Download - Risks Risks In Construction
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Risks in Civil Engineering
Projects
Constructors perspective
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Risk Analysis In Project Mgt.
This is not a speculative game at all. Our
objective is not to avoid risks but to recognise i
price it and sell it.
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Construction Budgeting DecisionsRisks and Uncertainties
Non-availability of detailed designs anddrawings
Precise ground conditions at site
Type of contract arrangementInflation and price variation
Annual change in Govt. budget and policies
Construction market conditionsGlobal competition for works in India
Industrial relations
Adequacy of site investigations
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Management RisksSame project, different contractorsMaterialsDiscounts, terms of payment,
vertical integrationLabour productivityskill, workmanshipLabour CostMaterials Mgt.Wastage
Equipment Mgt.ProductivityConstn. TechniquesSequence operationsDistortion in bidding - front loadingOverheads and profits
Construction Budgeting DecisionsRisks and Uncertainties
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Professional Liability
Adequacy of site survey
Design errors
Misleading estimates
Selection of contractorsTerms of Contract
Management of Contract
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CR Policies
General exclusions, period of cover
Sum insured, Replacement value
Endorsement for Special Risks
Cover for Cross liabilityMaintenance visits cover
Cover for extra charges for airfreight
Structures earthquake zone
Cover for surrounding property
Cover for Designers risks
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Insurance
Identify potential exporters to Laws
Separate pure risks from speculative risks.
Consult Insurance Companies before.commencement of work to cover unusual risks.
Carefully choose the period of insurance cover.
Define site, CV to include price variation.
Professional Indemnity policy.
Consequential losses, debris removal
Legal liability, exclusions, claims etc.
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Decennial Guarantee
Scope of coverDamage to structures
Damage to non-structural works
Debris removalLimit of Indemnity: Limited to value of
structures insured on the date of acceptance
ExclusionsFraudulent act of policy holder / all the insured
Damage due to fire or explosives
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Decennial Guarantee
Damage due to settlement by miningoperations
Damage to third parties
Failure to carry out the finishing operations
Damage due to faulty maintenance, abnormalusage, normal wear and tear
Modifications subsequent to the completion
Damage resulting from substandard workmentioned at the time of acceptance
Damage occasioned by faulty waterproofing
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Risks - Overseas Projects
Risks of projects in Third World countries
FIDIC Conditions of Contract
Political Stability
Volatile currency rates
Sanctity of the contract agreement.
Registration of Contract
Customs Regulations, entry to Ports.
Local agents, Local Laws, Local Insurance Co
Settlement of claims in local currency
Incometax by the host country
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Risk Analysis in Project Mgt.Role of Actuaries
In 1994 the Institution of Civil Engineers (UK) andthe British Institute of Actuaries established a jointworking partner to produce risk analysis andmanagement process.
A handbookRAMPRisk Analysis and Mgt. forproject has been produced.
Civil Engineers aware of technical risks with limited
exposure to non-engineering financial risks.RAMP methodology encourages Civil Engineers to be
aware of the business side of projects and to mange awider variety of risks.
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Risk Analysis in Project Mgt.Role of Actuaries
CIDC initiatives and intervention resulted in a
National Conference in Delhi in February 2000.
Risk analysis specifically discussed.
Bench marks required for most appropriate
insurance products.
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Item Rate Contracts
Quantity variation at Employers Risk
More competitive Quotes
Employer responsible for Design and
Drawings and their accuracy
Detailed monthly measurements and
consequent time for certification
Risk of extended construction time
Ri k i Ci il E i i C t t
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Risks in Civil Engineering Contracts
Why Contracts?
Risk sharing by Employers, Contractors.
Utilise special skills/ resources.
Faster completion, less cost.Special equipment, Processes.
Different types of Contracts allow flexibility in
sharing of Risks.Item rate, Design-Build, Turnkey contr.
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Turnkey Contracts
Maximum Risk borne by the ContractorIncludes Engineering, Procurement,
manufacture,inspection,QA ,Supply erection,
testing, commissioning, performance testing.
AS-Built Drawings,operation manuals
Maintenance , Manuals.Final handing over
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Project Management Consultancy
Pre-investment studiesDesign, Engineering
Tenders, Contracts finalisation
Construction supervision
Contract management
QA, Certification of all Payments
Commissioning, Maintenance
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General Conditions of
ContractDeveloped Countries have Standard GeneralConditions of Contract, max two or three typesfor use within the country. India does not have
any Such Document
There are more than 100 versions of General
Conditions of Contract,in use by Central,State
Govt Depts, Undertakings, Architects
Consultants, and other Employers
G l C diti f C t t
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General Conditions of Contract
Prepared by FIDIC Switzerland
CONDITIONS OF CONTRACT FOR WORKSOF CIVIL ENGINEERING CONSTRUCTION
Part I General Conditions, with forms oftender and agreement
Part II Conditions of particular application
with guidelines for preparation of Part II
Clauses
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General Conditions of Contract
Prepared by FIDICPrepared by the International federation of
Consulting Engineers; India is
represented by ACEDocument universally accepted , but not by
India
World Bank, Asian Development Bank
insist on adoption for India also
Suitable for Domestic Contracts also
General Conditions of Contract
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General Conditions of Contract
Prepared by FIDIC
Cl 21 Insurance of Works, Equipment:Works, together with materials and Plant for
incorporation therein, to the full replacement
cost plus 15 %
The Contractors equipment and other things
brought to site , for a sum sufficient to
provide for replacement
General Conditions of Contract
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General Conditions of Contract
Prepared by FIDIC
Insurance of WorksExclusions Cl 21.4
War, hostilities, acts of foreign enemies
Rebellion, Revolution, Insurrection, or Militaryor usurped Power, or Civil War
Radioactive toxic explosive, ionizing radiation,
Radioactive Contamination
Pressure waves caused by aircraft
General Conditions of Contract
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General Conditions of Contract
Employers Risks FIDIC
All Exclusions PLUS loss or damage due to useor occupation by the Employer of any part of
the works,
Loss or damage due to design of the
works,except that of the Contractor
Operation of forces of Nature which an
experienced contractor cannot foresee
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Civil Engineering Constructin
Risk Factors
The Works, Construction Equipment and
Enabling works
Contractors liability to own employeesPublic Liability and cross liability
Damage to Employers Property
Professional Indemnity
Employers personnel at the site
Guarantees, Liquidated Damages
Civil Engineering Construction
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Civil Engineering Construction
Risk Factors: Works definition
The permanent & temporary works andmaterials to be incorporated therein,and
situated at the Contract Site or in transit thereto
or there from, or in Stores situated at
The Works may, if defined,include or exclude
property supplied for installation by someoneelse
Civil Engineering Construction
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Civil Engineering Construction
Risk Factors: Contract Value
Contract Price: Sum stated in the letter
of acceptance
Contract Value may vary due toVariation in Scope of work
Additions/ Deletions Changes
in Specification, Design PriceFluctuations/ Variations Delayed
handing over of
Site Drawings
Civil Engineering Construction
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Civil Engineering Construction
Risk Factors: Contract Period
Contract agreement specifies construction andmaintenance periods
They also provide for time extensions
Liable for delays due to Contractor / Employer /
other factors
Contract liability continues during suchextended periods, even under changed political/
economic regimes
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