This chapter presents significant literature on pricing risk with a scope on the construction project as this research proposal pretends to discuss. The concept of risk will be defined on the scope of construction management through the point of view of several researchers. Additionally, this literature review highlights the factors that may affect the cost of the project, determining both external and internal considerations. Complementary findings from other studies are critically analysed in this chapter. Finally, this proposal will present an overview of several methods of cost estimation will be revised and discussed in the context of construction risk management.
2.2 Definition of Risk
Oxford English Dictionary (2013) defines risk as “a situation involving exposure to danger.” The meaning of risk has been discussed by many authors, associating this occurrence with certain uncertainty and inadmissible episode (Willet, 1951). Loosemore et al. (2006) include that a company’s goals could be modified or unachievable about the risk that it is exposed. Commonly, as it is possible to interpret through these definitions, the risk is mainly associated with future events that involve undesirable concerns.
Nevertheless, according to the Project Management Institute (2013), the definition of risk can be associated with both positive and negative effects on the objectives and general development of the project, regarding the uncertainty of the context. Considering both negative and positive side of the risk, Figueiredo and Kitson (2009) name specific terms such as ‘threat’ and ‘opportunity’ to classify the potential effects of the risk in a specific situation.
In the matters of the construction sector, Mills (2001) ...
... middle of paper ...
...d also turnkey contracts, the risk is assumed by the contractor considering that the firm is responsible for undertaking all process of the project and the client is just financing the project (Ghahramanzadeh, 2013). Meanwhile, in reimbursable contracts, the firm is rewarded a percentage of the total cost, then the client assumes most of the financial risk (ibid). In case of partnership contracts, there is a balance in distributing the risk between the contractor and the client (Avazkhah and Mohebbi, 2010).
It can be clearly seen that the risk shared by contractors and clients regarding the type of contract. For this reason, it is necessary to determine systematic controls for managing and pricing the risk within a bid. The involvement of risk within the price as an essential part of the financial management of the project will be argued in the following section.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Labor productivity is a major factor on a construction project to stay within the budget and complete on time. Work sampling system is a simple technique to use in management of cost, site resources, time and labor, but it is only an indirect measurement of actual productivity. In a construction projects waste can rise at any phase of the construction development from the start, doing the design phase, and throughout the operation of the construction of the building. In recent years, labor productivity and waste in the construction industry has been one of the major focus of numerous study of construction projects worldwide.... [tags: Construction, Project management, Project manager]
2332 words (6.7 pages)
- The Elite Eagles team cooperated on Assignment 5.3a to prepare a study of the Silver Fiddle Construction (SFC) case as shown on page 233-234 of the textbook (Larson and Gray, 2014). Starting from the project scope statement (created by the president of SFC), the team identified five potential risks and one opportunity as outcomes of the Czopek project. These results derive from team discussions of the case study, summarized below. Our analysis begins with (1) a review of the president’s project scope, followed by (2) our assessment of the possible risks and responses, (3) the corresponding scenarios of risk we identified, and, finally, (4) our view of the president’s best response to each o... [tags: Risk management, Risk, Construction]
1995 words (5.7 pages)
- 1. Introduction Constant progress monitoring at construction sites is crucial to reducing cost and schedule overruns and enhancing quality control, documentation, and communication . Therefore, there has been extensive research on automating the monitoring processes to ensure that the project managers can make informed decisions and take preventive measures at the right time. The state-of-the-art technologies for automated progress monitoring mainly include radio frequency identification (RFID) and three-dimensional (3D) model-based approaches such as laser scanning and vision-based augmented reality methods.... [tags: Construction, Building, Project management]
743 words (2.1 pages)
- Article Review: “Appropriate or Default Project Procurement Systems?” by Rwelamila and Meyer Student’s Name Institution Affiliation Article Review: “Appropriate or Default Project Procurement Systems?” by Rwelamila and Meyer The article “Appropriate or default project procurement systems?” reports the findings of a research conducted in Botswana, a Southern Africa Development Community (SADC) member, to determine the shortfalls in the building procurement systems in the SADC construction industry.... [tags: Project management, Construction, Africa]
1145 words (3.3 pages)
- This paper will reflect on the different uses of Project Risk Management and ways in which it can benefit organizations to have the ability to identify potential problems prior to the problem occurring. Risk, this is not something to be taken lightly whilst dealing with matters that include high end projects meeting specific details, deadlines and expectations for the end client. Project risk management teaches one to be aggressive early on in the phases of planning and implementing the tools for a project.... [tags: Project management, Risk management, Management]
1157 words (3.3 pages)
- A project is not considered like an ordinary work on daily basis but it is described as work that is done on certain occasion (Field and Keller 1998). However, some of the fields that are related to research, software design and construction are highly related to projects. According to Buchanan and Boddy (1992, p.8), a project has a beginning and an end that is conducted by people to achieve the same goals within a budget constraint, time frame and quality of work. Lewis (2000, p. 4) defines a project as a one-time, multi-task job that has clearly defined starting and ending dates, a specific scope of work to be performed, a budget, and a specified level of performance to be achieved.... [tags: Project management, Management, Risk management]
2074 words (5.9 pages)
- BACKGROUND OF STUDY 1.0 Introduction The construction industry is one of the main engines of growth of domestic economy in Malaysia. Its cyclical growth is a barometric reflection of the economic climate, experiencing accelerated expansion when the economy is booming and sharp decline when the economic system is on the downside. Normally, the production of construction products is a risky, complex and extended operation. The full development of a construction project normally consists of several phases involving a diverse scope of specialized services (Abdul Rahim, n.d).... [tags: economy, safety, design]
1605 words (4.6 pages)
- Hyperloop Project Contract Selection All the subcontracts for this project will involve fixed price contracts while the contract between the project and the sponsor will involve a Time and Material Contracts (T&M). This is because the subcontracts are time dependable and any deviation in specified schedule may cost the project more money being the cost of money. The cost of money may be defined in the contract as the losses suffered by the project due to any breach of contract agreements. The cost of money will be calculated and agreed upon to be deducted in the case of a bridge of contract which affects schedule or budget.... [tags: Project management, Management, Ethics, Contract]
1132 words (3.2 pages)
- Several years ago, Harvard University began planning a $1 billion renovation project for its 12 residential colleges, which includes 44 historic buildings totaling more than 2 million square feet. Harvard committed itself to achieving ambitious goals with respect to energy conservation as part of the building renovation project. In particular, Harvard seeks to achieve: Substantial improvements in its energy efficiency; Major gains in energy sustainability; and At least a 30 percent reduction in greenhouse gas emissions associated with its use of energy.... [tags: Project Proposal]
1792 words (5.1 pages)
- INTRODUCTION This paper outlines the specific project management services recommended for the following three stages of any development. 1. A new project that as yet has not commenced 2. A project underway though only the design has been completed 3. A project underway that is already within the construction phase As the services within items 2. and 3. primarily form a subset of item 1, we will identify all of the services normally recommended for a complete project and then list those that are applicable to items 2.... [tags: Business Project Management]
1902 words (5.4 pages)
- The Forensic Science Workplace Social Responsibility
- Why The Government Is Allowed Their Own Personal Belief System
- The Role Of Students On Social Inclusion And Diversity At The University Of Melbourne, Parkville Campus
- Frederic Skinner : An Emotional Speech At The American Psychological Association
- Analysis Of ' X ' By Lois Gould
- A Vision Without Action Is Merely A Dream