Project Cost and Risk Management

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PROJECT COST OVERRUNS AND RISK MANAGEMENT

PROJECT COST OVERRUNS AND RISK MANAGEMENT

The challenge facing the construction industry is to manage the risk of cost overruns and deliver projects within budget. At the beginning of the last decade, Brandon (1990) stated that in construction the new orthodoxy is to accept risk and uncertainty. He explained that it has been recognised that the key decisions are made in the very early stages of the design process, and the task is to discover techniques, procedures and information support that will improve decision-making at this critical point. Ten years later, Brandon (2000) said “... we realise that we cannot actually forecast the future particularly well” ... “our job is to assess what the risks might be in the future but, at the same time, bring in management processes that allow us to minimise the risk or adapt to changing circumstances” ... “there is a world of difference between predicting the future and thinking intelligently about it, and I wonder whether sometimes we place too much emphasis on trying to get tools which will predict (sometimes you have to do that), but what we should be doing is thinking intelligently about it and creating the paradigms that will allow us to have an improved society in the future.”
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Risk Effect on Offshore Systems Development Project Cost

Risk Effect on Offshore Systems Development Project Cost

It is important to note that many of the risks involving offshoring critical functions have not been fully recognized by firms engaged in such activity ( King, 2007 ) . Risk assessment and risk management need to play a larger role in vendor selection and in continuing relationship man- agement. By identifying risks, and collecting and assessing information about them, organi- zations can incorporate accurate assumptions in their strategies and become increasingly proac- tive in mitigating and offsetting adverse out- comes. There are many ways in which an or- ganization can manage these risks, but they all add costs to what is meant to be a cost saving venture ( Fitzgerald, 2003 ) . The cost of manag- ing these risks potentially offsets the gains from offshoring in the long run ( Kleim, 2004 ) .
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A NAVAL APPROACH ON PROJECT RISK MANAGEMENT

A NAVAL APPROACH ON PROJECT RISK MANAGEMENT

The term “research design” refers to the plan or organization of scientific investigation, designing of a research study involves the development of a plan or strategy that will guide the collection and analysis of data (Polit&Hungler, 1999). In this research a closed- ended questionnaire with interview is used to collect data from respondents to identify the risk affecting time, cost and quality. One of the attempts to handle risks is by allocating project cost contingency. Traditionally, contractors determine cost contingency simply by adding; say 10 percentage contingency onto the estimated cost of a project. However, this conventional method is arbitrary and difficult to justify or defend. This paper also aims to develop a method to estimate cost contingency using a flexible and rational approach that could accommodate contractors‟ subjective judgment based on risk analysis and fuzzy interference system.
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Risk Identification and Applying Risk Management Technique in Construction Project

Risk Identification and Applying Risk Management Technique in Construction Project

Abstract – Construction is a risky industry and there is no other industry that requires proper application of business practices much as construction industry. Risks have a major impact on a construction project’s performance in terms of cost, time and quality. The aim of study to identify risk factor to most effect the construction project and generate model for their mitigation of risks. This research is based on a questionnaire survey to collect the primary data. In questionnaire, question generate on evaluated six risk factors. Questionnaire was conducted with the project manager, senior engineers having experience above 5-15 years. The results are based on analyzing 82 questionnaires that were directed respondents and concluded that the most effect risk factors are: Construction risk, Environmental risk, financial risk, Management risk, Contact risk and Political risk. Data from respondents by rating on a 5 point Likert scale were analyzed through tools like MS Excel. Survey has been carried out from some area of Ahmedabad. Finally, the conclusion was made regarding results of the research.
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Risk Management in Residential Project by Primavera Software

Risk Management in Residential Project by Primavera Software

1. This research is unique in a way that a project case study is used to develop a better understanding using the realistic data compared with the formulated model of risks. 2. A stepwise case study is elaborated in the light of the guidelines. From the results of the case study of building construction at Pune, it showed that the forecasted results are approximately accurate as per their experience. 3. In the case study, high-risk categories are time, people, market and a cost which are highlighted in red colour. Medium risk is identified project management and low risks are identified as quality, contract and environment. 4. Out of eight main categories four categories are under high risk, one is under medium risk and three are under low risk. 5. Future scope of the project is wide as the same model can be applied in similar constructions to avoid risks. The model can be easily modified and applied in any construction risk involving attributes to analyse the most critical attributes causing risks to the construction of the building.
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Two-Pillar Risk Management (TPRM): A Generic Project Risk Management Process

Two-Pillar Risk Management (TPRM): A Generic Project Risk Management Process

Now, we consider a project that is a real case taken from the construction industry. This project in- cludes the Engineering, Procurement and Construction (EPC) of the radial gates from a hydro-mechanical power plant. To clarify the procedure of the TPRM, we trace the results of the rst round of the process. In the actuation phase, risk analysts consider three risk measures, including risk probability, risk cost impact and risk eect delay. They also select two response measures, i.e. response implementation cost and re- sponse urgency. In the next step, the entire selected risk/response measures were qualitatively scaled in 5- level scaling tables. For instance, Tables 4 and 5 are the scaling tables of risk eect-delay and response urgency, respectively.
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LEAN PROJECT MANAGEMENT Assessment of project risk management processes NEUS ALCARAZ BOSCÀ

LEAN PROJECT MANAGEMENT Assessment of project risk management processes NEUS ALCARAZ BOSCÀ

On the one hand, there is common agreement between researchers that risk should be linked with both, positive and negative consequences. Specifically, Chapman and Ward (2003) state that risk management should be related not only with removing the possibility of underperformance, but also with the consideration of positive aspects of uncertainty, which can present opportunities instead of threats. Taking this into consideration, the PMI (2008) defines project risk as “an uncertain event or uncertain condition that, if occurs, has a positive or a negative effect on at least one project objective, such as cost, time, scope or quality.” According to the same source, a risk can have one or more causes and if occurs, one or more impacts. The causes are composed of requirements, suppositions, constraints or conditions that generate positive as well as negative consequences. Risk conditions can comprehend some environmental aspects of a project, for instance deficient practices in project management, lack of integrated management systems or the dependence of external actors that cannot be controlled. Other authors, as Perminova, Gustafsson and Wikström (2008) have also pointed out that risk and uncertainty are not synonyms, and that they should be defined properly. They state that the definition given by the PMI gives rise to conclude that risk is uncertainty, since it does not define the latter term adequately. They agree with researchers that describe uncertainty as changes that may bring new opportunities into the project in addition to the negative description, in which uncertainty can have undesirable impact in project performance and project’s objectives. From their point of view, risks should be comprehended as one of the implications of uncertainty, instead of considering that risk is uncertainty.
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Software Project Management Risk Management Literature Review

Software Project Management Risk Management Literature Review

programming escalated frameworks with unsurprising and enhanced cost, calendar, and quality the Branch of Protection started a sanction for a governmentally financed innovative work fixate concentrated on programming. In 1984 Carnegie Mellon College was granted a contract for and built up the Product Designing Organization (SEI) to propel the act of programming designing. The SEI has made various critical commitments in the rise of programming designing; be that as it may, the Capacity Development Demonstrate Incorporation (CMMII®) has turned out to be the SEI's head work. The CMMI® is a five- arrange show that furnishes programming associations with direction on how to pick up control of their procedures for creating and keeping up programming and how to develop toward a culture of programming building and administration brilliance. The model's five levels are dynamic and comprised of process regions (PAS).
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Risk management of building project budgets

Risk management of building project budgets

Towards the end of the last decade, a "QS think tank" was set up by the RICS. The objective was to look forward and develop a vision of where chartered surveyors working in construction would be in five to ten years time (RICS, 1998a). The findings identified forces driving change, looking ahead to the needs of the customers during this next decade, and pointing to the professional skills that must be acquired to successfully serve the market after 2000. Factors driving change included the global economy, the market, and the IT revolution. When considering the needs of the customer, clients said that the things that matter to them most include, among others, setting the budget, cost certainty, and risk management - which should be more than just inserting a contingency. The report concluded that if the quantity surveyor is to add value to clients projects, the skills of the profession must be re-addressed, and growth areas included initial cost planning, detailed cost planning, cost management, monitoring work ("participants will need a detailed understanding o f risk management"), and project management ("risk management will probably be expected as a standard service").
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Study of risk management for National Highway Project

Study of risk management for National Highway Project

Vaidya and Kumar (2006) shows AHP can be used on six types of decisions; selecting one alternative from many, evaluation of alternatives, benefit-cost analysis, resource allocations, planning and development, and priority and ranking. Fuzzy logic has been applied for risk evaluation in other projects: Lee et al. (2003) for assessment of risks in application development, Liadis (2005) for evaluation of risk of fire, Ngai and Wat (2005) for assessment of risks in E-commerce development, Serguieve and Hunter (2004) for investment risk, and Sadiq and Husian (2005) for environmental risks.
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Risk Management Analysis on Cochin Metro Rail Project

Risk Management Analysis on Cochin Metro Rail Project

Sai Krishnan.R (April 2016) have done research on risk identification and analysis in procurement of specialized items in metro rail projects. The demand for public transport system is growing rapidly by every year. This problem has severe effect on urban eco- system. For encountering this problem government has introduced new technology i.e., Metro rail project. Effective procurement of items plays an important role in successful completion of a metro rail project. More risks were encountered when the items were treated as specialized items. The impact of risks will be even more in the case of fast tracking of a project like a metro rail project because of the high quality and safety measures involved. Proper risk management analysis plays an important role to control cost overrun and time overrun of a metro rail project. For the purpose of the study, procurement of 5 items carried out in Cochin metro rail project (KMRP). In this research paper risks are identified through document review and discussion with procurement experts. In present scenario the number of metro rail projects are increasing that’s why we should concentrate on risks in procurement of specialized items in metro rail projects. The nature of risks were also analysed based on their applicability to the items considered. Based on analysis carried out, the procurement of specialized items in metro rail projects are identified and measures were taken to minimize the risks associated with procurement of items in metro rail project. Based on findings of this research paper mitigation measures has been taken to reduce the risks involved in procurement of items, if the process is completed systematically which is explained by Sai Krishnan.R will enable to reduce the cost overrun and schedule delays in metro rail projects .
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Cost of Quality (CoQ) Metrics for Telescope Operations and Project Management

Cost of Quality (CoQ) Metrics for Telescope Operations and Project Management

investment in planning and risk management versus the cost of rework. An activity-based Cost of Quality (CoQ) model was blended with the Cost of Software Quality (CoSQ) model that has been successfully deployed at Raytheon Electronic Systems (RES) for this pilot program, analyzing the efforts of the GBT Software Development Division. Using this model, questions that can now be answered include: What is an appropriate length for our development cycle? Are some observing modes more reliable than others? Are we testing too much, or not enough? How good is our software quality, not in terms of defects reported and fixed, but in terms of its impact on the user? The ultimate goal is to provide a higher quality of service to customers of the telescope.
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Risk management of bridge construction project in Indonesia

Risk management of bridge construction project in Indonesia

Risk Management is defined as a systematic planning process to identify, analyse, respond and monitor project risks. This process involves processes, tools, and techniques that will help the project manager to maximise the likelihood and produce positive events and minimise the likelihood and consequences of adverse events as indicated and appropriate in the context of risk to the overall project objectives of cost, time, scope and quality (OSPMI, 2007).

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1.
													Time and cost optimization techniques in construction project management

1. Time and cost optimization techniques in construction project management

One of the major objectives of construction industry is the quantification and minimization of risk associated with the construction projects. An improved model of the least-cost scheduling technique is proposed by [3]. In this model, range estimating and probabilistic scheduling is applied over the data, and then the resulting data is analyze in a statistical way to reach an optimum project cost and duration at higher confidence level.

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Project Risk Management Handbook: A Scalable Approach

Project Risk Management Handbook: A Scalable Approach

Table 5 lists the Caltrans standard definition of risk probability and impact ratings. The cost impact ratings may be easier to apply if expressed in terms of dollars. The ratings for the project serve as a consistent frame of reference for the PRMT in assessing the risks during the life of the project. The table is intended as a guide – the PRMT may define dollar and time ranges as appropriate for the project. The impacts are to the overall project. Schedule delay applies to risks that are on the critical path (the longest path). During the Planning and Design phase, delay impacts to RTL may be of primary interest. During construction, delays impact project completion.
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ROLE OF RISK MANAGEMENT IN CONSTRUCTION PROJECT IN AFGHANISTAN

ROLE OF RISK MANAGEMENT IN CONSTRUCTION PROJECT IN AFGHANISTAN

In this research, I tried to define the risk management practices by literature and compare with Afghanistan project Risk management; success in construction project is indicated by its performance in the achievement of project time, cost, quality, safety and environmental sustainability objectives (Zhou et al. 2007). Despite the efforts by all players in the construction industry and in infrastructure many construction projects in Afghanistan and generally in the region and the world run a high risk poor performance by being well over budget and significantly late. The construction industry generally has poor cost and schedule performance. The industry has a reputation for time and cost overruns. One of the reasons of the bad performance is that the construction industry is one of riskiest of all business types (Clough et al. 2005). While some degree of poor cost and time schedule performance is inevitable in construction projects, it is possible to improve risk management strategies to minimize their negative impact and thus improve the project performance. Risk management is usually starting with planning of implementation, the risks at construction project planning stage include poor scope definition, poor estimating and development of a budget based on incomplete data. The risk management practices required at this stage include risk profiling and identification, the architect and engineer selection process, construction site review and validation, needs identification and validation and preliminary budget and schedule development (Wallace and Blumkin, 2007).
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Project Cost Management: Does Information Technology Professionals Overlook Cost In Completing Project Within Budget?

Project Cost Management: Does Information Technology Professionals Overlook Cost In Completing Project Within Budget?

V. SUGGESTIONS / RECOMMENDATIONS As it was said in the introduction, "the report will provide an insight" on four topics regarding Project Cost Management. Answering all those matters provided insight in key important subjects about project cost management, such as discussion on why some managers overlook it, what are the basic principles, explaining different types of cost estimates and providing in details example of proper use of cost estimate tools and techniques. So each of these parts in body section identified key elements and recognized significant issues related to them, furthermore, to some extent providing suggestions on how to take proper care of them. One of the biggest reasons IT professionals have trouble with cost management is because many IT projects have very vague or undefined requirements initially. The unique nature of IT projects also includes a heavy reliance on new technologies and full business process analysis. Any use of modern technology has an associated risk, which often leads to complex problems or even abandonment of the technology itself. Both of these situations inflate project costs, and can quickly turn an on-budget project into a costly undertaking. IT Professionals to better understand the basic principles of cost management need to understand the terms used in a commercial section or the language of the accountants.
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Project Risk Management Guide

Project Risk Management Guide

When characterizing risks during workshops, some elicitors and participants may be more comfortable using simple distributions or multipoint discrete distributions to characterize uncertainties. The Risk Lead (elicitor) should determine the risk characterization that meets the need of the risk elicited and fits the group dynamics of a particular workshop membership. The distributions are representations of the “range and shape” of uncertainty. Elicitors may elicit ranges of information (min/max; low/high) and shape of information (symmetric, skewed). Consider this: simulations are useful to the extent that they reflect reality. Cost and duration (schedule) are conceptually continuous, random variables and should be modeled in a way that simulates this nature. This can be accomplished through continuous distributions or approximated with a discrete representation, as depicted above.
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HIGHWAY PROJECT COST ESTIMATING AND MANAGEMENT

HIGHWAY PROJECT COST ESTIMATING AND MANAGEMENT

STE also reviewed MDT’s current highway project cost estimating practices to develop specific recommendations for enhancement. STE worked with the various project development sections within MDT to better understand their organizational structure, methods of operations, and how each of these areas develops its cost estimates. This was accomplished with email surveys, interviews, conference calls, and meetings. Analysis of limited MDT data revealed that for the Statewide and Urban Section Projects initial and latest revised costs varied by 181%. For MDT highway projects, the analysis of limited data revealed that final construction costs were 46% higher than anticipated at the time of programming. With great assistance from project panel, STE developed a Cost Estimation Tracking System in MS Excel to be used for future data collection on project cost overruns. The use of the newly developed tracking system will ease the difficulty of gathering the historical cost data for future analysis. Eight risk factors namely insufficient knowledge of right-of-way, environmental mitigation requirements, unforeseen engineering complexities/constructability issues, changes in traffic control needs, increased stakeholders expectations, unforeseen events, changes in market conditions (inflation), and utilities were identified. A Monte Carlo simulation process was evaluated for project specific risk factors using the cost estimation tracking system database. The project specific risk factors can be used in lieu of unknown portion of contingency factors currently used at MDT.
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PROJECT RISK ANALYSIS AND MANAGEMENT

PROJECT RISK ANALYSIS AND MANAGEMENT

Once all risks have been identified, during the qualitative analysis, it may be appropriate to enter into a detailed quantitative analysis. This will enable the impacts of the risks to be quantified against the three basic project success criteria: cost, time and performance. Several techniques have been developed for analysing the effect of risks on the final cost and time-scale of projects. However, such techniques do not always readily apply themselves to the analysis of performance objectives.

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