Risk Assessment for Art Library Construction - Case Study Example

Risk Assessment for Art Library Construction Introduction Risk assessment and management is crucial to the success of any project. In construction, the two play a major role in ensuring that the plan accounts for all events likely to occur, increasing the efficiency of the working team. The report focuses on construction management of an Art Gallery. The project is a crucial one, and the paper aims at assessing all unexpected events and managing them to improve the smooth flow of events. The unexpected events have adverse effects on the overall cost of the art gallery, and their occurrence may stretch the budget, minimizing the profits. Another effect is on the duration of the project, where these uncalled for events affect the projects deadline. Completion of a project on time is one of the key focuses of any constructor. Therefore, completion of the art gallery may be affected adversely by these unexpected happenings (Lee and Jones, 2004, p. 12). These unexpected events are often unforeseen, and the constructor has no power over heir occurrence. However, meeting the deadline as stipulated in the contract is a major concern for the organization, as delays results to fines, which minimize the constructor’s profits. The risks to be discussed in this paper are majorly four, among them bad weather conditions at the site of the art gallery. The condition will automatically stop the flow of events, and the project will be late, resulting in major constructor losses. The occurrence will greatly hinder construction, and the constructor will have to wait for a better period to continue with the project. Another major unexpected event is a planning dispute, which hinders the commencement of construction as planned. Coming up with a methodology to start, run and complete the project fast is vital, and when such an event occurs, the organization is set to face major losses. The dispute will affect the project in two major dimensions, time, and cost. The third unforeseen event is where the client reduction of the car park required in the art gallery. The reduction of these slots has a positive implication on deadline, but a negative one on time. Funds will have to be refunded for the minimized cost, whereas the time for project completion will reduce. The final event is the increment of the taxes by the government by a further 2.5%, where the client wishes to share the extra charge. There is no effect on the time, but the event will minimize the profits because of the VAT increment. Art Gallery Risk Assessment The part of risk assessment is a major constituent of the construction plan, aimed at depicting the effects of unexpected events on the relevant stakeholders. Unexpected events have major effects on the organization, the public, owners, and the constructor. Therefore, it is vital for any project to entail risk assessment, with the aim of minimizing the damage instituted by these unforeseen events. The risk assessment process begins from the start of the project to the end. It focuses on ensuring that the constructor remains on track and that the occurrence of any hazard would have no major effects on the company. The four most considered aspects in the risk assessment are operation, construction, maintenance, and demolition. Through them, a constructor is in a position of realizing the level of danger posed to him or her, and the damage set to be incurred. Schemes Hazard Person at risk Comments and control measures Probability Risk I Working at heights Contractors/ Workers Provision of scaffolds Fencing around the site Site Labeling Qualified staff for demanding tasks II Manual handling of equipment Contractors/ Workers Offering right attire for handling Use of proper machinery Qualified staff only III Moving vehicles Contractors/ Workers Induction process to inform workers on the various undertakings and avenues Road clearing during transit Wearing of high visibility vest for every worker IV Delivering Materials Contractors/ Workers Right attire for the task Qualified staff only Adherence delivery rules Risk Management Construction entails a diversified set of activities, among them risk management. Construction works have major risks, whose inconsideration affects the project adversely. Identifying and managing these risks is vital and helps the constructor to reduce the damage inflicted, bettering his or her chances of success in completion of the project. The activities have variant effects on the business, and they result in different forms of losses and occurrences. The disparity of these risks causes varied effects on the stakeholders, and thus it is crucial for their management to minimize the extent to which the span of their occurrence takes. With such measures in place, the process becomes simplified, and risk occurrence has minimized effects on the organization, owing to the much ready recipient, which is we, the constructor. Risks vary from events arising during the construction process to external events, to which we have no control. Issues such as client requirements, change of plan, are majorly internal. However, changes in weather conditions and the increment of VAT by the government is an outside force, to which we have no control. Risk management entails minimizing the effects of these occurrences or happenings, enabling the constructor to get back on track and complete the project on time and as planned (Hester and Harrison, 2003, p. 113). The process of risk management spans to a wide degree, entailing a variety of events, all aimed at minimizing the effects of the loss. The methodology involves incorporating risk management into the project design, enabling the accountability of any lost time or resources. In this manner, the constructor is in a position of identifying causes of damage to the plan, putting him or her in a much better position in terms of readiness and countermeasures. The process involves identifying the risk at an early age, communicating it to the relevant people, analyzing the potential risks, prioritizing the risks, tracking risks, and development of countermeasures to prevent further or extend damage on the project. Risk management is a vital part of a development of a product, owing to its participation in the minimization of threats and losses to the organization. It helps the constructor remain on track and develop a good project matching the intended specifications, including time and cost, which are the two major aspects of construction activities. Project Contract For the successful completion of the project, it is vital to adhere to an efficient and viable contract. For the construction of the art gallery, the NEC 3 Engineering contract will be enacted for the construction of the complex. The agreement stipulates the consequences of delays by the constructors, among which the client is in a position to ask for compensation. The reasoning behind this is the assumption that the delay limits the generation of income as intended by the owner from the project (Haas, Gerba and Rose, 2008, p. 3). However, the contract also allows the constructor to ask for an extension, in case there are delays that limit the ongoing of the project. Unexpected events always occur, and it is vital that both parties agree on extension issues, enabling the completion of the project peacefully, and delivery of quality work. The fixed date provided must be adhered to unless the two parties agree on a different line of thought, often owing to the occurrence of risks (Haas, Gerba and Rose, 2008, p. 3). Case Study Risk Management Planning disputes prevents commencement of work on the site (+17 days) Before the commencement of activities on the planned site, there arises a dispute among the constructors. The dispute is in relation to the number of the workforce to be hired, their salary, and the expertise needed. The dispute has a varied effect on the project, which is fully negative. The implications on the deadline for completion of the order are major, causing a 17-day delay. It is a major breach of contract, and the constructor has to face major losses from the unexpected event. In their contract, the two parties had already specified the deadline for completion of the order. The causes of a need to extend trace back to the constructor, who has not consolidated the team into working and kicking off the project. Therefore, the cause is self-induced and should be compensated for by the client. The jury is in charge of estimating the actual damage caused by the actions of the construction company. However, some estimates can be made based on the set contract for the project. The contract specifies that in case of any delays, the contractor must pay a fine of £1,000 daily. Therefore, with an increment of 17 days, the expected reimbursement is £17,000. It is a major blow to the constructor and minimizes the profits accrued in the project. The constructing company should compensate the client for these self-caused delays that it has caused. The charge is in terms of the contract, as specified in the liquidated damage section. Bad weather stops roofing (+14 days) Another major blow to the already trailing project is bad weather. During roofing, major rains and storms stop the construction process, where the company has to extend its delay. Bad weather is a tricky event for the company at this stage, especially owing to the reason that the company is already off schedule. The company is not in control of the weather, and it has no option but to focus on other activities as it awaits better conditions. The occurrence has a major effect on the derailing of the deadline, where time extends by another 14 days. It is evident that changes in weather conditions have adverse effects on construction processes, limiting their success. The further extension of the deadline has major causes, and the organization has to cover the losses faced by the client. The derailed project is costing the client even more, where he or she has to reschedule the planned activities for the museum. If the time is not accounted for later, a loss of £14,000 is expected to be accrued by the constructor based on the contract specifications. However, the contractor may seek extension, which only eliminates the financial loss but still inflicts a much dangerous threat, time. However, the contract covers such events and depicts them as causes of nature. The implications on cost might be different, and a disagreement between may require legal advice, where the verdict may be passed by a jury. In this context, justice will be achieved, and all losses accounted for (Powell, 2000, p. 4). The client reduces the number of required parking slots (-10 days) The client’s decision to reduce the number of parking spaces in the art gallery has a varied effect on the organization. Since the time for completion of the order had already been set, the company is set to enjoy a positive effect. The time for completion of the order increases, since the effect is a reduction in the project completion time. The time reduces by ten days, which the company can capitalize on for success in completion. The added time comes with a negative effect on the constructor, where he or she has to part with £5,000, owing to the reduced cost of construction. The negative impact on the cost minimizes the profits accrued by the company, despite the additional time. The company is therefore supposed to capitalize on the additional time and reduced workload to complete the construction of the art gallery. It will help minimize the losses accrued due to the past and unexpected events, which rendered the constructor off schedule and had a negative impact on the earnings from the project. Government increase VAT on the day of the signing of the contract and the client wishes to split the extra 2.5% with the company (0 days) After all the agreements have been made pertaining the project and contract details, an unexpected event occurs. The government increases the VAT by an extra 2.5%. It is a major blow since the organization and the client should both participate in the payment of the extra cash. The increase has a decreasing effect on the organization’s profits, and the construction company receives reduced revenues. The damage instituted by the loss is half of the increment set by the government since the client agrees to share the loss and split the VAT between the two parties. The company, therefore, encounters a loss of 1.25%, which reflects on the company’s profits. From the expected income, which attributes to 100%, the company receives a lower value by 1.25%, which is ultimately 98.75%. It is a major decrease in the companys earnings, and, therefore, has a subsequent effect on the organizations profits. The company enjoys reduced profits in comparison to the agreed value as per the contract. However, the case may be presented in a court of law, where the local authority may determine the means of payment of the increased VAT. In this case, the body in charge determines the repayment method and the party responsible for the loss. The argument to this is that the property owner should suffer the loss, and the contractor should not be included. In case of this occurrence, the assessment in terms of costs is to be made by the body responsible for the issue at hand. Breach of Contract The project is not complete on time, as specified in the contract, resulting in a breach of contract. The construction company is therefore on the verge of receiving major penalties as stipulated in the contract signed by the two parties. In an assumption, the loss encountered for each lost day is £1,000. The company has lost 17 days to the planning dispute, 14 days to bad weather, and gained ten days from the reduction of parking spaces. Therefore, the total increase in time is 21 days, all of which should be accounted for by the company. The penalty is, therefore, £21,000, and the company should reimburse the client that much. It is also possible that the penalty rises, owing to the increase in VAT, which is under assessment. However, according to the NEC 3 contract, we as a company can negotiate with the client concerning the events. It will enable us come to an agreement and reduce the implicated penalties to safeguard our relationship and at the same time improve the level of profits (Kemshall and Pritchard, 2006, p. 40). Conclusion As depicted in the report, it is evident that unexpected events have major implications for a project, precise construction of an art gallery. During the process, the company incurred various risks, which consequently amounted to major losses on the aspects of time and cost. However, with a well-laid risk management design, it is possible to eliminate the dangers enacted by occurrence of these events. It helps the organization cut on costs, and if we had applied it in our organization, we would be in a position to meet the deadline. It would eliminate any losses that have been incurred, bettering our relation with the client, and allowing us proceed to other activities. References Haas, C. N., Gerba, C. P. and Rose, J. B., 2008. Quantitative risk assessment. New York, NY [u.a.], Wiley. Hester, R. E. and Harrison, R. M., 2003. Risk assessment and risk management. Cambridge, Royal Society of Chemistry. Kemshall, H. and Pritchard, J., 2006. Good practice in risk assessment and risk management 2: protection, rights, and responsibilities. London, Jessica Kingsley Publishers. Lee, E. M. and Jones, D. K. C., 2004. Landslide risk assessment. London, Telford. Powell, S. K., 2000. Case management a practical guide to success in managed care. Philadelphia, Lippincott. Read More