Project in Risk Management PDF

A Project Report
On
Project risk management in Construction

By
NIRMAL DUTTA
(1402005119)
A project report submitted in partial fulfillment of the requirements

For the degree of Master of Business Administration of
Sikkim Manipal University, INDIA
Sikkim Manipal University, India

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(Student Declaration)
I hereby declare that the project report entitled
Submitted in partial fulfillment of the requirements for the degree of
Masters of Business Administration

To Sikkim Manipal University, India,
is my original work and not submitted for the award of any other
degree, diploma,
fellowship, or any other similar title or prizes.
Place: Duliajan
Date: 22.01.2016
Signature: _______________
(NIRMAL DUTTA)
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(Examiners Certification)
The project report

On
By
(NIRMAL DUTTA)
Internal Examiner
(Name: .....................)
External Examiner
(Name: ..................)
Date:
Reg. No: 1402005119
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(University Study Centre Certificate)
This is to certify that the project report entitled

Submitted in partial fulfillment of the requirements for the

degree of
Masters of Business Administration
of Sikkim Manipal University

by
(NIRMAL DUTTA)
has worked under my supervision and guidance and that no part of this report has
been submitted for the award of any other degree, Diploma, Fellowship or other
similar titles or prizes and that the work has not been published in any journal or
Magazine
Certified by:
Guide :Mr Jayanta Narayan Das(BE, MBA). Guide Reg No- MBAAS0546
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ACKNOLEDGEMENT
On the very outset of this report, I would like to extend my sincere & heartfelt obligation
towards all the personages who have helped me in this endeavor. Without their active
guidance, help, cooperation & encouragement, I would not have made headway in the
project. I am ineffably indebted to Mr Debabrata Goswami , Engineer from OIL INDIA
LIMITED for conscientious guidance and encouragement to accomplish this assignment. I
am extremely thankful and pay my gratitude to my Project Guide Mr Jayanta Narayan Das,
Chief Engineer , Pipeline-Oil India Limited
for valuable guidance and support on
completion of this project .I extend my gratitude to Sikkim Manipal University for giving
me
opportunity to carry out this project. I also acknowledge with a deep sense of
reverence, my gratitude towards my parents and member of my family, who has always
supported me morally as well as economically.
At last but not least gratitude goes to all of my friends who directly or indirectly helped me
to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You
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DECLARATION
I, Nirmal Dutta hereby declare that the report of the project entitled
Project risk management in Construction Projects has not presented as a
part of any other academic work to get my degree or certificate except Sikkim
Manipal University for the fulfillment of the requirements for the degree of
MBA.
Name: NIRMAL DUTTA

Reg No- 1402005119
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BONAFIDE CERTIFICATE
It is certified that this project report titled is the bonafide work of
Project
risk management in Construction Projects by Nirmal Dutta who carried

out the project work under my supervision.
Mr Jayanta Narayan Das

Chief Engineer-Pipeline OIL
Guide Reg No- MBAAS0546
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EXECUTIVE SUMMARY
This project is all about the managing risk in any construction industry projects and the
title of the project is Project risk management in Construction Projects. As construction
projects are complex and dynamic in nature thereby contributing to a significant amount of
risks. The procedure of taking a project from inception to completion, and then into use is
a complex one that entails time-consuming design and production processes. Most of the
time, these risks are not dealt with appropriately and the industry has suffered poor
performance as a result. Insufficient skilled staff was identified as the most important
source of risk in construction; lack of risk management knowledge was ranked the most
severe factor that militates against the practice of risk management while contribution to
project success was ranked as the most important benefit of Risk Management. It is
concluded that most of the respondents do not identify risk management to be associated
with the achievement of all project objectives in terms of time, cost, quality and
environmental sustainability. As the most common and typical project types, construction
projects have several characteristics such as specific objects time limit financial constraints
and economic requirements, special organizational and legal conditions, complexity and
systematic characteristics, For that each investment project itself is a complex system.
Keywords: risk, risk management, construction project, construction period
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TABLES OF CONTENTS
CHAPTER-1 ......................................................................................................................................... 13
1. INTRODUCTION ............................................................................................................................. 14
1.1 INDUSTRY PROFILE .................................................................................................................... 14
1.2 COMPANY PROFILE .................................................................................................................... 15
1.3 BRIEF DETAILS....16
1.4 OBJECTIVES OF THE PROJECT ................................................................................................. 26
CHAPTER-2 ......................................................................................................................................... 28
2. LITERATURE REVIEW .................................................................................................................. 29
2.1 RELATED RESEARCH OUTCOMES .......................................................................................... 30
CHAPTER-3 ......................................................................................................................................... 32
3. RESEARCH METHODOLOGY ...................................................................................................... 33
3.1 RESEARCH PROBLEM ................................................................................................................ 33
3.2 RESEARCH METHODOLOGY .................................................................................................... 34
CHAPTER-4 ......................................................................................................................................... 35
4. NEED FOR THE PROJECT ............................................................................................................. 36
4.2 RISK MANAGEMENT AND ITS IMPORTANCE ...................................................................... 36
CHAPTER-5 ......................................................................................................................................... 39
5. TOOLS AND TECHNIQUES .......................................................................................................... 40
5.1 TOOLS / TECHNIQUES TO BE USED FOR DATA ANALYSIS .............................................. 40
CHAPTER-6 ......................................................................................................................................... 41
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6. RISK MANAGEMENT PROCESS .................................................................................................. 42

6.1 THE PROCESS OF CONSTRUCTION PROJECTS ..................................................................... 45
CHAPTER-7 ......................................................................................................................................... 46
7. RISK INVOLVE IN CONSTRUCTION PROJECT ........................................................................ 47
7.1 TYPES OF RISK INVOLVED ....................................................................................................... 47
CHAPTER-8 ......................................................................................................................................... 51
8. FINDINGS AND RESULTS ANALYSIS ........................................................................................ 52
CHAPTER-9 ....................................................................................................................................... 866
9. CONCLUSIONS ............................................................................................................................. 877
CHAPTER-10 ..................................................................................................................................... 888
10. FUTURE RESEARCH.................................................................................................................. 889
CHAPTER-11 ..................................................................................................................................... 900
11. RECOMMENDATIONS .............................................................................................................. 911
REFERRENCES ................................................................................................................................. 922
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LIST OF TABLES
Table -1 Risk categories list.566

Table-2 The final section wise details of the PMC's and Contractors involved ...62
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LIST OF FIGURES
Figure 1-research questions (The first three questions as the basis to support last three ones.) ........... 27
Figure 2-Relationships among the five risk facets ................................................................................ 33
Figure 3-The structure of risk management .......................................................................................... 42
Figure 4-A general description of the construction process .................................................................. 45
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CHAPTER-1
INTRODUCTION
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1. INTRODUCTION
The construction industry, perhaps more than most, is overwhelmed with risks iterated that
it is highly risk prone, with complex and dynamic project environments creating an
atmosphere of high uncertainty and risk. The industry is vulnerable to various technical,
sociopolitical and business risks. Further stated that too often this risk is not dealt with
satisfactorily and the industry has suffered poor performance as a result. The Risk is a state
of uncertainty where some possible outcomes have an undesired effect or significant loss.
Risk concerns the deviation of one or more results of one or more future events from their
expected value. Technically, the value of those results may be positive or negative.
However, general usage tends to focus only on potential harm that may arise from a future
event, which may accrue either from incurring a cost or by failing to attain some benefit.
The complicated relations include direct, indirect, obvious, implicit or unpredictable,
What's more, the various risk factors will cause different severity of the consequences. If
you do not consider these risk factors, or ignore the major factors, they all will cause
damage because of decision-making errors. Quality targets, time targets, cost targets are
the three objectives of project management. Especially in the construction project, the time
objective is closely and inseparably related to the cost objective. Therefore, risk
management is a key part of construction period.
The overall aim of this study report is to let everyone know what risk management is,
realize the procedure of risk management in construction project and have a deeper study
on the application of risk management in construction period. The results of this study
present the effect of common and major risks on construction period. Meanwhile, put
forward the corresponding countermeasures.
1.1 INDUSTRY PROFILE
Today, India is the second fastest growing economy in the world. The Indian construction
industry is an integral part of the economy and a conduit for a substantial part of its
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development investment, is poised for growth on account of industrialization, urbanization,

economic development and people's rising expectations for improved quality of living.
In India, construction is the second largest economic activity after agriculture.

Construction accounts for nearly 65 per cent of the total investment in infrastructure and is
expected to be the biggest beneficiary of the surge in infrastructure investment over the
next five years.
Investment in construction accounts for nearly 11 per cent of Indias Gross Domestic
Product (GDP). As opportunities in the sector continue to come to the fore, foreign direct
investment has been moving upwards.
Industry Segments
REAL ESTATE
Residential (Housing & Development)
Industrial (Industrial Parks, Factories, Plants, etc.)
Corporate (Office, Research Centers)
Commercial (Retail: Malls, Shops, Showrooms; Hotels; etc.)
INFRASTRUCTURE
Roads
Railways
Urban infrastructure
Ports
Airports
Power
1.2 COMPANY PROFILE

Larsen & Toubro (L&T) is Indias largest technology, engineering, manufacturing and
construction organization with a record of over 70 years. L&T Construction is the largest
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construction organization in the country. L&T Constructions cutting edge capabilities

cover every discipline of construction civil, mechanical, and electrical and
instrumentation engineering and services extend to large industrial and infrastructure
projects from concept to commissioning. L&T Construction has played a prominent role in
Indias industrial and infrastructure development by executing several projects across
length and breadth of the country and abroad.
L&T Construction are structured into four Independent Companies.
Buildings & Factories (B&F)
Infrastructure (Infra)
Metallurgical & Material Handling (MMH)
Power Transmission & Distribution (PT&D)
1.3 BRIEF DETAILS ABOUT OIL INDIA LTD AND RECENTLY PLANNED
CONSTRUCTION PROJECT OF PUMP STATION UPGRADATION::
Oil India Limited (OIL) is an Indian public sector oil and gas company based in Assam,
India under the administrative control of the Ministry of Petroleum & Natural
Gas, Government of India. OIL is engaged in the business of exploration, development and
production of crude oil and natural gas, transportation of crude oil and production of liquid
petroleum gas.
M/s Oil India Ltd. (OIL) operates 16 (406 mm) / 14 (356 mm) diameter, 1157 km long
Naharkatiya-Barauni Crude Oil Pipeline (NBPL) since 1962. The pipeline has a capacity of 7
MMTPA with 11 Pumping stations and 18 Repeater Stations configured into two sections
as below:
a) Naharkatiya to Bongaigaon Section: 16 X 401 km, 14 X 156 km transporting Crude

from OIL/ONGC fields to feed Digboi, Numaligarh, Guwahati and Bongaigaon Refineries.
b) Barauni to Bongaigaon Section: 14 X 600 km transporting RAVVA / Imported Crude
from Barauni to feed Bongaigaon Refinery.
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OIL is currently carrying out the up gradation of the various Pumping Stations and
Repeater stations replacing the old pumps, prime movers, power generators etc for
extending operating life of the system, optimization of capacity utilization, improvement
in overall system efficiency, providing flexibility for sourcing opportunity crude with
higher sulphur content, compliance to latest OISD and DGMS requirements under NBPSPhase I wherein EIL is providing EPCM services.
Additionally, due to development of new OIL fields at Balimara (Upper Assam) and
expected increase in demand of crude oil by refineries in future, the upgradation of
pumping stations/terminals of the existing NBPL(Naharkatia Barauni Pipeline) system
with optimized pumping philosophy involving installation of VFD Controlled Motor
Driven Mainline Centrifugal Pumps, Crude Engine Generators for station power, Control
Room cum Station Room, Scraper Traps, Filters, Metering assemblies, new Fire Water
Network consisting of Pumps and Tanks among others is being carried out by OIL with
EPCM services being provided by EIL.
NEED AND BASIS OF FEASIBILITY STUDY
M/s Oil India Ltd., has presently undertaken up-gradation of pump stations and receipt
terminals for Naharkatiya-Barauni Pipeline under NBPS-Phase I where presently eight
(08) numbers of pumping stations are taken up for up-gradation
out of existing 11 pump stations. PS-7 (Madarihat) in West Bengal and PS-9 (Dumar) in
Bihar are kept by-passed in view of optimized pumping philosophy for feeding
Bongaigaon Refinery based on the past trend of pumping. Pipeline throughput with bypass
of PS-7 & PS-9 is 2.0 MMTPA. With the crude demand rising in the downstream
Bongaigaon Refinery i.e. 2.7MMTPA as informed by IOCL/OIL, and supply of Assam
crude depleting, OIL intends to augment the capacity of the pipeline up to maximum
possible throughput by taking PS-7 & PS-9 in line to satisfy the demand of the Bongaigaon
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Refinery, and possibly, also Guwahati Refinery in future. OIL intends to study also the
transportation of crude oil from Bongaigaon to Guwahati Refinery, i.e. Reverse Pumping
for the up-gradation of pumping facilities at PS-6-Bongaiagaon.
PROJECT SCHEDULE FOR IMPLEMENTATION

The overall project schedule has been considered as 36 months for Mechanical Completion
and 03 months for Commissioning.
ENVIRONMENT IMPACT ASSESSMENT (EIA)
Environment Impact Assessment (EIA) study shall be carried out as per MOEF
requirements for necessary regulatory approvals by Owner during detailed engineering.
PIPELINE COST AND FINANCIAL ANALYSIS
DESCRIPTION
COST
(Rs. Crore)
Capital Cost (Excluding Financing Charges,

Line Pack Cost, Working Capital Margin,
XXX
Escalation During Implementation Phase)

Variable Operating Cost (Annual)
XXX
Fixed Operating Cost (Annual)
XXX
Total Operating Cost (Annual)
XXX
KEY ASSUMPTIONS
S. No.
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ACTIVITY
ASSUMPTIONS
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1.
Survey Reports
All survey reports (i.e. cadastral including centerline,
PDI, crossings details, topographical and geotechnical
including for station land & crossings, hydrological
surveys for rivers, seismic data etc.)are provided by
OIL..
2.
Statutory Clearances
All statutory clearances are carried out by OIL .
3.
ROU Acquisition
Existing Right Of User will be used.
4. ROU Acquisition, Crop
Not Applicable
Compensation &
Land Rates
5.
Validity of Cost
Estimate
6.
Cost estimate valid as of August 2016 price basis

(assumed zero date of project).
Construction Power Construction power and construction water will be

arranged by contractor or OIL on chargeable basis.
and Water
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PROJECT BENEFITS
The augmentation of pumping station / terminal facilities of NBPS (Naharkatia- Barauni
Pump Station Upgradation Project) shall have the following distinct benefits:
The future increased demand of Bongaigaon Refinery of IOCL i.e. 2.7 MMTPA can be
met from Imported/RAVVA supplied at PS-10 (Barauni).
a) In the event of depleting supply of crude from oilfields of Upper Assam, the demand of
Guwahati Refinery of IOCL i.e. upto1 MMTPA can be met using reverse pumping
arrangement at PS 06 (Bongaigaon).
b) Compliance of OISD Recommendations , as old systems have already crossed 50 years of
service
c) Capacity Enhancement of Pumping System.
d) Energy Savings by implementing new and modern energy efficient system.
e) Improving Operation & Maintenance Philosophy.
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The location of various stations / terminal facilities is detailed as under:

A. Oil Injection at Naharkatia
B. Receipt Terminal at Digboi
C. Pumping Station - PS-01 at Naharkatia
D. Tengakhat Pumping Station (TPS)
E. Oil Injection at Moran
F. Pumping Station - PS-02 at Moran
G. Pumping Station - PS-05 at Noonmati
H. Pumping Station - PS-06 at Bongaigaon
I. Receipt Terminal at Bongaigaon
J. Pumping Station - PS-08 at Sonapur
K. Pumping Station - PS-10 at Barauni
L. Receipt Terminal at Barauni
Description of Terminal/Pumping Station Facilities:

The following new facilities are envisaged in this project for upgrading the
plant and equipment of Oil India crude oil trunk pipeline system. The descriptions of
proposed facilities at each terminal of the pipeline system are as under.
Pumping Station PS-5 (Guwahati)
The new proposed facilities shall consist of augmentation of filtering and
metering facilities, auto sampler, density meter, control valve assembly, scraper launcher
(10) for Guwahati RT, hook-ups with existing piping facilities including main pipeline
and associated piping. Additionally, the existing 10X14 scraper launcher shall be
replaced by a new 20X14 bi-directional scraper trap along with associated piping
facilities to enable reverse pumping between PS-6 & PS-5.
Pumping Station PS-6 (Bongaigaon)
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metering facilities, flow meter, auto sampler, density meter, mainline pump (for reverse
pumping arrangement), control valves assemblies, SRV skid, hook-ups with existing
piping facilities including main pipeline and associated piping. Additionally, the existing
20X14 receiver shall be replaced by a new 20X14 bi-directional scraper trap along
with associated piping facilities to enable reverse pumping arrangement between PS-6 &
PS-5.
Pumping Station PS-7 (Madarihat)
The new proposed facilities shall consist of filtering and metering facilities,
mainline pumps, sump tank, sump pump, flow meter; slop transfer pump, auto sampler,
density meter, control valves assemblies scraper launcher / receiver, hook-ups with
existing piping facilities including main pipeline and associated piping.
Pumping Station PS-8 (Sonapur)
metering facilities, mainline pumps, control valves assemblies, hook-ups with existing
piping facilities including main pipeline and associated piping.
Pumping Station PS-9 (Dumar)
metering facilities, mainline pumps, sump pump & sump tank, slop transfer pump, auto
sampler, density meter, flow meter, density meter, control valves assemblies, scraper
launcher / receiver, hook-ups with existing piping facilities including main pipeline and
associated piping.
Pumping Station PS-10 (Barauni)
The new proposed facilities shall consist of filtering and metering facilities,
mainline pumps, booster pump, control valves assemblies scraper launcher, hook-ups with
existing piping facilities including main pipeline and associated piping.
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Receipt Terminals
Guwahati Refinery RT
Pipeline facilities at receipt terminal shall include scraper receiver, metering
assembly, density meters, control valves, flow meter and auto sampler, hook-ups with
existing piping facilities including surliness and associated piping for the Guwahati
Refinery RT.
Bongaigaon Refinery RT
Pipeline facilities at receipt terminal shall include augmentation of metering
assembly along with hook-ups with existing piping facilities for the Bongaigaon Refinery
RT.
Facilities to be installed at all Terminals are indicated in respective Piping &
Instrumentation diagrams (P&IDs) enclosed. Summary of major proposed facilities is
tabulated below:
LOCATION
PS-5
PS-6
Mainline Pumps
PS-7
PS-8
PS-9 PS-10 RT-GH RT-BGR
Booster Pumps
Basket Filters
METER
Control Valve
Launcher
Receiver
Bi-Directional
Density meter
Scraper Trap
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Auto sampler
RO
SRV
Sump
Tank & Pump
Slop
Transfer Pump
Pipeline Facility
Apart from these terminal works, new pipeline (4 km approx) shall be laid from PS05(Noonmati) to Guwahati Refinery RT. The salient features along the pipeline route are
as given below:
Crossing
Sl No. Type of Crossings
Methodology
(Boring/Open Cut)
Total Crossing Length

No. of
(Approx.)
Crossings
(m)
Road Crossings
Open Cut
72
2 Railway Crossing
Boring
60
Open Cut
60*
Minor Water body/

Marsh Area
BASIS & STIPULATIONS FOR OVERALL PROJECT SCHEDULE
A.
1.
BASIS
Zero date shall be latest of the following:

Date of award of EPCM Contract.
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Date of receipt of data / documents / drawings information necessary to commence

EPCM Contract.
Mechanical completion date of the Project is 36 Months from Zero date.
2.
3.
Commissioning date of the Project is 3 Months from Mechanical Completion
date.
4.
B.
Further, 3 Months for closure of contract from Commissioning.
STIPULATIONS
1. Scope of Work for Schedule has been considered as per MOM

2. Necessary provisions shall be made in Contract to facilitate unhindered
work during
heavy monsoon encountered in the region.

3.
All statutory approvals for the project have been obtained by OIL as per schedule
requirement.
4. Necessary survey data, Geotechnical and Topography Survey have been made available
by OIL.
5.
Land free from all encumbrances and proper approaches are made available by OIL
from Zero Date of award of Civil Tender.
ESTIMATION METHODOLOGY
Cost estimate is based on cost information available from EILs current in-house cost data
and engineering inputs for cost estimation purpose. In-house cost data has been analyzed
and adopted for estimation.
Cost data has been updated to prevailing price level using relevant economic indices.
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These Cost estimates are subject to identified scope of work and engineering inputs /
technical information, the qualifications, assumptions and exclusions stated herein.
The accuracy of these estimates is targeted at 10% based on the methodology used and
the quality of the information available for cost estimation.
1.4 OBJECTIVES OF THE RISK MANAGEMENT PROJECT

The overall aim of this study report is to let everyone know what risk management
is, realize the procedure of risk management in construction project and have a deeper
study on the application of risk management during construction period, therefore, a better
project output and better value for both clients and constructors.
There are two objectives of this study:
1. To assess the most major and common risks which cause bad effect on construction
period.
2. To figure out reasonable solutions.
On the basis of the aim and the objectives, research questions have been formulated as
under:
1. What is the process of risk management?
2. How to apply risk management in construction projects?
3. What risks are there in construction projects?
4. How risks can be indentified during construction period?
5. How risks can be assessed during construction period?
6. How risks can be controlled during construction period?
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Figure 1-research questions (The first three questions as the basis to support last three ones.)
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CHAPTER-2
LITERATURE REVIEW
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2. LITERATURE REVIEW
In todays post-crisis economy effective risk management is a critical component of any
winning management strategy. Risk management is one of the nine knowledge areas
propagated by the Project Management Institute. There are mainly nine knowledge areas
typical of almost all projects. The nine knowledge areas are:
1. Project integration management.
2. Project scope management.
3. Project time management.
4. Project cost management.
5. Project quality management.
6. Project human resource management.
7. Project communications management.
8. Project risk management.
9. Project procurement management.
Although these knowledge areas are all equally important from a project managers point
of view, in practice a project manager might determine the key areas which will have the
greatest impact on the outcome of the project
For example, project risk management includes:
Risk management planning;
Risk identification;
Qualitative risk analysis;
Quantitative risk analysis;
Risk response planning;
Risk monitoring and control.
Risk management is probably the most difficult aspect of project management. A project
manager must be able to recognize and identify the root causes of risks and to trace these
causes through the project to their consequences. Furthermore, risk management in the
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construction project management context is a comprehensive and systematic way of

identifying, analyzing and responding to risks to achieve the project objectives. The
construction project is heterogeneous and enormously complex. There are several major
classifications of construction that differ markedly from one another: housing,
nonresidential building, heavy, highway, utility, and industrial. Construction projects
include new construction, renovation, and demolition for both residential and
nonresidential projects, as well as public works projects, such as streets, roads, highways,
utility plants, bridges, tunnels, and overpasses. The success parameters for any project are
in time completion, within specific budget and requisite performance (technical
requirement). Large construction projects are exposed to uncertain environment because of
such factors as planning, design and construction complexity, presence of various interest
groups (owner, consultants, contractors, suppliers, etc.), resources (manpower, materials,
equipment, and funds) availability, environmental factors, the economic and political
environment and statutory regulations. Construction projects can be unpredictable.
Managing risks in construction projects has been recognized as a very important process in
order to achieve project objectives in terms of time, cost, quality, safety and environmental
sustainability. Project risk management is an iterative process: the process is beneficial
when is implemented from the planning stage to completion.
2.1 RELATED RESEARCH OUTCOMES
Worldwide, construction workers are three times more likely to be killed and twice as
likely to be injured as workers in other occupations. The costs of these accidents are
immense to the individual, to the employer and to society.
Construction activities in Lithuania provided employment to an estimated 93.7 thousand
persons in 2011, while an annual turnover in excess of EUR 1.91 billion.
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A construction project is complex, has many moving parts and is especially dependent
upon third parties to meet their contractual obligations. No two projects are alike. The most
significant day-to-day risks facing the industry relate to changes in schedule, scope creep
and technology constraints, which often result in budget and cost overruns. Employing an
ongoing and effective risk assessment process is essential to proactively addressing risks.
Most companies have implemented some form of risk assessment but have failed to go one
step further in developing and implementing an effective mitigation strategy. As a result,
associates are always one step behind and are reactionary to unexpected surprises. Good
risk management involves more than using simple checklists. A risk management advisor
can assist your company by conducting a thorough risk assessment or review your current
methodology against best practices.
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CHAPTER-3
RESEARCH METHODOLOGY
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3. RESEARCH METHODOLOGY
The relevant information necessary for this study was collected through a detailed
literature review in relevant work such as books, journals etc. The information gathered
formed the basis for understanding the concept of risk management and data collection.
3.1 RESEARCH PROBLEM
The original Risk Management: Concepts and Guidance (Defense Systems
Management College 1986) classified risk into five facets:
1. Technical (performance related)
2. Programmatic (performance related)
3. Supportability (environment related)
4. Cost
5. Schedule
Figure 2-Relationships among the five risk facets
Considering that, cost and schedule risks frequently serve as indicators of project status.
They are treated somewhat differently from the others. However, cost and schedule can
become a major source of project risk. The most common and major risks during
construction period are as given below:
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Customer risk
Political risk
Execution risk
Commercial risk
Financial risk
Design risk
Engineering risk
Resource risk
Country risk.etc.
3.2 RESEARCH METHODOLOGY
Literature study and analytical research play an important role in this report. Analytical
research involves analyzing existing facts and information. Todays world is based on
information technology and huge amounts of information are available on all kinds of
subjects.
Data will be from company, manuals, newspapers, magazines and internet.
Sources of data will be primary as well as secondary.
Tools of data collection will be research data collected by industry experts & prior years
historical data and current policies followed by the company managers.
Risk registers for various projects will be prepared and reviewed at regular interval.
Monte Carlo charts will be used for analysis wherever possible.
Comparison will be made between the different Companies risk management policy.
Reviewing the risks at each phase of a live construction project.
Observing the effects of risks and risk mitigation procedures adopted in each and every
phase of live construction project.
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CHAPTER-4
NEED OF THE PROJECT
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4.1 NEED FOR THE PROJECT

Risk management affects all aspects of project
Risks can be positive as well as negative
Risk management needs to be conducted from the start of the project, constantly discussed
& monitored, & involve all members of project team.
How you choose to handle risks depends on your most influential project stakeholders
'appetite for risk'.
Each identified risk needs to be assessed, a strategy for dealing with it agreed upon by all
appropriate parties, and tracked until closure.
Project risk management is not the project manager tracking risks in a Risks Register and
sharing it occasionally when or if people ask to see it it is much more than that.
4.2 RISK MANAGEMENT AND ITS IMPORTANCE
Risk management is one of the most critical project management practices to ensure a
project is successfully completed.
Project managers, as unmanaged or unmitigated
risks are one of the primary causes of project failure. Risk management is thus in direct
relation to the successful project completion. Project management literature describes a
detailed and widely accepted risk management process, which is constructed basically
from four iterative phases: risk identification, risk estimation, risk response planning and
execution, often managing the risk management process are included. The uncertainty of a
risk event as well as the probability of occurrence or potential impact should decrease by
selecting the appropriate risk mitigation strategy. Walewski and Gibson categorized risk
mitigation strategies commonly used as follows:
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Avoidance when a risk is not accepted and other lower risk choices are available from
several alternatives
Retention/Acceptance when a conscious decision is made to accept the consequences
should the event occur.
Control/Reduction when a process of continually monitoring and correcting the condition
on the project is used. This process involves the development of a risk reduction plan and
then tracking the plan. This mitigation strategy is the most common risk management and
handling technique.
Transfer/Deflect when the risk is shared with others. Forms of sharing the risk with
others include contractual shifting, performance incentives, insurance, warranties, bonds,
etc.
4.3 PRINCIPLE OF RISK MANAGEMENT

The International Organization for Standardization identifies the following principles of risk
management:
Risk management should create value.
Risk management should be an integral part of organizational processes.
Risk management should be part of decision-making.
Risk management should explicitly address uncertainty.
Risk management should be systematic and structured.
Risk management should be based on the best available information.
Risk management should be tailor-made.
Risk management should take into account human factors.
Risk management should be transparent and inclusive.
Risk management should be dynamic, iterative and responsive to change.
Risk management should be capable of continual improvement and enhancement.
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The value of systematic risk management of project activity is not fully recognized by the
construction industry. Since no common view of risk exists, owners, investors, designers,
and constructors have differing objectives and adverse relationships between the parties
are common. Attempts at coordinating risk analysis management between all of the project
participants have not been formalized and this is especially true between contractors and
owners.
Risk management involves four processes, namely
1. Risk Identification: Determining which risks are likely to affect the project and documenting the Characteristic
of each.
2. Risk Quantification: Evaluating risks and risk interactions to assess the range of possible project outcomes.
3. Risk Response Development: Defining enhancement steps for opportunities and responses to threats.
4. Risk Response Control: Responding to changes in risk over the course of the project.
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CHAPTER-5
TOOLS / TECHNIQUES
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5. TOOLS AND TECHNIQUES
5.1 TOOLS / TECHNIQUES TO BE USED FOR DATA ANALYSIS

Construction projects can be managed using various risk management tools and
techniques. Techniques for context establishment, risk identification, risk assessment and
treatment were provided. Application of risk Risks and uncertainties, involved in
construction projects, cause cost overrun, schedule delay and lack of quality during the
progression of the projects and at their end.
As stated by Baloi and Price, poor cost performance of construction projects seems to be
the norm rather than the exception, and both clients and contractors suffer significant
financial losses due to cost overruns. Management tools depends on the nature of the
project, organizations policy, project management strategy, risk attitude of the project
team members, and availability of the resources The authors identified some areas in
supply chain processes which are prone to greater risks and uncertainty and propose an
agile management principle based on the concept of integration and fragmentation in
product development and execution processes respectively. Some tools and techniques are
given below:
Samples
Observing well-defined events
Survey
Interviews
Visits to other construction companies.
Monte Carlo Charts
Risk Register of projects
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CHAPTER-6
RISK MANAGEMENT
PROCESS
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6. RISK MANAGEMENT PROCESS

A typical risk management process includes the following key steps.
Risk identification;
Risk assessment;
Risk mitigation;
Risk monitoring.
Figure 3-The structure of risk management
6.1 KEY STEPS IN RISK MANAGEMENT PROCESS

6.1.1 Risk Environment
In every project, there is a risk environment. There are risks that must be faced, and there
is a host of different ways to deal with them. Risk management planning is the effort,
organizationally, to draw together the risk policies, practices, and procedures of the
organization into a whole that will address the nature of risk peculiar to the project.
6.1.2. Risk Identification
A critical step in the risk management process, risk identification is an organized, thorough
approach to finding real risks associated with a project. It is not, however, a process of
inventing highly improbable scenarios in an effort to cover every conceivable possibility.
After risks are identified and described, then they can be assessed or managed. Risk
identification is the first and perhaps the most important step in the risk management
process, as it attempts to identify the source and type of risks. Risk identification develops
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the basis for the next steps: analysis and control of risk management. Corrects risk
identification ensures risk management effectiveness.
The risk identification process would have highlighted risks that may be considered by
project management to be more significant and selected for further analysis. Risk
identification is an iterative process because new risks may become known as the project
progresses through its life cycle and previously-identified risks may drop out.
6.1.3. Risk Assessment
Risk assessment is performed in numerous ways. Tools and techniques have been
developed to consider probabilities and consequences, using historical data, statistical data
or estimated judgment translated into numerical.
Generally two broad categories, namely, qualitative and quantitative analysis are
distinguished in literature on risk assessment. A qualitative analysis allows the key risk
factors to be identified. There are also assessments grading certainty in scales such as rarealmost certain and low-extreme. They share estimates of probability and consequence and
the use of software tools to manage the data. Scoring techniques (Grey, 1995) are
developed checklists that include the evaluation of both probability and the consequence of
a risk breakdown and those are used to produce risk matrices. This is a common technique
for risk assessment in construction projects that is widely used due to its simple approach.
As with checklists, the disadvantage is that some aspects are forgotten. The bias that also
needs to be considered is that different evaluations will appear depending on the
individuals carrying out the assessment. Using models or simulation to assess risks is
another approach.
Quantitative analysis involves more sophisticated techniques and methods to investigate
and analyze construction project risks. Quantitative risk analysis attempts to estimate the
frequency of risks and the magnitude of their consequences by different methods such as
the decision tree analysis, the cost risk analysis, and Monte Carlo simulation. The
application of the quantitative risk analysis allows the construction project exposure to be
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modeled, and quantifies the probability of occurrence of the identified risk factors as well
as their potential impact.
6.1.4. Risk Response Planning
Risk response development is a critical element in the risk management process that
determines what action (if any) will be taken to address risks evaluated in the
identification, qualification, and quantification efforts. All information generated to date
becomes crucial in determining what the organization will do that is in keeping with the
risks, the organization's tolerance, the project tolerances, and the customer culture.
All risks have causes; sometimes multiple risks within a given project arise from a
common cause. In developing risk responses, the project team should work to identify any
common causes, as those causes may have common risk responses. Generally, response
strategies for threats fall into one of the following categories:
Avoidance
Transference
Mitigation
Acceptance
6.1.5. Risk Control
After risks have been identified, qualified, and quantified, and clear responses have
been developed, those findings must be put into action. Risk monitoring and control
involves implementing the risk plan, which should be an integral part of the project plan.
Two key challenges are associated with monitoring and control. The first is putting the risk
plans into action and ensuring that the plans are still valid. The second is generating
meaningful documentation to support the process. The final step in the description of the
risk management flow chosen in this thesis involves ensuring the use of the prior steps. It
is a question of making sure that the identified risks, which are regarded as important, are
also controlled in the way that was planned in the response step. In the control step, it is
also possible to identify new risks that emerge and the continuous process proceeds.
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6.2 THE PROCESS OF CONSTRUCTION PROJECTS

In general, Idea, Briefing, Design, Production and Maintenance management, are
five steps as the process of construction project.
Depending on the scope of the
construction companies business concept, they enter this process in different phases.
Figure 4-A general description of the construction process
In the construction process, it is still most common with competition using a tender
process to obtain the project and finish it. According to the client demands, each of the
competing companies submits a bid. The client will decide to choose the company as a
winner, which is offered by the most favorable price.
The winner is the one that continues with the project into the design and/or production
phase of the construction process.
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CHAPTER-7
RISK INVOLVE IN
CONSTRUCTION PROJECT
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7. RISK INVOLVE IN CONSTRUCTION PROJECT

7.1 TYPES OF RISK INVOLVED
Risks in construction projects may be classified in a number of ways. One form of
risks classification is as follows:
1. Socioeconomic factors
Environmental protection
Public safety regulation
Economic instability
Exchange rate fluctuation
2. Organizational relationships
Contractual relations
Attitudes of participants
Communication
3. Technological problems
Design assumptions
Site conditions
Construction procedures
Construction occupational safety
The environmental protection movement has contributed to the uncertainty for
construction because of the inability to know what will be required and how long it will
take to obtain approval from the regulatory agencies. Public safety regulations have similar
effects, which have been most noticeable in the energy field involving nuclear power
plants and coal mining. The situation has created constantly shifting guidelines for
engineers, constructors and owners as projects move through the stages of planning to
construction. These moving targets add a significant new dimension of uncertainty which
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can make it virtually impossible to schedule and complete work at budgeted cost.
Economic conditions of the past decade have further reinforced the climate of uncertainty
with high inflation and interest rates.
During periods of economic expansion, in order to control costs, some owners attempt
to use fixed price contracts so that the risks of unforeseen contingencies related to an
overheated economy are passed on to contractors.
However, contractors will raise their prices to compensate for the additional risks.
The risks related to organizational relationships may appear to be unnecessary but
are quite real. Strained relationships may develop between various organizations involved
in the design/construct process. When problems occur, discussions often center on
responsibilities rather than project needs at a time when the focus should be on solving the
problems.
The risks related to technological problems are familiar to the design/construct
professions which have some degree of control over this category. Certain design
assumptions which have served the professions well in the past may become obsolete in
dealing with new types of facilities which may have greater complexity or scale or both.
Because construction procedures may not have been fully anticipated, the design may have
to be modified after construction has begun. If each of the problems cited above can cause
uncertainty, the combination of such problems is often regarded by all parties as being out
of control and inherently risky.
Problem Formulation
As the most common and typical project types, construction projects have several
characteristics such as specific objects: time restraints, cost restraints, special
organizational and legal conditions, complexity and systematic characteristics.
Risk factors will cause different severity of the consequences. If you do not consider
these risk factors at all, or ignore the main factors, they will cause damage because of
decision-making errors.
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Especially in the construction project, the time objective is closely and inseparably
related to the cost objective. Therefore, we cannot ignore risk management of the effect on
time objective caused by risks during construction phase. The construction project
implementation process can be broken down into several specific parts, and these parts are
always affected by the political and economic environment, sources condition, technical
development, so there are uncertainty on their future change, What is more, there are
limitation on the predictable methods and working conditions. Therefore, the assessment
and predicting outcomes will be erroneous results inevitably. This makes possible
deviation between actual value and predicting value, which bring about large risk to both
the owner and the construction companies. For example, investment or time limit
prolonged, productivity under design requirement, rising cost of raw materials, increasing
labor fee, fluctuating product prices, changing market demand, loan interest rate and rate in
foreign money, all these unpredictable effect even damage to an investment project.
From the site managers aspects, there are four main risks that would affect the
construction period.
1. Safety risk
The first one would be safety risk. According to his opinion, this is the most important
thing that should be paid attention to. Based on plans for safety and health, all the works
should have its own precautions. The site manager has to make a safe working
environment for labors. If any accident happens during the process, not only the schedule
will be delayed but also the other areas will be affected.
2. Material supply risk
The second one would be risk on material supply. Material supply is a compulsory part of
the construction project. Under the influences of global economy crisis, many suppliers are
facing bankruptcy. By choosing a supplier without great reputation and funding, it may
lead the construction to facing delay on delivery. If it is during the critical process, it will
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surely delay the whole construction. In construction industry, the delay on time always
cost more
3. Unforeseen extra work
Third of all, unforeseen extra work is also one of site managers concerns. Most of the
unforeseen extra works take place on soil work. It is because that geological exploration
datum cannot predict and analyze the exact condition of geology. The rest extra work
might happen in other construction work methods. 4. Omissions of construction work
The last main risk would be omissions of construction work. Due to the consideration of
cost, clients all wish to finish the construction as soon as possible. This will bring a lot of
pressure to the total contractor. They are trying to do their work faster. When rushing into
doing things, more mistakes might happen. As a result, the quality of the construction will
highly be reduced.
During the period of construction projects, site manager always identify, assess and control
risks based on their own experience. This is also considered as the most practical and
convenient risk management. There are also other methods which cannot be ignored, such
as risk breaking down system, meetings planning and so on.
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CHAPTER-8
FINDINGS AND RESULTS
ANALYSIS
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8. FINDINGS AND RESULTS ANALYSIS

Risks may exist throughout the project lifetime from inception to design, bidding,
construction and commission. From previous cases what we have uncovered is that the
main and critical the risks are occurring during construction period. Actually, in the whole
project process, there are other risks such as political risk, legal risk, financial and
economic risks, design risk, cultural risk. Bureaucracy, inadequate legal framework, high
inflation rate, those issues are significant factors affecting both clients and contractors
venture. After we know those, effective risk response techniques must be adopted to
manage the risks, such as documentation reviews, checklists assumptions analysis are used
often.
Another effective risk response technique is to use negotiation to solve problems. As the
quality of work and safety could be compromised in projects, it is recommended that
contractors provide workers with some training so that they can achieve certain skills level
and safety awareness. Safety management systems should also be implemented on site.
Findings about risks be identified during construction period
For that the construction project itself is a complicated system, there are many
influencing factors and various uncertainties result in different consequences. We can start
from the viewpoint of system when identifying uncertainties. Risk identification is an
organized, thorough approach to finding real risks associated with a project. The common
methods are: Expert interviews, which depend on veteran like Project Manager or Site
Manager. Documentation reviews, Analogy comparisons, Brainstorming, Risk breakdown
structure, and Delphi technique. In construction projects, the common uncertainties are:
soil and geological conditions, weather conditions, material and equipment deficiency,
imperfect design scope, equipment change, labor Productivity, contractors neglect of duty
and so on.
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Findings about the impact of risks on the construction period

Uncertainties include three facets, operation factor, industry factor and market
factor. These three facets together have an effect on the project construction period.
However, the influences of the three factors made on the construction period are quite
different. Operational risk is on the top, it is the most uncertainty during the
implementation of a construction project.
The following are the description of the major uncertain factors influencing the
construction period:
1. The Nature risk. Open air, upper air and the underground are the major building
operation field, so the weather plays an important role on the construction period and
safety. For example, flood, earthquake, rainstorm etc.
2. Innovation of design, like using new technique, change of work method deficiency of
design and so on.
3. Equipment failure.
(1) Uncertainty of construction technology: every building is unique and has its own
characteristic. Construction technology needs to be innovated continuously because of the
constant change of the design, and then the construction technology will meet the risk of
first failure.
(2) Equipment breakdown.(such as crane, Hydraulic jacks, hydraulic concrete
pumps, welding equipment, demolition devices)
4. Labor productivity.
(1) The quality of construction teams
(2) Mating between labor and equipment.
(3) Employment dynamics: if service operations are according to construction
schedule, keep the working performance as planned, pull the job off up to standard within
the limited time, after hand over or check the completed project and leave the construction
site immediately or not.
5. Materials delay.
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(1) Dissatisfactory material quality.

(2) Uncertainty of equipment supply: the major materials used in the construction
are steel, wood, concrete, sands and brick, etc. Although these construction materials are
rich in the domestic market, the big amount of manufacturers, the different quality of the
same material and misuse of construction companies may affect the construction quality
and cause direct financial loss.
(3) Uncertain price of construction materials: the bid price of the contract in a
construction project includes material prices. The construction period is very long and if
the material prices increase, the income will decrease.
(4) Poor local transportation condition.
6. Soil situation, Geological exploration datum cant give an overall and exact explanation
of the geology, so soil situation is an indispensable factor.
The countermeasures for risks in construction period
According to the above analysis, we can take actions to control those uncertainties
which have great influence on the process of construction so as to provide a most effective
risk control and risk management of the project period. Moreover, take the following
relative measures if necessary:
1. Try to make sure that the project gets up to a high standard on processing operation and
organizational structure, more importantly on the qualifications of contractor.
2. Raise legal consciousness. We must comply with the law when we sign contracts, claim
indemnity, protect rights, operate, withstand risks, financing and settle accounts, etc.
3. Implement talent strategy, impart knowledge of construction project management, risk
management, contract management, economy, finance, insurance, operation control, etc to
employees so that the enterprise can own experts and professional project managers
absorbing skills, law, strategy, operation, foreign language, management.
4. Set specification on construction management, prepare the manuals and planning by
total contractor, in addition, build up their own risk management system.
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5. Take active technical countermeasures, including risk avoidance, risk reduction, risk
prevention, risk transfer and risk retention
Measures to avoid risk: If risks become big threats that the enterprise could hardly bear
and control to the project, we should give up the contract and the project definitely to
avoid greater losses. Moreover, laying down the regulation that certain project should be
prohibited and avoiding the actions which may cause damage are also good measures to
evade risk.
Measures to reduce risk: This kind of measures can reduce the incidence of risk or the
damage when risk occurs. For the known risk, we can use project resources to cut down,
for the predictable or unpredictable risk, we should change it to known risk through
assumption and limited conditions and then take measures to reduce the possibilities risk
happen to a level which risk can be accepted.
Measures to prevent risk: Implement technical supporting and effective control planning
to prevent risk. The aiming is to prevent new risk factors; reduce existing risk factors;
reduce the incidence of risk events
Measures to transfer project risk: Spread the risk to other objects, including owners,
subcontractor, partners, investors, suppliers, etc.
Measures to risk retention: If the damage caused by known risks is not serious, sustain it
on ones own.
And one should have the ability; have emergency measures, back-up actions and financial
reserve.
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Table 1-Risk categories list:

Risk Categories
Category
1. Inputs to DoT
2. People
3. IT Systems (hardware & software)
4. Information & Knowledge
5. Business Processes
6. Physical Assets
7. DoT Output
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1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.1
1.11
1.12
1.13
1.14
2.1
2.2
2.3
2.4
2.5
2.6
2.7
3.1
3.2
3.3
4.1
4.2
4.3
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
7.5
Sub Category
Government Policy
Existing Transport Infrastructure
Legislative and Regulatory Requirements
Structure and Development Planning
Community Needs
Industry and Commerce needs
Economic Climate
Lenders and Banks
Contractors and Consultants
Suppliers
Media and Press
Natural Hazards
Weather
Terrain and Ground Conditions
Sufficient Human resources
Competency,Knowledge and Training
Behaviuor Motivation and Morale
Language and Communication
Organizational Structure
Accountability and Supervision
Culture and Ethics
Systems Capabilities
Systems Maintenance & Retention
IT Security
Data Acquisition,Maintenance&Retention
Organizational Learning
Intellectual Property
Business Planning and Budgeting(Strategic)
Operating Processes
Maintenance Processes
Commercial & Procurement Processes
Project Management Processes
Governance and Assurance Processes
Decision Making & Approval Processes
Business Continuity Management
Design and Legacy Issues
Operability
Capacity
Reliability,Availability& Maintenance (Incl Spares)
Quality
Quantity
Timeliness
Reliability & Availability
Reputation
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The Mumbai Pune Expressway: A case study

THE MUMBAI PUNE EXPRESSWAY
As the first car on the first section of the Mumbai Pune Expressway (MPE) went
through, Mr. P.L. Bongirwar, the joint MD of the Maharashtra State Roads Development
Corporation (MSRDC) started thinking. Its been a long way, from conceptualizing the
project to the position we are in today, and our claim of being able to halve the journey
time from Mumbai to Pune should come true.
Background of the Mumbai Pune Expressway:
The Mumbai Pune Corridor a part of the National Highways NH4 is was identified
by a study conducted by the Ministry of Surface Transport (MoST) during the seventh five
year plan as amongst the three most congested national highway corridors in the country.
MoST proposed that this corridor be developed as part of the National Expressway
System. This corridor had been unable to develop because of high traffic volumes, high
growth rates and restrictions on widening because of the topography of the Ghats and the
lack of sufficient funds with the Government. Because of this, the corridor was unable to
grow and match the needs of traffic. Handling around 20000 PCUs 1 a day in 1990, it was
projected that the traffic volumes would raise to around 100,000 PCUs, necessitating a ten
lane corridor between Mumbai and Pune.
The GoM, in 1990, decided to construct a new expressway between the cities of
Mumbai and Pune as a long-term solution to the problem and accordingly appointed
RITES along with Scott Wilson Kirkpatrick (UK) to conduct a techno-economic viability
study for the expressway.
The RITES recommendations:
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RITES submitted its report in 1995 and recommended that a new expressway be
constructed starting at Kon near Panvel and ending at Dehu road near Pune to be operated
as an access-controlled tolled road. The road was to be constructed with the latest
technology and incorporate features such as guard rails, dual carriageways, and speed
monitoring equipment which would make it much more safer than the existing road.
In addition, the width of the road would ensure that congestion did not take place. Some
of the salient features of the RITES report are as shown.
1. The construction of a dual three-lane expressway taking off from Kon near Panvel and
ending on the Westerly Bypass outside Pune at Dehu Road. The total length of the
proposed road is 85 km.
2. The estimated project cost at 1994 prices is Rs 11,464 million
3. Diversion of traffic to the new expressway is estimated to be between 40-45%.
4. The EIRR for the project is 17.81% as opposed to the Planning Commissions cut-off rate
of 12%. Hence the project is economically viable.
5. Property development on the land in the vicinity of the expressway is a possible source of
subsidy for the project.
The New Government's Role:

The GoM was had been newly elected in 1995. Because of the prestige value
attached to the project, the GoM was very keen on early completion of the Mumbai Pune
Expressway. In July 1996, a policy decision was taken to implement the project as a BOT
project. Accordingly, appropriate tenders were prepared. Only one bid was submitted by
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Reliance India Limited. The bid was not acceptable to the Government on financial
grounds.
Establishment of the MSRDC:
In order to accelerate the process of road development in Maharashtra, the

MSRDC was established by the Government of Maharashtra through a resolution issued
on 9th July, 1996 and incorporated as a limited company on 2nd August, 1996 under the
Indian Companies Act, 1956.
MSRDC had been constituted with the following objectives .
To promote and operate road projects
To plan, investigate, design, construct and manage identified road projects and their
area development.
To enter into a contract in respects of the works and any other matters transferred to the
Corporation along with assets and liabilities.
To invite tenders, bids, offers and enter into contracts for the purposes of all the activities
of the Corporation.
To promote participation of any person or body or association of individuals.
To undertake schemes or works, either jointly with other corporate bodies or institutions,
or with Government or local authorities, or on agency basis .
To undertake any other project and other activities entrusted by the State Government in
furtherance of the objectives for which the Corporation is established.
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MSRDC's mandate was to accelerate transport infrastructure development in the state by

overseeing the completion of existing and new projects with the active participation of the
private sector through a time bound program.
Because of unavailability of any private sector player and because of its mandate, the
work of the MPE had been awarded to the MSRDC in March 1997.
Workforce:
Most of the workforce for the MSRDC came from the Public Works Department and
CIDCO. The CIDCO employees had extensive experience in the development of large
scale projects. Employees from the revenue department were also taken on deputation to
help with the land acquisition process.
Political Commitment:
In order to speed up the process of implementation of the project, the GoM constituted a
High Powered Steering Committee under the chairmanship of the MD and VC of MSRDC,
Mr. P.L. Bongirwar, for proper coordination among different Government departments and
to obtain the requisite clearances.
The Chief Minister also convened a meeting of Secretaries of all departments in the GoM
where an announcement was made that the MPE was a project not just of MSRDC, but of
the GoM. This meeting proved to be very useful as can be seen by the fact that there were
very few hindrances to the project.
A Steering Committee was also set up under the chairmanship of Mr. R.T. Atre, retired
PWD Secretary, to recommend different technical standards to be adopted, to prepare
geometric standards, and to help MSRDC in deciding upon various provisions of tender
documents and related matters.
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Appointment of Project Management Consultants:
The Steering Committee proposed that Project Management Consultants (PMCs) be

appointed for preparing and ensuring consistency in design standards, cost estimates and
tender documents, and to supervise the construction work as and when it began.
In addition it was also though that if the technical aspects of the projects were taken care of
by PMC's, then MSRDC could concentrate on the task of coordinating the various
administrative requirements such as getting clearances, raising finances etc.
The Project Management consultants were to have the following functions:
1. Preparing estimates and detailed

Designs
2. Issuing tender papers & bid
Evaluation
3. Supervision: ensuring quality and correctness of work
Committees were to be formed to perform each of the aforementioned tasks by drawing

personnel from each of the PMCs to ensure consistency.
A list of prospective PMCs was drawn up from the lists available with MoST and NHAI,
and bids were invited from them. Because the most important skill for a PMC was
considered to be Technical Skill, the selection criteria were such that 80% weightage was
assigned to the technical bid and 20% to the financial bid. A condition was imposed that 1
PMC could work on only 1 section of the Expressway to avoid excess load on a PMC.
Presence of a minimum number of technical supervisory staff at the project site was
insisted upon before awarding the contract.
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April 1997 Bids for PMCs called for.

May 1997 Receipt of bids from prospective PMCs.
June 1997 Fixing of 6 PMCs 1 each for Sections A, B, C and D; I for
the
Panvel Bypass; 1 for the Ghat section.
Table-2 The final section wise details of the PMC's and Contractors involved are:
Section Description
Technical Consultants
Estd
Tender
Cost in
Amount
Contractor
Crores in Crores
Section 'A'
Stup Consultants with
(Kon to Chowk)
Hyder Consulting Ltd.
13.232 km.
U.K.
Section 'B'
Intercontinental
(Chowk to Adoshi) Consultants & Technocrats
127.33
136.82
183.73
194.00
IJM/SCL Joint Venture
Hindustan Construction
Co. Mumbai
16.629 km.
Section 'C'
(Kusgaon to Ozarde)
Pvt. Ltd. India

Frishmann Prabhu (India)
177.46
163.56
Pvt. Ltd.
Larsen and Toubro Ltd.

Mumbai
22.995 km.
Section 'D'
(Ozarde to Dehu Road)
Sir Owen Williams
132.70
133.47
Innovestment
V.M. Jog Engineering Ltd.

Pune
16.150 km.
Shapoorji Pallonj & Co.
Ghat Section
Package - I
Consulting Engg.
86.46
93.15
Service (India) Ltd.
with Lighten Asai Jt.

Venture Larson & Toubro
Adoshi to long tunnel 7.13 km

Ltd. Chennai
Shapoorji Pallonj & Co.
Ghat Section
Package - II
Consulting Engg.
Long tunnel to Lonavala bypass
Service (India) Ltd.
[Type text]
108.96
104.35
with Lighten Asai Jt.

Venture Larson & Toubro
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8.28 km.
Panvel Bypass
Package - I
Ltd. Chennai
Technogem Consultants
PBA - PCEC (JV)

108.00
88.89
M. Venkat Rao
Thane
0/0 to 8/200, 8.20 km.
Panvel Bypass
Package - II
Visakhapatnam
Technogem Consultants
PBA - PCEC (JV)

64.50
49.99
M. Venkat Rao
Thane
8/200 to 9/750, 1.550 km
Visakhapatnam
Tunnel Work
5 Twin Tunnel 5724 m. Tunnel
200.00
200.00 Kokan Railway Corp. Ltd.
Length
Other Exp.
Technical Consultants
Estd
Tender
Cost in
Amount
Contractor
Crores in Crores
Toll Plaza, Building, Fencing
signboard, Technical
consultants fees, etc
324.00
Total
[Type text]
1200.46
1488.00
Page 63
Modifications to the Project:

In October 1997, forest and environmental clearances had been received. However,
the Ministry of Environment and Forests did not permit construction of the new alignment
in the Ghat area. The reason was that there was a danger to endangered species of flora
(800 species of rare medicinal herbs found exclusively in the Ghats) and rare species of
wildlife such as the mouse deer, the giant Malabar squirrel and some species of butterfly.
The environmental management plan proposed was deemed not to sufficiently protect
them.
However the MoEF allowed widening of the existing Ghat portion of NH4, along
with the Lonavala and Khandala bypasses in lieu of the original expressway alignment.
Hence the MoST clearance had to be obtained to widen NH4 and use it. The new
expressway alignment would use the same corridor through the Ghats as the existing NH4,
instead of the original alignment from Adoshi to Kusgaon. This would entail the
construction of a bypass around the town of Lonavla to reduce congestion and increase the
average speed on the road. However this also resulted in increase of the total km of the
road by around 8km. The final alignment for the road is as shown:
The dotted line sown the original alignment through the Ghats while the dark
Line shows the final alignment.
As a final modification in 1998, GoM decided that the Panvel Bypass be included as part
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of the Expressway, and GoI was requested to transfer work on the bypass to MSRDC.
Then necessary clearance for this was obtained. The length of the project now was 95 km.
Issuing Tenders:
The Tender Committee was formed, in the manner stated above. In consultation
with the Joint MD of MSRDC, it proposed the draft tender document. This was then
discussed at length with the Steering Committee headed by Mr. R.T. Atre and the tender
document for contractors was then finalized.
Stringent criteria had to be specified by selected constructors. Stringent qualification
criteria were specified, so only those contractors having minimum experience in their main
items of work, minimum number of required key personnel, and minimum financial assets
and credit facilities could succeed. Although bidders could bid for more than 1 section,
they would be eligible to get work for only 1 section. This was done to harness resources
from 4 agencies for the work, and to finish the work within the tight schedule.
There was transparency in the bidding process. It was clearly specified in the tender
document how the technical evaluation would be carried out on the basis of the
Information provided. The maximum marks allotted to the various aspects were clearly
specified in the tender document. If a bidder scored less than 75% on the technical
evaluation, his financial bid would not be opened.
However, once the technical bid was qualified, a 75 % weightage would be given to the
financial bid so that only financially viable and less expensive bidder was awarded with
the final contracts. As a result of this the final bids were less than the estimated costs.
The criteria used for evaluation of the contractors were as shown in exhibit 6:
November 10, 1997 Calling of bids for civil construction.
November 27, 1997 Receipt of tenders.
January 1998 Fixing of construction agencies after assessment, and issuance of work
orders. Construction work started. The contract specified
project completion time as 27 months from commencement of work (January 1998). The
contract also required substantial completion in 24 months. It was proposed to open the
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Expressway to traffic by January-end 2000.

July 1998 Tenders invited for widening the Khandala Ghat and the Khandala-Lonavala
bypass.
Facilities given by MSRDC to consultants and Contractors:
To ensure quick and efficient working, and to ensure that the project was completed
on time, MSRDC and GoM provided several facilities to contractors and consultants.
These facilities include sops to the project partners, and also included completion of tasks
that the consultants/contractors would normally have to do themselves. The expenditure on
extra services/facilities did not, however, increase production costs it reduced them by 810% as a result of speedy project completion and reduction in delay-induced cost overruns.
To PMCs:
On-site facilities given to PMCs. Site offices constructed for PMCs by contractors at
MSRDCs expense, and standard equipment like Xerox, printer, telephone provided.
Financial sops
Running Account bills to be cleared within 10 days. Beyond that 16% interest to be paid.
Materials to be provided at the project site at 75% of the market value. Escalation of steel,
cement and bitumen prices to be absorbed.
Mobilization advances and machine advances (up to 15% of project cost) granted to ease
cash flow situation in the initial stage.
Reimbursement granted for increase in sales tax or other taxes.
For new construction machinery imports, customs duties to be reimbursed, to a limit of
$0.7 million.
Bonus clause (Rs. 2 million / week) for early project completion. Penalty clause (Rs. 3
million / week) for delayed completion. Also, 4 milestones along the way, stipulated in
terms of physical completion of important items in specified time. For non-achievement of
milestones, compensation, subject to a maximum of 10% of contract value, was stipulated.
Compensation was Rs. 2 million, Rs. 1.5 million, Rs. 3 million, and Rs. 3 million per week
for milestones 1, 2, 3, and 4 respectively.
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Land:
Land for RoW acquired for almost the entire alignment so that the construction could
begin immediately (1000 ha of land acquired in 8-9 months by liaising with the revenue
department).
Land for contractors camps, site plants, crushers, quarries, muck dumping made available
immediately at suitable locations.
All this land was provided at no cost to the contractor.
Other services:
MSRDC facilitated setting up of 8 substations through MSEB at suitable locations
(Locations specified in tender document so complete information disclosure and good
advance planning), from where the constructors could buy power supply.
Explosives magazines set up at various locations to facilitate rock-blasting.
MSRDC prompted HP and IOCL to set up petrol/diesel pumps adjacent to alignment.
MSRDC took action to remove/divert utility services like power lines (cost Rs. 300
million, time taken 4-6 months), telephone lines, water lines, sewer lines etc. coming in the
alignment.
Took necessary tree cutting permission.
Survey instruments and laboratory testing equipment procured at MSRDCs cost.
Construction Work Starts:
Construction work started in right earnest with the issue of the order to proceed with
the works in Jan/Feb 1998. The contract completion date was specified as 27 months
requiring substantial completion in 24 months when it was proposed to open the
expressway to traffic by Jan 2000. The scale and time schedule of the work was
unprecedented in the highway sector but Indian Contractors rose up to the occasion. Most
of the technologies were being tried out in the country for the first time. The consultants
also showed remarkable skills in adapting to new technology and monitoring techniques.
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Environmental Problems:
Because of the large scale nature of the project, there was a significant impact to the
environment. Hence an environmental impact assessment had to be carried out to estimate
the effects of the project on the environment. The EIA was conducted by RITES. The EIA
had identified the following
Components of concern:
The water quality in the river Patalganga, Pauna and Indrayani which was used for
drinking and industrial Purposes
Drainage of the entire are along the alignment and in particular, the low lying area around
Panvel.
Loss of forest are in general and loss of exclusive and rare flora.
Effect on the wild life in ghat are and on endangered species. (Giant Squirrel and
Mousedeer in Paticular)
Land slides
Severance suffered by the inhabitants of villages close to alignment Land
Use and Grazing Pattern
Landscaping in the Ghat section
Adverse impacts on other parameters such as air quality, noise, vibration, fisheries,
navigation, land use, public health and places of archaeological and historical values were
not expected to be appreciable, though, mitigative measures to minimise their adverse
impacts had to be implemented.
The EIA also had identified certain positive impacts:
Travel between Mumbai and Pune would be economical, safe and fast.
Traffic Volume on NH4 would decrease because of diversion to the expressway, reducing
the traffic intensity and hence the air and noise pollution on NH4.
Inconvenience faced by the people at Panvel, Khopoli, Khandal and Lonavla, because of
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the traffic intensity would be reduced.

Industrial activity at Panvel, Rasayani and Pimpri would be enhanced.
Commercial activity would come up at the point of access to the proposed expressway
Job Opportunities would be created during construction and operation of the
expressway.
However in order to mitigate the impact on the environment, an environment
management plan was formulated. The objectives of the plan were as follows:
To mitigate adverse effects on environmental resources identified in EIA
Protect Environmental resources where possible
Enhance the value of environmental components where possible
Monitoring to evaluate success or failure of measures
The Environment Management Plan is shown in Exhibit 9.
The costs because of the plan were estimated to be as follows:
Total Capital Cost:
Forestation
Rs 30 lakh
Minimization of Severance
Rs 3874 lakh
Development of Grazing lands
Rs 80 lakh
Annual Recurring Costs:
Monitoring Costs
Rs 6.0 lakh
Ecology Survey
Rs 3.0 lakh
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Litigation:
From the beginning itself MSRDC had adopted a very proactive stand towards
litigation in the project. There was a realization that litigation could induce substantial
delays in the project. The MSRDC could appoint a panel of legal experts for handling
cases. Also there was a policy that the organization would respond to any court order in the
fastest possible time. This ensured that the problem of re-seeking appropriate dates was
minimized. Political influence was also used to make sure that there would be little legal
problems. In addition to this there was a dispute redressal mechanism for contractors,
because of which contractors involved themselves in little litigation. During the award of
the bid itself care had been taken that the contractor did not have a poor history of
litigation.
Jan 1998: Construction starts
April 8, 1998: Groups in Pune start opposing the project saying that it is a sheer waste of
taxpayers money.
July 6, 1998: The sole objection to be raised by a private party against the proposed
Mumbai-Pune Expressway squashed. (All the other objections were raised by Public
Interest Groups)
Dec 9, 1998: Mumbai high court admits writ petition, restrains the state
Government and MSRDC from further acquisition and displacement of tribals and
villagers affected by the controversial Mumbai Pune expressway, till the pendency and
final disposal of the case Jan 4, 1999: Stay on acquisition released.
The protests against construction continue throughout the execution of the project.
Financial structuring of the MSRDC and the MPE:
The MSRDC was raised with an equity contribution of Rs 150 crore from the GoM
and s 125 cr from the Bombay Municipal Corporation.
The means of finance for the MSRDC as of July 12, 1999 were as follows.
Budgetary Support from BMC and GoM: Rs 275 cr Loan
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from MMRDA: Rs 548 cr

Bank Loans: Rs 107 cr
Capital Market borrowings:
Bonds (rated AA) of over Rs 1897.6 crores
The details of these bonds are shown in the exhibit 9:
The Government of Maharashtra had guaranteed the bonds. As a result the rate of
interest in these bonds was low (~14%). The bonds had been rated as AA. Exhibit 8
shows details of two series of bonds.
The toll rates proposed were as follows:

Type of VehicleToll for full LengthToll for Interchanges
Panvel Bypass
Car
80
50
15
LMV
135
80
20
Truck
190
115
40
Bus
270
160
40
2/3 axle container
450
270
90
Trailer Truck
600
360
120
The Future:
May 1, 2000:
As he watched the first car zoom away into the distance, Mr. Bongirwar had several things
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on his mind. Had they taken the correct decision when they decided to use the existing
alignment through the Ghats?
Would they be able to collect enough tolls to make the project financially viable in the
long run? And because of the tremendous economic impact of the project and the
extremely long-term nature of these benefits, did it even matter if the project was not
financially viable? Did it make sense for MSRDC to charge the BMC and the PMC for
contributing to the economic development of the cities?
The whole basis of executing the project had been to speed up those activities that
typically impede a project. But would they be able to replicate these methods elsewhere,
where there was little political support? One thing gave him satisfaction though, that his
claim that they could manage the project in far lesser time at a lesser cost had materialized.
Now the only thing that remained was opening the remaining sections of the expressway to
traffic. Once this was done they would charge the full toll rates. Till then, they would do
with one third the rates. He just hoped that a sufficient number of vehicles would take the
new road once the entire stretch was completed.
Exhibit 1:
Traffic Profile on existing NH4:
Source: RITES report on the feasibility of the MPE, Volume 1, Average traffic count on
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The basis of surveys at Panvel, Khopoli, Lonavla and Shedung (1992 data)
Exhibit 2:
Traffic projections, 1992- 2004:
Exhibit 3: Accidents on the Existing NH4:

Year
Total
Head on
Fatal
accidents
Accidents
Accidents
killed
1990
2109
1687
246
287
21
1991
2342
1874
257
301
23
1992
2670
2136
288
365
27
1993
2670
2136
306
352
27
[Type text]
PersonsInsurance @
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1994
2901
2321
324
359
29
1995
3576
2861
393
486
36
1996
3613
2890
366
316
36
1997
3870
3096
386
NA
39
1998
4128
3302
406
(est)
41
1999
4385
3508
426
(est)
44
2000
4642
3714
446
(est)
46
2001
4900
3920
466
(est)
49
Total
Rs.418 cr
(Source:
IMC)
@ Rs. 1 lakh per accident
Exhibit 4:
Estimated Savings on account of the MPE:
*Savings in annual fuel consumption because of reduction in congestion: Rs
80-90 crore
*Reduction in Vehicle operating costs as compared to a similar distance elsewhere with
lower traffic congestion: Rs 100 (from Rs 160 - Rs 60)
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*Reduction in Journey time between Mumbai and Pune: 2 hrs

*Reduction in the accident rate. (Currently 410 accidents p. a.). Reduction in insurance
cost: 49 cr per annum.
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In addition there are chief engineers in charge of each project followed by Superintending
Engineers and Executive engineers.
Exhibit 6: Criteria for technical evaluation of Contractors
Annexure III: Award of Contract
Award Criteria:
Subject to clause 29.0 of the ITB, the employer will award the contract to the bidder
whose bid has been determined to be substantially responsive in accordance with
clause28.2 of the ITB.
Criterion
Maximum Marks
1.
Structure and Organization
20
2.
Financial Strength
40
3.
Work Experience:
a. General
10
b. Similar Works
30
4.
Plant and Equipment
40
5.
Quality of Works Executed
20
6.
Timely
40
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Completion/Litigation record
Sub total A
200
1.
Personnel available
40
2.
Work Plan
40
3.
Quality assurance
20
Sub Total B
100
Total
300
Exhibit 7:
02 Jan 1998
Malaysian firm, two others bag Mumbai-Pune expressway
deals
OUR INFRASTRUCTURE BUREAU
MUMBAI, January 1: Maharashtra State Road Development Corporation (MSRDC) on

Thursday gave away work orders worth Rs 494.38 crore to three developers for the
construction of three sections on the ambitious 84-km Mumbai-Pune expressway.
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The Rs 127.33-crore contract for the 13-km Kon-Chowk section has been awarded to IJMSathyam joint venture. IJM, a Rs 1,000-crore Malaysian company involved in highways,
ports, airways and power house construction, has a majority holding in the Sicunderabadbased Sathyam company, a leading player in computer software and construction.
Sathyam's turnover is Rs 200 crore. Indian construction major Hindustan Construction
Company (HCC) has been given work order for the development of a 16.65-km section
between Chowk and Adoshi at the cost of Rs 194 crore. Larsen and Toubro has bagged a
contract worth Rs 163.56 crore for the construction of a 23-km section between Kusgaon
to Ozarde.
Public works minister Nitin Gadkari told reporters that the Rs 100-crore contract for the
construction of tunnels has already been awarded to the Konkan Railway Corporation,
adding that the MSRDC has signed a memorandum of understanding with the latter.
Gadkari said that the tender submitted by the Hyderabad-based Nagarjun Construction
Company (NCC) for the Rs 132.70-crore Ozarde-Dehuroad section (16.65 km) was below
15 per cent (Rs 112 crore). He stated that NCC's bid has been referred to the ICICI for
scrutiny.
The minister said that the construction would be completed by January 1, 2000, and the
Mumbai-Pune expressway would be made open for vehicular transportation. He informed
that the contractors would be given a bonus of Rs 20 lakh a week if they complete work
before two years, while a penalty of Rs 30 lakh would be charged on them if they fail to
meet the deadline.
He gave a pat to the MSRDC for awarding contracts in record time. Bids were invited on
November 11, 1997, while pre-bid meeting of all the prospective bidders took place on
November 27, 1997, and clarification to bid the document on December 2, 1997.
He said that detailed discussions with various lowest bidders in each section took place on
December 30, 1997, while the final bid approval was given on December 31 by the
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steering committee appointed by the MSRDC. MSRDC had received 55 bids for these four
sections, he said. Gadkari said that contractors were entitled for extention in custom duties
on construction material imported from outside, while they would be given exemption of
excise duty on ready-mix concrete.
The MSRDC would give 15 per cent advance to these contractors, while it had already
acquired the necessary land for roadway and quarries and received permissions for
explosives. He said that MSRDC had appointed STUP Consultants Ltd, ICT Pvt Ltd,
Frischmann Prabhu (India) Pvt Ltd and Sir Owen Williams (India) Pvt Ltd for these four
sections for the purpose of detailed engineering and for construction supervision of works.
Copyright 1998 Indian Express Newspapers (Bombay) Ltd.
Exhibit 8:
Monday, July 6, 1998
Acquire private land for expressway: HC
Express News Service
MUMBAI, JUNE 3: The sole objection to be raised by a private party against the proposed
Mumbai-Pune Expressway was squashed today when the Bombay High Court vacated a
stay on the acquisition of an acre of private land near Lonavala.
The rest of the objections to the expressway were raised by groups as public interest issues.
The plot of land, owned by Nanikram Murlimal Devnani, is situated in village Dongargaon
in Pune district. The plot (survey 386/2), measuring barely an acre, was located bang in the
middle of the expressway, which made it crucial to acquire it.
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Devnani challenged the acquisition in High Court, claiming that the acquisition procedure
was not adhered to, and that he was not given due notice and adequate hearing before the
land was taken into possession. The division bench of Justice A Desai and Justice T K
Chandrasekhar Das had admitted Devnani's petition in January this year. They ordered
status quo on the land until final disposal of the petition.
However, the state government filed an affidavit to clarify the situation today before the
division bench of Chief Justice M B Shah and Justice R M S Khandeparkar. State
Advocate General C J Sawant, appearing for the government, claimed that it had complied
with every possible procedure of acquisition. Devnani was given notice as well as paid
adequate compensation, the government claimed. Copyright 1998 Indian Express
Newspapers (Bombay) Ltd.
Learning Note:
Following are the issues that can be raised through the case:
1. Was the Expressway really needed?
Typical performance indicators for roads are as follows:
Safety indicators:
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The aggregate number of transportation-related fatalities
The aggregate number of transportation-related fatalities divided by 100 million

passenger-miles.
The aggregate number of transportation incidents. Mobility
Indicators: Percent of km of pavements with poor ride quality
(International Roughness Index more than 170 inches/mile).
Percent of bridges on the NHS and percent of all bridges structurally or functionally
deficient.
Measure of time between system disruption and restoration. Economic
Indicators:
Expenditure on passenger transportation per passenger-mile. Expenditure on
freight transportation per ton-mile.
Comparison of actual costs to projected costs in transportation improvement projects.
Hours of delay per 1000 vehicle miles traveled.
Indicators related to the Natural and Social Environment
Emission Levels of CO2, CO, Nox, Sox and greenhouse gases Noise Levels
within 50 mts of the road
Wildlife, Destruction of Fauna, Harm to Endangered species because of a project
Severance, Loss of Grazing land etc.
As the case says, in terms of the traffic volumes and the safety record of NH4, there was a
case for developing the road. A qualitative evaluation of the NH4 on the basis of the above
indicators reveals that NH4 was a poor performer. In comparison, the benefits from the
expressway are as follows: Reduce time of travel to 2 hours
Reduce VOCs from Rs.160 to Rs 60
Reduce accident risks
Reduced vehicular pollution
Improved efficiency of freight movement Externalities
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The reduction in time lost itself is a significant advantage, though it is difficult to qualtify
it.
2. Why was the Private Bid rejected?
The most obvious answer to this question is because the bid amount was
significantly higher than the estimates prepared by RITES. (Rs 3000 cr as opposed to Rs
1600 cr) The reasons behind this need to be investigated. We can identify the following
reasons:
The cost of capital for Reliance industries would have been much higher than for the
MSRDC. MSRDC raised most of its capital through private bond placements at a very low
rate. The reason for this is the guarantee that was given by the GoM which enjoys a good
rating, because of which the bonds were AA rated.
Raising such a large amount of debt would have significantly affected the companys
balance sheet, the alternative would have been going through the project financing
route by floating an SPV.
The risks involved in the project are very high. Firstly there is the technical risk that
construction of the road would be very difficult and there would be
Significant cost overruns when the construction would actually start. There is also the
financial risk that the company would not be able to collect toll because of various
reasons: Political reasons, the risk that the courts would stop toll collection or because
the traffic did not match up to expectations. Because of this, any private sector bidder
would have preferred to have its cash inflows in the beginning i.e. by making a profit
during the actual construction of the road and this was only possible by making bids at
significantly higher amounts than the estimated costs.
The implication of this is that in a large scale risky project such as this one, only the
Government or a government back body could have implemented without making a
profit during construction. A private sector player would have come in only if the
Government had guaranteed a good return on his investment if toll did not materialize.
Since the cost of capital for the Government was lower than that for a private player, it
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made sense for the Government to hand over the project to the MSRDC.
3.The importance of Political Will:
The most important factor that enabled the construction of the road is political will.
According to internal sources of the MSRDC, "The project could achieve its present level
of success only because of the active support and cooperation of all wings of the
Government and above all the strong political will in favor of the project right at the top
level." In fact, the absence of large scale litigation and protests can be attributed to a
general political consensus about the importance of the project.
4. The use of PMC's:
The functions of the PMC's were as given in the case. But what is important is that
because of the PMC's MSRDC freed itself from the day to day monitoring of the
construction work. It could then concentrate in the next level of project managementensuring coordination with other departments for land acquisition, quarry permits,
explosive permits, labor and environmental issues etc. The workforce structure is also
significant because officials from the PWD could monitor the technical aspects while
Officials from the revenue department could liason with their former department for land
acquisition.
For PMC selections, more weightage was given to the technical competence of the bidder.
5. Contractual Issues:
While selection of contractor, it was ensured that only technically superior parties got
through and out of these the best financial bid was selected. Another interesting aspect is
the high weight given to the past history of the contractor.
Project split into 4 sections + Ghat section + Panvel bypass. This was done keeping in
mind the short time frame for construction, and the present level of availability of
constructors and consultants capabilities.
The bidding and consultant/contractor selection process was also speeded up so as to
reduce the time required for project completion.
6. Speedy Implementation:
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Speedy implementation of BOT projects is advantageous because of the following

reasons:
Savings due to reduction in cost escalation and the amount of interest to be paid during
the construction period.
Savings due to reduction in time overruns
Cash inflows start before time which significantly improves the NPV of the project.
Given the financial sops MSRDC granted to the contractors, the project was structured in
such a way that MSRDC bore ALL the non-project risks of the project. This is also
important in the process of speeding up the implementation because with all his risks taken
away, he can focus exclusively on his work.
There is also a policy of taking contractors into confidence no animosity as in normal
projects. The bonus and penalty clauses in the contract are also important because of the
tremendous incentive to the contractor not to delay the work.
The importance given to reducing the impact on the environment is also important.
7. Financial Viability:
The Government guaranteed repayment of all loans taken by MSRDC. Thus, with an
equity base of Rs. 50 million, MSRDC was able to raise debt of Rs. 21208.1 million. In
order to pay the interest obligations, sufficient toll has to be generated. However it is not
necessary that all the interest be paid out of payment can again be borrowed.
Traffic growth takes place on a compounded basis: Increase in number of vehicles with
GDP * the increase in collection/ vehicle because of WPI inflation.
8. Is Financial Viability Important:
It is practically very difficult to estimate the benefits due to the tremendous positive
externalities associated with roads. The economic return to communities from such road
development is substantially higher. These include increases in the overall efficiency of
the economy and its rate of growth as well as increases in the value of land surrounding
the road. Financial viability is not important in this sense because the financial rates of
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return of roads are very low. But given the tremendous benefits that have been listed for
the MPE: Mobility, Safety, Environment and Economical, there is a case for constructing
an expressway even if financial rates of return are very low. One possible alternative that
is described is the subsidy from the PMC and the BMC, both of which will benefit in the
long run because of the economic opportunities generated by the Mumbai Pune
Expressway.
9. Problems of Toll roads:
As can be seen from the traffic profile, trucks and buses are the most important in
order to increase toll revenues. However, in India, a typical problem that is faced is the
mentality of Truck drivers to avoid toll. Car drivers tend to be much more flexible because
the value of time tends to be high.
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CHAPTER-9
CONCLUSIONS
86
9. CONCLUSIONS
The orientation of my study is the application of risk management in construction projects.

This report tells us what risks will occur during construction period for that risks have an
effect on the cost and schedule of construction projects. I make my study and description
mainly on the schedule. Then presenting what are the major and common risks influencing
construction period that I choose from numerous factors. In the end, I got the answers like
how to ensure as soon as possible how to make reasonable analysis and how to have a
good control of these risks. As part of the final semester work, I get down to my report and
graduation project at the same time. Considering the writing time and writing depth, it is a
challenge for me. Nevertheless, I still try my best to search literature and references and
have profound study. I treat a better final report as my pursuit.
87
CHAPTER-10
FUTURE RESEARCH
88
10. FUTURE RESEARCH
I have learnt a lot what I did not know before through finishing this report, which enrich
my learning experience and broaden my horizon of project management.
As is known to all, there are still many risks, which need us to solve. Risk management has
a wide usage, for example, we can apply risk management to the analysis and management
of the existing and possible risks from the design phase to the construction phase.
Regarding writing time and writing scope, I narrow my report to a specific aspect, which
describes what risks are there during construction period and what are the common risks
affecting construction schedule. This is just a small part of risk management application in
construction projects. Moreover, there is no more deep study of other aspects in this report.
Based on the report, we can make further analysis and study about the risks, which affect
construction cost for the further study to ensure budget balance of construction projects,
and maximum value of clients such as the study of what factors may cause cost change
except extension of construction time. There is one of aspects of risk management is worth
doing it.
89
CHAPTER-11
RECOMMENDATIONS
90
11. RECOMMENDATIONS
Construction projects increase in complexity and risk is an aspect of everyday life. Although risk
could be a negative or positive impact, the perception of extent of risk involved and its
management is very vital and should be integrated into every construction firm to identify and
provide comprehensive analysis of potential project impacts in order to prevent increased
costs, delays and interferences; hence enhance opportunities.
Risk management can be very rewarding when organizations assess their risks
appropriately and determine the most economical way to avoid them entirely, or reduce
them to a minimum and limit possible expenditures arising from accidents or emergencies.
These could be achieved with the training of the construction workforce in managing risk
in all phases of construction.
A similar study should be carried out in other parts of the country to ascertain the level of
knowledge of risk management of the construction workers in the Construction Industry.
91
REFERENCES
Deviprasadh A (2007). Risk Assessment and Management in Construction Projects.

College of Engineering Guindy Campus, Anna University Chennai. M.Engg. Available on
http://www.scribd.com/doc/14565333/Risk-Assessment-and-Management-inConstruction-Projects-Full-Thesis
Klemetti A. (2006) Risk Management in Construction Projects. Available on
https://aaltodoc.aalto.fi/bitstream/handle/123456789/849/isbn9512281473.pdf?sequence=1
Royer, P.S. (2000). Risk Management: The Undiscovered Dimension of Project
Management. Project Management Journal, 31 (1): 6-13
Ehsan N. (2006). Risk Management in Construction Industry. 3rd IEEE conference on
computer
science
and
information
technology,
pp.
16-21.
Available
on
http://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=5564663&url=http%3A%2F%2Fie
eexplore.ieee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D5564663
Monetti E., Rosa da Silva S. A. and Rocha R. M. (2006). The practice of Project Risk
management
in
Government
Projects:
case
study
in
Sao
Paula
city.
http://www.realestate.pcc.usp.br/arquivos%20PDF/Eliane_CIBW107.pdf
Opolot, P.K., Buys, N. S. and Slabber, J. M. (undated). Risk management in the South
African
construction
industry.
Available
at
http://www.nmmu.ac.za/documents/faniebuys/Slabber%20Buys%20Opolot%20%20Risk%20management.pdf
Pritchard C. L., (2001). Risk Management, Concept and Guidance. 2. ed., Virginia, ESI
International.
Walewski J. and Gibson G.E. (2003). International Project Risk Assessment: Methods,
Procedures, and Critical Factors.
Websites:
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www.google.com
www.wiki.com
http://www.lntecc.com/
http://www.construindia.com/
http://www.cio.com.au/
http://www.bkd.com/
93

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A Project Report

Project risk management in Construction

A project report submitted in partial fulfillment of the requirements

Sikkim Manipal University, India

Project risk management in Construction

Submitted in partial fulfillment of the requirements for the degree of

Masters of Business Administration

The project report

Reg. No: 1402005119

(University Study Centre Certificate)

This is to certify that the project report entitled

Submitted in partial fulfillment of the requirements for the

Masters of Business Administration

of Sikkim Manipal University

for valuable guidance and support on

Name: NIRMAL DUTTA

risk management in Construction Projects by Nirmal Dutta who carried

Mr Jayanta Narayan Das

6. RISK MANAGEMENT PROCESS .................................................................................................. 42

Table -1 Risk categories list.566

development investment, is poised for growth on account of industrialization, urbanization,

In India, construction is the second largest economic activity after agriculture.

1.2 COMPANY PROFILE

construction organization in the country. L&T Constructions cutting edge capabilities

a) Naharkatiya to Bongaigaon Section: 16 X 401 km, 14 X 156 km transporting Crude

NEED AND BASIS OF FEASIBILITY STUDY

PROJECT SCHEDULE FOR IMPLEMENTATION

ENVIRONMENT IMPACT ASSESSMENT (EIA)

PIPELINE COST AND FINANCIAL ANALYSIS

Capital Cost (Excluding Financing Charges,

Escalation During Implementation Phase)

Fixed Operating Cost (Annual)

Total Operating Cost (Annual)

All statutory clearances are carried out by OIL .

Existing Right Of User will be used.

4. ROU Acquisition, Crop

Cost estimate valid as of August 2016 price basis

Construction Power Construction power and construction water will be

The location of various stations / terminal facilities is detailed as under:

Description of Terminal/Pumping Station Facilities:

The new proposed facilities shall consist of augmentation of filtering and

PS-9 PS-10 RT-GH RT-BGR

Total Crossing Length

Minor Water body/

BASIS & STIPULATIONS FOR OVERALL PROJECT SCHEDULE

Zero date shall be latest of the following:

Date of receipt of data / documents / drawings information necessary to commence

Commissioning date of the Project is 3 Months from Mechanical Completion

Further, 3 Months for closure of contract from Commissioning.

1. Scope of Work for Schedule has been considered as per MOM

heavy monsoon encountered in the region.

from Zero Date of award of Civil Tender.

1.4 OBJECTIVES OF THE RISK MANAGEMENT PROJECT

construction project management context is a comprehensive and systematic way of

Figure 2-Relationships among the five risk facets

4.1 NEED FOR THE PROJECT

4.2 RISK MANAGEMENT AND ITS IMPORTANCE

Project managers, as unmanaged or unmitigated

4.3 PRINCIPLE OF RISK MANAGEMENT

5. TOOLS AND TECHNIQUES

5.1 TOOLS / TECHNIQUES TO BE USED FOR DATA ANALYSIS

6. RISK MANAGEMENT PROCESS

Figure 3-The structure of risk management