Risks in Construction Projects

Construction Project RisksRisks in construction projects may be classified in a number of ways. One form of risks classification is as follows:

  1. Socioeconomic factors
    • Environmental protection
    • Public safety regulation
    • Economic instability
    • Exchange rate fluctuation
  2. Organizational relationships
    • Contractual relations
    • Attitudes of participants
    • Communication
  3. Technological problems
    • Design assumptions
    • Site conditions
    • Construction procedures
    • Construction occupational safety

The environmental protection movement has contributed to the uncertainty for construction because of the inability to know what will be required and how long it will take to obtain approval from the regulatory agencies. The requirements of continued re-evaluation of problems and the lack of definitive criteria which are practical have also resulted in added costs. Public safety regulations have similar effects, which have been most noticeable in the energy field involving nuclear power plants and coal mining. The situation has created constantly shifting guidelines for engineers, constructors and owners as projects move through the stages of planning to construction. These moving targets add a significant new dimension of uncertainty which can make it virtually impossible to schedule and complete work at budgeted cost. Economic conditions of the past decade have further reinforced the climate of uncertainty with high inflation and interest rates. The deregulation of financial institutions has also generated unanticipated problems related to the financing of construction.