Type Of Risk That Faced By The Contractors Construction Essay

Hazards are involved in all phase of a building undertaking. The building hazards will originate within the contract period and those building hazards will do the Contractors failure to maintain within the cost budget, failure to finish the work within the completion day of the month and failure to accomplish the quality demand of work ( Flanagan and Norman, 1993, p.8 ) . Furthermore, the Contractors have the duties to bear for the hazards that arise during the building period ( Flanagan and Norman, 1993, p.183 ) . Once the contract has been signed, the contractors have the duty to execute the undertaking either the contract is continue for better or for worse, in illness and in wellness, until their natural or unnatural decision ( Sayers, 1997, p.1 ) . Consequently, the Contractors can non merely tender for a undertaking without consider those hazard that involved in the undertaking ( Cooke and Williams, 2004 ) . As a consequence of non recognized the hazards, it may do the Contractors to lose money or become belly-up.

Furthermore, the Contractors have to see the hazard factors that involved in the undertaking in order to do a determination on whether or non to tender the undertaking. The stamp monetary value will be influence by the hazard factors. The hazard has the capacity of gnawing net income and traveling the undertaking from a net income devising into a loss-making venture. A Contractor can do a net income or loss at the terminal of the undertaking is depending in how accurately the hazards have been assessed. Therefore, before the contract is being signed by the Contractor, hazard direction procedure will help Contractor to aware of the possible hazards and deduction of the event happening and hence the Contractors are able to delegate eventuality amount and good be aftering for it. The building hazards will do the estimated stamp amount difference with the existent cost of undertaking ( Andrew and Raden Kusomo, 2004 ) . During tendering for a undertaking, a Contractor has to see the hazards factors that may happen during the building phase in order to guarantee they have the capableness to transport out the work and doing a net income border at the terminal of the undertaking.

1.2 Aim and Aims

This survey purpose is to understand the importance of manages the building hazards at stamp phase. In order to accomplish the purpose, the undermentioned aims are conducted to back up the purpose: –

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To find the building hazard that faced by the Contractor within the contract period.

To exemplify the effect of the hazard where the Contractor does non managed at the stamp phase.

To place the attack of pull offing the hazard that faced by the Contractor.

1.3 Background

Hazard are involved in the all phase of a building undertaking due to the building procedure period are long, the procedure are complicated, and dearly-won. A hazard can be managed, reduced, transferred, shared, and accepted, but it can non be ignored ( Dallas, 2008, p. 5 ) . Furthermore, the hazard has an impact over the building objectives which in term of cost, clip, quality, safety and wellness and environmental ( Flanagan and Norman, 1993, p.8 ) . The hazards that faced by the Contractors are including the fiscal hazards, legal hazards, political hazards, societal hazards, environmental hazards, communications hazards, geographical hazards, geotechnical hazards, building hazards, technological hazards, demand or merchandise hazards, completion hazards, supply hazards and force majeure hazards ( Smith et al. , 1999, p.45 ) . Therefore, before the Contractor are traveling to tender for a undertaking, he has to identified all the hazard that face by him to mensurate the impact that against by him. In order to covering with the hazards, a hazard direction procedures are recognized as a systems procedure which assists the Contractors to pull off the building hazards. Risk direction is one of the systematic ways to pull off the hazard or unwanted event which influence the result of the undertaking. Harmonizing to Smith et Al. ( 2006, p.2 ) , undertaken a hazard direction procedure in stamp phase can help the Contractors to minimise the impact of the hazard and doing a better determination over the hazard. By carry oning the hazard direction procedure the hazard can be identified, analyzed and responded.

1.4 Scope of survey

This survey is focus on how the Malayan private Contractor pull offing the hazard before signed the contract for a undertaking. The country of research is focus on Malayan private Contractor. The Scopess of this survey including happening out the different type of the building hazard which may happen within the contract period and the effect of those hazard against the Contractor. A suited attack of pull offing the building must be provided in order to place, analyse and response those hazards. The questionnaire study will conducted in order to heighten this survey. This survey will merely concentrate on the group of the Malayan private Contractor.

1.5 Research Methodology

In this research, the chief research methods used to finish this research are the literature reappraisal and informations aggregation through the questionnaire study which among the Malayan private Contractors. The literature reviews in this research are conducted to back up the aims of this survey. The resources of the literature reappraisal are from the books, diary articles, and cyberspace beginnings. In order to accomplish the aims of this survey, the literature reappraisal has concentrating on the possible building hazard that encountered by the private Contractor, the consequence to the building against the Contractor and the attack of pull offing the building hazard that are required to transport out by the Contractor.

Furthermore, the questionnaire study will conducted among Malayan private Contractor to heighten this survey and accomplish the aims of this survey. The questionnaire study sent to the Contractor through either by manus, electronic mail and station. The chief intent of behavior the questionnaire study is to obtain the information from the concentrating groups of Malayan private Contractors in order to look into the building hazard that faced by them, the consequence of building hazard among them and how the Contractor manage the building hazard. After the collected information from the questionnaire study has been collected, so the collected informations will be sum uping, set uping and analysing by utilizing the SPSS package. Furthermore, a clear reading of the consequence will be conducted to back up this survey.

1.6 Structure of the Dissertation

This survey contains of 5 chapters and each of the chapter had summarizing as follows:

Chapter 1: Introduction

This chapter highlights the chief ground that the Contractors have to transport out hazard direction during the stamp phase. The purpose and aims and background of this survey has determined in this chapter.

Chapter 2: Literature Reappraisal

This chapter discussed on the possible hazard that encountered by the Contractor, the effect of building hazard against the Contractor, importance of managed hazard in stamp phase, and the attack of manage the hazard.

Chapter 3: Research Methodology and Questionnaire Structuring

This chapter identified the method and stuff that used in this survey. The research method of this survey will be good interpreted in this chapter.

Chapter 4: Datas Analysis

This chapter summarized, arranged and analyzed the collected informations and behavior a clearly reading on the consequence of the collected information.

Chapter 5: Decision

This chapter summarized the lineation and the determination of this survey, and urge on this survey for future research.

Chapter 2: LITERATURE REVIEW

2.1 Overview of the building hazard that faced by the Contractors

This chapter discussed on the possible hazard that may happen during the contract period. The definition of hazard and the assorted types of the hazards will be discussed on this chapter.

2.1.1Definition of hazard

Hazards that involved in the building undertaking can be described as the chance of occur something or happen some unwanted or unfavourable event which that will has an impact over the undertaking ( Mostata Ghadak Zadeh, 2010, p.9 ) . Flanagan and Norman ( 1993, p.8 ) emphasized that, hazard is an unsure event the may do a building undertaking failure to maintain within the aim of undertaking which in term of cost, clip, quality, safety and environmental sustainability. Furthermore, Begum Ongel ( 2009 ) stated that, hazards can be described as the unanticipated event that might be occur in the hereafter and may hold negative effects over the undertaking objectives. The building hazard can be described as an uncertainness or chance of happening of something that has an impact over the undertaking result every bit shown as Figure 2.1.

Figure 2.1: The Concept of the hazard ( Source: Merna and A-Thani, 2008, p.8 )

Merna and A-Thani ( 2008, p.13 ) suggested that, the hazard can be described into 3 categorized: –

Known risk- The known hazard can be described as the hazards that happen every twenty-four hours on building industry. Basically, the known hazard will be the fluctuation work and the rising prices in building resource costs. Those known hazard will do the extra work needed to be carry out and detain for the work. If the known hazard has happen in the building phase, so those work will normally covered by the eventuality amount of the contract. ( Merna and A-Thani, 2008, p.13 )

Known unknowns- The known terra incognitas are the hazard event that can be predicted or foreseen. The consequence of the known terra incognitas and their chance of happening will be easy to be known. ( Merna and A-Thani, 2008, p.13 )

Unknown unknowns- The unknown terra incognitas are the hazard that can non easy be predicted. Generally, those events that can non be easy foreseen are the force majeure event. ( Merna and A-Thani, 2008, p.13 )

2.1.2 Type of hazard that faced by the Contractors

Harmonizing to Odeyinka et Al ( 2006 ) , the hazard beginnings in the building industry that are occur in the stamp phase are including the estimating hazards, design hazards, stamp rating hazards and the competitory hazards.

Design risks- When the design is changed, there will necessitate to do accommodation to the over the appraisal rate.

Estimating risks- During the readying of the stamp monetary value, the calculators will may misidentify on measures.

Tender rating risks-

Competitive tendering risks- In traditional stamp procedure, the stamp will awarded by the lowest bidder. Many of the Contractors will seek to take down down the stamp monetary value in order to winning the command. In this instance, the Contractors may non hold sufficient resource to finish or transport out the work. Consequently, lose the net income border.

To go on with Odeyinka et Al ( 2006 ) , the hazards factors that are involved in the stamp phase are including the follows: –

Site status hazards

Physical hazards

Inclement conditions hazards

Legal hazards

Environmental hazards

Political hazards

Fiscal hazards

Construction hazards

2.1.3 Construction hazard

Construction hazards are one of the major hazards that have to be considered by the Contractors during the stamp phase. Harmonizing to Nafisah Binti Abdul Rahiman ( 2006, p.24 ) , the building hazards are the unanticipated or unwanted events that occur within the building period. Flanagan and Norman ( 1993 ) stated that, the hazard are involved in the building undertaking due to the building activities procedure are taken long continuance, complicated, influence by environment factor and dearly-won. Harmonizing to Boussabaine and Richard ( 2004, p.180 ) , the building risks has an affect the over the cost, clip and work quality of the undertaking. During the building phase, the Contractors have the duty to bear for the hazard. Therefore, when the Contractors are carried out the building work, they are require to concentrating on the building hazard that may confront by them in order to cut down the consequence against them. Boussabaine and Richard ( 2004, pp.181-184 ) mentioned that, the building risks that face by the Contractors during the building period are as follows: –

Hazard due to the handiness of resources- The handiness of stuff, labor and works and machinery will act upon the building cost be increased. The monetary value of the stuff, labor and works and machinery are expensive in the status of those resources are non readily available in the country of the building site. It may necessitate the excess transit fees to present the stuff and works and machinery to the building site. Furthermore, when the certain labor is non readily available in the country of the building site, it may necessitate using them from an country where such labor is available.

Hazard due to industrial disruption- The industrial break hazard may happen due to the work stoppage action among the labor. The work stoppage event may happen when the labor is unwilling to follow any affair that instruct by the Contractor. In this instance, the building work will be delayed and can non be completed within the completed day of the month. Consequently, the contractors suffer the losingss due to pay for the cost to settle down the work stoppage event and pay the liquidated harm over the delayed work.

Hazard due to the productiveness of labor and works and machinery- The low productiveness of labor or works and machinery has lead to detain in the building work and necessitate the extra cost to finish the work.

Hazard due to safety and health- The safety and wellness hazard are occur due to the impact of jeopardies which involved in building site. Hazard of accidents is happening during the building period and that cause the personal hurt. Thereby, the Contractor has the duty to guarantee the building site is safety.

Hazard due to the public presentation of subcontractor- The public presentation of the subcontractor will act upon the building work be delayed in instance of the low public presentation of the subcontractor.

Hazard due to hapless workmanship- The hapless craft can do the quality of building work is non meet with the standard demand. A Contractor has the duties to guarantee the building work is fitting and harmonizing to the contract demand. In this instance, the Contractors may necessitate to retrace the work and to rectify the work by his ain cost.

Hazard due to schedule programme accuracy- Sometime the existent work will non maintain within undertaking agenda and program. The undertaking programme are non accuracy due to the hazards are do the work be delayed or over the building budget. The Contractors will neglect to maintain within the planned clip and work will be holds.

Hazard due to capableness of the contractors- The Contractors have to guarantee he has sufficient capital and resource in order to transport out the work. The Contractors must see the size of the undertaking in order to guarantee that he has sufficient resource to transport out the work of the undertaking. Besides, the Contractor must guarantee that the type of undertaking is the work that he has the experience and he has performed the similar type of work in the yesteryear. This is to guarantee the Contractors can transport out the undertaking successfully.

Hazard due to the stuffs or components- The Contractors have the duties to guarantee the plants are meet with the quality demand. Therefore, the Contractors have to guarantee the quality of the stuff and be careful on taking the stuff.

Hazard due to the site condition- Sometime the existent site status may different with the outlook status. The type of the earthwork support may necessitate support by an expensive foundation as the land status of site is weak.

Hazard due to unfavourable conditions conditions- Weather is an unanticipated hazard during the building period and it will do hold of work. Furthermore, the inauspicious conditions will damage the constituents and component in the building site. Therefore, the Contractors should see the conditions status to guarantee the plants are no interrupt by the conditions.

Hazard due to measures of work- The Contractors has to bear for the loss due to the measure in the measure of measures is non accuracy. It will do the building cost and clip overproduction if the measure work is later cut down ( Cooke and Williams, 2009, p.123 ) .

Hazard due to monetary value inflation- The monetary value rising prices is means a relentless rise in the monetary value of the building resources such as the cost of stuff, transit fees, cost of labor and cost of works or machineries. The rising prices on the monetary value of building resources is hard to calculating. During the recession, the monetary value of resources may increase and this causes the Contractor loss money.

2.2 The importance of pull offing hazard in stamp phase

This chapter discussed the assorted grounds for the Contractor to pull offing the hazard in the early phase of the undertaking which at the stamp phase and the effects of the hazards that against the Contractors.

2.2.1 Why should the hazard be managed at the stamp phase

Risk direction procedure has to supply at the stamp phase which when there is still has a possibility for cardinal alterations of any determination ( Anna Klemetti, 2006, p.24 ) . To tender for a contract will be a batch of money and hence the Contractors can non merely accept to tender a contract without consider of any hazard factors and net income potency in the undertaking ( Cooke and Williams, 2004 ) . Boussabaine and Richard ( 2004, p. 181 ) emphasized that, the Contractors has to bears and take on the hazard that occur during the building phase. Therefore, this is of import for the Contractors to aware of all the building risks that faced by him before the contract is being signed and carry oning the hazard direction in stamp phase.

The Contractors have to do the right determination on whether or non to tender the undertaking. Once the contract was signed, the Contractors have to bear for all hazard that involved the undertaking until the undertaking is completed ( Sayers, 1997, p.1 ) . A hazard direction can help the Contractors to understand the possible hazard that involved in the undertaking. Consequently, the Contractors can transport out the hazard direction in stamp phase in order to doing a right determination on whether or non to tender for the contract.

The Contractors will confront two hazards during they tender for the undertaking which are the hazard of losing the undertaking and the hazard of winning the undertaking ( Boyce, 2003, p.9 ) . Once the Contractors have winning the undertaking, the Contractors have started to execute the contract. In instance of awarded a undertaking that is hard to be completed or managed, it may do the Contractors suffer for losing their fiscal or repute ( Boyce, 2003, p.9 ) . Harmonizing to Smith et Al. ( 2006, p.94 ) , the hazard direction procedure can assist the Contractors to concern on the determination of to or non to offer for the undertaking. Consequently, the determination to offer that brand by the Contractors are really of import. The Contractors are necessitating carry oning the hazard direction in stamp phase to do right determination by better understanding the hazard involved in the undertaking.

The chief aims of the building undertaking will probably to be influence by the building hazard ( Smith et al. , 2006, p.2 ) . As a consequence of this, the Contractors need to acknowledge the hazard involved in the undertaking and pull off the hazards at stamp phase in order to guarantee the aims of the undertaking are achieved over the contract period.

Smith et Al. ( 2006, p.2 ) , the hazard direction provides a better reviewing, understood, consideration over the undertaking issues. To continues with Smith et Al. ( 2006, p.94 ) emphasized that, a deficiency of understanding the hazard may do the Contractors pricing the stamp monetary value wrongly and as a consequence of this the extra cost will necessitate to pay by the Contractors. Contractors have to supply the hazard direction procedure in stamp phase to avoid failure to maintain within the aims of undertaking.

Smith et Al. ( 2006, p.193 ) suggested that, the hazard direction is used in the undertaking due to it supply the undermentioned benefits: –

To help Contractors to aware of the hazard that involved in the undertaking and impact of the hazards. Therefore, the Contractors can concentrate on minimising the hazard or seek to apportion hazards to the other parties.

To help the Contractors to supply better determination over the possible hazards or job.

To provides a better apprehension of the hazards or job.

To supply a better apprehension over the undertaking item. This may assists Contractors to supply the realistic program in term of programme agenda and cost estimation.

To gives cognition of the hazard in undertakings. This may let appraisal of eventualities that really reflect the hazards and besides tend to deter the credence of financially unsound undertaking.

To supply the better direction over the major hazards that involved in the undertaking.

Harmonizing to Simon and Burtonshaw ( 2009, p.21 ) , the hazard direction can help the Contractor on the followers: –

To program and taken necessary action to cut down the hazard before the hazard has been occur and help the Contractors to covering with the possible job that involved in the undertaking.

To supervising the possible impact of hazards by reexamining the action program, and supply and pull off equal fiscal and agenda eventualities for hazards.

Furthermore, the hazards will act upon the stamp monetary value. A hazard direction has to be conducted in stamp phase in order to guarantee the stamp monetary value is pricing right. The hazard factors should be considered by the calculators during readying of the stamp monetary value. A hazard analysis has to be conducted in order to assist the calculators to pricing for the hazard and adding the eventualities allowance or increase the net income border to cover the hazards. Through the hazard direction procedure, the calculators can reexamining the hazard factors and pricing the hazard included into the stamp monetary value and hence cut down the negative effect of hazard that faced by the Contractors.

2.2.2 The effect of building hazard against Contractor

The building undertakings are hazardous and the hazards have negative effects on the undertaking. Burtonshaw-Gunn ( 2009, pp.11-12 ) stated that, by disregarding the building hazards will do the building cost overproduction, work be delayed and failure to accomplish the quality of the work. To go on with Burtonshaw-Gunn ( 2009, p.12 ) , the effects of the hazards over a undertaking may besides do the Contractors to loss of repute, Client tend to end the contract with the Contractors and do the personal or organisation liability. Flanagan and Norman ( 1993, p. 49 ) mentioned that, the building hazard has a effect over the undertaking which including the follows: –

Fail to maintain within the building cost,

Fail to finish work within the completion day of the month,

Fail to accomplish the quality of work or non run into with the contract demand,

Damage to the belongings or hurt to a labor.

2.2.2.1 Fail to maintain within the building cost

The hazard has the capacity of gnawing net income and traveling the undertaking from a net income devising into a loss-making venture. Consequently, the Contractors will lose a batch of money and net income border at the terminal of the undertaking ( IMCA, 2006 ) .

In instance of the Contractors have no sufficient fiscal capitals or resources to transport out the work, it may do the Contractors fail to maintain within the contract cost budget. Furthermore, the stamp monetary value will act upon by the hazards factor. The hazards such as the market status hazards, design hazards, quality hazards will do the cost be increased. Smith et Al. ( 2006, p.94 ) emphasized that, a deficiency of understanding the hazard may do the calculator pricing the stamp monetary value wrongly. Harmonizing to Andrew and Raden Kusomo ( 2004 ) , the stamp cost will different with the existent cost of the undertaking. The differences of the stamp cost with the existent cost have cause the Contractors suffer for the wage extra cost for the undertaking.

2.2.2.2 Fail to finish work within the completion day of the month

The hazards that occur during the building procedure will do the building work be delayed. Harmonizing to Flanagan and Norman ( 1993, p.183 ) , when the work is delayed and can non be completed at the completion day of the month, the Contractors have to pay for the liquidated harm to the client. There are many of the hazards will do the work be delayed which including the hazards of public presentation of subcontractor, labor and equipment, inauspicious conditions. For the adverse conditions which occur during the building period, will damage the constituents and component in the building site.

2.2.2.3 Failure to maintain within the quality of work

The hazards that influences the quality of work is included the hapless craft and the type of the stuff be used. Those hazards will act upon the quality of the work be non run into with the standard demand. The Contractors have the duty to guarantee the quality of the work is meet with the standard demand. In instance of the work are found be non run into with the demand, the Contractors will necessitate to pay for the excess cost to rectify the work by his ain cost.

2.4 The attacks of pull offing the building hazard

This chapter discussed on the methods of pull offing the building hazard that faced by the Contractor. A simplest attack of hazard direction system has been discussed in this chapter in order to help the Contractor to pull off the hazard during stamp phase. The simplest attacks of hazard direction system procedures are including the hazard designation, hazard rating, and hazard response.

2.4.1 Risk direction

Risk direction can be described as a procedure of covering with the uncertainness and seeking to accomplish the best result for a undertaking. Brook ( 2008 ) , risk direction is the procedure which carries out to place, analyse, program, manage and cut down the undertaking hazard. Risk direction is the systematic manner which conducted to command and cut down the hazard. Mostafe Ghadak Zadeh ( 2010 ) mentioned that, hazard direction is the system which provided to place the hazard of a undertaking and taken necessary action to pull off the hazard. Ainon Basar et Al. ( 2011, p.13 ) described risk direction as a activities that conducted to place, measure and analyse the loss exposures and pull offing the hazard by choosing the most effectual technique to cut down their impact. Consequently, the hazard direction can help the Contractors to pull offing and cut downing the consequence of the hazards during the stamp phase.

2.4.2 Risk direction procedure

A simplest attack of hazard direction system processes can be used by the Contractors in order to pull off the hazard during the stamp phase. Kajsa Simu ( 2006, p.23 ) stated that, the simplest attack of hazard direction system procedures are consist of the hazard designation, hazard rating, and hazard response as shown in the Figure 2.2.

Figure 2.2: Simplest attack to put on the line direction system. ( Beginning: Kajsa Simu, 2006, p.23 )

2.4.2.1 Risk Identification

Begum Ongel ( 2009, p.18 ) stated that, hazard designation can be described as a procedure of placing or finding the potency hazard which may happen on the undertaking. The hazard designation is the procedure to name out the beginning and type of the hazards that involved in the undertaking ( Flanagan and Norman, 1993, p.46 ) .

Flanagan and Norman, ( 1993, p.47 ) suggested that, when set abouting the hazard designation process the beginning of hazard and consequence of hazard has to identified. By make up one’s minding the consequence of the hazards, the inquiry of dependance between the variables has to be considered which are shown in the Figure 2.3.

Figure 2.3: Hazard designation procedure ( Beginning: Flanagan and Norman, 1993, p.47 )

After the beginning of hazard has been identified, the following measure is to place the effects of the hazards. Fewings ( 2000, p.196 ) stated that, by place the effects of the hazard will has the benefit on doing determination on how the hazard be response. The effects of the hazards can be categorized into governable or unmanageable ( Flanagan and Norman, 1993, p.49 ) . The governable hazards are described as the hazards that are able to pull off and command. For the hazards of defective of stuff, deficiency of coordination between client and Contractors, design disagreements, and hold in acquiring the require papers can be consider as the governable hazard. Furthermore, the unmanageable hazards are the hazards that are unable to be managed such as an unfavourable conditions and unanticipated fortunes ( Flanagan and Norman, 1993, p.49 ) .

2.4.2.2Risk Analysis

Hazard analysis procedure is the procedure to analyse those hazards which has been identified in the hazard designation phase. Smith et Al ( 2006, p.46 ) emphasized that, the hazard analysis procedure is of import due to it can help the Contractors to has better apprehension and consciousness on the impact of hazards. The hazard analysis is the procedure of measuring the hazard impact over the undertaking. By transporting out the hazard analysis procedure, the impact of the hazard can be analyzed and categorized into acceptable degree and unacceptable degree. For those acceptable hazards, the Contractor will accept it due to it does non hold much impact over the undertaking or the Contractors are able to pull off the hazards. On the other manus, the hazards that are under unacceptable degree, the Contractors have to reassign to the other party or has bear for the hazard by themselves. By transporting out the hazards analysis, the hazards can be good responded and managed.

2.4.2.3 Risk Response

Harmonizing to Begum Ongel ( 2009 ) , the hazard response is the procedure of manage the hazard either to reassign to another party or to staying it. Risk response procedures are classs into hazard keeping, hazard decrease, hazard transportation and hazard turning away which as shown in Figure 2.4.

Figure 2.4: Hazard Responses ( Beginning: Flanagan and Norman, 1993, p.61 )

Harmonizing to Flanagan and Norman ( 1993, pp. 62-65 ) , the hazard response can be classs into: –

Hazard retention- The hazard keeping is average that the Contractor has decided to take on the hazard or accept the hazards. The Contractor will retained the hazard due to he is able to pull off the hazard, unable to reassign the hazard to another party or unable to avoid the hazard. Furthermore, if the hazard is under the acceptable degree, so the Contractor can accept the hazard.

Hazard transfer- The hazard transportation means that the Contractor has switching the hazard to another party. The Contractor can reassign the hazard to the subcontractor or insurance company. Therefore, a hazard premium will be charged by the party who take on the hazard. By transportation the hazard to the subcontractor, the Contractor will necessitate to include an allowance in sub-contractor ‘s monetary value to cover the hazard transferred to him.

Hazard reduction- Risk decrease means that when the Contractor is make up one’s minding to take on the hazard, the step should be adopted to cut down the impact of the hazard. One of the ways of hazard decrease is to portion hazards with other parties such as joint venture with other Contractor.

Hazard avoidance- Risk remotion means that to take the activity that brush by the hazard. If the degree of the hazard under an unacceptable degree, the Contractor should cover with it by take the activity with which the hazard is associated.

2.5 Pull offing Hazard in Tender Phase

This chapter discussed on how the Contractors pull offing hazard at each phase of the stamp phase. The general information of the stamp phase is identified at this chapter. A Contractor has to pull offing hazard in each phase of the stamp phase which including pull offing hazard at the phase of determination to accept to tender, pull offing hazard at the phase of readying of stamp, pull offing hazard at the phase of stamp adjudication and managing hazard at the phase of award of stamp.

2.5.1 Tendering

In the traditional procurance undertaking, the Contractor is merely appointed after the full stamp paperss are good prepared. Based on the Royal Institute of British Architect ( RIBA ) Plan of Work ( 2007 ) , the Contractor will be appointed into a undertaking at the pre-construction phases which are the Stage G of RIBA Plan of Work. In Stage G of the RIBA Plan of Work, the Contractor will be invited to offer for the stamp. The Contractor is so being awarded the contract in the Stage H of RIBA Plan of Work. Furthermore, in design and construct undertaking undertaking the Contractor will be appointed at the design phase ( Stage C of RIBA Plan of Work ) .

Basically, the type of the tendering will be classs into unfastened tendering, selective tendering and negotiated tendering. The contract will be awarded to the tenderer who are submitted the lowest command. The unfastened tendering is based on the method of advertisement ask foring any eligible Contractor to monetary value the stamp papers. The selective tendering will be carry out by a figure of tenderer who are considered as suited for the work and have good path record for the work. Furthermore, the negotiated tendering will ask for merely 1 or 2 tenderers to monetary value the stamp papers.

2.5.1 Tender Procedure

The tendering is the procedure of the work that carries by the contractor in order to present a contract. The Contractor has to monetary value all the points of one contract by fix the measures of measures which harmonizing to the stamp drawing and specification ( Chinyio, E. , 2011 ) . The tendering will transport out to choose a suited Contractor for a building undertaking. The stamp procedures are including the invitation to tender, readying of stamp, stamp adjudication and award of stamp. The Contractor will transport out the different undertaking during each of the stamp phase. The Contractor has to guarantee the work is transporting out within the period of fixing the stamp. Before subjecting the stamp, the Contractor has to do certain the stamp amount is truth.

Harmonizing to Rosmayati Mohemad et Al ( 2010 ) , the stamp procedures are including the followers: –

Invitations to tender- The Contractors are invited to tender after all the stamp drawing and specification are good provided. During this phase, the Contractor will have the missive of invitation to tender and the direction to tenderers. Once the Contractors are having the missive of invitation to tender, they are require to make up one’s mind whether or non to offer for the undertaking.

Preparation of tender- Once the Contractors has decided to offer the undertaking, they are necessitating to fix the measures of measures harmonizing to the stamp drawing and specification or other item of the undertaking.

Tender adjudication- The stamp adjudication is the phase that to measure all the work before subjecting the stamp. This is the phase to allow the Contractor carry out concluding reappraisal for all of the plants.

Submission of tender- After the tenderer has completed stamp for the undertaking, they will necessitate to subject within the clip of entry.

Award of tender- After the stamp has been submitted, the contract will awarded to the tenderer who bid the lowest command. Once the contract is awarded to the Contractor, the Contractor will necessitate executing the work.

2.5.2 Pull offing hazards during the phase of Invitation to tender

Once the Contractors are invited to tender for a undertaking, the Contractors has to see whether or non to tender the undertaking by reexamining all the hazards that involved in the undertaking during the stamp phase. Therefore, the hazard designation procedure and hazard appraisal procedure should be conducted at stamp phase. Harmonizing to Jackson ( 2010, p.311 ) , risk designation procedure should be get down conducted at stamp phase when the Contractors is invited to tender for the undertaking. The Contractors has to place the hazard involved in the undertaking and analyse whether the hazard is under the acceptable degree or unacceptable degree to doing determination on accept the undertaking or reject the undertaking. Jackson ( 2010, p.311 ) emphasized that, carry oning the hazard designation and hazard appraisal procedure in stamp phase can help the Contractors to measure the hazards and do a better determination over the hazards.

In this phase, the Contractors will place the hazard factors in order to doing a better determination. Harmonizing to Hillebeandt ( 2000, p. 162 ) , in make up one’s minding to offer for the undertaking, the most of import factors that are required sing by the Contractors for the determination whether to or non to tender the undertaking are including the follows: –

The demand for work

The figure of rivals tendering

Experience in such undertaking

Undertaking type and size

Client ‘s repute

Contract status

Type of contract

Past net income in similar undertaking

Tendering method

Hazard involved owing to the nature of the work

Handiness of resource

The Contractors can be reexamining the hazards to doing the determination. Cooke and Williams ( 2009, pp. 194-197 ) mentioned that, the Contractor demand to be see the undermentioned point in order to make up one’s mind to accept the stamp or to reject the stamp: –

Type and size of undertaking risks- Is it the type of the undertaking with which the Contractor has experience? Is the Contractor able to transporting out the work? Is the contract excessively large for the Contractor to set about?

Location risk- Does the location of the site is proximity to office? Is the location of the site is located at the Contractor ‘s trading country? Is the location of the site doing any job on bringing of stuff and the handiness of labor?

Handiness of resource risks- Does the Contractor has the sufficient fiscal resources to set about the undertaking? Does the site direction term, adviser and subcontractor are available and is sufficient in order to assist the Contractor to transport out the work?

Working Capital risks- Is the Contractor has the sufficient working capital in order to fund the undertaking?

Tender certification risks- Is at that place any measure hazard placed on the Contractor?

Market factor risks- What are the market status in relation to the handiness of work? What is the current degree of bank involvement rates? How is the current authorities policy and will it impact the undertaking?

Term and status of contract risks- What are the payment conditions, insurances demand and the standard signifier of contract used in the undertaking?

Tender period risks- Does the Contractors have sufficient clip to transport out the work?

Degree of competition risks- How many Contractors are invited to tender for the undertaking?

By reexamining the above factor, the contractors will place and analyse the hazards factors into acceptable degree or unacceptable degree. Jackson ( 2010, p. 311 ) suggested that, after the Contractors analyze the hazard into acceptable or unacceptable degree, he can get down to make up one’s mind whether or non accept the undertaking by doing determination on the undermentioned points: –

Contractors to accept the undertaking but increases the net income border and add eventualities sum to the stamp monetary value to cover the hazards.

Contractors to accept the undertaking but reassign the hazard to subcontractor but necessitate to adding an allowance in subcontractor ‘s monetary value to cover the hazard transferred to him.

Contractors to reject the undertaking due to the hazard are unacceptable.

If the hazard factors are under acceptable degree, the Contractors can accept the work but the Contractors has to let the hazard included into the stamp monetary value by increasing the net income border and adding the eventualities sum to the stamp monetary value or to reassign the hazard to the subcontractors. If the undertaking consists of many unacceptable hazard so the Contractors has to reject the work.

Fewings ( 2000, p.196 ) stated that, by place the effects of the hazard will has the benefit on doing determination on how the hazard be response.

2.5.3 Pull offing hazards during the phase of readying of stamp

Once the Contractors have decided to tender the undertaking, the Contactors have to place the hazard factors that affect the truth of the stamp monetary value. Andrew and Raden Kusomo ( 2004 ) suggested that, the hazard designation and assessment procedure must be taken in the procedure of gauging the stamp monetary value. This is to guarantee the eventuality allowances are included in the stamp monetary value. Pilcher ( 1992, p.255 ) mentioned that, the Contractors have to do an allowances during fixing the stamp to cover the hazard.

Harmonizing to Akintoye and Skitmore ( 1990, p.3 ) , the hazards factors that influence the stamp monetary value are including market status, handiness of stuffs and labor, transit fees, location of site, site status, land status, size of undertaking, and storey tallness of undertaking.

In the cost gauging procedure, the calculators have to supply a elaborate analysis of cost. Cooke and Williams ( 2009 ) mentioned that, the site status will act upon the stamp monetary value in the undermentioned factors: –

Existing edifice on site- The bing edifice on site will act upon the stamp monetary value due to the increasing of the site destruction work.

Land conditions, site topography and groundwater level- The stamp monetary value will act upon by the land conditions, site topography and groundwater degrees. If the land status of site is really hebdomad so it may necessitate an expensive foundation to back up the edifice therefore the foundation monetary value in the stamp demand to harmonizing to the land status of site. If site contain of any taint so it will necessitate the site emendation therefore the cost of site clearance will be more expensive. The topography of site means that either the site is level or inclining or concise of shrubs and trees. By and large, the site clearance for the sloping site will be more expensive so the level site. An calculator needs to follow the existent site status to pricing for the stamp.

Site access- The entree roads of the site will act upon the motion of the works and equipment to site. In instance of the entree route of site is non convenience, it will necessitate more transit fees to present the stuff or the works and equipment to the site.

Distance to local tips for the disposal of material- The location of the site will act upon the fees of lodging the stuff. If the distance of site is excessively far with the local tips so the fees will be addition.

Handiness of bing site services- The stamp monetary value will besides be influence by the bing services. The Contractor demand to guarantee that the site is functioning for H2O, electricity supply and the drainage and sewage work is around the site. Therefore, the calculator needs to see that site services in order to monetary value the stamp.

This is of import for the calculators to see to the site in order to look into the site status and guarantee the pricing the stamp right. Ashworth ( 2008, p. 318 ) suggested that, in order to roll up the sufficient information to fix the appraisal, a calculator has to see to the office of the different advisers in order to discourse the item of the undertaking and acquire more information for fixing the stamp.

During readying of stamp monetary value, the calculators are necessitating to pricing for the hazard. To pricing for the hazard, the types of the hazards have to be categorized in order to pricing the hazard right ( Boyce, 2003, p.20 ) . Boyce ( 2003, p.20 ) suggested that, the hazard can be categorized into the follows: –

Class

Hazard description

1

Hazards that are able to passed to the client under the contract

2

Hazards that are able to passed to subcontractors under the term of purchase orders and subcontracts

3

Hazards that are able to cover by insurance

4

Hazards that the contractor will transport but for which executable programs exists to cast the hazards if and when they should happen

Table 2.1: The class of hazard for pricing the hazard ( Source: Boyce, 2003, p.20 )

Harmonizing to the above tabular array, the hazards are categorized into 4 classs. By categorized the hazard into different class, it may assist the calculator to pricing the hazard right. Therefore, calculators can increase the net income border to the stamp monetary value in order to guarantee the hazards are covered in the stamp monetary value.

2.5.4 Pull offing hazards during the phase of Tender Adjudication

Once the calculator completed pricing for the stamp monetary value, the Contractor require behavior the concluding reappraisal before the monetary value of stamp is subjecting. This is the phase of sing that all portion of plant is done in right. During the concluding reappraisal, all the hazard factors have to be identified, analyzed and responded. The concluding reappraisal of the work are including reexamining the undertaking study, conditions of the contract, market status, current work load, building hazard and the repute of the client and advisers. The concluding reappraisal is of import before subjecting the stamp to guarantee allowance given by the calculator are realistic.

Harmonizing to Brook ( 2004, p. 237 ) , the issues that must be considered in the concluding reappraisal phase are as follows: –

Contractor ‘s working capital- This is to guarantee the Contractor has sufficient capital to fund for the undertaking.

Contractor ‘s resources- This is to guarantee the Contractor has sufficient worker, direction term to transport out the work.

The market condition- This is to guarantee the market status in relation to the handiness of work, current degree of bank involvement rate, and the current authorities policy will non to act upon the undertaking.

The repute of client- This is to guarantee the attitude of the client are non impact the undertaking and can able smooth running of a undertaking.

In this phase, the Contractor will seek to reassign the hazard to subcontractor or client. By transportation the hazard to the subcontractor, the Contractor will necessitate to add on an extra allowance in subcontractor ‘s monetary value in order to cover the hazard that transferred to him. In the instance of the hazard is excluded from the Contractor ‘s contractual duties or the unforeseeable hazard such as force majeure event, the Contractors can claim from the client ( Brook, 2004, p. 237 ) . If the hazards are unable to reassign to the subcontractor or client, the Contractor will necessitate taking on the hazards. Furthermore, if the hazards are under the acceptable degree, so the Contractor will accept the hazards. However, the Contractor is has to cut down the impact of the hazard by take the activity in the state of affairs of the degree of the hazard under an unacceptable degree ( Brook, 2004, p. 237 ) .

Before submit the stamp, a hazard analysis procedure will necessitate transporting out in order to let a eventuality amount to delegate based on the possible hazard ( Peurifoy and Oberlender, 2002, p. 57 ) . Harmonizing to Smith et Al. ( 2006, p.94 ) , the Contractors add the eventualities to the stamp monetary value in order to cover the building hazards. The eventuality amount should be added to tender monetary value in order to covering with the unmanageable hazards. The eventualities can be described as a hazard premium that pays by the client for apportioning building hazards to the Contractors. To go on with Smith et Al. ( 2006, p.94 ) , “ The hazard allotment scheme employed can hold a major consequence on the Contractor ‘s stamp for a undertaking, peculiarly when the undertaking is perceived every bit high hazard by the Contractors ”

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