Risk Assessment in Fast Track Projects In UAE

Risks involve the notion of uncertainty associated with a project under management. Risk assessment is the process of identifying the risks that are most likely to affect a given project (Oberlende 2009). It also involves describing the characteristics and evaluation of every risk identified. The risk assessment procedure starts as the first step in carrying out a project and lasts throughout the lifetime of the project.

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In the UAE, the massive number of projects taking place due to economic boom requires adequate methods of risk assessment. Equally, the number of risks associated with construction projects in the UAE is relatively high. In the modern world, the idea of fast track projects has dominated most businesses. Unlike conventional projects, fast track projects have a number of unique characteristics. For instance, the project timeline is tight, with a less lifetime allowed, as compared to conventional projects’ one. Therefore, fast track projects face more risks than conventional projects do. The purpose of this paper is to develop a comprehensive analysis of risk assessment for fast track projects in the UAE. The paper will look at a number of factors that pose possible problems to fast tracking of construction projects in the country. The analysis will use data obtained from the construction companies in the UAE regarding fast tracking of projects. The degree of risks is investigated in terms of probability and impact of each risk (Mulholland & Christian 2011). Secondly, the paper will attempt to compare the risk assessment for fast track projects with risk assessment for normal or conventional projects (Oberlende 2009). The analysis will attempt to improve the existing knowledge of risk assessment for fast track projects, which has become a common phenomenon among most businesses in the UAE.

Risk assessment for fast track projects in the UAE: A statistical analysis

Data obtained from companies carrying out fast tracking of construction projects in the United Arab Emirates have shown that the projects face a number of risks. However, the risks can be categorised depending on its nature and source.

Owner derived risks are the factor associated with the involvement of the project owner in the entire process. First, it was found that owners are likely to delay payment to the contractors. In this case, contractors must assess the nature and degree of this risk in case such an event takes place (Mulholland & Christian 2011). From data obtained from the field, it was found that the probability of this risk occurring had a mean of 25%, with a low of 14% and a high of 32%. This is a relatively high probability of occurrence. In addition, the impact of the risk was relatively high, with a mean average impact of about 15%. Thus, it was found that the degree of the risk was relatively high because it had a medium of 375, a high of 1504 and a low of 126. Secondly, owners are likely to impose unreasonable tight schedules, which affect the set duration of the project (Lyneis & Ford 2007). Considering that the owners are aware that the project is a fast track, it is evident that they will expect the entire project to complete within the shortest time possible (Chan, Chan, Chiang, Tang, et al 2011). Data obtained from UAE companies indicate that this risk was also relatively high, with an average probability of 22% and impact of 18%. In addition, the risk had a medium of 396, which meant that it was likely to affect any fast track project. Thirdly, owners are likely to intervene in an improper manner during the construction phase. In the UAE, this risk was found to be the highest among the owner-derived risks, with an average probability of 29%, an average impact of 25% and a medium likelihood of 725. Fourthly, owners are likely to change the design or fail to provide definitions of the scope of work, when assigning contracts (Heagney 2011). The risk of changing design by the owner was found to be relatively low, but equally significant, with an average probability of 18% and an average impact of 18%. On the other hand, the probability of lacking definition of the scope of work by the owners was found to be relatively high, with an average probability of 29% and an average impact of 27%.

The study also found that owners were likely to involve in activities that may have resulted in a breach of contract with their contractors, creation of disputes with contractors or sudden bankruptcy of the owner (Ng & Loosemore 2007). These factors were found to be important risks that were likely to pose risks to the project management in fast track projects. The study in the UAE found that the average probability of occurrence of these risks stood at 21%, 32% and 11% respectively. In addition, the average impact was found to be 32%, 32% and 12% respectively. It is worth noting that the probability of the owner going bankrupt is relatively lower than the creation of disputes or breach of contracts. In most cases, owners who seek for fast track projects have adequate sources of resources, which makes the risk of bankruptcy quite low (Chan, Chan, Chiang, Tang, et al 2011). On the other hand, owners are likely to involve in activities that amount to violation of contracts or creation of owner-contractor disputes. In this case, the owners pose a major threat to the progress and survival of the project.

Therefore, it is evident that owners pose some of the most important problems and risks to management of a fast tract project. Since owners have the right to check and obtain updated information from the contractors, it is clear that their involvement is sometimes considered a potential risk. Thus, these risks were assessed in the UAE and found to be real and affecting several companies. Organisations taking into consideration fast track projects should take ino account these risks by analysing the possible behaviour and actions of the owners. These risks should be considered when the project is about to start and addressed in the risk management process. For instance, the owners must be involved in the intensive analysis of the project, project life cycle, cost and outcomes. The owners should have the right information about these issues to avoid these risks. In addition, involvement of other procedures, such as a legal consultation, is likely to reduce the risks associated with the owners (Chan, Chan, Chiang, Tang, et al 2011).

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Risks associated with designs and designers

These risks pose a major problem to the continuation and survival of fast track projects in the UAE. In most projects, especially in construction, designs are important aspects. They determine the cost, lifetime, procedure and outcomes of the project. First, defective designs pose a major risk to fast track projects. Designers are likely to make errors when making their designs, which is likely to affect the whole or part of the project (Chapman & Ward 2007). In the UAE, it was found that the probability of defective designs affecting a fast track project is 19% on average, while the average impact stands at 21%. In addition, drawing and specification deficiencies, frequent change of designs and the latest issue of drawings and designs are major problems that pose threats to fast tract projects in the country. It was found that the probability of these four risks had an average of 23%, while their probable impact on the project was estimated to be 21%. Thus, these statistics indicate that designers, like owners, are likely to pose threats to the survival and completion of fast track projects in the UAE. Thus, this study finds it necessary for the contractors to work closely with the designers and involve them in frequent analysis of the progress of the project (Holland & Light 2009). In addition, frequent communication between the contractors and the designers should be enhanced to ensure that the designs deliver on time, do not have deficiencies and are not changed frequently without the knowledge of the contractor and other parties involved in the project.

Accidents and incidents

These are the risks associated with events that cause harm to the individuals working on the project as well as property located within or close to the project site (Holland & Light 2009). These risks are associated with such incidents as fall, sliding, injuries and other potential harms to the workers (Holland & Light 2009). In the UAE, it was found that the average probability of occurrence of these risks was 23%, while the average impact on a project was 30%. To reduce these risks, the contractors are supposed to provide adequate protection measures that seek to prevent injuries and other potential harms to their workers. In addition, workers should be trained to observe standard operating procedures and safety measures to avoid these incidents.

Risks associated with the contractor

The contractors are supposed to be competent in their work. They should be in a position to provide quality work, enhance productivity and provision of equipment and provide methods for coping with technical problems. In the UAE, it was found that poor work quality, slow labor productivity, slow productivity of the equipment used and incompetence of the contractors were major risks of fast track projects. The average probability of these risks was found to be 21%, while the possible impact on the project was 22%.

Staff associated risks

Lack of qualified staff and departure of staff from one of the contracting organisations are two major aspects that are likely to affect the expected outcomes of a fast track project. The probability of their occurrence stood at 29%, while the their possible impact was 7% and 9% respectively. Although the probability of occurrence is relatively high, the probability of yielding a significant impact on a project in the UAE seems to be relatively low. This is possible because contracting companies are often faced with problems of staff turnover, but they have implemented various measures to ensure that the existing members of the staff are replaced within the shortest time possible.

Risks associated with subcontractors

These risks include subcontractors’ poor performance, poor management, breach of contract and disputes between them and the main contractors. In the UAE, it was found that these problems pose significant threats to the projects. For instance, it was found that the average probability of occurrence for these risks was 29%, while the average possible impact was about 28%. This indicates that the risks are common and have a high potential to pose affect fast track projects in the UAE.

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Supplier-associated risks

These include delays by suppliers in delivering materials of all the types. It is likely to affect the progress of the project by delaying it for a significant period. To avoid these risks, it is necessary for the contractors and suppliers to enhance communication and association at the workplace. Supplies should be ready to fast tract their duties and responsibilities in the supply of materials required at the site.

Social, political, economic, and legal risks

At any particular site, industry and location in the UAE, these risks were found to be numerous and with a relatively high likelihood of occurring, they have affected fast tract projects. The risks were found to have significant probability of occurrence, which was averaged at 23%. For instance, political instability, corruption, bribes and conflict, due to differences in cultures and traditions, were found to be the most significant social and political problems likely to affect a project. In addition, labor strikes, criminal acts by employees, such as substance abuse, were found to be significant risks, with an average probability of 17% and an average rate of impact of 18%. Financial issues, such as inflation, sudden change of prices, fluctuations and currency exchange problems, were also found to have the highest probability of occurrence, which stood at 29%. Noteworthy, at a free market economy like the UAE, the likelihood of these risks occurring is relatively high due to the effects of the forces of demand and supply, international monetary system and external occurrences in other nations. In addition, economic issues, such as availability of manpower, materials and equipment, were found to have an average probability of occurrence of 33%, which is relatively high. It is worth noting that most workers in the UAE are foreigners, which implies that the risk of poor supply of manpower is relatively high. Some legal aspects, such as provision of laws protecting the local industries, companies or employees, are likely to affect fast track projects in the UAE. It was found that the average probability of local protectionism was 28% while an average rate of impact on the project was 34%. Thus, it is evident that the country has some laws and regulations that seek to protect the local employees, companies and industries.

Insurance risks

Fast track projects in the UAE also face some issues related to insurance. For example, there are possibilities of occurrence of difficulties in claiming insurance compensation, which was found to have an average probability of 33%. This is relatively high and proves to be a possible problem likely to affect fast track projects.

Risks associated with weather and site conditions

Unforeseen site conditions and unpredicted weather changes are other risks that are likely to affect the process and outcomes of fast tract projects in the UAE, especially when construction projects are concerned. It was found that the average probability of unexpected weather conditions affecting a project in the UAE was about 26% and an average impact rate of 33%. It is evident that the rate of impact on the project is relatively high even in cases where the probability of occurrence is low.

Comparison of risk assessment in a fast track project with risk assessment in conventional projects

A study by El-Sayegh (2007) in Dubai and other cities within the UAE is one of the most recent ones that has tend to examine the level of risk assessment and allocation of it in the construction in the industry. It also seeks to analyse the possible types of risks that affect conventional projects in construction. Based on this and other studies, it is possible to determine the difference between risk assessment in fast track and risk assessment in conventional projects in the UAE.

First, it is worth noting that the classification of risks in conventional projects is similar to the classification in fast track projects. The classification is based on the nature and cause of the risks. For instance, like fast track projects, risk assessment in conventional projects classifies risks in terms of owners, contractors, subcontractors, suppliers, socio- political, economic and natural causes (Olander 2007). In this case, the risks are similar in both the types of the projects.

Nevertheless, the degree of probity and impact of each risk to the project differ significantly between fast track and conventional projects. For instance, the average probability of risks associated with the owners in conventional projects is relatively low, standing at about 3.05% as compared with 23% in fast tract projects. This also applies to other classes of risks, which proves evidence that fast track projects face significantly higher risks than those of conventional projects in the UAE.

However, some risks, such as the bankruptcy of the owner, unpredicted technical and environmental or site conditions, are relatively higher in more conventional than fast tract projects (Ng & Loosemore 2007). For instance, the probability of a sudden bankruptcy of the owner stands at 40% in conventional projects as compared to 18% in fast track projects. These differences show that most owners in fast tract projects are aware of the needs for adequate supply of resources. They tend to be ready to meet all the demands of the project from the beginning to the end. On the other hand, conventional projects are relatively slow. Owners tend to have a low probability of considering the likelihood of going bankrupt during the lifetime of the project.

Conclusion

This analysis provides evidence that fast track projects in the UAE are faced with similar risks that affect conventional projects. However, the study also indicates that large differences in the probability of risks exist between fast track and conventional projects. Most of the modern projects in the UAE, especially in Abu Dhabi and Dubai, are fast tract projects that seek to be complete within the shortest time possible. Thus, this study is important in providing information to the parties and analysts involved in fast tract projects across the country. It reveals that additional efforts are needed to mitigate these risks, especially those risks that show significantly high probabilities of occurrence, when compared to the risks involved in conventional projects (Mulholland & Christian 2011).

References

Chan, AP, Chan, DW, Chiang, YH, Tang, et al, 2011, “Exploring critical success factors for partnering in construction projects”, Journal of Construction Engineering and Management, vol. 130, no. 2, pp. 188-198.

Chapman, C & Ward, S, 2007, Project risk management: processes, techniques and insights,John Wiley & Sons, New York.

El-Sayegh, SM, 2007, “Risk assessment and allocation in the UAE construction industry”, International journal of project management, vol. 26 no. 4, pp. 431-438.

Heagney, J, 2011, Fundamentals of project management, AMACOM Div American Mgmt Assn, New York.

Holland, CP & Light, B, 2009, “A critical success factors model for ERP implementation”, IEEE software, vol. 16 no. 2, pp. 30-36.

Lyneis, JM & Ford, DN, 2007, “System dynamics applied to project management: a survey, assessment, and directions for future research”, System Dynamics Review, vol. 23, no. 2‐3, pp. 157-189.

Mulholland, B & Christian, J, 2011, “Risk assessment in construction schedules. Journal of Construction Engineering and Management, vol. 125, no. 1, pp. 8-15.

Ng, A & Loosemore, M, 2007, “Risk allocation in the private provision of public infrastructure”, International Journal of Project Management, vol. 25, no. 1, pp. 66-76.

Oberlender, GD, 2009, Project management for engineering and construction, McGraw-Hill, New York.

Olander, S, 2007, “Stakeholder impact analysis in construction project management”, Construction Management and Economics, vol. 25, no. 3, pp. 277-287.

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