledges doubt that surrounds the most suitable assessment by
producing a probability distribution depending on professional opinion. Thus , the
knowledge regarding the impacts of doubt upon the project will be enhanced. Risk
analysis ought not be regarded as a stand alone process; all approaches devised
ought not be viewed as cast in stone commandants. Instead, they ought to be
viewed as a portion of all judgements generated routinely to acknowledge project
dynamics (Banta, 2002). Risk analysis entails appraising risks and risk associations
to evaluate the array of potential project results. It is complex by numerous
variables such as, though not restricted to (PMI, 1996):
Prospects and threats can associate in unpredictable ways (e.g., routine gaps
may compel contemplation of fresh strategy that lowers entire project
timeframe).
One risk event triggers several impacts, as when overdue delivery of an

important material incurs cost overruns, schedule delays, penalty payments,
and a reduced quality product.
The mathematical methods applied produce a misleading perception of

accuracy and stability.
What is required is a use of risk analysis to aid project managers handle cost that is
easy to utilize, can be used all through the life cycle of a construction project,
represents the inclination of construction experts to utilize risk in linguistic terms,
and employ their expertise Farrel, 2002(Fleen & knochle, 2002).
2.5.3.1.
METHODS OF RISK ANALYSIS
The analysis of risks could be quantitative or qualitative in nature based on the
volume of data obtainable (APM, 2000). Qualitative analysis concentrates on
identification alongside assessment of risk, and quantitative analysis concentrates
on the evaluation of risk (David, 2001). Certainly there could be very little facts
about specific risks that no analysis is achievable. Table (2.1) summarizes the
different methods utilized for risk analysis.
Risk Analysis
Qualitative
Quantitative
I.
Direct judgment
V.
Probability analysis
II.
Ranking options
VI.
Sensitivity analysis
III.
Comparing options
VII.
Scenario analysis
IV.
Descriptive analysis VIII.
Simulation
analysis
Table 2.1. Various risk analysis techniques, adapted from (David & Grant, 1996)
A. QUALITATIVE RISK ANALYSIS
Solomon (2000) initiated a definition for the qualitative evaluation of risk requires
the detection of a hierarchy of risks, their range, factors that cause them to happen
and possible dependencies. The hierarchy is dependent on the likelihood of the
incident as well as the effect on the project. In qualitative risk analysis risk
management plays the role of an approach to choosing the attributes of each risk
(Kuismanen et al, 2002). Qualitative risk analysis evaluates the relevance of the
observed risks and produces prioritized lists of these risks for additional analysis or
direct mitigation. The management staff evaluates all observed risk for its likelihood
of happening and its effect on project goals. Occasionally professionals or
operational units evaluate the risks in their specific areas and distribute these
evaluations with the team (Office of project management process improvement,
2003). Elements of risk analysis were conceived by Breeman and Klogan (2001):
I.
List activities, tasks, or elements that make up the project.
Recognize relevant risk factors .
Formulate risk-ranking scale for each risk factor.
Rate risk for every action for every risk activity.
Record the outcomes and recognize possible risk-reduction steps.
QUALITATIVE RISK RANKING GUIDELINES

An approach to methodically Funding
record constraints
the risk for every qualitative risk factor
observed in Figure (2.4) is required
to carry
out a regular analysis of risk across the
Prioritization
uncertainty
various project or program routines.
To
make
this possible, qualitative definitions of
Underfunding potential
risk factors are outlined for three categories of risk (none/low, medium, and high). A
basic illustration of a finished evaluation is outlined in Figure (2.5).
FUNDING RISK
Escalation sensitivity
Labor rate uncertainty
Equip & material uncertainty
Estimate completeness
Productivity uncertainty
Area or facility availability
SCHEDULE RISKPersonnel availability
Equipment/material availability
Adverse environmental conditions
COST RISK
TECHNICAL RISK
Rework potential
Design and construction methods maturity
Infrastructure Needs
Technology maturity
Performance requirements severity
Design data availability
Figure 2.4. Qualitative Risk Factor Ranking Criteria, adopted from (Breeman &
Klogan, 2001)
System
Element A
II.
Element B
Element C
Risk Factor
Risk Factor
Total
Low (1)
Low (1)
High (3)
II
Medium
(2)
High (3)
Medium (2)
III
Low (1)
Low (1)
High (3)
Activity
Total
Figure 2.5. Risk Factor Evaluation, (Breeman & Klogan, 2001)

USES OF QUALITATIVE RISK ANALYSIS RESULTS
Qualitative risk analysis outcomes are used to assist the project management team
in three vital ways (Breeman & Klogan, 2001):
The qualitative risk analysis factor ratings for every project task present a
first-order prioritization of project risks before the use of risk reduction steps.
This basic rating procedure is demonstrated in Figure (2.5).
The more significant, result from carrying out a qualitative risk analysis is the
detection of potential risk-reduction steps addressing the observed risk
factors. Risk reduction suggestions tend to be simple to create when the risk
problem is recognized.
The final application of the qualitative risk analysis is the development of

input distributions for qualitative and quantitative risk modeling. The
combined qualitative and quantitative risk analysis is demonstrated below in
Figure (2.6).
Quantitative Risk Analysis Tasks
Qualitative Risk Factor Analysi
Figure 2.6. Integrated qualitative and quantitative risk analysis, (Breeman & Klogan,
2000)
B. QUANTITATIVE RISK ANALYSIS
Quantitative risk analysis is a method of numerically estimating the chances that a
project would fulfill its cost and time goals. Quantitative analysis relies upon a
concurrent assessment of the impact of all identified and quantified risks. The
outcome is a likelihood distribution of the projects cost and completion date
dependent on the risks in the project (Office of Project Management Process
Improvement, 2003). The quantitative approaches depend on probability

distribution of risks and can provide more purposeful outcomes than the qualitative
approaches, provided enough updated information is obtainable. On the contrary,
qualitative approaches rely on the individual evaluation and past experiences of the
analyst and the outcomes may differ from one individual to another. Therefore the
quantitative approaches are recommended by the majority of analysts (Ahmed et
al, 2001). Quantitative risk analysis views the collection of potential values for
essential parameters, and the possibility with which they could happen. Concurrent
and random variation within these ranges results in a merged likelihood that the
project will be unsatisfactory (Asian Development Bank, 2002). Quantitative risk
analysis requires statistical methods which are most readily applied with unique
programs (Office of Project Management Process Improvement, 2003). Quantitative
risk analysis is to allocate possibilities or chances to the numerous elements and a
value for the effect then determine seriousness for each element (Brute Amos,
2000). Once detailed quantitative risk analysis is required it usually takes two
alternative methods (Basilees, 2000):
1. Risks can be quantified as separate items whilst considering the big picture .
Thereby incorporate the cumulative impacts (to certain accuracy) into each
individual risk thereby create greater precise estimations of the total value of
the risks.
2. On the other hand modeling the mathematical attributes of the interrelations
from the base up could be initiated thereafter evaluate the total effect of
each risk as well as the impacts of interrelations.
3. In Figure 2.7 the basic steps of a quantitative risk analysis and a defined
association between risk analysis, risk assessment and risk management is
displayed (Cheng, 2001).
Define scope and objectives

Identify harzards/define potential accident scenarios
Risk Analysis
Estimate the potential accident frequencies
Evaluate the event consequences/effects
Risk assessment
Estimate the risk
Risk management
Risk Evaluation
Tolerability decisions
Analysis of options
Risk reduction/control
Decision making
Implementation/monitoring
Figure 2.7. basic relationship between risk analysis, risk assessment and risk
management. (Cheng, 2002).
I.
BASIC STEPS OF QUANTITATIVE RISK ANALYSIS
As stated earlier, the goal of risk analysis is to ascertain how possibly a harmful
occurrence ought to happen and the implications when it does happen. When
quantitative risk analysis ought to be carried out, it is endeavored to illustrate risk in
numerical details. To achieve this, it ought to follow a couple of procedures
(Doeman, 2001):
1. Describe the repercussion; describe the necessary numerical approximation
of risk.
2. Develop a direction; examine of all sequential actions that ought to happen
for the unfavorable event to happen.
3. Create a model - Gather facts; examine each stage on the course as well as
the associated elements for those stages.
4. Approximate the risk; once the model has been created and the facts
gathered the risk can be calculated. Contained in this calculation will be an
examination of the impacts of varying model elements to show prospective
risk management tactics.
5. Carry out a sensitivity and scenario analysis; Carrying out a risk analysis
needs more details than for sensitivity analysis.
II.
METHODS OF QUANTITATIVE RISK ANALYSIS
Any sort of risk analysis method would need an approach. It is advisable to start by
supplying a means of contemplating risk analysis that is relevant to any specific tool
could be utilized.
Probability Analysis is a tool in evaluating issues which lack just one value
approach, Monte Carlo Simulation is the most easily utilized type of
probability analysis.
Monte Carlo Simulation is offered as the method of generally interest as it is

the tool that is utilized mostly.
Sensitivity Analysis is a tool that has been utilized to great degree by the
majority of risk analysts concurrently.
Breakeven Analysis is a form of a sensitivity analysis. It may be utilized to

calculate the vital elements which prove a project to be good or bad.
Scenario Analysis is a quite brilliant designation for another derivative of

sensitivity analysis approach which assesses alternative scenarios; the goal is
to evaluate multiple scenarios as alternatives.
a) SENSITIVITY ANALYSIS
Sensitivity analysis is a deterministic modeling approach that is utilized to
evaluation the effect of an alteration of the valuation on an independent element on
the dependent element. Sensitivity analysis recognizes the purpose where a
particular change in the anticipated value of a price parameter changes a decision.
Sensitivity analysis is conducted by switching the values of independent risk
elements to forecast the monetary requirements of the project (Fishner & Sandrel,
2002). Sensitivity analysis is an engaging procedure which shows you what impacts
alterations in a price will have on the life cycle cost (Abassan & Orman, 1996).
Sensitivity Analysis is the evaluating technique employed for forecast of impact of
alterations of input records on output outcomes of one model (Floe, 1995). It does
not attempt to quantify risk instead to detect elements that are risk sensitive.
Sensitivity analysis helps the analyst to analyze which elements of the project have
the most effect upon the outcomes, hence cutting down the key convenience and
potential to concentrate on specific quotes (Abassan & Orman, 1996). The benefit of
sensitivity analysis is that it can often be carried out to certain degree. Particular
situations of interest can be relatively well explained. Excessive results, such as the
highest or lowest feasible rates, are usually calculated.
The key negative aspect of sensitivity analysis is that the analyst often lacks the
idea how possibly these numerous scenarios are. Most people equate feasible with
likely, which is not the case with sensitivity analysis (Flop, 2003).
b) MONTE CARLO SIMULATION

Simulation is a probability-based approach in which all unknown aspects are
presumed to adopt the traits of random uncertainty. A random procedure is where
the results of a specific procedure are purely dependent on chance (Flanagan,
2003). The Monte Carlo procedure is merely an approach for producing random
quantities and converting them into quantities of interest , the techniques of
producing random or pseudo random values are more complex nowadays and the
calculations of further distributions is more complicated (Yoe, 2000). Various
quantities of risk elements are merged in a Monte Carlo simulation. The frequency
of the occurrence of a specific value of any one of the elements depends on
describing the probability distribution to be utilized across the assigned array of
quantities. The outcomes are displayed as frequency and cumulative frequency
diagrams. The distribution of likelihood of happening to each risk demands the
interpretation of ranges for each risk (Henry (2002)). Henry (2002) provided risk
analysis simulation procedures:
1. Begin with a project valuation carried out for every cost account.
2. Select the most probably cost, pessimistic costs, and optimistic costs.
3. Place data into simulation program, then execute the model.
4. Ascertain contingencies determined by preferred risk degree.
5. Prioritize risky cost accounts for risk response planning.
This technique of sampling (i.e. random sampling) ought to, produce over- and
under-sampling from numerous aspects of the distribution. In practice, this signifies
that to guarantee that the feedback distribution is well documented by the
examples taken from it, an exceedingly large number of iterations ought to be
generated. In several risk analysis jobs, the key consideration is that the model or
sampling scheme we utilize ought to reflect the distributions proven for the inputs
(Fishner & Sandrel, 2002). However, Banta & Steve, 1989 listed some of the
simulation advantages:
Enhances estimate precision, it assists ascertain a contingency plan for a

suitable degree of risk.
Assists ascertain the higher cost risks for risk response planning.
II.6.
RISK RESPONSE PRACTICES
PMI (1996) proposed three methods of responding to risk in projects, they are listed
below:
Avoidance: removing a particular threat, typically by removing the cause. The

project management team cant ever remove all risks, though certain risk
actions can sometimes be removed.
Mitigation: minimizing the anticipated economic worth at risk situations by

minimizing the likelihood of happening (e.g., using new technology),
minimizing the risk event worth (e.g., buying insurance), or both.
Acceptance: agreeing to the implications. Acceptance can be active by

generating a contingency plan to follow if the risk event happens or passive
by agreeing to lesser profit in case certain events overrun.
Brute Amos (2002) suggested some steps to be taken in a reaction to residual risks.
Steps include:
Reduce insecurity by acquiring more detail; this will result in re-evaluation of

the possibility and effect.
Eradicate or prevent the risk element via means like a partial or entire
remodel, a new approach or technique etc.
Transfer the risk factor by contracting out impact job.
Insure against the happening of the factor.
Stop the project if the risk is unbearable and no other alternative may be
implemented to abate its negative effects.
Baalif et al (2002), Boyega and Funsho (1998), Enshassi and Mayer (2001), and
Education and Learning Whales (2001) argued that there are four distinguished
methods of responding to risks in a construction project, such as, risk avoidance,
risk reduction, risk retention and risk transfer. Those methods are discussed lightly
below.
II.6.1. RISK AVOIDANCE
Risk avoidance is oftentimes called risk elimination. Risk avoidance in construction
is not usually identified to be unrealistic as it may result in projects not going
forward, a contractor not submittinAbassan & Orman, 1996 a bid or the owner not
carrying on with project financing are two instances of completely eliminating the
risks. There are several manners whereby risks can be avoided, e.g. tendering an
extremely high bid; listing conditions on the bid; pre-contract discussions
concerning which party carries specific risks; and not binding on the high risk area
of the contract (Abassan & Orman, 1996).
II.6.2. RISK TRANSFER

This is basically attempting to shift the risk to an alternative party. For a
construction project, an insurance premium might not remedy all risks, even though
it provides certain gains as a prospective loss is covered by fixed costs (Richard &
Telaman, 1996)
Risk transfer usually takes two essential patterns:
The assets or action liable for the risk may be shifted, i.e. employ a
subcontractor to focus on an unsafe practice;
The asset or action could be held, but the monetary risk shifted, i.e. by tactics
like insurance and surety.
II.6.3. RISK RETENTION

This is the procedure for minimizing controlling risks by in-house management
(Chinn, 1997); managing risks by the organization that is carrying out the project
where risk avoidance is unachievable, potential monetary loss is low, likelihood of
happening is insignificant and shift is uneconomic (Boyega & Funsho 1998). The
risks, anticipated or unforeseen, are managed and financed by the organization or
contractor. There are two retention approaches, active and passive;
a) Active Retention (often called self-insurance) is a deliberate management
technique after a sensitive assessment of the potential losses and expenses
of alternative methods of managing risks.
b) Passive Retention (often referred to as non-insurance), however, happens
as a result of negligence, ignorance or lack of decision, e.g. a risk has not
been discovered and managing the effects of that risk has to be borne by the
contractor carrying out the job.
II.6.4. RISK REDUCTION
This is a common expression for minimizing likelihood and/or effects of a negative
risk incident. In the severe scenario, this can result in remove completely, as
observed in risk avoidance. Nevertheless, in reduction, it is not enough to look
into primarily the resultant anticipated worth, since, if possible effect is above
specific stage, the risk stays unacceptable. In this case, one of the other methods
ought to be implemented (Flanagan, 2000).
3 RESEARCH METHODOLOGY
3.1. INTRODUCTION
This chapter discusses the data collection procedure used for this research. This
chapter also offers the details about research strategy, research design, target
population and sample size. It also discusses a couple of the basic challenges
encountered. A comprehensive methodology and resources used are discussed.
3.2. RESEARCH STRATEGY

Research is persistent, organized investigation or enquiry to reinforce previous
knowledge and produce fresh knowledge (Banta & Steve, 1989). Research does not
take place in a vacuum, research projects take place in the areas of researcher's
interests, skills and experiences; of human consultations; of the physical
environment, etc (Kingsley & Frank, 1996) .
Research strategy can be defined as the means whereby the research objectives
can be investigated (Balim, 1996).
There are two forms of research methods such as quantitative research and
qualitative research (Balim, 1995). Quantitative methods attempt to collect factual
data and to analyze associations between facts and how such facts and interactions
match with theories and the results of any research carried out previously (Kingsley
& Frank, 1996), where qualitative methods attempt to secure ideas and to perceive
people's opinion of "the world" whether as individuals or groups (Kingsley & Frank,
1996). Qualitative research is "subjective" in nature, emphasizing meanings,
experiences and so on (Balim, 1996).
In this research, a quantitative method is chosen to ascertain the relevance of risk
management practices in construction projects in Nigeria.
3.3. RESEARCH DESIGN

The term "research design" denotes the arrangement or coordination of scientific
inquiry, designing of a research study includes the development of an approach or
method that will enable the gathering and studies of data (George & Bruma,
1996).Banta & Steve (1996) described the term design as some view research
design to be the complete approach for the analysis, from recognizing the problem
to obtain the strategies for data gathering. Additionally design to can be defined as
the structural framework within which the analysis is implemented. The framework
that the researcher generates is the design (Alphonsus & Henry, 1996). Much study
in the social sciences and management spheres requires asking and acquiring
responses to questions via carrying out studies of people by questionnaires,
interviews and case studies (Kingsley & Frank, 1996).
In this research a closed-ended questionnaire with interview is employed to collect
data from respondents. In structured interview, inquiries are displayed in the same
order and with the same words to all interviewees. The interviewers possess total
control on the questionnaire throughout the whole process of the interview (Balim,
1995).
In structured interview, the interviewer administers a questionnaire, possibly by
asking the questions and capturing the replies, with little scope for probing those
replies by requesting additional questions to acquire extra details and to pursue
new and attractive areas (Kingsley & Frank, 1996). Balim (1996) summarizes the
key benefits of structured interview provided below:
1. The answers can be more accurate.
2. The response rate is comparatively high (approximately 60-70 percent),
particularly if interviewees are approached directly.
3. The answers can be investigated with realizing "Why" the specific answers are
supplied.
Figure (3 .1) depicts the summarized methodology chart.
3.4. RESEARCH POPULATION

A population is made up of the entirety of the observation with which we are
concerned (Frank & krutcha, 1996). In this research, the population is the total
number of staff of alheri construction company who participated in the survey.
3.5. SAMPLE SIZE

Sampling defines the procedure of providing the selections; sample defines the
selected items (Banta & Steve, 1989). Alphonsus and Henry (1998) defined the
sampling as the procedure of choosing representative units of a population for the
research in an investigation. Scientists obtain information from samples; many
issues in scientific study cannot be resolved without using sampling procedures
(Alphonsus & Henry, 1995).
Sadly, without a survey of the population, the representativeness of any sample is
not sure; nevertheless statistical theory can be employed show representativeness
(Kingsley & Frank, 1996). One of the most frequent questions asked "what size
sample I use?" traditionally, the responses to this question a minimum of 30
subjects. Nevertheless, generally 30 subjects will be insufficient as a sample size
(Kingsley & Frank, 1996 & Steve, 1989).
A statistical approximation was employed in lieu to evaluate the sample size. The
formula below was employed to ascertain the sample size of infinite population
(Creative Research Systems, 2001):
SS =
Z2 X P X (1 P)
C2
Where SS = Sample Size.

Z = Z Value (e.g. 1.96 for 95% confidence interval).
P = Percentage picking a choice, expressed as decimal, (0.50 used for sample size
needed).
C = Confidence interval (0.05)
1.962 X 0.5 X (1
0.5)
SS =
= 384
Correction for finite population:
0.052
SS new
=
SS
1+
SS - 1
pop
Where pop is the population = 75 first class contracting companies according to the
PCU records.
SS
384
new
=
1+
384 1
75
= 40.36 ~
40
A study of Risk Management as A Critical Success Factor in Nigerian Construction Projects

Literature review in Risk Management
Concept analysis of factors affecting risk management practices
Risk
management
Evaluationactions
of benefits of applying risk manage
Exploring the factors and
Risk
their
allocation
relative and
importance
significance In
construction
Organization Profile
Questionnaire Design
Test validity Panel of experts -CVI

Risk severity and allocation
Actions to manage risks
Piloting ten experts were invited

Testing reliability Test/retest
Internal consistency test
Case study
ey and data collection by structural interview 75 questionnaire for each category
Results and analysis
Discussions
Figure 3.1. Methodology flow chart
76 questionnaires are to be distributed to staff; all of whom are classified as
Conclusion and recommendations
registered contractors of alheri comstruction company. To carry out a evaluation
between contractors and staff perspectives, the same number of questionnaires will
be distributed to staff that are members of the project management team.
3.6. SAMPLE METHOD

The objective of sampling is to present a reasonable technique of carrying out the
data collection and processing components of research to be performed while
making sure the sample present a reliable illustration of the population (Kingsley &
Frank, 1996).
Simple sampling was used to represent the total sample size, since it is the most
basic of the probability plans. A list of contractors was obtained from alheri
construction company a renowned construction company in Nigeria with over 28
years of practice.
3.7. LIMITATION OF THE RESEARCHBalim, 1996

1. Due to time limitation, this research is concerned with projects executed by
Alhairi Group only and will not take into account that there are other
construction companies in Nigeria.
2. This research is limited to the contractors who have a valid registration with
Alheri Construction Company.
3. This study is limited to the construction industry practitioners in Nigeria.
3.8.
RESEARCH LOCATION
The research is carried out in Nigeria which consists of 36 states and the federal
capital territory. The states that where visited during the questionnaire population
were Abuja being the federal capital considered as the fasted growing city if west
Africa with a record number of on-going construction projects, Lagos being the
economic hub of the nation with a considerable number of construction projects and
Kano being the headquarters of Alheri Group and a location for most of their
projects.
3.9.
QUESTIONNAIRE DESIGN
The questionnaire survey was performed to ascertain the opinion of contractors and
owners concerning the risk factors. A four pages questionnaire attached with a
covering letter were delivered to 75 contractors and 75 owner representatives
(owners could be: ministries, municipalities, consultants, and so on)
The letter shows the objectives of the research and informed the participants that
the outcomes of the questionnaire would be employed to enhance the capability of
contractors and owners to identify, analyze and estimate the risk factors effect on
the construction projects.
A close-ended questionnaire was administered for its advantages being easy to ask
and quick to answer, they need no writing by either respondents or interviewer.
The questionnaire was made up of five parts to fulfill the purpose of this research,
given below:
1. The organization profile ( contractor and owner )
2. Risk factors that have been identified by literature, experts and by the
researcher.
3. Risk preventive methods which could be used to avoid risk to take place.
4. Risk mitigation methods that could be used to mitigate risk impact or
likelihood.
5. Risk analysis techniques that could be used to analyze and estimate risk
factors impact.
The questionnaire was prepared in English language (Annex 1). To guarantee getting
complete and meaningful response to the questionnaire an interview was carried
out with each respondent to explain the objective of the study and to get
suggestions towards the questionnaire design, specifically towards pinpointing risk
types and management actions for managing these risks. Some of the
questionnaires were filled throughout the interview. Additionally, their analysis is
self-explanatory GEORGE & BRUMA, 1983Balim (1996).
A draft questionnaire, with 36 risk factors (Annex 3), prepared from literature and
distributed into nine groups by adding two groups to the literature (Fletcher,
2000); political and construction. Content genuineness was carried out by sending
the draft questionnaire with covering letter to six experts to assess the content
genuineness of questionnaire, to check readability, offensiveness of the language
and to add more factors and information if necessary (Annex 3). As a result, good
feedback relating to the shape and the factors were taken into consideration and 12
additional factors were added and 4 were omitted to reflect the nature of
construction industry in Nigeria. These factors were amalgamated with the original
factors and the required modifications have been added to the final questionnaire. A
total of 44 factors were distributed into nine groups. To form the final questionnaire
(Annex 1); which was printed by using two different colors in order to distinguish
between the contractors and owners.
3.9.1. CONSTRUCTION RISK ALLOCATION
There are varieties of risks related to the construction projects. These include
physical, environmental, design, logistics, financial, legal, political, construction and
management risks (Peter & Jones, 1987, cited in Flop, 2003tam, 2001). Table (3.1)
shows various kinds of risk contained in the questionnaire. To obtain input for the
questionnaire design, particularly towards identifying risk types, rather than the
related literature, an interview was carried out with five alhairi staff. Accordingly, all
practitioners have took part in the questionnaire design, hence, the questionnaire
was modified as mentioned before in section 3.9. Some of the literature's risk types
such as floods, earthquakes, wind damages and pollution were not used in this
study because of inapplicability.
3.9.2. SIGNIFICANCE OF RISK AND MEASUREMENT SCALES
The level of
Constructi Rush bidding
effect for each
on
Gaps between the implementation and the specification due
risk type was
to misunderstanding of drawing and specification
captured in
the
Undocumented change orders
questionnaire
Lower work quality in presence of time constraints
under the title
"Significance".
The
questionnaire
was designed
to analyze
practitioners'
observations
and
judgments in
deciding the
relative
relevance of
each risk
type. Though
the level of
effect varies
from project
to project, the
questionnaire
is expected to
elicit a
general
evaluation of
the
importance of
risk. Each
respondent
was expected
to rank each
risk on a scale
from 1 to 10
by looking at
its impact to
project
delays. Scale
1 t10 is
chosen to
attain a
higher level of
suppleness in
selecting
statistical
processes
Design changes
Actual quantities differ from the contract quantities
Defective design (incorrect)
Not coordinated design (structural, mechanical, electrical,
etc.)
Design
Inaccurate quantities
Lack of consistency between bill of quantities, drawing and
specifications
Rush design
Awarding the design to unqualified designers
Environmental factors (floods, earthquakes, etc.)
Environme
nt
Difficulty to access the site (very far, settlements)

Adverse weather conditions
Inflation
Delayed payments on contract
Financial failure of the contractor
Financial
Unmanaged cash flow

Exchange rate fluctuation
Monopolizing of materials due to the closure and other
unexpected political conditions
Difficulty to get permits
Ambiguity of work legislations
Legal
Legal disputes during the construction phase among the

parties of the contract
Delayed disputes resolution
No specialized arbitrators to help settle fast
Logistics
Unavailable labor, materials and equipment

Undefined scope of working
High competition in bids
Inaccurate project program
(Alphonsus &
Henry, 1996).
Rank 1 is
assigned to a
risk would
give the
lowest
contributions
to risk effects
while Rank 10
is given to a
risk that
would cause
the highest
contribution.
In the same
time ranks (13) denotes
low
significance
risks, ranks
(4-7) for
medium risks
and (8-10) for
high
risks.Construc
tion Project
Risk
Poor communication between the home and field offices

(contractor side)
Ambiguous planning due to project complexity
Resource management
Managem
ent
Changes in management ways

Information unavailability (include uncertainty)
Poor communication between involved parties
Occurrence of accidents due to poor safety procedures
Physical
Supplies of defective materials

Varied labor and equipment productivity
Segmentation of Nigerian states
Working at hot (dangerous) areas
New government acts or legislations
Political
Unstable security circumstances

closure
Table 3.1. Risk variables (factors) included in the questionnaire

To be able to quantitatively present the relative relevance of risks to a project, a
weighting method is used. The concept is that the risk with the highest contribution
rank would be given the largest weight. The figures in brackets in Table (3.2) are
weighted scores for each risk at different contribution rank. Each individual's
weighted score is gotten by multiplying the number of respondents with the
associated weight. The figures in the last column of the table show the total
weighted scores for each risk. The rank range of 1 to 3 refers to risks that are not
important, 4 to 7 indicates important risks and 8 to 10 displays very high important
risks
Types of
Risk
Contribution rank
Total
weighted
scores
Defective
materials
Inaccurate
quantities
10
2
(2)
0
(0)
3
(9)
1
(4)
8
(4
0)
5
(3
0)
4
(2
8)
4
(3
2)
2
(1
8)
2
(2
0)
183
2
(2)
0
(0)
0
(0)
1
(4)
1
(5)
1
(6)
9
(6
3)
4
(3
2)
7
(6
3)
6
(6
0)
235
Table 3.2 An example for contribution of risks to a project (risk significance).

3.9.3. RISK MANAGEMENT ACTIONS
Managing risks means reducing, controlling, and sharing of risks, and not simply
transferring them off onto another party (Rankley, 1996, cited in Sloken, 2000). The
approaches to managing risks are retention, transfer, mitigation, and prevention of
risks or any combination thereof. There are two types of management steps:
preventive action and mitigative action. Preventive actions are used to prevent and
reduce risks at the early stage of project construction, yet they may result in placing
and excessive high bid for a project. Where the study is related to the construction
phase; the survey dealt with mitigative actions are remedial measures geared
towards minimizing the impacts of risks through the construction phase. The survey
presents six mitigative actions. These actions were produced based on similar study
on construction risk management.
3.9.3.1.
PREVENTIVE ACTIONS
Table (3.3) demonstrates the seven preventive methods that suggested to
respondents to measure the effectiveness for each. Preventive actions are used to
avoid and reduce risks at the early stage of project construction, yet they may
result in placing an excessive high bid for a project. The relative level of
effectiveness between the methods will be quantitatively shown as presented
previously.
Total
weighte
d scores
Effectiveness of preventive methods

Preventive
method
Depend on
subjective
judgment to
produce a proper
High
Moderat
e
Lo
w
Very
low
In
applicabl
e
15
(75)
8 (32)
Very
high
program
Produce a proper
schedule by
getting updated
project
information
Refer to previous
and ongoing
similar projects
for accurate
program
Consciously
adjust for bias risk
premium to time
estimation
Plan alternative
methods as
stand-by
Utilize
quantitative risk
analysis
techniques for
accurate time
estimate
Transfer or share
risk to/with other
parties
Table 3.3 Relative effectiveness of preventive methods
3.9.3.2.
MITIGATIVE ACTIONS
Although certain project delay risks can be lowered by using various preventive
actions at early stages, the delay of progress still takes place in many projects in
the construction process. A recent industry survey has shown that over 80% of
projects go beyond their slated time even with the use of software techniques for
project development (Sloken, 1995). When delay arises, contractors can implement
various mitigative actions to reduce the impacts of the delay. Table (3.4) shows the
six mitigative methods being offered to the respondents to measure the
effectiveness for each of the methods. The relative level of effectiveness between
the methods will be quantitatively proven as presented earlier.
Total
weighte
d scores
Effectiveness of remedial methods

Remedial method
Increase
manpower and/or
equipment
High
Moderat
e
Lo
w
Very
low
In
applicabl
e
15
(75)
8 (32)
Very
high
Increase the
working hours
Change the
construction
method
Change the
sequence of work
by overlapping
activities
Coordinate closely
with
subcontractors
Close supervision
to subordinates
for minimizing
abortive work
Table 3.4 Relative effectiveness of mitigative methods
3.9.4. RISK ANALYSIS TECHNIQUES
Table (3.5) below depicts the risks analysis methods. Respondents were asked to
ascertain the relative use of those methods. Six methods were added to show the
construction industry experts concerns regarding risk analysis and its strategies,
and to evaluate between contractors usage of these methods and owners. The
same weighing strategy is used to measure the weighted score for each method
shown.
Total
weighte
d scores
Uses of risk analysis methods

Risk analysis
methods
Direct judgment
using experience
and personal
skills
High
Moderat
e
Lo
w
Very
low
In
applicabl
e
15
(75)
8 (32)
Very
high
Comparing
analysis
(comparing
similar projects
through similar
conditions)
Probability
analysis (analyze
historical data)
Expert systems
(including
software
packages,
decision support
systems,
computer-based
analysis) methods
Sensitivity
analysis
Simulation
analysis using
simulator
computer
packages
Table 3.5 Relative effectiveness of risk analysis techniques
3.10. VALIDITY OF RESEARCH

Validity means the extent to which an instrument measures what it is supposed to
be measuring (Pilot and Hungler, 1985). High validity is the lack of organized errors
in the measuring instrument. When an instrument is valid; it truly displays the
concept it is meant to measure (Alphonsus and Henry, 1996). Validity possesses a
variety of areas and evaluation methods (George & Bruma, 1983). Below, several
ways to evaluating an instrument's validity are listed:
Content validity
Criterion-related validity
Construct validity
Questionnaire was evaluated by two groups of experts. The first was asked to find
out if the questions agreed with the scope of the items and the degree to which
these items depict the idea of the research problem. The other was asked to find
out that the instrument utilized is accurate statistically and that the questionnaire
was designed well enough to give relations and tests between variables. The two
groups of experts do agree that the questionnaire was valid and appropriate enough
to measure the concept of interest with some amendments, the most crucial are:
12 additional risk factors were included in the questionnaire and 4 were

discarded as a result of recurrence and ambiguity, (see Annex 3 and Annex
1).
7 preventive methods were included, (see Annex 3 and Annex 1).
3.11. RELIABILITY OF RESEARCH

Reliability of an instrument is the level of consistency with which it measures the
attribute it is meant to be measuring (George & Bruma, 1983). The less variation an
instrument generates in continued measurements of an attribute, the higher its
reliability. Reliability can be equated with the balance, persistence, or consistency of
a measuring tool. The test is repeated to the same sample of people on two
instances after which the ratings achieved were compared by calculating a
reliability coefficient (Alphonsus & Henry, 1996). For the most usages reliability
coefficients above 0 .7 are viewed acceptable. Period of two weeks to a month is
suggested between two tests (Banta & Steve, 1989). Ten questionnaires were redistributed among contractors and owners. The reliability coefficient was (0.90) in
the contractors case and (0.87) in owners which shows a high level of reliability and
the correlation was significant at 0 .01 level.
3.12. DATA COLLECTION

Data collection was derived from personal interview for filing questions. The
individual interview, which is a face-to-face activity, wherein the respondents were
asked questions with a brief description for the views and details of questionnaire,
was carried out. The number of respondents who agreed to go along was 63 out of
80 which symbolize 79 % of the overall sample. On the contractors side the ratio
was 78%, and on the owners was 80%.
3.13. DATA ANALYSIS

Analysis is an engaging procedure through which answers to be analyzed to check if
these results agree with the hypothesis necessary for each question (Bramstler,
2001). Quantitative statistical analysis for questionnaire was performed by utilizing
Statistical Package for Social Sciences (SPSS). The analysis of data is performed to
rate the gravity of reasons behind contractor's failure in Nigeria. Ranking was
accompanied by assessment of mean rates within groups and for the general subfactors. The perception of contractors concerning the gravity of each cause was
examined by analysis of variance (ANOVA). The following statistical analysis
measures were carried out:
Coding and defining each variable
Summarizing the data on documenting method
Entering data to a work sheet
Cleaning data
Mean and rank of each cause
Comparing of mean values for each main group and overall sub-factors
ANOVA evaluation was carried out to evaluate the difference of responses of

contractors regarding to variables
Partial correlation test was carried out to evaluate the mean values of
different groups
Multi-comparison evaluation was also carried out if there is a substantial

difference
4. RESULTS AND DISCUSSION

4.1. INTRODUCTION
This chapter embodies the results of the research. Primarily it includes; the
seriousness of risk elements, distribution of each, techniques of managing risks and
techniques of analysis. Then, a comparison will be carried out between contractors
and owners views regarding the seriousness and distribution of each risk factor.
Additionally, within this chapter the results and findings of this study are discussed
fully.
4.2. RISK FACTORS Contractors Perspective

As said before in chapter 3, the questionnaire contained 44 risk elements, which
were divided in nine major categories, these categories were: physical category,
environmental category, design category, logistics category, financial category,
legal category, construction category, political category and management category.
The elements of each category will be showcased in the terms of seriousness and
distribution based on the participants responses.
4.2.1. PHYSICAL GROUP (CATEGORY 1)
4.2.1.1. SERIOUSNESS
Results proved that the supply of defect materials is the most essential risk in the
physical category (Table 4.1), occurrence of accidents was the next from relevance
and the third was the variation in labor and equipment productivity. These outcomes
show the worries of contractors concerning relevance of materials and safety
measures; this outcome is backed up by the outcomes of Baalif, et al. (1998) as well
as the final results of National Audit Office (2001) which regarded the risks of defect
materials and safety measures as very essential risks.
4.2.1.2. DISTRIBUTION
The standard for a risk to appropriated to a specific category (owner, contractor,
shared, insurance or ignored), was that it ought to receive a minimum of (60%)
response rate to attain the standard of the rates. Those that failed to obtain this
sort of response rate for any category were shown to be undecided. As
demonstrated in Figure (4.1), (39%) of contractors attempted to transfer the
implications of accidents to other parties for example insurance, (42%) of
contractors seemed to be prepared to bear these implications and (19%) of them
appeared to share these implications with owners. Meaning to say that contractors
are undecided about the distribution of safety risks and likewise Hong Kong
contractors (Baalif et al, 1998) and unlike Kuwait contractor who agreed to endure
the safety risks (Farrel, 2002). As a matter of fact contractors are better able to
manage such risks by handling the use of safety precautions inside the construction
sites. However, the presence of insurance premiums for accidents and injuries can
ease some of these risk implications. Contractors ought to deliberately give extra
effort to ease the accidents costs and other implications by using productive
training and boosting consciousness of safety measures. The greater part of
contractors (97%) agreed on the risks of supplying defect materials and variation in
productivity (71%). Basically, not only did contractors assign them as their
obligations, but a majority of analysts also back this position (Farrel, 2002).
Moreover, contractors of Hong Kong verified this allocation (Baalif et al, 1998).
No
.
Physical Category Risks
Weight
Seriousn
ess (110)
239
7.7
221
7.1
188
6.1
Table 4.1. Physical group risks ranking

120%
100%
80%
97%
71%
allocation contractor
oc
cu
rre
nc
e
la
bo
ra
nd
of
po
or
va
rie
d
of
ac
ci
de
nt
s
be
ca
us
e
allocation ignored
eq
ui
pm
sa
fe
ty
pr
oc
ed
ur
es
Response Rate %
en
tp
ro
du
ct
iv
ity
60% 42%
39%
40%
19%
13% 18%
20%
3%
allocation owner
allocation shared
allocation insurance
0%
0%
0%
0% 0%0%
0% 0%
Risk Factors (Category

1)
Figure 4.1. Physical group risks allocation, contractors perspective

4.2.2. ENVIRONMENTAL GROUP (CATEGORY 2)
As depicted in Table (4.2), contractors regarded site accessibility as a principal
reason for delay; furthermore they regarded the risk of unfavorable weather
conditions to be a moderate risk. These risk categories boost the likelihood of

uncertain, unpredictable and even undesirable elements in the construction site.
Nevertheless, the risks of unfavorable weather conditions and site accessibility did
not emerge with high important risks among the surveyed risks. Environmental
elements (catastrophes) took place rarely, because of this the weight of the risk of
Environmental elements was considerably low. These outcomes are backed up with
the final results of (Farrel, 2002).
Figure (4.2) illustrates that contractors were not decided on the distribution of risk
of Environmental factors. Furthermore, a huge share of contractors (39%) chose to
ignore its risk. Alternatively Odey & Russ (cited in Baalif et al, 1998) recommend
that it ought to be a shared risk, such incidents are not predictable. Risk of site
access was regarded as a shared risk (share the risk between the owner and the
contractor) by the a good number of contractors (71%), as a matter of fact, site
access risk ought to be borne by the owner who ought to analyze the requirements
throughout the planning stage (Odey & Russ, cited in Baalif et al, 1998), however as
a result of the current tense situation, contractors and owners ought to harmonize
their attempts to secure a best managing of such risks. 52% of contractors meant to
share the risks of unfavorable weather conditions, (13%) supposed contractors to
bear this risk; simply put they were not decided on this risks allocation, in fact, and
as a result of the evaluation of certain types of contracts that are used in Nigeria,
the majority of owners of the construction projects in the Nigeria are legally
protected from dangers of this risk by allotting certain exculpatory clauses in their
contracts, but it is noted that weather conditions are uncontrollable and such risk
ought to be shared to get better handling and to lessen conflicts likelihood.
No
.
Environmental Category Risks
Weight
Seriousn
ess (110)
Difficulty to access the site (very far, settlements)
207
6.7
173
5.6
Environmental factors
160
5.2
Table 4.2. Environmental group risks ranking
80%
70%
60%
50%
40%
30%
20%
10%
Allocation Contractor
0%
Allocation Owner
Allocation Shared
Allocation Insurance
D
iffi
cu
lty
we
at
he
rc
on
di
tio
n
to
ac
ce
s
th
e
si
te
Allocation Ignored
Ad
ve
rs
e
(v
er
y
fa
r,
s
Ac
ts
et
tle
m
en
ts
)
of
G
od
Response Rate %
Risk Factors (Category

2)
Figure 4.2. Environmental group risks allocation, contractors perspective

4.2.3. DESIGN CATEGORY (CATEGORY 3)
Design category elements presented one of the crucially significant analyzed risks.
As specified in Table (4.3), defective design with (8.5) seriousness and absence of
awarding the design to unqualified designer with (7.8) seriousness are the most
significant elements. These outcomes also indicate that contractors experience
incomplete or inaccurate design information. This outcome was gathered from
rating the defective design risk category among of the five most essential risks to
project delays. These outcomes complied with the outcomes of Farrel, (2002),
(Preston et al, 2003) and (Flen, 1998). It has to be stated that contractors worried
about defective design challenges as they could be responsible for any crucial
challenges might occur as a result of wrong design. Respondents designated the
risks of un-coordinated design and lack of coordination in design as great relevance
risks, however these risks could be address by giving genuine interest and
coordinate properly between design aspects. Other design risk elements regarded
as moderate risks by contractors.
No
Design Category Risks
Weight
Seriousn
ess (1-
10)
7
12
246
8.5
243
7.8
255
7.3
Lack of consistency between bill of quantities, drawings

and specifications
211
6.8
195
6.3
Rush design
192
6.2
Not
coordinated
electrical, etc.)
8
10
9
11
design
(structural,
mechanical,
Table 4.3. Design group risks ranking

Figure (4.3) shows that bulk of contractors assign design risks onto owners.
Contractors had taken into account that owners ought to withstand the risks of:
Defective design (84%)
Not coordinated design (87%)
Inaccurate quantities (48%)
Lack of consistency between bill of quantities, drawings and specifications

(58%)
Rush design (68%)
Awarding design to unqualified designers (81%)
Large distribution percentages were going for owners that are in a more suitable
opportunity to provide adequate and appropriate drawings on the design and
services. These conclusion complied with outcomes of (Ahmed et al., 1999) and
(Farrel, 2002) who claimed that the owner are able to best manage inadequacies in
specifications and drawings by hiring an efficient consultant and supplying enough
design funds.
de
si
gn
Ru
sh
qu
an
tit
ie
s
In
ac
cu
ra
te
D
ef
ec
tiv
e
de
si
gn
(in
co
rre
ct
)
100%
87%
84%
90%
81%
80%
68%
70%
58%
60%
48%
50%
Response Rate % 40%
32%
29%
26%
30%
19%
19%
13%
20% 13%
10%
10%
Allocation
Contractor Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
0%
0%0%0% 0%
0%0%
0%0%
0%0% 0%
0%0% 0%
0%0%
Risk Factors
(Category 3)
Figure 4.3. Design group factor allocation, contractors perspective
4.2.4. LOGISTICS CATEGORY (CATEGORY 4)
Table (4.4) displays the weights of logistic category elements. Contractors figured
that the risks of unavailability of labor and materials and poor communication
among contractors teams are tremendously important risks. It is apparent that the
stated challenges are severe risks that could be confronted. The risk of contractors
proficiency is a risk that contractors were concerned with, it is difficult for
contracting companies with huge administrative overheads to contest with
companies with lesser administrative overheads. The unavailability of labor and
materials is in some way linked to political cases; if closure occurs, materials will be
prone to rise in prices; reinforcement steel is a great instance. Contractors
concerned about poor communications in their part; this reflects its happening,
contractors ought to take care of this issue by arranging and implementing
management specifications to manage such issues. Undefined scope of work and
inaccurate project program practically get the similar seriousness, they possess
moderate weights which emphasized the misconception of these issues among
contractors. These risks ought to be properly understood. Such understanding may
lessen and handle the work appropriately.
No
.
Logistics Category Risks
Weight
Seriousn
ess (110)
13
222
7.2
17
Poor communication between home and field offices

(contractor side)
222
7.2
15
201
7.2
14
Undefined scope of work
182
5.9
16
179
5.8
Table 4.4. Logistics group risks ranking

Figure (4.4) shows that contractors are apparently prepared to accept the risks of:
Unavailability of labor, materials and equipment
Poor communication among contractors teams
It is the contractors obligation to supply labor, materials and equipment to perform

the job. similarly, contracting companies ought to train its teams on ways to
communicate and exchange information. However, contractors were uncertain on
the distribution of other elements of the logistics category. It ought to be the
responsibility of owner who could manage the risk of contractor proficiency by
enforcing stringent standards for the choice of contractor; this was backed up by
(Ahmed, et al 1999). Therefore, risk of contractor proficiency ought to be assigned
onto owners, however, ongoing poor economic development and very competitive
market in Nigeria have driven contractors to cut down or simply leave out their
profit in order to stay in competition. Concerning other two elements, nearly (50%)
of contractors regarded them as shared risk. It is reasoned that owners ought to
plainly outline the depth of work and establish a suitable plan to adhere to
throughout construction, however this does not wipe out the contractors task
regardless if was incomplete. Both contractor and owner can offer the employees
and capabilities to secure an appropriate project plan.
bi
ds
in
Allocation Shared
Allocation Ignored
an
d
ho
m
co
m
th
e
H
ig
h
at
er
ia
ls
be
tw
ee
n
m
un
ic
at
io
n
na
va
ila
bl
e
la
bo
r,
fie
ld
pe
tit
io
n
allocation owner
an
d
eq
ui
pm
en
t
Response Rate %
offi
ce
rs
120%
97%
97%
100%
80%
48%
60%
45% 48%
39% 32%
29%
40%
26%
23%
20%
3%
3%
3%
0%
0%0%0%
0%0%
0%0%
0%0%
0% 0%0%
Po
or
co
m
Risk factors (category

4)
Figure 4.4. Logistics group risks allocation, contractors perspective
4.2.5. FINANCIAL CATEGORY (CATEGORY 5)
As observed in table (4.5), financial risks experienced the topmost counts of
analyzed risk elements provided by contractors respondents. Contractors regarded
the financial setback of contractor is considered the most sever risk in the financial
group. Based on Bramstler, (2001), contractors may financially fail as a result of:
Depending on banks and paying high.
Lack of capital.
Lack of expertise in the brand of work.
Cash flow management.
Low margin of profit due to competition.
Lack of experience in contracts.
Award contracts to cheapest price.
Closure.
Above 80% of the setbacks were as a result of financial elements, as a result

financial risks received the greatest weights of the analyzed risks, Table (4.5). Based
on Fem (cited in Bramstler, 2001), small companies dont give the amount of care
about financial ratios as larger companies. Small companies have not an accounting
team that posts reviews routinely thereby; financial ratios are tough to track given
that they employ independent accountants. Nigerian small companies by no means
contemplate the employee's advantages and compensations, variation orders,
handling equipment cost and usage, material wastages and annually reviewing
profits as a necessity which may impact the financial situation of the firm.
No
.
Financial Category Risks
Weight
Seriousn
ess (110)
20
279
9.0
19
260
8.4
21
Unmanaged cash flow
256
8.3
23
Monopolizing of materials due to closure and other

243
7.8
18
Inflation
240
7.7
22
232
7.5
Table 4.5. Financial group risks ranking

Figure (4.5) demonstrates that contractors seem to be prepared to sustain the risks
of:
Financial failure of contractor (71%)
Unmanaged cash flow (90%)
Most contractors (81%) allotted the delayed payments risk to the owners. This risk
category is among the often disputed ones. These outcomes are backed up by
(Farrel, 2002). Besides Bellos (cited in Farrel, 2002) claimed that in the law, this
issue often is reported within loss and expense (Bellos, cited in Farrel, 2002).
Contractors respondents were in doubt on who ought to take inflation risk, however
(45%) of the contractor respondents viewed it as a contractors challenge since the
contracts here in Nigeria include clauses to assign such risks onto the contractors.
Even, the pre-bid meeting minutes might as well include such clauses. Contractors
are contemplating this risk category as an oscillating risk category, wherein its
danger rises as inflation rises, and vice versa. Contractors were uncertain
concerning exchange rate fluctuation and monopoly risks. Inflation and exchange
rate fluctuation risks ought to be best distributed between the owner and the
contractor by adding contract clauses that explain the necessary criteria and rules
for sharing. These are risks in which each party can manage more under separate
circumstances and may be outlined in contracts as recommended above.
71%
29%
at
er
ia
ls
un
ex
pe
ct
ed
ra
te
du
e
to
cl
os
ur
e
an
d
ot
he
r
Risk Category (category 5)
in
g
of
m
Figure 4.5. Financial group risks allocation, contractors perspective

M
on
op
ol
iz
0%
Ex
ch
an
ge
an
ag
ed
nm
of
th
e
Allocation Shared
42%
35%
32%
19%
3%
po
lit
ic
al
co
nd
iti
on
s
flo
w
0% 0%0%
ca
sh
co
nt
ra
ct
or
0% 0%0%
in
fla
tio
n
26% 26%
13%
10%
Fin
an
ci
al
fa
ilu
re
D
el
ay
ed
90%
Allocation Owner
pa
ym
en
to
n
co
nt
ra
ct
In
fla
tio
n
100%
81%
90%
80%
70%
60%
50% 45%
35%
40%
30%
19%
13%
20%
8%
Response Rate
10%%
0%
0%
0%0%0%
0%
Allocation Ignored
4.2.6. LEGAL CATEGORY (CATEGORY 6)

Table (4.6) demonstrates that legal disputes, delayed disputes resolution and lack of
specialized arbitrators had the greatest weights in the legal category, which shows
the significance of dispute resolutions and the disputes repercussions. Legal
category risks like Difficulty to settle disputes between project parties. Ambiguity of
work legislations and difficulty to get permits were found in the tail respectively.
Nevertheless the lesser weight shows that contractors are not experiencing such
risks, contrary to Hong Kong contractors who do worry about obtaining permits and
regard it as a very valuable risk (Baalif et al, 1998).
No
.
Legal Category Risks
Weight
Seriousn
ess (110)
26

228
7.4
27
Delayed disputes resolutions
228
7.4
28
222
7.2
25
Ambiguity of working legislations
171
5.5
24
Difficulty to get permit
166
5.4
Table 4.6. Legal group risks ranking
fa
st
he
lp
ar
bi
tr
at
or
s
no
sp
ec
ia
liz
ed
th
e
on
g
am
ph
as
e
co
ns
tr
uc
tio
n
Allocation Ignored
to
pa
rt
ie
s
di
ffi
cu
lty
to
of
th
e
Allocation Contrator Allocation Owner Allocation Shared Allocation Insurance
se
tt
le
ge
tp
er
m
it
Response Rate %
co
nt
ra
ct
94%
94%
100%
90%
80%
70%
58%
60%
48%
45%
50%
40%
29%
26%
23%
30%
19%
13%11% 11% 11%
11%
11%
11%
11%
11%
10%11%
10%
20% 13%
6%
6%
6%
10%
0%
du
rin
g
th
e
Risk Factors (category

5)
Figure 4.6. Legal group risks allocation, contractors perspective
le
ga
ld
is
pu
te
s
Figure (4.6) demonstrates the distribution of legal category elements based on
contractors respondents. It is apparent that the largest section of contractor
respondents handled legal risks as shared risks. 48% of respondents regarded the
risk of difficulty to get permits a shared risk, alternatively virtually the third of
respondents (29%) disregarded this risk. 58% of respondents handled ambiguity of
work legislations as shared as well . The largest section of respondents (94%) chose
to share legal disputes and delayed resolution with owners. Disputes could arise as
a result of error or misconception by either party. Therefore, these risks ought to be
shared risks.
4.2.7. CONSTRUCTION CATEGORY (CATEGORY 7)
In table (4.7) risks connected to construction were split into two categories based on
weights. The more important category included the risks of undocumented change
orders, lower work quality and misunderstanding drawings and specifications
respectively. Baalif et al. (1998) backed up theses outcomes. Taking into account the
risk of undocumented change orders as a very important risk shows a pattern
wherein contractors are concerned with receiving payment for an alteration of the
job, because the cost effect of altering orders cannot be claimed later. Contractors
bothered with the lesser work quality, and as a result contractors do their best not
to get abortive jobs, to uphold a great reputation and to prevent additional
expenses repeating the abortive jobs. Other relevant risk is the risk of
misunderstanding of drawings and specifications, this risk produces substantial job
setbacks, and therefore contractors demonstrate knowledge about this risk. Design
changes, difference between actual and contract quantities and rush bidding were
in the 4th, 5th and 6th positions with moderate severities, this shows the minimal
focus given by contractors to these problems.
No
.
Construction Category Risks
Weight
Seriousn
ess (110)
31
236
7.6
32
228
7.4
30
Gaps between the implementation and the specifications

due to misunderstanding of drawings and specifications
225
7.3
33
Design changes
187
6.0
34
169
5.5
29
Rush bidding
152
4.9
Table 4.7. Construction group risks ranking

Figure (4.7) demonstrates the distribution of construction risks. Contractors took the
risk of undocumented change orders (68%); contractors recognize that the
documentation of change order is their duty. Most contractor respondents (68%)
assign the risks of rush bidding, design changes and difference between actual and
contract quantities on the owner. Assigning design changes risk category to the
owner shows a pattern wherein contractors are significantly less worried about
alterations in the job. Respondents were in doubt regarding lower quality of work in
presence of time constraints. It is believed that this risk category ought to be
allotted to the contractor, given that contractors will be in the best view to manage
this risk (Farrel, 2002).
80%
68%
70%
68%
65%
68%
68%
60%
42%45%
50%
40%
Allocation Contractors26% Allocation Owners
26%
30%
23%
0%
0%0%
0%0%
6%
0%0%
0%
13%13%
0%
6%
0%
un
do
cu
m
en
te
d
ru
sh
ch
an
ge
Allocation Ignored
13%
6%
ch
an
ge
s
bi
dd
in
g
0%
10%
de
si
gn
10%
3% 6%
or
de
rs
20%
Allocation Shared 26%

Figure 4.7. Construction group risks allocation, contractors perspective

4.2.8. POLITICAL CATEGORY (CATEGORY 8)
Table (4.8) illustrates the rating of political category risks. Virtually all the political
risks are believed highly important risks because of the insecure current disturbing
condition. Nevertheless, respondents seemed that they failed to be concerned with
new acts or legislations. That is because Nigeria indicate the highest unanticipated
cost overburden that a contractor could encounter. Working at hot areas risk is
regarded as an extremely high risk, contractors cannot be required to work at such
locations. Closure could result in unavailability of materials and even inflation as a
result of monopoly. Invasions could deconstruct the unaccomplished projects, which
results in conflicts.
No
.
Political Category Risks
Weight
Seriousn
ess (110)
36
279
9.0
39
Closure
277
8.9
35
Segmentation of Nigeria
258
8.3
38
Unstable security circumstances (insurgency)
258
8.3
37
151
4.9
Table 4.8. Political group risks ranking

In figure (4.8) distribution of political risks is observed. Obviously, respondents are
prepared to share the majority of risks with owners. Segmentation, working at hot
areas, closure and unstable security circumstances were regarded as shared risks
with (71%), (68%), (68%) and (61%) respectively. It is believed that all risks that
cannot be managed ought to be shared risks. 55% of respondents chosen to share
the new legislations risk regardless of its minimal relevance - with owner and
(35%) to disregard. this shows the minimal impacts of such category.
0%
0%
Allocation
3%Insurance
0%
0%
ci
rc
um
0%
un
st
ab
le
ne
w
se
cu
rit
y
go
ve
rn
m
0%
26%
cl
os
ur
e
Allocation Shared
3%
en
ta
ct
s
0%
35%
st
an
ce
s
10%
6% 3%3%
Allocation
Owners
68%
61%
55%
35%
wo
rk
in
g
Allocation Ignored
68%
at
ho
ta
re
as
se
gm
en
ta
tio
n
of
N
ig
er
ia
71%
80%
70%
60%
50%
40%
29%
30%
20%
Allocation
Contractors
10%
Response Rate
%
0%
0%0% 0%
Risk Factors (category 8)
Figure 4.8. Political group risks allocation, contractors perspective

4.2.9. MANAGEMENT CATEGORY (CATEGORY 9)
Management category elements rates are presented in Table (4.9). Poor
communication between parties rated first with (8.3) seriousness, the second was
resource management with (7.3) seriousness, project complexity with (6.9)
seriousness was third and the fourth was changes in management ways with
seriousness of (6.4). These statistics show the relevance of management matters
for contractors and shows the presence of these risks, which require increasingly
more implementation of management rules. Uncertainty rated fifth with (6.2)
seriousness. It is believed that management of projects require even more training
to adequately handle projects particularly the big ones.
No
.
44

Weight
Seriousn
ess (110)
258
8.3
41
Resource management
226
7.3
40
215
6.9
42
199
6.4
43
Information unavailability
191
6.2
Table 4.9. Management group risks ranking

Figure (4.9) demonstrates the respondents distribution of management risks.
Contractors appeared to be prepared to take in the resource management and
change in management ways risks with (68%) and (61%) respectively. It is typical
for contractor to handle these risks. Contractor respondents chose to share
ambiguous planning, uncertainty and poor communication risks with (61%), (65%)
and (71%) respectively. These three challenges ought to be actually shared risks; it
is the contractors and owners obligation to place a definite arrangement for the
project implementation, to explain any ambiguous information and to uphold proper
communication habits in support of project fulfillment.
pa
rt
ie
en
tw
ay
s
pl
ex
ity
Response Rate %
80%
70%
60%
50%
40%
30%
20%
10%
0%
in
vo
lv
ed
be
tw
ee
n
an
ag
em
m
un
ic
at
io
n
ch
an
ge
s
in
po
or
co
m
m
bi
gu
ou
s
pl
an
ni
ng
du
e
to
pr
oj
ec
tc
om
Allocation Contractors Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
am
Risk Factor (category

9)
Figure 4.9. Management group risks allocation, contractors perspective
4.3. OVERALL RISK SERIOUSNESS AND DISTRIBUTION, CONTRACTORS

PERSPECTIVE
4.3.1. SERIOUSNESS
Table (4.10) demonstrates all risk factors used in the questionnaire rated in
descending order based on their weight from the contractors point of view. The
highest and lowest essential risk categories for Nigerian Contractors are
demonstrated in Table (4.11) that was created depending on the facts in Table
(4.10). The outcome reveals that Nigerian contractors regarded financial failure of
the contractor and Working at hot (dangerous) areas to be the biggest construction
risks getting them a rating of (279), as demonstrated in Table (4.11). They were
followed by Closure, with a rating of (277). The ratings of the five biggest risks fall
between (260) and (279). The lowest essential risk, from the contractors point of
view is the risk of new governmental acts, with a rating of (151) followed by the risk
of Rush bidding with a rating of (152). The ratings fall between (155) and (169). The
outcomes prove that contractors regarded (57%) of the risk factors as very essential
risks and (43%) of them as moderate risks.
No
.
Risk Factors
Weight
Seriousn
ess (110)
20
279
9.0
36
279
9.0
39
Closure
277
8.9
264
8.5
19
260
8.4
35
258
8.3
38
Unstable security systems (insurgency)
258
8.3
44
258
8.3
21
Unmanaged cash flow
256
8.3
12
243
7.8
23
Monopolizing of materials due to closure
243
7.8
18
Inflation
240
7.7
239
7.7
31
Undocumented change overs
236
7.6
22
232
7.5
26
Legal disputes during construction phase
228
7.4
27
Delayed dispute resolution
228
7.4
32
226
7.4
41
Resource management
225
7.3
Not coordinated design
225
7.3
30
Gaps between implementation due to misunderstandings

of drawings
222
7.3
13
222
7.2
17
222
7.2
28
Not specialized arbitrators to help settle fast
222
7.2
Occurrence of accidents due to poor safety measures
221
7.1
40
215
6.9
10

and specifications
211
6.8
Difficulty to access the site
207
6.7
15
High competition of bids
201
6.5
42
199
6.4
195
6.3
11
Rush design
192
6.2
43
191
6.2
188
6.1
33
Design changes
187
6.0
14
182
5.9
16
179
5.8
173
5.6
25
171
5.5
34
169
5.5
24
166
5.4
160
5.2
29
Rush bidding
152
4.9
37
New government acts of legislations
151
4.9
Table 4.10. Risk factors ranking

Relevance
Risk
High
Financial failure
(most
important
ranked
first)
Low
New government acts of legislation
(least
important
ranked
first)
Rush bidding
Closure
Delayed payment on contract
Actual quantities differ from contract quantities
Table 4.11. Most and least important risk categories as perceived by Contractors
4.3.2. DISTRIBUTION
The standard for a risk to be appropriated to a specific category (contractor, owner,
shared, insurance, or ignored), was that it ought to attain a minimum of a (60%)
reaction level. Those that did not to attain such feed-back level in support of any
category were displayed as undecided. Allocation of risk elements used in the
questionnaire, based on the contractors respondents, is shown in Table (4.12).
Contractors have allotted nine risks onto themselves, meaning contractors get
(20%) of the risk elements, they have allotted eight risks onto owners, which means
that (18%) of the risk elements the owner ought to manage, as outlined by the
contractors. The contractors also regarded eleven risks as shared risks, i.e. (25%) of
the risk elements ought to be shared. However, they were not certain about sixteen
risks, which means the contractors were unsuccessful in allocating (37%) of the risk
elements. These outcomes show that contracts clauses employed in Nigeria
neglects the larger part of risk elements.
Allocation
Risk description
Contracto

Poor communications between the home and the field offices
r
Unmanaged cash flow

Resource management
Defective design
Rush design
Owner

Rush bidding
Design changes
Shared

Legal disputes during the construction phase among the parties of the
contract
Gaps between the implementation and the specifications due to
misunderstanding of drawings and specifications
Work at hot (dangerous) areas
Closure

Lack of consistency
specifications
between
bill
of
quantities,
drawings
and

Undecide
d
Inflation
Monopolization of materials due to closure and other unexpected
political conditions
Table 4.12. Risk allocation, Contractors perspective
4.4. RISK FACTORS OWNERS PERSPECTIVE

In these segments, risk factors seriousness and distribution will be reviewed in
depth from owners point of view. The work done for the contractor respondents will
be repeated for owners.
4.4.1. PHYSICAL CATEGORY (CATEGORY 1)
No
.
1
Physical Category Risks

Weight
Seriousn
ess (110)
258
8.1
Supply of defective materials
201
6.3
165
5.2
Table 4.13. Physical group risks ranking

Incidence of accidents was rated first by owners respondents with (258) weight as
demonstrated in table (4.13). The weight allotted to this risk by owners was greater
than contractors assessment (221), which shows that owners are more conscious
about safety precautions than contractors. Owners gave less focus on defect
material supplies than contractors, but they were less worried about change in
productivity; this outcome is backed up by the outcomes of Baalif, et al. (1998) and
those of National Audit Office (2001) which regarded the risks of defect materials
and safety measures as very crucial risks.
Figure (4.10) demonstrates that owners respondents chose to assign all the
physical group risks to contractors. The greater part of respondents assign
occurrence of accidents, defect material supplies and productivity variation to
contractors by (72%), (69%) and (84%) of respondents respectively. These
deductions go along with the outcomes of Baalif, et al. (1998) in Hong Kong. It is
reasoned that the contractor is in a more suitable position to manage these
difficulties.
4.4.2. ENVIRONMENTAL CATEGORY (CATEGORY 2)
As demonstrated in table (4.14), owners respondents worried about site
accessibility that is rated first with (258) weight. The second was Environmental
factors risk with (178) weight and adverse weather conditions risk came third with
(165) weight. In contrast to contractors, owners failed to worry over weather
conditions greatly, rather they were concerned about site accessibility.
af
et
y
ea
su
re
s
eq
ui
pm
en
tp
ro
du
ct
iv
ity
84%
90% 72%
69%
80%
70%
60%
50%
40%
25%
22%
30%
13%
20%
6%
3% Allocation Shared
Allocation Contractor 10%
Allocation3%
Owner
0%
Response Rate %
0%
0%0%
0% 0%0%
la
bo
ra
nd
Risk Factors (category 1)
va
rie
d
of
ac
ci
de
nt
s
du
e
to
po
or
s
Allocation Ignored
oc
cu
rre
nc
e
Figure 4.10. Physical group risks allocation, owners perspective
No
.
Environmental Category Risks
Weight
Seriousn
ess (110)
253
7.9
178
5.6
165
5.2
Table 4.14. Environmental group risks ranking
Figure (4.11) demonstrates the distribution of environmental risks based on owners
point of view. The respondents practically allotted the site accessibility risk as
shared risk (59%). 34% of respondents regarded this risk as contractors problem;
this distribution of respondents has a pattern to assign risks onto contractor
although these risks are uncontrollable risks. Respondents were in doubt about the
risks of Environmental factors and adverse weather conditions, which is
conventional perspective as these risks are uncontrollable. Contractors and owners
ought to share such risks. Farrel, (2002) and Baalif, et al. (1998) backed up these
outcomes.
70%
59%
60%
50%
44%
41%
40%
34%
28%
Allocation contractors
Allocation Owners
30%
16%
13%
0%
si
te
of
G
od
0%
9%
6%
10%
di
ffi
cu
lty
to
ac
ce
s
ac
ts
th
e
Allocation Ignored
0% 0%
6%
we
at
he
rc
on
di
tio
ns
20%
Allocation Shared
25%
19%
ad
ve
rs
e
Response Rate %
Risk Factors
(category 2)
Figure 4.11. Environmental group risks allocations, owners perspective
4.4.3. DESIGN CATEGORY (CATEGORY 3)
Table (4.15) below illustrates weights and scores of design category elements. Along
with contractors, Owners respondents regarded design risks high risks. Owners are
worried with the quality of design. It has to be observed that owners worried about
defective design problems because they could be the catalyst for several conflicts
and unwanted implications. This risk if not handled appropriately it could result in
unwanted implications particularly in construction. These findings are reinforced by
the outcomes of Ahmed, et al (1999), (Preston et al, 2003) and (Flen, 1998). The
illegitimate outcome would be to allot the risk of the rush design as a moderate risk
of the owners. It is a severe issue for owners to possess this perspective.
Weight
Seriousn
ess (110)
296
9.3
Defective design
260
8.1
246
7.7
No
.
12
Design Category Risks
10
Lack of consistency between bill quantities, drawings and

specifications
224
7.0
11
Rush design
211
6.6
205
6.4
Table 4.15. Design group risks ranking

Figure (4.12) illustrates design risks from owners point of view . It is obvious that
owners agreed to bear the risks of:
Incorrect design
Rush design
Awarding to unqualified designers.
Nevertheless, it is noticed from figure (4.12) that the risks of not coordinated
design, inaccurate quantities, lack of consistency between quantities, specifications
and drawings have received (59), (34) and (41%) reactions respectively. They came
below the selected standard (60% responses) for determining its distribution. This is
contrary to Hong Kong owners who allotted the design risk on themselves (Baalif, et
al. 1998). This further justifies the requirement for innovative contract procurement
strategies for example management contracting that are better able to distribute
the risks to the groups that are capable of managing them better.
Risk Factor (category 3)
de
si
gn
ru
sh
qu
an
tit
ie
s
in
ac
cu
ra
te
de
fe
ct
iv
e
de
si
gn
100%
91%
84%
90%
80%
63%
70%
59%
60%
44% Insurance
Allocation
Owner
Allocation
Allocation Shared
50%
41%
41%
Response Rate
%
34%
40%
25%
30%
19% 19%
16%
16%
16%
20%
12%
9%
10%
3%
0%
0%0%
0%0%
0%
0%0% 0%
0%0% 0%
0%0%
Allocation Ignored
Figure 4.12. Design group risks allocation, owners perspective

4.4.4. LOGISTICS CATEGORY (CATEGORY 4)
The data demonstrated in Table (4.16) displays the weights and ranks of the
logistics category risks. It may be seen that both contractors and owners had the
same rates for the first two risks. Both equally worried about contractor competence
and availability of labor and materials. For the first risk brought up, it was argued
the owners policies are the immediate reasons behind this risk. The weights given
to this group of elements are considerably huge, which means the relevance of
these risks at owners respondents. The respondents were worried about poor
communication of contractors side, this risk creates barriers in the way of
achievement, and it can be seen in large companies.
No
.
Weight
Seriousn
ess (110)
15
213
6.7
13
Unavailable labor, material and equipment
211
6.6
16
200
6.3
17
Poor communication between home and field officers
187
5.8
14
149
4.7
Table 4.16. Logistics group risks allocation
un
av
ai
la
bl
e
la
bo
rm
Allocation Ignored
in
ac
cu
ra
te
at
er
ia
la
nd
eq
ui
pm
pr
oj
ec
tp
ro
gr
am
en
t
120%
97%
91%
100%
69%
80%
53%
60%
44%
28%
40%
25%
25%
22%
22%
9%
20%
6%
3%
3%
Allocation
Owner
Allocation Shared 3% Allocation
Insurance
0%
Response Rate %
0% 0%0%
0%
0%0%
0%
0% 0%0%
Risk Factors (category

4)
Figure 4.13. Logistics group risks allocation, owners perspective
Owners had contemplated that contractors ought to carry the risks of:
Labor and materials unavailability (97% responses)
Inaccurate project program (69% responses)
Poor communication between contractors teams (91% responses)
It ought to be the contractors duty to ascertain that labor and materials are
provided to perform the jobs. Contrary to owners, it is reasoned that it ought to be a
collective duty to place an appropriate plan to adequately handle the projects tasks.
Contractors ought to be able to organize the communication procedure among their
teams. Respondents were in doubt regarding the risks of undefined scope of work
and contractors competence. The risk of contractors competence needs to be the
responsibility of the owner who can handle it by enforcing thorough standards for
the choice of the contractor.
4.4.5. FINANCIAL CATEGORY (CATEGORY 5)
Financial risks that may be encountered in construction projects are weighted and
rated in Table (4.17). Owners respondents regarded contractors financial failure as
the most critical financial risk with (215) weight. Subsequently followed the risk of
inflation (191), monopoly and unmanaged cash flow risks were the third and the
fourth respectively with (176) and (171) weights, regardless that unmanaged cash
flow is an immediate reason for contractors financial failure in Nigeria. The fifth was
the risk of delayed payments on contract. Owners respondents assessment
differed entirely from contractors. Owners concerned about failure however they
would not about delayed payments and exchange rate fluctuation. Basically, owners
worried about not quitting the works.
No
.
Weight
Seriousn
ess (110)
20
215
6.7
18
Inflation
191
6.0
23
Monopolizing of materials due to closure and other

176
5.5
21
Unmanaged cash flow
171
5.3
19
Delayed payment methods
157
4.9
22
138
4.3
Table 4.17. Financial group risks ranking

Outcomes of the study indicate that both owners and contractors chose to
designate the risk of delayed payment on contracts on the owners with similar
repose rate (81%). Owners were of the opinion that the contractor ought to be
accountable for its failure and for handling its funds. However, owners seemed not
to share risks of inflation, exchange rate fluctuation or monopoly, whilst these risks
ought to ideally be shared between owners and contractors by adding contract
clauses that outline the necessary criteria and conditions for sharing. These are
risks wherein each party could possibly handle it better under different conditions
and might be stipulated in the agreement as recommended above.
of
m
at
er
ia
ls
ra
te
ex
ch
an
ge
on
op
ol
iz
in
g
flu
nc
tu
at
io
n
flo
w
ca
sh
an
ag
ed
un
m
co
nt
ra
ct
or
of
th
e
fin
an
ci
al
fa
ilu
re
de
la
ye
d
pa
ym
en
ts
on
co
nt
ra
ct
s
in
fla
tio
n
100%
88%
90%
81%
78%
80%
70%
60%
50%
44%
50% 38% 38%
40%
31%
25% 22%
22%
30%
16%
16%
13%
20%%
Response Rate
9%
9%
6%
6%
3%
3%
3%
10%
0%
Allocation Contractor Allocation Owner Allocation Shared Allocation Insurance Allocation Ignored
0%
0%0%
0%0%
0%0%
0%
0%

5)
Figure 4.14. Financial group risks allocation, owners perspective
4.4.6. LEGAL CATEGORY (CATEGORY 6)
No
.
Legal Category Risks
Weight
Seriousn
ess (110)
27
205
6.4
28
192
6.0
26

164
5.1
25
143
4.5
24
127
4.0
Table 4.18. Legal group risks ranking

Outcomes presented in Table (4.18) demonstrate the weights and rates of legal
group risks. Respondents regarded the risk of delayed dispute resolution among the
greatest risks. In fact, owners possess a less practical opinion to the legal risks than
contractors. Owners are less worried about legal issues than contractors, might
cause more conflicts and raise the setback in settling these conflicts. The owners in
other places such as Hong Kong and Kuwait give increased consideration for legal
issues (Baalif, et al, 1998) and (Farrel, 2002).
88%
84%
72%
34%
28%
25%
fa
st
0%
he
lp
to
sp
ec
ia
liz
ed
Risk Factor
(category 6)
0%
no
le
ga
ld
is
pu
te
s
du
rin
g
th
e
Allocation Ignored
0%
ar
bi
tr
at
or
s
di
ffi
cu
lty
to
co
ns
tr
uc
tio
n
ge
tp
er
m
0%
se
tt
le
0%
ph
as
e
16%
13%
9%
3%9% Alloaction
3%
3%9%Insurance
Allocation Owners
Shared 3% Allocation
its
100%
90%
80%
70%
60%
50% 41%
31%
40%
19%
30%
9%
20%
Allocation
Contractors
10%
0%
0%
Response Rate %
Figure 4.15. Legal group risks allocation, owners perspective

Owners respondents were not decided regarding the risks of challenges to obtain
permits as well as the ambiguity of job legislation Figure (4.15). Nevertheless,
owners wanted to share the following risks with contractors:
Legal disputes during construction phase (84%)
Delayed disputes resolutions (88%)
Arbitrators absence (72%)
4.4.7. CONSTRUCTION CATEGORY (CATEGORY 7)

Table (4.19) illustrates the weights and rates provided by owners respondents to
construction risks. As demonstrated in the table, respondents allocated great
relevance to risks that contractors regarded as low-effects risks. Risk of rush bidding
for instance, contractors rated it least. Put simply, contractors and owners possess
distinctive of opinions regarding construction risks. The researcher is more prone to
regard contractors perspective since contractors are in immediately contact with
these risks; they possess a better perspective than owners.
No
.
Construction Category Risks
Weight
Seriousn
ess (110)
29
Rush bidding
198
6.2
32
186
5.8
30
Gaps between the implementation and the specification
178
5.6
34
166
5.2
33
Design changes
150
4.7
31
140
4.4
Table 4.19. Construction group risks ranking

Outcomes in Figure (4.16) indicate that owners assign onto themselves the risks of:
Rush bidding (75%)
Design changes (66%)
It is the owners duty to handle bidding process and to manage design changes.
They allotted onto the contractors the risk of low quality as a result of time
limitations. Contractors will pay off all potential effort to attain the job based on
requirements and criteria despite that time limitations are present. Respondents
were not sure of the risks of:
Misunderstandings
The differences between actual quantities and contract quantities.
The final stated risks ought to be actually shared risks as they can happen due to
misconception by either party.
qu
an
tit
ie
s
de
si
gn
Allocation Ignored
di
ffe
rf
ro
m
de
si
gn
of
tim
e
qu
an
tit
ie
s
pr
es
en
ce
in
ch
an
ge
s
co
ns
tr
ai
nt
s
or
de
rs
ch
an
ge
ac
tu
al
be
tw
ee
n
lo
we
rw
or
k
th
e
im
qu
al
ity
un
do
cu
m
th
e
an
d
en
ta
tio
n
pl
em
Allocation Shared
en
te
d
Allocation Owner
ru
sh
sp
ec
ifi
ca
tio
n
Response Rate %
bi
dd
in
g
75%
80%
66%
66%
70%
53%
60%
50%
38%
34%38%
34%
34%
40%
28%
28%
25%
22%
30%
20% 13%13%
9%
9%
9%
6%
10%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
ga
ps

7)
Figure 4.16. Construction group risks allocation, owners perspective
4.4.8. POLITICAL CATEGORY (CATEGORY 8)
No
.
Weight
Seriousn
ess (110)
36
224
7.0
39
Closure
214
6.7
37
New governments acts on legislations
172
5.4
38
172
5.4
35
139
4.3
Table 4.20. Political group risks ranking

Owners were concerned about the political ingoing scenario Table (4.20),
respondents apportioned great significance to the risks of working at dangerous
areas and closure. New legislations and unstable sanctuary conditions risks were
moderate risks. On the other hand of contractors assessment, owners regarded the
risk of segmentation of Nigeria is not a significant risk. That is based on the fact that
the contractor is required to move through Nigeria if he has numerous projects in
different locations to be accomplished, but owners (kano state government for
example) have no need for a personnel in Tudun-wada.
Figures (4.8) and (4.17) indicate that both the owners and contractors choose to
share the political risks. Political risks are uncontrollable generally in most cases and
ought to be shared. Risks of political doubts ought to be collectively placed on both
parties of a contract. This is a risk in which, just like the case of risk of inflation
outlined above, each party could possibly handle it much better under distinct
conditions and might be outlined in the contract by establishing the scenarios for
sharing.
22%
9%
0%
0%
63%
16%
0%
22%
6%9%
cl
os
ur
e
0%
16%
6%
63%
(in
su
rg
en
cy
)
6%3%
19%
9%
la
tio
n
25%
ar
ea
s
16%
3%
69%
63%
56%
ig
er
ia
80%
70%
60%
50%
40%
30%
20%
Response Rate10%
%
0%
0%
st
an
ce
s
of
le
gi
s
ci
rc
um
en
ta
ct
s
un
st
ab
le
Risk Factors
(category 8)
se
cu
rit
y
ne
w
go
ve
rn
m
at
ho
t(
da
ng
er
ou
s)
wo
rk
in
g
se
gm
en
ta
tio
n
of
N
Figure 4.17. Political group risks allocation, owners perspective

4.4.9. MANAGEMENT CATEGORY (CATEGORY 9)
Table (4.21) demonstrates the significance of managing risks based on owners
respondents. Ambiguous planning and poor communication risks were the most
crucial risks in management group with weights of (203) and (195) respectively.
Other management risks are viewed with moderate significance. In fact the
management risks are viewed as contractor challenges, that clarifies the lesser
value given by owner respondents.
No
.
Management Category Risks
Weight
Seriousn
ess (110)
40
203
6.3
44
195
6.1
43
178
5.6
41
Resource management
156
4.9
42
151
4.7
Table 4.21. Management group risks ranking

Owners allotted resource management and changes in management ways risks
onto contactors Figure (4.18). Owners regarded the poor communications risk ought
to be shared with (81% responses). This contemplation is smart, because it is
contractors and owners duty to uphold a remarkable degree of communication.
They were not sure regarding ambiguous planning and information unavailability
risks. These risks also ought to be best shared. It is every partys advantage secure
a distinct perception and adequate planning for any project.
81%
81%
90%
80%
70%
59%
60%
44%
41%41%
50% 38%
40%
25%
30%
19%
19%
16%
16%
13%
20%
3%
3%
3%
10%
0%
0%0%
0%0%
0%
0%
0% 0%0%
pe
rt
ie
s
wa
ys
pl
ex
ity
Response Rate %
in
vo
lv
ed
be
tw
ee
n
m
in
un
ic
at
io
n
ch
an
ge
s
Risk Factors
(category 9)
po
or
co
m
am
bi
gu
ou
s
pl
an
ni
ng
du
e
to
pr
oj
ec
tc
om
an
ag
em
en
t
Figure 4.18. Management group risks allocation, owners perspective
4.5. OVERALL RISK SERIOUSNESS AND DISTRIBUTION, OWNERS

PERSPECTIVE
4.5.1. SERIOUSNESS
Table (4.22) demonstrates all risk factors contained in the questionnaire rated in
descending sequence based on their weight from the owners point of view. The
highest and lowest vital risk categories for Nigerian owners are demonstrated in
Table (4.23) that was created with regards to the records in Table (4.22). The
outcome demonstrates that Nigerian owners regard awarding the design to
unqualified designer to be the most crucial construction risk getting it a score of
(296), as demonstrated in Table (4.22). It was accompanied by defective design,
with a rating of (260). The scores of the five vital risks range between (246) and
(296).The least essential risk, from the owners point of view is the risk of difficulty
to get permits, with a rating of (127) accompanied by the risk of exchange rate
fluctuation with a rating of (138). The ratings span between (127) and (143). The
outcomes indicate that owners regarded only (16%) of the risk factors as very
essential risks and (84%) of them as moderate risks.
Weight
Seriousn
ess (110)
203
9.3
Defective design
195
8.1
178
8.1
Difficulty to access site
156
7.9
151
7.7
No
.
12
Risk Factor
10

and specifications
36
Working in hot (dangerous) areas
20
6.7
39
Closure
6.7
15
6.7
11
Rush design
6.6
13
6.6
6.4
27
Delayed dispute resolutions
6.4
40
Ambiguous planning due to property complexity
6.3
6.3
16
6.3
29
Rush bidding
6.2
44
6.1
28
18
Inflation
17
5.8
32
5.8
5.6
30
Gaps between the implementation and the specification
5.6
43
5.6
23
Monopolizing of matters due

37
New government acts on legislations
5.4
38
5.4
21
Unmanaged cash flow
5.3
34
5.2
5.2
5.2
26

5.1
19
4.9
41
Resource management
4.9
42
4.7
33
Design changes
4.7
14
4.7
25
4.5
31
4.4
35
4.3
22
4.3
24
Difficult to get permits
to
closure
and
Table 4.22. Risk factors ranking

Importan
ce
High
Risks
other
5.5
(most
importan
t ranked
first)
Low
(least
importan
t ranked
first)
Defective design
Table 4.23. Most and least important risk categories as perceived by owners
4.5.2. DISTRIBUTION
The standard for a risk to be appropriated to a specific category (contractor, owner,
shared, insurance, or ignored), was reviewed in section 4.2.1.2. Distribution of risk
elements contained in the questionnaire is illustrated in Table (4.24), owners have
allotted ten risks onto contractors, therefore -from owners perspective- contractors
ought to be accountable for (23%) of the risk elements, they have allotted six risks
onto themselves, i.e. owners agreed to carry merely (14%) of the risk elements, and
regarded eight risks as shared risks, notably, owners seemed willing to share (18%)
of the risk elements with contractors. In conclusion, they were in doubt regarding
twenty risks. To be precise, owners were unsuccessful to assign the largest portion
(45%) of the risk elements on any category. These results indicate the loss of
implemented contract systems concerning risk identification and allocation.
Furthermore, they can show the owners' wish to keep risk factors away of
contractual challenges.
4.6. COMPARISON OF RISK IMPORTANCE AND DISTRIBUTION (CONTRACTORS

VERSUS OWNERS)
According to chapter 3, rates (1-3) signify low risk importance, (4-7) medium risk
and (8-10) high risk. Table (4.25) exhibits a comparison and review of contractors
and owners opinions on the relevance and distribution of risk factors. The outcomes
shows that contractors regarded (57%) of the risks to be highly important risks.
Alternatively, owners considered only (11%) of the risks to be highly important risks
(sections, 4.3.1 and 4.5.1). Contractors took (20%) of the risk elements, they have
allotted (18%) of the risk elements onto owners, contractors equally assumed that
(25%) of the risk elements ought to be shared and were in doubt regarding (37%) of
the risk elements. Alternatively, owners took (14%) of the risk elements, allotted
(23%) of the risk elements onto contractors, assumed (18%) of the risk elements as
shared risk and were unable to assign (45%) of the risk elements.
Allocation
Risk description
Poor communications between the home and the field offices
Contracto
r
Unmanaged cash flow

Resource management
Defective design
Rush design
Owner

Rush bidding
Design changes
Shared

Legal disputes during the construction phase among the parties of the
contract
New government acts or legislators
Work at hot (dangerous) areas
Closure

Difficulty to access site (very far)
Lack of consistency
specifications
between
bill
of
quantities,
drawings
and

Inflation
Undecide
d
Monopolization of materials due to closure and other unexpected

Actual quantities differ from contract quantities
Change in management ways
Gaps between
misunderstand
implementation
and
the
specifications
due
to

Table 4.24. Risk allocation, Owners perspective
No
Risk Description
Contractors
Owners
importan
ce
distributi
on
importan
ce
distributi
on
Occurrence of accidents due to poor

safety measures
High
Undecide
d
High
Contract
or
High
Contract
or
Medium
Contract
or
Varied labor equipment productivity
Medium
Contract
or
Medium
Contract
or
Medium
Undecide
d
Medium
Undecide
d
Medium
Shared
High
Undecide
d
Medium
Undecide
d
Medium
Undecide
d
Defective design
High
Owner
High
Owner
High
Owner
Medium
Undecide
d
Medium
Undecide
d
High
Undecide
d
10
Lack of consistency between bill of

quantities, drawings and specifications
Medium
Undecide
d
Medium
Undecide
d
11
Rush design
Medium
Owner
Medium
Owner
12
Awarding the design to unqualified

designers
High
Owner
High
Owner
13
Unavailable labor, materials and

equipment
High
Contract
or
Medium
Contract
or
14
Medium
Undecide
d
Medium
Undecide
d
15
Medium
Undecide
d
Medium
Undecide
d
16
Medium
Undecide
d
Medium
Contract
or
17
Poor communication between the

home and field offices
High
Contract
or
Medium
Contract
or
18
Inflation
High
Undecide
d
Medium
Undecide
d
19
High
Owner
Medium
Owner
20
High
Contract
or
Medium
Contract
or
21
Unmanaged cash flow
High
Contract
or
Medium
Contract
or
22
High
Undecide
d
Medium
Undecide
d
23
Monopolization of materials due to

closure and other political factors
High
Undecide
d
Medium
Undecide
d
24
Difficulty to obtain permits
Medium
Undecide
d
Medium
Undecide
d
25
Medium
Undecide
d
Medium
Undecide
d
26
Legal disputes during the construction

phase among the parties of the
contract
High
Shared
Medium
Shared
27
Delayed dispute resolutions
High
Shared
Medium
Shared
28
No specialized arbitrators to help settle

fast
High
Undecide
d
Medium
Shared
29
Rush bidding
Medium
Owner
Medium
Owner
30
Gaps between the implementation and

specification due to misunderstanding
of drawings and specifications
High
Shared
Medium
Undecide
d
31
High
Contract
or
Medium
Undecide
d
32
Lower work quality in presence of time

constraints
High
Undecide
d
Medium
Contract
or
33
Design changes
Medium
Owner
Medium
Owner
34
Actual quantities differ from

contractual quantities
Medium
Owner
Medium
Undecide
d
35
High
Shared
Medium
Undecide
d
36
High
Shared
Medium
Shared
37
New governmental acts or legislations
Medium
Undecide
d
Medium
Shared
38
Unstable security circumstances

(insurgency)
High
Shared
Medium
Shared
39
Closure
High
Shared
Medium
Shared
40
Ambiguous planning due to project

complexity
Medium
Shared
Medium
Undecide
d
41
Resource management
High
Contract
or
Medium
Contract
or
42
Medium
Contract
or
Medium
Undecide
d
43
Medium
Shared
Medium
Undecide
d
44
Poor communication between involved

parties
High
Shared
Medium
Shared
Table 4.25. Comparison of risk factors: severity and allocation (contractors versus
owners)
No
.
Risk description
Importance
High
High
High
12
Table 4.26. Risk severity concurrence between contractors and owners (High)
Contractors and owners concurred to allot the same 3 risk elements to be high risks.
These risks elements are linked to safety measures, supplies of defective materials
and varied productivity. Table 4.26 demonstrates that contractors and owners are
tackling such risks in various projects. Therefore these elements ought to be
handled appropriately.
No
.
Risk Description
Importance
Medium
Medium
Medium
10
Lack of consistency between bill of quantities, drawings and

specifications
Medium
11
Rush design
Medium
14
Medium
15
Medium
16
Medium
24
Medium
25
Medium
29
Rush bidding
Medium
33
Design changes
Medium
34
Actual quantities differ from contact quantities
Medium
37
New government or legislations
Medium
40
Medium
42
Medium
43
Medium
Table 4.27. Risk severity concurrence between contractors and owners (Medium)
Contractors and owners designated 17 risk elements (39% of risk elements that
were observed) to be moderate risks (Tables 4.27). Since there was no Low-category
based on respondents replies, this means the low impacts of those risks on
construction projects. These risk elements were dispersed among all groups. This
emphasized that every risk element ought to be evaluated alone without another
element.
No
.
Risk Description
Distribution
Contractor
Contractor
13
Contractor
17
Contractor
20
Contractor
21
Unmanaged cash flow
Contractor
31
Contractor
Table 4.28.
(Contractor)
Risk
allocation
concurrence
between
contractors
and
owners
In regard to the distribution, contractors and owners possess similar views regarding
7 risk elements (16% of the observed risk elements) to be allotted on the contractor
(Table 4.28). This accordance signifies that contractor and owner possess a
preliminary included agreement with regards to contractors ought to handle of risk
implications throughout lifecycle of any project. This preliminary agreement ought
to be advanced onto obtaining complete knowledge regarding each risk element
distribution. Table 4 .29 demonstrates the risk elements that contractors and
owners allotted on owners. Table 4.30 shows those that are designated as shared.
No
.
Risk Description
Distribution
33
Design changes
Owner
11
Rush design
Owner
12
Owner
19
Owner
29
Rush bidding
Owner
Defective design
Owner
Table 4.29. Risk allocation concurrence between contractors and owners (Owner)
No
.
Risk Description
Distribution
44
Shared
38
Shared
39
Closure
Shared
36
Shared
26
Legal disputes during the construction phase among the parties

of the contract
Shared
27
Shared
Table 4.30. Risk allocation concurrence between contractors and owners (Shared)
No
.
Risk Description
Distribution
22
Undecided
23
Monopolizing of materials due to closure and other unexpected

Undecided
24
Difficulty to obtain permits
Undecided
25
Undecided
Undecided
Undecided
10

specifications
Undecided
14
Undecided
15
Undecided
18
Inflation
Undecided
Undecided
Table 4.31.
(Undecided)
Risk
allocation
concurrence
between
contractors
and
owners
Contractors and owners were unable to assign the same 11 risk elements (25% of
identified risk elements). The conformity not to assign the very same 11 risk
elements was remarkable (Table 4.31). The failure of allotting these risk elements
increases the likelihood of disputes regarding who ought to suffer these risk
implications. This, in fact, brings up the need to assign each risk element legally and
contractually.
4.7. RISK MANAGEMENT ACTIONS, CONTRACTORS PERSPECTIVE

4.7.1. PREVENTIVE ACTIONS
As outlined by the study outcomes (Figure 4.19), contractors normally rely on
subjective judgment to generate an appropriate plan is the most reliable risk
preventive actions. Evaluation or subjective probability utilizes the experience
acquired from related projects carried out previously by the decision maker to
determine the possibility of risk exposure and the results. These conclusions are
backed up by Farrel, (2002). Assessment and expertise acquired from prior jobs may
become the best knowledge base for the use should there be insufficient time for
organizing the project plan. Construction, nevertheless, is exposed to a dynamic
environment, therefore risk managers have to continuously work to advance their
quotes. In spite of close to perfect quotes, judgment regarding risk is a tough job.
Therefore relying merely on experience and subjective judgment may not be
sufficient, and up to date project details ought to be acquired and employed.
Therefore, contractors regarded obtaining up-to-date project details and include risk
premiums to time approximation at the project planning phase to be good risk
preventive approach. But, this outcome was anticipated because taking into
account such risks premiums would boost the priced bid and would hence reduce
the likelihood of achieving the bid as a result of the highly competitive Nigerian
construction industry market. Create more precise time estimation by means of
quantitative risk analyses methods such as Primavera Monte Carlo program was not
regarded as an efficient preventive technique for lowering the impacts of risk. This
will back-up Farrel, (2002) that the method of risk analysis is mainly dependent on
the use of checklists by managers, who attempt to consider all potential risks. A
shortage of information and experience of analysis methods and the challenges of
locating the probability distribution for risk in practice might be the key two causes
of such outcome. Making reference to related projects to for correct program was
suggested by the experts to be an efficient preventive method. The percentage
above the column is efficiency fraction for each method.
4.7.2. MITIGATIVE ACTIONS
Figure (4.20) corresponds to the six mitigative methods being suggested. The
percentage above the column is effectiveness percentage for each method. The first
mitigative method suggested by the respondents is close supervision to
subordinates for minimizing abortive work, and the last suggested mitigative
method is change the construction method.
Increase working hours and coordinate closely with subcontractors were the next
most efficient mitigative methods for reducing the effects of setback whereas
Change the construction method was seldom utilized as a mitigative method. This
may imply that the energy motivated on site is amongst the most crucial factors to
project progress, since construction projects typically include a lot of labor-intensive
procedures. Basically, as highlighted before, shortage of manpower in
subcontractors companies is among the most significant risks to project setbacks.
Hence, increasing the work hours usually increases progress depending on the
access to materials and supervisors, physical limitations of the site , and
construction progression.
90%
82.60% 80.60% 80.60%
80%
75.50%
70%
63.90%
60%
Effectiveness %
52.30%
50%
43.20%
40%
30%
20%
10%
0%
Depend on subjective judgment to produce a proper program.
Preventive Methods
Figure 4.19. Preventive methods effectiveness, contractors perspective

100% 86.50% 80.60% 80.60%
90%
70.30% 69.00%
80%
59.40%
70%
60%
50%
40%
30%
20%
10%
0%
m
In
cr
ea
se
Mitigative Methods
to
su
bo
rd
in
at
es
fo
rm
in
im
iz
in
g
ab
or
tiv
e
an
po
we
ra
nd
/o
re
qu
ip
m
en
t
wo
rk
Effectiveness %
Cl
os
e
su
pe
rv
is
io
n
Figure 4.20. Mitigative methods effectiveness, contractors perspective
4.8.
RISK MANAGEMENT ACTIONS, OWNERS PERSPECTIVE
4.8.1. PREVENTIVE ACTIONS

Besides contractors, owners likewise regarded the subjective judgment is the most
efficient method employed to create an appropriate program Figure (4.21). After
that, owners regarded getting updated project information and use comparative
estimates are very effective preventive methods. Owners also chose not to regard
make more accurate time estimation through quantitative risk analyses techniques
and plan alternative plans as efficient preventive techniques for minimizing the
impacts of risk. Insufficient knowledge and experience of analysis techniques and
the difficulty of finding the probability distribution for risk in practice might be the
chief two cause of such an outcome. Owners failed to suggest sharing risks with
other parties.
100%
90%
86.30%
80%
Effectiveness %
70%
80.60%
70.60%
66.30%
61.90%
56.30%
60%
50%
45.60%
40%
30%
20%
10%
0%
Depend on subjective judgment to produce a proper program.
Preventive Methods
Figure 4.21. Preventive methods effectiveness, owners perspective
4.8.2. MITIGATIVE ACTIONS
Figure (4.22) presents the six mitigative methods. The first mitigative method
suggested by the respondents is close supervision to subordinates for minimizing
abortive work and the last suggested mitigative method is change the construction
method. Coordinate closely with subcontractors were the second most efficient
mitigative methods for reducing the effects of delay while Change the construction
method was seldom utilized as a mitigative method. Increase working hours and
increase manpower and equipment were suggested by owners to be mitigative
methods, therefore owners assume that generating additional effort could increase
the contractors efficiency, because construction projects usually include a lot of
labor-intensive procedures. Basically, as mentioned before, shortage of manpower
in subcontractors companies is among the more critical risks to project delays.
Consequently, boosting the work hours usually enhances progress prone to the
access to materials and supervisors, physical constraints of the site, and
construction progression.
74.20%
62.60%
48.40%
35.50% 30.30%
ul
at
or
si
m
us
in
g
is
an
al
ys
Analysis techniques
Si
m
ul
at
io
n
D
ire
ct
ju
dg
m
en
tu
si
ng
ex
pe
rie
nc
e
co
m
an
d
pu
te
r
pe
rs
on
al
sk
ills
Usage %
83.20%
pa
ck
ag
es
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Figure 4.22. Mitigative methods effectiveness, owners perspective
5. CONCLUSIONS AND RECOMMENDATIONS

5.1.
INTRODUCTION
This research was conducted to analyze the construction sector risk factors, their
relevance and their distribution. Furthermore, risk management actions, risk
analysis techniques and their effectiveness and usage were determined. The above
subjects were analyzed from contractors and owners viewpoint. These objectives
were achieved, certain trends were identified and steps that could enhance risk
management methods were suggested.
5.2.
CONCLUSIONS
The construction sector has features that clearly differentiate it from other sectors
of the economy. It is fragmented, very vulnerable to economic phases, and very
competitive due to the large volume companies and considerably simple start-up. It
is simply as a result of these distinctive features regarded as a risky business.
In this research, identifying the risk factors faced by construction sector focuses on
gathering facts about construction risks, their effects and corrective measures that
could be taken to avert or minimize the risk impacts. Risk analysis methods were
evaluated as well. Nevertheless, analysis of seriousness and distribution of these
risk factors was the primary outcome of this research.
The focus of this research is to research the fundamental risk factors and detect
these factors that may be experienced in construction sector in Nigeria. Evaluation
of these risk factors was performed to determine their impact on construction
projects and to allocate each risk factor on the group that is in the ideal position to
manage such conditions. The risk factors that were observed are demonstrated in
Table (3.1). These factors were researched to determine the seriousness of each
one. The ten most sever risk factors are illustrated in Table (5.1).
No
.
Risk Description
Distribution
Contractor
Shared
closure
Shared
Defective design
Owner
Owner
Shared
Shared
Unmanaged cash flow
10
Undecided
Contractor
Owner
Table 5.1. Most ten sever risk factors and allocation according to contractors
Alternatively, owners acquired a separate viewpoint as regards the ten most sever
risks, they considered:
No
.
Risk Description
Distribution
Owner
Defective design
Owner
Contractor
Undecided
Undecided

specifications
Undecided
Working in hot (dangerous) areas
Shared
Contractor
Closure
Contractor
Undecided
10
Table 5.2. Most ten sever risk factors and allocation according to owners
The outcomes demonstrated the dissimilarity between contractors and owners
assessment of risks; the outcomes indicate that contractors regarded (57%) of the
risk factors as very significant risks and (43%) of them as moderate risks. But,
owners regarded only (11%) of the risk factors as very significant risks and (89%) of
them as moderate risks. That shows the great interest of contractors regarding
these factors. More illustrations are in section (4.3.1 and 4.5.1). Contractors were
more particular in allotting risks and were prone to share these risks with owners
who were in doubt on 45% of risks, however contractors were in doubt on 37% of
risks. Contractors allotted 20% of risks on themselves, 18% on owners and 25% to
be shared. Owners allotted on themselves 14% of risks, 23% on contractors and
allotted 18% of risks as shared. (See sections 4.3.2 and 4.5.2). It was observed that
no risk factor was allotted outside of the earlier three groups (contractor, owner and
shared) regardless of the presence of additional two subjects; insurance and
ignored. Analogy between the two opinions is elaborated in Table (4.25).
Contractors and owners yet rely on old fashioned methods to manage risk factors
and their effects; the utilization of direct judgment to manage risk factors was the
generally employed approach utilized to handle risk incidents (sections 4.7 and 4.8).
These outcomes guarantee the necessity to cultivate the employed procedures for
handling risk factors. Application of quantitative approaches, computer systems or
sensitivity analyses were not employed by respondents, additionally, they rely on
direct judgment and evaluating studies to review risk effects (section 4.9).
5.3.
RECOMMENDATIONS
5.3.1. RECOMMENDATIONS TO CONTRACTORS

Contracting firms should calculate and evaluate risks by including a risk
premium to quotation and time approximation.
Contractors should endeavor to avoid financial failure by applying a strict

cash flow management and reducing the reliance on bank loans.
Contractors should endeavor to share and shift various risks by employing

professional team or expert sub-contractors.
Contracting companies should use computerized solutions meant for risk

analysis and evaluation for example @Risk kit which combines with
commonly used applications like Microsoft Project and Microsoft Excel. Or
else, employ manual method like the one demonstrated in Annex 4.
Furthermore, contractors should focus on training their staff to adequately

employ management concepts. It is the responsibility of institutes to offer
such training.
5.3.2. RECOMMENDATIONS TO OWNERS

Tenders should be presented to correct calculated cost rather than essentially
to the least bidder. This could reduce the of high competition in bids and
lessen risks' effects by offering additional profit margin for contractors.
Exchange rate fluctuation should be considered as a risk factor by owners

and donors additionally they should provide a payment system in case there
has been any loss as a result of this risk.
The contract clauses should be revised and upgraded to fulfill the effect of
closure and segmentation of Nigeria rather than to allot the entire effects on
the contracting firms. These contracts are meant to help companies generate
more profit.
Owners should carryout constant training courses in collaboration with PCU to

enhance administrative and financial techniques to clarify the internal and
external risk factors impacting the construction sector as well as begin the
appropriate methods to handle such factors.
The design procedure is a vital stage in the construction practice. Design

products should be at the finest standard; subsequently it should get extra
attention by owners.
5.3.3. SHARED RECOMMENDATIONS

Possible risks should be allotted contractually and plainly on each party. That
may be carried out by describing the prospective risk factors and allot them
on the party that is in the best position to take care of these risks.
Both contractors and owners have to be better knowledgeable regarding

safety precautions.
A reasonable volume of communications between parties should be kept to

communicate required information focusing on documentation.
Specialized construction arbitrators are required to assist in managing

disputes and conflicts in a manner the amalgamate legal and construction
requirements.
Documentation works should be employed extensively in the industry.

Furthermore, contractors and owners are required to maintain computerized
historical information of completed projects. This could assist in rights
reservation as well as be an information base for prospective review.
There is a vital requirement for additional standardization and reliable kinds

of contract, which deal with challenges of clarity, fairness, roles and
responsibilities, distribution of risks, dispute resolution and payment this
may be achieved by using a standard type of contract e.g. FIDIC.
There should be an addendum or addenda for each standard contract

describing the risk factors related to construction sector in the Nigeria as well
as the distribution of each factor.
5.3.4. PROPOSED FUTURE STUDIES

This research was carried out during the ongoing political transition. It is
better to repeat this research in regular conditions to evaluate to what extent
the effect of political transition on construction industry.
It is important to repeat this research every 2 years by an authorized

organization to study the new risk factors and their distribution, as well as
generate the outcomes for owners and contractors.
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A Study of Risk Management in Nigerian Construction Projects From Contactors and Owners Perspective. A Case Study of Alhairi Construction Group of Companies

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A Study of Risk Management in Nigerian Construction Projects From Contactors and Owners Perspective. A Case Study of Alhairi Construction Group of Companies

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1 INTRODUCTION

Nigeria is unmistakably the most influential country in Africa; Strategically

1.2. RESEARCH CONTEXT: THE CONSTRUCTION INDUSTRY

1.3. RESEARCH PROBLEM

1.4. RESEARCH IMPORTANCE

1.5. BENEFITS AND CONTRIBUTION OF THE RESEARCH

1.7. RESEARCH OBJECTIVES

Studying the risk management steps practiced in the industry by each

Offering reasonable recommendations and suggestions aiming toward

1.8. ALHAIRI GROUP BASIC INFORMATION

1.9. METHODOLOGY AND SAMPLING TECHNIQUES

1.10. RESEARCH BOUNDARIES

Due to time limitation, this research is concerned with projects executed by

2.2. DEFINITION OF RISK

4 THE PROJECT MANAGEMENT BOOK OF KNOWLEDGE (PMBOK Guide) Fourth Edition

Risk is present once a decision is depicted with regards to selection of viable

Uncertainty is present when there is multiple available outcome of a course

Risk may be viewed as an organized method of managing hazards. While it is

2.3. CAUSES OF RISK AS THREATS

A tremendously fragmented sector.

Industry tremendously susceptible to economic cycles.

Fierce competition due to an over-capacitated market.

Relative easy access.

Trading such as:

5 National Audit Office (NAO, UK): http://www.nao.org.uk/

Accounting, due inconsistencies that emerge in the financial data collected

Increase in project size.

Unfamiliarity with new geographic region.

Moving into new style of construction.

Change in crucial staff.

2.4. SOURCES OF RISKS

6 Estate Management Manual, 2001: http://www.worldcat.org/title/estatemanagement-manual-2001/oclc/57566265

These sources of risk refer to project-specific and non-project-specific risks, because

2.5. RISK MANAGEMENT PROCESS

Identify risks & risk owners.

Evaluate the risks with regards to possibility and repercussions.

Assess the alternatives for accommodating the risks.

Prioritize the risk management attempts.

Develop risk management plans.

Authorize the use of the risk management plans.

Incomplete design scope

Changes in law and regulation

k Identification List for Construction Project

7. Determine the relative size of the various risks;

Project Decision-Making Context

Risk avoidance or reduction .

Identify risk options

Take risk attitude into account

One risk event triggers several impacts, as when overdue delivery of an

The mathematical methods applied produce a misleading perception of

Descriptive analysis VIII.

List activities, tasks, or elements that make up the project.

Recognize relevant risk factors .

Formulate risk-ranking scale for each risk factor.

Rate risk for every action for every risk activity.

Record the outcomes and recognize possible risk-reduction steps.

QUALITATIVE RISK RANKING GUIDELINES

Figure 2.5. Risk Factor Evaluation, (Breeman & Klogan, 2001)

The final application of the qualitative risk analysis is the development of

Quantitative Risk Analysis Tasks

Qualitative Risk Factor Analysi

Improvement, 2003). The quantitative approaches depend on probability

Define scope and objectives