ASSESSMENT OF RISK RESPONSE TECHNIQUES FOR CONSTRUCTION PROJECTS UNDER DESIGN BID BUILD AND DESIGN & BUILD PROCUREMENT METHODS IN ABUJA

ABSTRACT

The non-implementation of risk management techniques constitutes a lot to most of the project failures encountered nowadays. This leads to variations, incessant claims due to time loss by the contractor and loss of significant stakeholder’s value. This study assessed risk response techniques for construction projects under Design Bid Build and Design & Build (DBB and DB) procurement methods in Abuja, with a view to enhancing the level of understanding and implementation of risk management in DBB and DB procurement methods. Data were collected from 150 respondents who are professionals working under companies registered with Federation of Construction Industry (FOCI). Tools used for data analysis were Relative Importance Index (RII) and Mean Item Score (MIS). Findings from the study revealed six (6) major risk response techniques that are often practiced on construction projects with average RII of 0.71. The most effective risk response techniques in construction projects are “Risk mitigation/Reduction” and “Risk Acceptance” (MIS = 3.94 and 3.60 respectively). “Insurance” is the most effective risk sharing technique for DBB procurement method (RII = 0.81). On the average, the risk sharing techniques for DBB procurement method are effective in construction projects procurement (average RII = 0.70). The most effective risk sharing technique under the DB procurement method is “Warranty” (RII = 0.71). On the average, the risk sharing techniques under the DB Procurement method are effective in construction projects procurement  (average  RII  =  0.61). It  was  concluded  that  the  risk  sharing  and  response techniques under the Design Bid Build (DBB) and Design and Build (DB) procurement methods are effective. However, the techniques for the sharing and responding to risks in construction projects under the DBB procurement method are more effective than the risk sharing and response techniques under the DB procurement method in Abuja, Nigeria. It was therefore recommended that stakeholders should consider the use of DBB procurement method for procuring projects in order to respond to risks in construction projects more effectively.

CHAPTER ONE

1.0      INTRODUCTION

1.1      Study Background

Construction projects have been described to be highly complex and executed under circumstances of fluctuating degrees of risks (Oladokun et al., 2016). The sector of which can stand as an industry on its own with different sub-sectors, example of which is the building sector, a loosely coupled system which displays characteristics of intricacy. This means that any changes to the core areas of support for the building product and process will have a significant effect on all parties participating in the strategic preparation, architecture, sourcing, delivery, service and maintenance phases. (Kordas, 2015). The construction firm is undergoing restructuring, especially in the procurement system, as a result of ever-increasing and evolving client demands, as well as the need to minimize project costs, time, and risks (Oyelami, 2015).

According to Ogunsanmi (2013), expense, time, efficiency, project characteristics, and external environmental factors significantly impact on project success when used as parameters for choosing procurement methods. In view of this, the final decision would be based on risk retention attitudes, prior experience, and understanding of the alternatives.In summary, choosing the right procurement strategy will make or break the progress of projects. Any organisation experiences complexity in a variety of settings, each with its own set of characteristics and consequences.The company can face serious or less severe sanctions as a result of this confusion (Aven, 2011).The study of Basheka and Tumutegyereize (2012) inferred that it is a construction venture principle that project is good when the product is completed on schedule, at the appropriate price, required standards, providing clients with the satisfaction they want. If performance is critical, the study found that risk distribution and avoidance are the most relevant issues to address. Complexity is a major challenge that must be solved when our environment is alive and difficult. The concept “risk” has been the subject of extensive studies by various scholars in various zones. Hillson (2013) described risk as the assurance of knowing the magnitude of a risk, while uncertainty is a risk that cannot be determined. Risk cannot be completely avoided in a building project because of the terrain and environmental intrusion. However, risk cannot be completely ignored but it may be mitigated, dealt with, exchanged, embraced, or relocated (Bahamid & Doh, 2017).

Several researchers and works of expertise have recommended various versions of the risk assessment process in the literature (Goh et al., 2013).Assessment of risk is carried out with the purpose of detecting, evaluating, and monitoring of risks with the use of strategies that reduce risks to a manageable level while ensuring project completion(Rohaninejad & Bagherpour, 2013).There are numerous risk response articles available in hard copies, books and magazines, and on the internet which focus on the influence of the contract procurement process on risk response implementation is limited in practice (Bahamid & Doh, 2017).

Procurement is described as the combination of different methods of acquiring construction for design, responsibility for management, and amount of subcontracting in the integration of various variables such as source of financing, price base, partner selection process, responsibility for design and management, and amount of subcontracting (Murdoch & Hughes, 2008).The c1ient’s procurement option may influence risk management (Love et al., 1998; Eriksson & Westerberg, 2011; Osipova & Eriksson, 2011).Project execution mechanisms, payment methods and the utilization of supplemental cooperation or collaborating interventions are all factors to include.

In general, the client/owner bears responsibility for design, while the contractor bears responsibility for design in design-build contracts.Since design is regarded as a significant source of risk, accountability for design can influence actors’ risk management attitudes (Akintoye & Macleod, 1998).As a result of the above evidence, it is clear that a study to determine the situation is needed.

1.2       Statement of Research Problem

In the building industry as a whole, the acquisition route/methods for purchasing construction contracts play an important role in achieving the project’s goals.The overall success or failure of any project is determined in part by the contracting processes employed and in part by the effectiveness of risk response approaches used in project management.Contractors follow informal risk response approaches around the globe, abandoning the traditional way of risk response, according to Allan et al. (2007), resulting in project delays, call for variations, incessant claims, and a lack of major shareholder equity, as well as the rare collapse of contractors.These issues or complexities, among others, increase project risk and necessitate careful monitoring if progress is to be achieved. Traditional Design Bid Build, Project Management, Design and Build, and Public Private Partnership are some of the approaches used to procure building contracts. Nigerian contractors are most concerned about financial, political, and physical threats (Dada, 2010).

However, there is dearth of literature on the method(s) of procuring construction projects to check or minimize the impact of risk on the effective attainment of project, in spite of the various levels of risk. Bahamid and Doh (2017) researched on rethinking the erection risk management method  and bridging the  gap between building risk theory and practice in developing countries.The study, however, did not go so far as to use procurement practices as a way of handling or reducing risk in construction projects.The failure to apply risk response methods, as documented in publications and academic studies, from theory to reality, contributes significantly to the majority of project delays today.As a result of the contractor’s time loss and the loss of significance, there are constant arguments. This study therefore addressed the main problems of risk response techniques in management and successful delivery of construction projects under Design and Build & Design Bid Build procurement methods(DB and DBB) in Abuja.

1.3 Research Questions

To address the research problem, the research provided answers to the following questions:

i.      What are the risk factors with higher possibility of occurring during construction process?

ii.      What are the main risk response techniques practiced in managing risks in construction projects?

iii.       How  effective  are  the  risk  response  techniques  used  in  managing  risk  in construction projects?

iv.      What is the level of level of effectiveness of risk sharing techniques between DBB and DB procurement methods?

v.      What are the strategies for enhancing the level of understanding of risk response under DBB and DB procurement methods?

1.4 Aim and Objectives of the Study

1.4.1    Aim of the Study

The study aimed at evaluating risk response strategies for building projects under the Design Bid Build and Design &Build procurement system (DBB and DB) in Abuja, Nigeria, with the goal of improving risk response knowledge and application in DBB and DB procurement methods in Abuja.

1.4.2    Objectives of the Study

The objectives of the study are:

i.      Identify and  examine  risk  factors  with  higher  possibility of  occurring  during construction process.

ii.      Identify and examine main risk response techniques in practice used in  managing risks in construction projects.

iii.     To examine the level of effectiveness of risk techniques techniques.

iv.      Tocompare the level of effectiveness of risk sharing techniques betweenDBB and

DB procurement methods.

v.      To propose strategies forenhancing the level of understanding of risk response under DBB and DB procurement methods.

1.5       Need for the Study

Building firms have been battling with the challenges of risk response for such a long time.In the light of this, the need for a risk control structure that can be implemented to mitigate risks inunindustrialized economies such as the Nigerian construction firms has become a pressing concern (Oladokun et al., 2016).Past studies have worked on risk assessment techniques/processes used by builders in the context of building projects all over the world. These studies, including those by Oladokun et al. (2010), Okenwa (2011), and Fabi and Awo1esi (2013), identified significant threats faced by Nigerian construction firms.These studies have found that the threats have caused construction contractors to lose their corporate image as a result of poorly delivered projects that resulted in cost overruns, delays, and low efficiency, as previously reported, and a greater percentage of all construction projects face interruptions.Furthermore, incessant design flaws, constructability problems, inadequate plans, and inadequate planning are all issues that plague the Nigerian construction industry, even at the design level. Aliyu (2013) suggested that the attitude of approving the lowest bid be changed to promote better work. Because the lowest bids are not always the best, particularly when it comes to risk response, some other criteria should be included in the selection process.As a result of the above, it is recommended that further research be conducted in order to conclude the extent of successful risk response technique application and improve strategies for improving risk response technique awareness for construction projects using the DBB and DB procurement approaches.

1.6     Scope of the Study

The thesis focused on evaluating risk control strategies in Abuja using DBB and DBprocurement approaches.The study focused on finished building projects that used DBB and DB procurement processes from January 2014 to December 2018.The construction firms chosen for this study were those registered with the Federation of Construction Industry in Nigeria (FOCI), based in Abuja, with a contract value of at least #50,000,000.00.

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