IJIRST International Journal for Innovative Research in Science & Technology| Volume 3 | Issue 06 | November 2016

ISSN (online): 2349-6010

Various Risks Involved in Highway Projects

Dr. R. R. Singh Gopesh Chugh
Professor M.E. Scholar
Department of Civil Engineering Department of Civil Engineering
PEC University of Technology, Chandigarh PEC University of Technology, Chandigarh

Abstract
The construction industry is exposed to wide array of risks such as financial, design and contractual ones, which might have
direct impact on their performance towards achieving the desired objectives. This study aims to identify the actual process of risk
management that is being applied in construction projects & to determine the effects of risk management implementation on
performance of construction project in terms of time and cost. Risk management is decision making process used to minimise
and manage the risk in efficient and appropriate manner. Most of construction employees involved in risk management are not
fully aware of available risk management technique that applied in highway projects. The construction industry and its clients are
associated with a high degree of risk due to the complex nature of the construction process. Construction Risk Management must
be given adequate attention in order to ensure a successful project that meets the expectation of project goals and objectives thus
risk management practice in a country with respect to highway projects is explored in this study. The study recommended
adequate training for all stakeholders in highway construction sector to improve management of risks thus meeting project goals
of time, approved budgets, and quality, imbibing the health and safety culture, and in an environmentally acceptable manner.
Keywords: Risk Management, Risk Assessment, Risk Drivers, Highway Construction, Operational Risks
_______________________________________________________________________________________________________

I. INTRODUCTION

The construction process has numerous uncertainties and risks, which increase with the size and the complexity of a project. Risk
has been defined in different ways. Project Management Institute (PMI) defines project risk as an uncertain event or condition
and that its occurrence has positive or negative effect on at least one project objective, such as time, cost, scope, or quality (PMI
2004). According to Smith et al. (2002). Risk is an unforeseen event that occurs during the process of construction projects.
Study shows that construction industry is subjected to more risk and uncertainties than any other industries. The reason for that is
mainly due to complex nature of construction business activities, process, environment and organization. Risks that occur in
highway projects will lead to inability to achieve desired project objectives. Delays, cost overruns and reduction of availability of
resources are negative effect of risk inherent to highway projects. Ashley et al. (2006) have emphasized the importance of risk
assessment, risk allocation, and risk management in effective management of highway construction projects. Risk management
must be forward looking and identify potential problems.

II. RISK MANAGEMENT IN THE CONSTRUCTION INDUSTRY

Zaghoul and Hertman (2003) described risk in construction projects as significant element by the total project cost and thus their
allocation has a major effect on project budget. Baloi and Price (2003) described construction project as an open system rather
than a closed system, which add to variability and riskiness of the project. Klemetti (2006) stated that risk management in the
construction industry still rely heavily on contract and the industry has the bad reputation of involvement in numerous dispute
and claims. Floricel and Miller (2001) stated that various studies have shown that contractual structures are the main sources of
the lack of flexibility and they have a significant negative effect on actors relationship. Risk management should be
implemented; contracting risks to other parties does not mean they are managed since nothing is done to deal with these risks;
rather there will be increase in the cost of contract.
Cost overruns and late completion times in large infrastructure projects have been widely recognized as risks impacting
project performance (Flyvbjerg et al. 2002). Controlling project budgets over project construction life cycle for mega
infrastructure projects is a major challenge for both the public and the private sectors. Accurately estimating cost is an important
factor for a successful project cost management from the start of planning phase to the completion of construction (Akintoye &
MacLeod 1997; Nassar et al. 2005). Contingency has been used to manage uncertainty and risk in construction projects. To
adequately calculate the project contingency, planners should focus on analysing the potential risk drivers. Contingency amount
is greatest in the beginning of a project and is gradually reduced as the project is designed, risks are resolved, or the contingency
amount is spent (Ashley et al. 2006).
Klemetti (2006) however asserted that the biggest barrier in construction project risks management are a drive for cost
effectiveness; risk management is seen only to consume resources and benefit are difficult to measure in financial terms. Lack of
risk management resources and know how restricts the use of risk management techniques. Several studies have shown that there

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are not enough capable personnel to conduct the risk management process and risk management is only in the hands of a few key
people. Hence, this study has the following objectives:
1) To assess factors affecting implementation of risk management practices of highway projects in Malaysia.
2) To assess if there is any difference in the way stakeholders management risks associated with highway projects in Malaysia.

III. METHODOLOGY

There are two stages involved in this research project: First, the key operational risks for highway projects in Malaysia and some
selected developing Asian countries were identified through literature review. This stage of research focuses on determining the
types of operational risk that had been identified by previous researchers, which have great potential of occurring in the
highway projects and causing significant impact to the project if occur.
Second, extensive interviews were conducted with a number of key personnel from the MHA in order to get their
personal opinions and views about the possibility of the operational risks identified from literature review to occur in the
highway projects in Malaysia. The selection of the personnel involved in the interviews was made based on a thorough
background check in regards to their knowledge and experience working as well as managing highway projects in Malaysia. For
example, the Regional director of the MHA who used to manage and also currently managing the operational contracts
of highway projects within its region. The personnel involved in the interviews then justified the possibility of the operational
risks identified from literature review to occur in the highway projects Malaysia.

IV. FINDINGS

Operational risk in construction projects like bridges, highways and hospitals reflects activities or events that have significant
impact towards the operation of the project if occur. Time and cost overrun in the operation and maintenance are among
key operational risks that have the possibility to occur in a construction project during the operational stage. Some References
outlined several factors that may dictate the occurrences of these risks in construction projects. The costs for operating and
maintaining a construction project are usually considered as overrun when the allocated expenses are found insufficient to carry
out the scheduled activities or works, after arising from unexpected escalation in the costs of equipment, labour, utilities and
other supplies. Reference identified other possible factors that can be associated with the occurrences of cost overrun in
particular, during the operation and maintenance of a construction project. These include the operators failure to meet the
desired performance standard or produce the required capacity, output and efficiency from the procured assets and/or
facilities as specified. However, in order to achieve the aim of this research, only findings related to operational risk for highway
projects in some selected developing Asian countries that had been identified by past researcher will be specified under this
heading.
A study on the operational risk of SenaiPasir Gudang Desaru Expressway (SPGDE) resulted in the identification of
potential environmental pollution to the water quality of the surrounding area caused by spillage of dangerous and
hazardous chemicals from the travelling heavy vehicle along the highway. This prospective environmental pollution was
identified as part of the risks for this project due to the location of the SPGDE where some part of the 77 km expressway had
been built across the Layang River catchment area, which situated between the Upper Layang Reservoir and Lower Layang
Reservoir.
Inappropriate operation and maintenance of the procured assets was another type of potential operational risk identified for
highway projects. A study conducted by past researcher on the expressway in China determined about the importance of
proper asset management to ensure that the procured highway projects are fully operational to the public. Generally, the quality
of road surface procured had been identified as part of the key assets towards a successful delivery of highway projects in China.
Thus there are two key risk sources identified that could affect the quality of road surface where the latter is also known as an
expressway asset for highway projects in China; man-made risk and natural risk. The man-made risk refers to activity or event
created by human being that could cause damage to the expressway asset either deliberately or not. Among the examples of man-
made risks identified from the study on highway projects in China include over-loaded freight transportation and leakage of
dangerous material/cargo on the road surface. The studies on the over-loaded freight issue for the highway projects in China had
resulted in the identification of the fact that direct loss of highway assets caused by overloading freight transport in a year was
equivalent to the total annual maintenance fee collected from highway projects nationwide. The natural risks in the highway
projects in China meanwhile are seen as events with negative consequences that occur beyond the control of human being such
as flood and fog.
A study on highway projects in Thailand had also been conducted in the past to determine their potential risks during
operation. The study had resulted in the identification of several risks, which could affect the effectiveness and efficiency of
highways operation. Among the key operational risks identified from the highway projects in Thailand include poor road sign
and delineator, road side hazard, inefficient road safety device and poor road surface. Several potential sub-risks that have great
potential to occur in highway projects in Thailand under each key operational risk were also identified by the researcher as
shown in Table 1.

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Table 1
Risk Sub-Risk
Hidden signage
Poor road sign and delineator Fade/Defect/Inappropriate signage
No proper marking/delineator for road side obstruction (warning sign).
Improper existence of road side fix objects such as tree and lamp post
Road side hazard Uncovered side drainage
Poor condition of bridge pier/ pedestrian foot bridge
Inefficient road safety Defect device Poor visibility
Device Improper installation
Poor road surface Debris on surface Uneven surface

V. CONSTRUCTION RISK DRIVERS

Project Scope
Project purpose is poorly defined
Changes by owners request
Changes to unforeseen site environment requirements
Right of Way
Right of way analysis in error
Land acquisition delay
Utility Conflict
Inadequate plan reviews by designers and contractors design errors
Poor involvement of utility companies in planning stage
High number of utilities in the site
Inaccuracy of existing utility locations and survey data
A/E Services
Surveys late and/or surveys in error
Inexperienced professionals for this type of project
Design errors and omissions
Inadequate constructability reviews
Delay in Quality Assurance/Quality Control (QA/QC) services
Project Construction Management
Poor communication with owner and contractor
Delay of permits
Subcontractors errors and delays
Maintenance of traffic/staging/auxiliary lanes
Safety issues

VI. RISK IDENTIFICATION

Some of the major Risks are as following:

1) Regulatory Risk: Crop up due to lax regulatory framework fixing of tariff and charges, dispute resolution, lack of
independence of regulator comes under this risk.
2) Legal Risk comes with lack of a standard model for PPP agreements that leaves general and special contract conditions
vulnerable to challenge and poor execution management. Force Majeure risk is the risk which is beyond the control of the
project developer (floods, earthquake, war etc.)
3) Land Acquisition: The primary reason for certain segments of the GQ phase of the NHDP exceeding the project completion
deadline had been due to problems in land acquisition. The effects of this can be mitigated with the project starting only after
all the required land is procured and handed over by the government.
4) Environmental risk & Social risk: delay in getting environmental clearance and pollution issues may impact performance of
the project. There should be an effective R&R policy for social and environmental impact assessment and findings of such
assessments should be discussed in public with affected stakeholders
5) Financial Risks: Financial risk is the risk of debt service and failure to pay adequate returns.

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6) Funding Risks- Failure to reach financial close, this is largely carried by the Promoter. Interest rate risk arises due to changes
in interest. Interest-rate movements between the submission of bids and financial close. Debt servicing risk is the next in
criticality appropriate debtequity mix and proactive managerial strategies in financial restructuring would be the risk
mitigates.

VII. RESULTS AND DISCUSSION

This section specifies the outcomes generated from the extensive interviews conducted with a number of key personnel
from the MHA in order to get their personal opinions and views about the potential occurrence of operational risks identified
from the literature review. The selection of the personnel involved in the interviews was made based on a thorough background
check in regards to their knowledge and experience working as well as managing highway projects in Malaysia. The personnel
involved in the interviews then justified on the possibility of operational risks identified from other highway projects in some
developed Asian countries to occur in Malaysia.
There were thirteen risks identified from the highway projects in Malaysia and some selected developing Asian countries
through the literature review. Table 2 indicates the types of risks identified from the highway projects in Malaysia and some
selected developing Asian countries via the literature review and also consensus achieved from personnel involved in
the interviews in regard to the probability occurrence of these risks in the highway projects in Malaysia. All the thirteen
risks identified from the literature review were found to have the potential of occurring in the highway projects in Malaysia. Out
of thirteen risks identified, only one was classified by the personnel involved as risk with high probability of occurrence in the
highway projects in Malaysia; the initial toll-tariff decided by the government.
Table 2
Probability Occurrence of Operational Risks in Highway Projects
Probability
Risk
(Low/Med/High)
Environmental pollution to water supply quality Low
Over-loaded freight transportation Medium
Leakage of dangerous material/cargo on road surface Medium
Flood/ fog Low
Initial toll-tariff decided by the government High
Sudden increase in toll-tariff Low
Traffic congestion Medium
Change of road network Medium
Change of government policy Low
Poor road sign and delineator Low
Road side hazard Low
Inefficient road safety device Low
However, this type of pre-commissioning decision would somehow have an effect on the low-income user if the initial toll-
tariff decided is expensive and hence preventing them from using the newly-procured highway project. Therefore, there is a high
possibility of this risk occurring in the highway projects in Malaysia. Unlike the highway projects in the UK where payments
are made by the Government through shadow toll estimate via the governments popular choice Private Finance
Initiative (PFI) procurement strategy, Basically, the shadow tolls reflect payments made by Government to the private operator
based on an estimated number of vehicles using the road where drivers do not need to pay tolls directly, thus minimizes the toll
collection costs.
Four other risks were classified by personnel involved in the interviews as risks with medium probability of occurrence in the
highway projects in Malaysia; over-loaded freight transportation, leakage of dangerous material/cargo on road surface, traffic
congestion and change of road network. According to the MHA personnel, most of lorry drivers in Malaysia have very poor
attitude specially to abide by the rules and regulations set by the Government for heavy vehicles such as speed limit, type of
carried material/cargo and also maximum loading limit. Although continuous actions have been taken by the road network,
there is low probability of occurrence in the projects in Malaysia due to proper initial planning prior to project implementation
between the Malaysian Government and other public sector agencies such as the MHA and Public Works Department Malaysia.
However heavy traffic congestion usually occurs in the highway projects in Malaysia during festive seasons and alternatively
change of road network would be initiated by Malaysian Government and the MHA to overcome the problem temporarily. Thus
the personnel involved in the interviews had classified these risks as risks with medium probability of occurrence.

VIII. CONCLUSION

Majority of responders (80%) indicated that risk assessment was important for highway construction projects. It has been used
more often in design build projects than design bid build highway projects. This might be due to the fact that formal risk
assessment is more required and it is considered an essential part in planning phase. Operational risks are events that would have
an adverse impact towards a particular construction project like highway if occur once it is commissioned. Although different
Asian countries explored in this research might have different type of operational risks due to geographical and cultural

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differences, still there is a great potential for each risk identified to occur in the highway projects in Malaysia except the level of
probability occurrence could be different. Thus there is a huge likeliness for the thirteen key operational risks identified to also
occur in other highway projects around the world. These operational risks ought to be carefully considered and mitigated to
appropriate project parties as a result, to ensure highway projects can be delivered in the most effective and efficient manner
around the world.The use of risk assessment lowered the rating of Cost growth(CG) and/or Schedule growth(SG) for the
following risk drivers:
Changes to unforeseen site environment requirements
Poor coordination among utility agencies, designers, and contractors
Inexperienced professionals for this type of project
Inadequate constructability reviews
Unforeseen hazard conditions
Inexperienced project manager
Safety issues

REFERENCES
[1] PMI. (2004). "A Guide to the project management body of knowledge." Project Management Institute, Newtown Square, PA, 237-268.
[2] Ashley, D., Diekmann, J., and Molenaar, K. (2006). "Guide to risk assessment and allocation for highway construction management." FHA, International
Technology Scanning Program. Office of international program, FHA, Washington, DC, 4-17.
[3] Molenaar, K. (2005). "Programmatic cost risk analysis for highway megaprojects". Journal of Construction Engineering and Management 131(3), 343-353.
[4] Zaghoul and Hertman (2003) "Risk analysis and management" International Journal of Highway Construction, 18 (2), 80-88.
[5] Hashim, A. and Ku Hamid, K.H. (2007), Pollutant removal system on Senai-Desaru Expressway, 9th Joint Technical Conference (JTC) 2007 Penang,
Malaysia.
[6] Akintoye, A. and MacLeod, M. (1997) "Risk analysis and management in construction." International Journal of Project Management, 15 (1), 31-38.

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