Risk Anaysis Case Study

Foreword				2.6 What goes wrong Consequences?

I wish to acknowledge the support of Mr John				ï‚§ Coast overrun 1300% (Ref. 18)
Tookey University of Auckland for his
generously support and valuable advises.				As feared many experts the project become an
				engineering financial debacle, lasting 15
1. Introduction				years and costing $107 million ($100 million
				over the initial estimate).
Risk management is one of the most critical
project management practices, to ensure a				ï‚§ Schedule overrun 250% (Ref. 18)
project be successfully completed Risk
management is thus in direct relation to the				ï‚§ Media and public scandal
successful project completion. Project
management literature describes a detailed				Fig 5 Time /cost Escalation
and widely accepted risk management process,
which constructed from four iterative phases				ï‚§ Management conflict occur between the
known as risk management plan				client and the architect that cause him to
				resign before the end of stage III .
â€¢ Risk identification
				3. Risk identification quantification
â€¢ Risk estimation
				3.1 Identification
â€¢ Risk response
				By looking at the project there are some
â€¢ Planning and execution				risks appear not used have the most adverse
				effect on the project
Risk Identification
				1. Poor Cost Estimate.
In this stage , we identify and name the
risks , there are different sorts of risks				2. Incomplete design.
and we need to decide on a project by
project basis what to do with each type.				3. Failure to keep within the cost estimate

Risk Quantification				4. Failure to achieve the required completion
				date.
Risk need to be quantified in two dimensions.
The impact of the risk needs to be assessed.				5. Changes in project scope and requirements.
The probability of the risk occurring needs
to be assessed. For simplicity, rate each on				6. Design changes.
a 1 to 4 scale. The larger the number, the
larger the impact or probability. By using a				7. Pressure to deliver project on an
matrix, a priority can be established.				accelerated schedule.

Fig 1 quantification scale matrix (Ref. 11)				8. Inaccurate contract time estimate

Risk Response				9. Lack of communication between project
				participants.
There are four things you can do about a
risk. The strategies are:				10. Inadequately defined roles and
				responsibilities.
â€¢ Avoid the risk. Do something to
remove it. Use another supplier for example.				11. Insufficient skilled staff.

â€¢ Deflect the risk. Make someone else				12. Political risks.
responsible. Perhaps contracting out or
insurance against (damage , liability,				3.2 Qualitative risk analysis
personnel liability etc
				Qualitative risk analysis assesses the
â€¢ Mitigate the risk. Take actions to				importance of the identified risks and
lessen the impact or chance of the risk				develops the prioritized lists ,using the 1
occurring. If the risk relates to				to 4 scale matrix discussed above to quantify
availability of resources, draw up an				identified risks
agreement and get sign-off for the resource
to be available.				Risk Probability Impact Risk
				Importance
â€¢ Accept the risk. The risk might be so
small the effort to do anything is not				1. Poor Cost Estimate. 3 3 Critical
worthwhile or a contingency plan may be
developed to deal with possible effects.				2. Incomplete design. 1 3 High

Risk Control				3. Failure to keep within the cost estimate
				3 4 Critical
The final step is to continually monitor
risks to identify any change in the status,				4. Failure to achieve the required completion
or if they turn into an issue. It is best to				date. 4 3 Critical
hold regular risk reviews to identify actions
outstanding, risk probability and impact,				5. Changes in project scope and requirements.
remove risks that have passed, and identify				1 3 High
new risks.
				6. Design changes. 2 2 Low
1.1 Risk management and construction
				7. Pressure to deliver project on an
The construction industry is subjected to				accelerated schedule. 2 2 Low
more risk and uncertainty than many other
industries. The process of taking a project				8. Inaccurate contract time estimate 3 4
from initial investment appraisal to				Critical
completion and into use is complex, generally
bespoke, and entails time-consuming design				9. Lack of communication between project
and production processes. It requires a				participants. 3 4 Critical
multitude of people with different skills and
interests and the co-ordination of a wide				10. Inadequately defined roles and
range of disparate, yet interrelated,				responsibilities. 1 4 High
activities. Such complexity is further
compounded by many uncontrollable external				11. Insufficient skilled staff.
factors (Flanagan and Norman, 1983). The				1 2 Low
construction industry has a poor reputation
in coping with risks, many projects failing				12. Political risks. 4 2 Medium
to meet deadlines and cost targets. Clients,
contractors, the public and others have				Three risks were selected for detailed
suffered as a result (Edwards 1995). This				qualitative risk assessment (refer to sheet 1
study will focus on applying project risk				, 2 and 3)
management strategies on construction of
Sydney opera house which is a well-known case				Risk Risk Control
for cost overrun.
				1. Poor Cost Estimate. Client, Contractor
1.2 The aim of the study
				2. Incomplete design. Client ,
The aim of this study is not to reduce the				Contractor
great achievement of construction such a
complicated building that changed the face of				3. Failure to keep within the cost estimate
the city but looking form management point of				Client
view to
				4. Failure to achieve the required completion
ï‚§ Identify and quantify the project				date. Client, Contractor
risks that been overlooked.
				5. Changes in project scope and requirements.
ï‚§ Highlight the dangers associated with				Engineers
using poor estimate.
				6. Design changes. Contractor
1.3 About the Sydney Opera House
				7. Pressure to deliver project on an
ï‚§ The owner :State government of New				accelerated schedule. Engineers
South Wales
				8. Inaccurate contract time estimate
ï‚§ Architect :Jorn Utzon				Contractor, Client

ï‚§ Engineer: Ove Arup & Parteners				9. Lack of communication between project
				participants. Engineers, Contractor, Client
ï‚§ Cost: $102 million
				10. Inadequately defined roles and
The Sydney Opera House is the busiest				responsibilities. Engineers, Client
performing arts centre in the world. Since
its opening in 1973, it has brought countless				11. Insufficient skilled staff. Client
hours of entertainment to millions of people
and has continued to attract the best in				12. Political risks. Contractor
world class talent year after year.
				3.2 Risk response
1.4 About the Building
				3.2.1 Risk Avoidance
There are nearly 1000 rooms in the Opera
House including the five main auditoria.				As discussed most of the risk could be
There is also a Reception Hall, five				avoided by only
rehearsal studios, four restaurants, six
theatre bars, extensive foyer and lounge				â€¢ Completed design .
areas, sixty dressing rooms and suites,
library, an artists' lounge and canteen known				â€¢ Estimating at a very detailed level.
as the "Green Room", administrative offices
and extensive plant and machinery areas. The				â€¢ Not selecting untested design .
building covers about 1.8 hectares (4.5
acres) of its 2.2 hectare (5.5 acre) site. It				â€¢ Using local Architecture office will
has about 4.5 hectares (11 acres) of usable				reduce many and more communication and
floor space. It is approximately 185 m (611				experienced architecture designer
ft) long and 120m (380 ft) wide at its widest
point. The highest roof vault (above the				3.2.2 Risk transfer
Concert Hall) is 67m (221 ft) above sea
level.				â€¢ Using a fixed price contract will
				transfer construction risk to the contactor.
The roofs are made up of 2,194 pre-cast
concrete sections. These sections weigh up to				â€¢ Obtaining Insurance to cover costly
15.5 tones (15 tons) each. They are held				risks.
together by 350 km (217 miles) of tensioned
steel cable. The roofs weigh 27,230 tones and				3.2.3 Mitigate the risk
are covered with exactly 1,056,056 Swedish
ceramic tiles arranged in 4,253 pre-cast				Risk analysis shows that no clear management
lids.				process for controlling the project however
				using an experienced project manager would
The entire building weighs 161,000 tones. It				effectively reduce probability or impact of
is supported on 580 concrete piers sunk up to				risks to an acceptable level.
25 m (82 ft) below sea level. The roofs are
supported on 32 concrete columns up to 2.5 m				4. Assessment forms
(8 ft) square. The exterior and interior
walls, stairs and floors are faced with pink				Following a three assessment forms for 3 of
aggregate granite which was quarried at				the significant risks
Tarana in New South Wales. The two woods used
extensively to decorate the interiors are				Performa for a Qualitative Risk Assessment
brush box and white birch plywood which were				(sheet 1)
both cut in northern NSW. There are 6,225 sq
m (67,000 sq ft) of glass, made in France, in				Reference No: 6 Date:25/06/2007
the mouths of the roofs and other areas of
the building. It is in two layers - one plain				Potential risk: Importance of Risk: Low
and the other demi-topaz tinted. About 2,000
panes in 700 sizes were installed.				Design changes

There are 645 km (400 miles) of electrical				Probability Medium
cable. 120 distribution boards regulate the
power supply, equivalent to the needs of a				Consequence Medium
town of 25,000 people. Twenty-six
air-conditioning plant rooms move more than				Stage of the project affected by this risk:
28,500 cubic meters (1,000,000 cubic feet) of
air per minute through 19.5 km (12 miles) of				Construction stage
ducting.
				Statement of risk:
Fig 2 Sydney opera house (Ref. 6)
				Cost and schedule overrun
Fig 3 Sydney opera house during construction
(Ref. 7)				(The factor that could cause it to occur)

Fig 4 Sydney opera house shells (Ref. 7)				Political business interest

Fig 4 Sydney opera house shells (Ref. 7)				Site problems

1.5 Design Stage				(any relationship or dependency on other
				risks)
The original concept for the project was a
sketch submitted by Danish architect , Jorn				Incomplete design
Utzon .Judges selected it from an
international open competition that ended				(the likelihood of occurring)
with 233 entries from 11 countries. Thought
happy to win the competition Utzon was mildly				Medium
shocked .although his concept had caught the
attention of the judges, it consisted only if				(how it could be affected)
simple sketches with no plans or even
perspective drawings , because the design				Design checking prior leaving the design
was so unique , some people presumed it would				office
also be inexpensive to build. No one knew how
it would be build , and some experts				Project:
questioned that it could be built at all.
				Sydney opera house
In spite all uncertainty , the initial
project cost estimate was pit at				Client:
$7million.The government would use profits
from a series of state run lotteries to pay				New South Wales government Risk Analyzed by:
the project.
				Khaled
The government was worried that the people
scrutinizing the design might raise question				Performa for a Qualitative Risk Assessment
about the potential problems hat would stall				(sheet 2)
the project they thus quickly mover ahead and
divided the work into three main contracts				Reference No:1 Date: 25/06/2007
:the foundation and the building except the
roof, the roof, and the interior and				Potential risk: Importance of Risk: Critical
equipment.
				Poor Cost Estimate
1.6 Construction stage
				Probability High
Many of the world's best-known construction
companies were involved in building				Consequence High

Sydney Opera House including Arups Structural				Stage of the project affected by this risk:
Engineering, Hornibrook and Rider Hunt, the
construction work of S.O.H was divided into				Design stage
three distinct stages as follows (Ref. 19)
				Construction stage
â€¢ Stage I
				Statement of risk:major source of
Sub structure , concrete structure from the				complainttime consuming
foundation up to the auditoria seating levels
excluding any finishes.				(the factor that could cause it to occur)

â€¢ Stage II				Changes in project scope and requirements

Superstructure or shells , concrete roof				(any relationship or dependency on other
vaults or major and minor halls an				risks)
restaurants , including the claddings.
				Inadequately defined roles and
â€¢ Stage III				responsibilities.

Everything not included in stages I and II ,				(the likelihood of occurring)
stage towers, all interior finishes, exterior
paving and cladding, glass walls , all				Height
electrical and mechanical services.
				(how it could be affected)
After he was elected premier of New South
Wales in 1965, Askin attempted to force Utzon				Effective project management
reduce costs by withholding payments. In 1966
Utzon resigned and returned to his native				Clearly defined roles
Denmark. He never even returned to see his
masterpiece completed.				Project:

The construction of the Sydney Opera House				Sydney opera house
was now handed over to a group or Australian
architects. Fortunately, the exterior had				Client:
already been completed by then so that the
impact of the altered design on the overall				New South Wales government Risk Analyzed by:
structure was minimal. The project was
finally completed in 1973 after a				Khaled
construction period of 14 years and an
expenditure of over $A100 million, almost 15				Performa for a Qualitative Risk Assessment
times the estimated budget.				(sheet 3)

2. Risk management strategies at S.O.H				Reference No:9 Date: 25/06/2007

2.1 Financial				Potential risk: Importance of Risk: Critical

Despite of all cost escalation , taxpayer had				Lack of communication between project
little to pay .Virtually all the costs were				participants. Probability high
covered by the proceeds of State Lotteries.
The continued need to the subside the running				Consequence high
costs of the opera house were financed by the
continuation of the Lottery State. The first				Stage of the project affected by this risk:
estimate for the Sydney Opera House was $7.2
million in Australian dollars. Once started,				Construction stage
however, costs kept rising and just to
complete the building cost $102 million.				Design stage

2.2 Political				Statement of risk:

Political risks are often occur in				Insufficient working drawing details
government project as they often hide
information affecting the community's				Late and in adequate information
support, which in turn affect the
effectiveness of the feasibility study .				Major costly errors.
S.O.H we mostly severely effect by political
decisions				(the factor that could cause it to occur)

2.2.1 Media and public deception				Lack of management

In S.O.H. the original budget of seven				Interest conflict between project
million Australian dollars was not a real but				participation
a political budget .The labour government of
New South Wales the main proponent of the				(any relationship or dependency on other
S.O.H, wanted the project started before				risks)
elections in March 1959-this would reduce the
risk of the stopping the project in case				Incomplete design
Labour lost the elections (8).
				(the likelihood of occurring)
2.2.2 Deceptive cost estimate
				Height
Kim Utzon explains in lieu of his father "It
was a political decision to publicize a low				(how it could be affected)
budget for the building, which was expected
to gain approval in the political system, but				Proper project management
which very quickly was exceeded. So even if
the cost overrun turned to be 1400% in				Project:
relation to the publicized budget, this
budget was an eight of the real budget of the				Sydney opera house
building .So the real overrun is only 100%
the rest was politics".				Client:

2.2.3 Political construction date				New South Wales government Risk Analyzed by:

The start of construction for stage I was				Khaled
fixed ., largely for political reasons , as
the 2nd March 1959.Thus Proceeding with				5. Lessons learned
construction before completing the design
process which is a great risk .				â€¢ Risk must be identified to be managed

2.2.4 Political design changes				â€¢ A poorly defined risk structure will
				breed more risks.
On 1966 major hall was changed from dual
purpose for concert and opera to a single				â€¢ A proper risk management strategy
purpose concert hall, the dual purpose was a				would planning.
requirement of the competition .
				â€¢ All designs and calculations should
2.3 Structural				be checked before they leave the design
				office further check calculation should be
2.3.1 The Supporting points				made by the authority , many errors that
				escape are picked up and corrected during
Arup and his engineers knew very well that				construction .This often cause a delay to the
the cross-section shape Utzon chose was far				project and might effect the cost.
from ideal known structures, however they
could not suggest changing to the shape as it				â€¢ The goal is to prevent political and
will alter the appearance of the roof				business interests from interfering with
drastically.				design and thus to arrive at an outcome as
				close as possible to the original design
2.3.2 The roof				drawings.

A question should be asked if this design is				â€¢ Continually monitor risks to identify
achievable?. The competition judges choose a				any change in the status, or if they turn
complex art design without asking how it will				into an issue. It is best to hold regular
be deigned? later on it was a major cause for				risk reviews to identify actions outstanding,
delaying the roof design if this point was				risk probability and impact, remove risks
been considered they should either choose a				that have passed, and identify new risks.
simple shape or a known geometry, at this
stage computer program analysis was not yet				â€¢ Risk management is not one off
been introduced that means only manual				activity instead, it should be applied
process can be used to calculate the forces				continuously through the project life.
acting on the structure.
				â€¢ The best way to control budget is not
2.3.3 Lack of suitable boundary condition.				to proceed with the building unlit you have
				all the drawings complete.
Another technical problem that the engineer
had to solve was the lack of boundary				6. Conclusion
condition that leads to some earthwork as sub
base for the structure foundation.				Study clearly identify the great importance
				of risk management on construction projects,
2.4 Technical				negligence will lead to an expensive cost
				effecting the project successes.
Utzon, ware of possible technical problems
since his design required advanced technology				A risk analysis project shows a large number
not yet available, requested additional time				qualitatively ranked as 1 , those risks have
to tackle those challenges Utzon faced the				a high probability of occurrence and height
task of converting the concept into a design				consequence shared between the client 42% ,
form which a structure could be built, but he				the contractor 36% and the engineer 21% .
had no prior experience in the design and
construction of such a large building.				This indicates that it was a very risky
Because of this lack of plans, detailed				project nevertheless risks were either
design drawings, and estimates of materials,				downplayed or ignored , and not much was done
little existed from which cost could be				to keep them under control, the project
determined.				management strategies was only focused on
				keeping the project going no matter how it is
2.4.1 Design errors and omissions				going .

â€¢ Unfortunately, the roof shells were				Finally although the opera house put Sydney
too heavy for the supporting columns that				on the world map, both architecturally and
were already built, so these were demolished				culturally but from project management
and rebuilt. These and several other setbacks				perspective it was a spectacular failure as a
led to delays and increasing cost overruns.				consequence of ignoring risk management.

â€¢ The original design called for two				References
theatres. The government changed its mind
and required the building to be altered and				1. [Accessed 2 May 2007].
that four theatres now be incorporated into
the design				2. [Accessed 2 May 2007].

â€¢ The foundation been demolished to				3. Edwards, L. (1995). Practical risk
suit the new roof design loads.				management in the construction industry,
				Thomas Telford, London
2.4.2 Fitness for purpose.
				4. Flyvbjerg, Bent, "Design by Deception: The
ï‚§ The main design overlooked acoustic				Politics of Megaproject Approval", Harvard
requirements which is the main purpose of				Design Magazine, Volume 22, 2005.
the building and had to be altered at later
stage.				5. [Accessed 2 May 2007].

ï‚§ The Running costs for S.O.H proved				6. [Accessed 2 May 2007].
expensive , it was a very labour intensive
building .In 1974 , it operation cost was				7. [Accessed 2 May 2007].
$A6M, of which only $A2M was covered by the
revenue. Thus costs ruled out small scale				8. Murray ,21-22.
opera and the Australian Opera were forced to
seek a cheaper venue.				9. Murray, P: The Saga of the Sydney Opera
				House, 2004, Spon Press (UK), ISBN 0415325218
2.5 Construction
				10. [Accessed 25 Jun 2007].
Engineers who revised the concept noted that
the roof shells were much larger and wider				11. Neville Turbit
than any shells seen so far. Further, because
they stuck up so height, they would act like				12. John Tookey civil 703 lecture notes
sails in strong winds blowing up the harbour.				University of Auckland.
Thus, the roof would have to be carefully
designed and constructed to resist such wind				13. Office of Project Management Process
pressure.				Improvement "Project Risk Management
				Handbook"
The construction was estimated to take about
five years at a cost of A$7 million. Ignoring				14. Peter Murray "The dramatic storey of the
his request, the government pressured Utzon				design and construction of the icon of modern
into starting construction in 1959, two years				Australia"(London and New York: Spon
ahead of the architect's proposed schedule.				Press,2004),105.

ï‚§ The lack of preparation soon				15. Roger Flangan & George Norman "Risk
backfired. After the completion of the grand				Management and Construction". Blackwell
podium with an enormous, 86 meter (282ft)				Scientific Publications ISBN 0-632-02816-5.
wide stair, several years were spent
reworking the design of the roof.				16. [Accessed 2 May 2007].

â€¢ Three tower cranes imported from				17. [Accessed 2 May 2007].
France for this job costing $100,000 each and
it was the first building constructed in				18. Woodward, Hugh PMP, PowerPoint
Australia using tower cranes.				Presentation to NASA on March 23, 2005,

â€¢ Unfortunately the roof shells were				19. Yozo Mikami "Utzon's Sphere" page 46
too heavy for the supporting columns that				Shokikusuha Tokyo ISBN 4-395-00712-0
were already built, so these were demolished
and rebuilt.				20. Ziegler, Oswald L. (ed) Sydney Builds an
				Opera House.

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Risk Anaysis Case Study