A study of risk management in the

procurement process.
INTRODUCTION
The construction industry is associated with a high risk exposure and is therefore a field
where risk management is crucial (Baker et al., 1998; Hastak and Shaked, 2000).
According to PMBOK Project risk is an uncertain event or condition that, if it occurs, has a
positive or negative effect on one or more project objectives such as scope, schedule, cost,
and quality. A risk may have one or more causes and, if it occurs, it may have one or more
impacts.
Risk Management includes the processes of conducting risk management planning,
identification, analysis, response planning, and controlling risk on a project. The objectives of
project risk management are to increase the likelihood and impact of positive events, and
decrease the likelihood and impact of negative events in the project.
Project Procurement Management is a part of project management process in which products
or services are acquired or purchased from outside the organisation in order to complete the
task of the project. This covers buying, leasing or hiring products or services from suppliers
as well as requisitioning them from other departments within the organization.
As affirmed in PMBOK, Project Procurement Management includes the contract
management and control processes required to develop and administer contracts or purchase
orders issued by authorized project team members. It also includes controlling any contract
issued by an outside organization (the buyer) that is acquiring deliverables from the project
from the performing organization (the seller), and administering contractual obligations
placed on the project team by the contract. According to Smith et al. (2006) the choice of
contract type for an infrastructure project has a significant impact on how risks are shared
between the contractor and the client.
In a study conducted by Ekaterina Osipova and Kajsa Simu in Sweden Where the
respondents were asked to estimate the importance of risk management in every phase of the
construction project (Figure 1), the production (execution) and planning phases were
identified as the most important for the management of risks followed by the procurement
and
programme
phases
follow.

However according to Smith et al. (2008), the level of risk increases in the beginning of a
project and reaches its highest level during the tendering process where the project

uncertainty is at its peak. When the production starts, risks are either actualised or expired
and the level of risk will decrease as the project progresses. As a result, risk management
becomes most vital in the tendering process. To confirm this statement, Elkington and
Smallman (2002) claim that there is a strong relation between an early risk management and
the success of a project. The volume of resources spent in risk management activities is a
fundamental factor to project success. An early involvement of risk management will create
better conditions for the contractor, in both the tendering process and in the execution phase.

NEED OF THE STUDY

Risks have a significant impact on a construction projects performance in terms of cost, time
and quality. As the size and complexity of the projects have increased, an ability to manage
risks throughout the construction process has become a central element preventing unwanted
consequences. How risks are shared between the project actors is to a large extent governed
by the procurement option and the content of the related contract documents. Therefore,
selecting an appropriate project procurement option is a key issue for project actors.

AIM
The overall aim of this seminar is to increase the understanding of risk management in the
different procurement options in India.

OBJECTIVE
To understand the risk management process.
To understand the procurement management and various procurement options for
construction projects.
To identify risk involved different procurement options and how they affect the project during
different phases of the project life.
What impact does the chosen procurement option have on risk management?
To analyse how risks are shared and managed in various procurement options.
To develop recommendations, which contribute to more effective risk management in
construction projects.

SCOPE
The seminar will focus on the risk management of the construction sector and is limited to
EPC, JV, Design build, Turnkey.

METHODOLOGY
Literature study of published journals, research papers, books, unpublished thesis, seminar
works to identify the risks involved in various procurement options for construction projects.
Survey through questionnaire to identify and prioritise the risks.
Interview with project management personals to get a better understanding of the risk
management in procurement.