Risk management of building project budgets.
All too often major public building projects make the national headlines for being financial disasters, rather than significant engineering achievements that contribute to the improvement of our built environment. This research is concerned with the development of a conceptual risk management model, to be used by quantity surveyors, during the establishment of initial budgets for building construction projects.The thesis is introduced with a discussion about the problem and challenge of accurate budgeting in the UK Construction Industry. Literature is then reviewed in the development of the risk management discipline, including consideration of the various definitions of both risk and risk management. The research then focuses on the establishment of the capital cost of construction for building projects, which also deals with a detailed assessment of risk management systems, tools, and techniques. A selection of commercial risk management software is also appraised.Industrial application of risk management when estimating initial budgets for building projects is investigated by use of a postal questionnaire survey of 125 quantity surveying practices in the UK. Budget estimating base methods are clarified, causes of cost overruns are identified, and, in particular, the awareness, use, and performance of risk management tools and techniques is determined. Eleven structured interviews with professionals are carried out to validate and qualify the survey findings.Based on this research a model is developed representing a risk management system framework which embraces the best performing tools and techniques. A project is selected as a case illustration and the use of the integrated model is demonstrated within a quantity surveying practice.Conclusions are drawn from the research, including the requirement to facilitate risk management within a qualitative framework. Risk itself is identified as presenting both problems and opportunities, and the quality of information, interpretation of language, change, and human inputs, all have an influence on establishing accurate building project budgets.It is recommended that further research should attempt to understand more clearly the issues of uncertainty, risk attitude, and change. This includes the possible development of a standard financial risk rating scale for the construction sector, coupled with the monitoring of industrial risk trends, and assessment of information on the reasons why building project budgets change from their initial estimates.
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Sheffield Hallam University (United Kingdom).