SRM777 Project Risk Management: Causes & Mitigation of Overruns

This report examines the pervasive issue of time and cost overruns in the construction industry, highlighting their negative impact on stakeholders and national GDP. It identifies key factors contributing to these overruns, including planning and control uncertainties, scope changes, site conditions, and market fluctuations. The report also categorizes construction delays and explores various mitigation techniques such as preventive, predictive, corrective, and organizational measures. It emphasizes the crucial role of project managers and their competencies in preventing and controlling overruns, citing research that links project manager competence to project success. The study draws on international examples and empirical data to provide a comprehensive overview of the challenges and potential solutions for managing project risks and ensuring timely and cost-effective project delivery. Desklib offers a wealth of resources, including similar solved assignments and past papers, to further assist students in their studies.

ASSESSMENT 1
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SRM777

Contents
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
Evidence indicates that the construction industry’s track-record of delivering projects is very
poor - a significant number of construction projects, particularly large major projects, are
delivered late and over-budget...............................................................................................2
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The construction industry is negatively laid low with price and time overruns which in
addition negatively influences the contractual stakeholders. Construction delays and price
overruns are an international phenomenon on the grounds that one of the important issues
withinside the production enterprise entails sudden incurred expenses and past due transport of
tasks. The fulfilment and failure of any assignment relies upon many elements and the Project
Manager is taken into consideration to be the important thing contributor to the fulfilment of any
assignment, in addition to manual the crew participants to gain the patron satisfaction. In
addition, the roles, responsibilities, duties, and skills of Project Managers have a right away
effect on effectively finishing production tasks on time and inside budgeted price. The examiner
aimed to locate the important thing competency capabilities that the Project Manager should own
to mitigate time and price overruns. A quantitative studies method turned into followed to decide
the important thing competency capabilities of a Project Manager with admire to price and time
delays. A web-primarily based totally questionnaire turned into posted withinside the Eastern
Cape Masters Builders Association (MBA) bulletin aimed toward contractors registered with the
association. The consequences discovered that the important thing skills required to mitigate for
price overruns are akin to the ones required to mitigate in opposition to time overruns (Bie,
Xiong, and Qu, 2020).
TASK
Evidence indicates that the construction industry’s track-record of delivering projects is very
poor - a significant number of construction projects, particularly large major projects, are
delivered late and over-budget
The construction industry is a superb indicator of monetary overall performance and
increase in a country, it additionally contributes notably to the Gross Domestic Product (GDP) of
many countries, South Africa included. It has been mentioned that the development enterprise
notably contributes to activity introduction in lots of economies, which consequently locations a
good deal significance of its effect on a nation’s GDP. Despite the modern monetary potential,
the development enterprise faces demanding situations of price and time overruns which has an
unwanted effect at the contractual events concerned withinside the undertaking. Construction
delays and price overruns are a world-huge phenomenon seeing that one of the most important

troubles withinside the production enterprise entails surprising received fees and the past due
shipping of tasks (Fabbrocino, Petracca, and Rainieri, 2021). It has been studied the ones 258
tasks internationally and concluded that 90% of production tasks are experiencing price will
increase and delays. The award of the 2010 FIFA World cup in South Africa led to ten stadia
being upgraded or newly constructed. Almost all of the tasks skilled time and price overruns.
The preliminary budgeted price of the Johannesburg Soccer City became R 2.2 billion and the
very last price amounted to R 3.7 billion. The outcomes of diverse production organizations
indicated that the growth in cloth price became the biggest unmarried contributor for the delays
and price overruns that's number one answerable for the delays that has been made withinside the
tasks finished through the development company. It has been tested the huge elements that cause
time overruns and time delays. It became discovered that layout changes, coins flow, and terrible
control are the maximum huge elements. The circle of research into overruns cannot be whole
until set up essential elements are matched towards respective mitigation techniques to govern
the incidence wherein the overruns occur. That is why different factors are being taken into
consideration of price and time overruns because of their lifestyles withinside the diverse degrees
of the undertaking lifecycle. The essential reasons have been then aligned with feasible matching
mitigation techniques. It has been discovered that classified the mitigation measures in line with
the wide feature they measure; Preventive, Predictive, Corrective and Organisational measures
respectively is essential for the commercial enterprise to be successful and facilitates in handing
over the tasks on time. The achievement and failure of any undertaking relies upon many
elements. It has been mentioned that 9 out of ten tasks failed because of incompetent undertaking
managers. Project Managers are taken into consideration to be the important thing contributor to
the achievement of any undertaking, in addition to manual the crew individuals to attain the
patron satisfaction (Gebremichael, Meggitt, and Kvenild, 2018). In addition, the Project
Managers’ roles, responsibilities, duties, and abilities have an instantaneous effect at the
achievement of production tasks. It has been judged that there may be an exceedingly sturdy
correlation among the Project Manager and the achievement of the development tasks.
There are numerous competency abilities that a Project Manager ought to have with a purpose to
save you value overruns and to govern time delays. In order to decide the important thing
competency abilities for a challenge supervisor to undertake with a purpose to mitigate the
prevalence of value and time overruns diverse varieties of inspection has been executed in order

that preferred effects might be generated (Khan, Verma, and Varsheny, 2021). It is taken into
consideration that on diverse infrastructure initiatives which spanned 5 continents to analyse the
reasons of value overruns. The goal of this document became to expand an empirical primarily
based totally category of the important reasons of value overruns. The important reasons have
been diagnosed and categorized as follows;
Planning and manage uncertainty – It have been referred to that making plans as key in challenge
making plans. Similarly, it's been diagnosed that a challenge to succeed, right making plans
ought to be advanced with a purpose to enhance value controls. It has been crucial for the
development corporations that it must study utilising for primary control gear which are; making
plans, organizing, main and controlling to enhance their value controls and decrease value will
increase problems. Furthermore, the reasons below making plans have been the dearth of revel in
via way of means of challenge managers, strategic misrepresentation, modifications in
substances and gadget, layout error, bad economic manage on web website online, waste on web
website online, scarcity of web website online workers, bad web website online control and
communication, loss of coordination, gadget availability and absence of implementation of
technology (Kim and Cho, 2019).
Change in scope – Scope alternate arise because of changes in layout of architectural, structural
or carrier components. This is regularly the effects of the consumer’s alternate of plans or
scope. The essential reasons of scope alternate resulted from unrealistic designs from
proprietors and modifications because of omissions. It has been found that scope modifications
are consumer associated value overruns that commonly arise because of versions made via way
of means of the consultants.
Site situations – These are reasons associated with environmental problems, social and tradition
effect. These problems can result in will increase to the uncertainty of obligations and
consequences, that can make making plans and estimating difficult. The growing of the
environmental necessity’s effects on production operations. For example, environmental
problems along with sudden geological situations can result in will increase withinside the
uncertainty project and consequences that can make making plans and estimating difficult. Site
situations as important effect of value overruns in Iranian constructing initiatives. The dimension
of environmental problems has many effects withinside the production enterprise which ends
specially the boom of charges of production initiatives and the time taken to manner layout,

making plans and production existence cycle. The public publicity of the challenge over their
environmental effect had damaging effect at the challenge itself that can result in the
abandonment or cancellation of the challenge itself. The British Rail’s excessive-pace hyperlink
to Channel Tunnel had value overruns of as much as US$1.4 billion due to modifications in web
website online situations (Liu, Shen, and Xu, 2019).
Market Fluctuation – The marketplace fluctuations are such situations may be skilled while the
costs of exertions and substances required to assemble a challenge vary unpredictably, or while
authorities’ rules alternate unpredictably, which ends up in boom in value production. Market
associated uncertainties have an effect on each challenge period and value. The supervisor
ought to don't forget all varieties of sources withinside the layout of production to make certain
that the sources fit every different and alter different varieties of sources while the provision of
any aid is raised or reduced via way of means of uncertainty.
This category of value overruns consists of month-to-month charge problems via way of means
of the consumer, sluggish bills of finished works, cashflow all through production, marketplace
situations, fluctuation in cash change charges, excessive hobby charges charged via way of
means of banks, fraudulent practices, political complexities, exercise of assigning settlement to
lowest bidding, legal guidelines and regulatory framework (Najib, Saud, and Hamzah, 2019).
Time overruns are described as greater time required to complete a given assignment past its
authentic deliberate duration, whether or not compensated for or not. Time overruns are
described because the distinction in time among the real and the to begin with deliberate dates of
crowning glory. Time overruns also can be described as an act or occasion that extends the time
to finish or carry out an act below the settlement. Time overruns virtually method the time
overrun both past the crowning glory date laid out in a settlement or past the date that the events
agreed upon for shipping of an assignment. It is an assignment slipping over its deliberate
programme and is taken into consideration a not unusual place trouble in creation initiatives
globally. Delivering initiatives in the settlement stipulated time is one of the backyard sticks of
measuring a a success assignment. Despite its established importance, it isn't always unusual to
peer creation initiatives failing to obtain their objectives. However, creation initiatives time table
overruns have poor influences on all creation events which includes the client. The elements of
delays studied in a assignment improvement assignment had been usually categorised as time
delays. In the study, it turned into located that the pinnacle ten main elements that contributed to

assignment delays turned into, terrible web website online control through the contractor, climate
conditions, terrible web website online conditions, incomplete files from the representative, loss
of enjoy at the a part of the representative’s web website online staff, monetary troubles of the
contractor, settlement adjustments through the client, creation errors and faulty paintings through
the contractor, put off in approving main modifications withinside the scope of labour through
the representative and lastly, contractor having coordination troubles with different events
(Rabhi, Benrahou, and Tounsi, 2020).
The construction delays into compensable put off, essential put off, non-essential put off,
excusable put off and concurrent put off. They had been categorised as follows;
 A compensable put off is one in which a contractor is entitled to economic healing
withinside the shape of direct and oblique time associated charges springing up from an
agency chance event. These are delays because of past due coaching through the task
supervisor or leader consultant, version because of proprietor and past due graduation of
production works because of the proprietor.
 Critical put off is a put off to the development of any interest on an essential route of a
task, which reasons put off to the task completion. Critical delays depend upon the task
itself, contracts plan, contracts series and all of the bodily constraints of the task.
 Excusable put off is a put off for which a contractor could have alleviation from damages
and capacity economic entitlement relying on contractual circumstances. The sorts of
delays beneath Neath this class consists of exertions strikes, herbal disasters (fires,
floods, earthquakes), modifications initiated through the proprietor mistakes and
omissions in plans (Santos, and Nunes, 2018).
 Non-excusable put off is a put off due to contractor. Under this class is delays due to
mobilization, past due overall performance through suppliers, defective workmanship
through contractor and past due overall performance through subcontractors.
It is clear that Project Manager’s competency is fundamental for any creation initiatives to
succeed. Competence refers back to the talent and potential required to finish assigned sports in
the task’s constraints. Explained from a semantics perspective, ‘competence’ has been used to
outline a specific understanding or observable characteristics, whereas ‘talents’ are an
amalgamation of knowledge and facilities, combined collectively through corporation technique
and culture. If a task supervisor does now no longer own the desired competences, overall

performance may be jeopardised. Major reasons of value overruns and delays are due to terrible
task control practices (Smith, Smith, and Teschner, 2018). The significance of task control
competency noting that loss of development in task overall performance might motive a
exquisite stride in value control, first-class and time taken to complete a creation task. The duties
of task managers variety from task directors to creation crew leaders. To efficaciously execute a
task, the latter wishes to own a completely unique set of understanding and abilities. Project
control expert abilities may be carried out via a aggregate of understanding won at some point of
training, talents advanced via operating revel in and finally, the software of the preceding
understanding acquired. The understanding that a task supervisor has may be very one-of-a-kind
from that of different creation professionals, consisting of vital course evaluation and task coins
float forecast.
The abilities of task managers below 3 wonderful classes as follows;
 Key abilities – The personal, interpersonal, monetary control, management style, layout
abilities, expert exercise and enterprise abilities not unusual place to all pathways and
obligatory for all applicants for making plans prices and budgets. Risk control, making
plans, web page organization, decision- making and coordination are key for the time
control of a task.
 Core abilities – The number one ability may also consist of enterprise skills, law, size
and realistic task control.
 Optional abilities – A set of abilities decided on through the candidate. These are usually
technical abilities; however positive obligatory abilities additionally seem at the
optionally available competency listing and applicants are authorized to pick this kind of
at a better level (Webber, 2018).
The effect of fee overruns has obtrusive outcomes withinside the creation industry. The effects to
be able to arise whilst the reasons of fee and time aren't diagnosed and laboured on effectively.
The outcomes are being diagnosed and ranked them as follows:
 Cost overrun: The impact of fee overruns to the purchaser implies delivered expenses to
the agreed agreement sum, ensuing in much less returns on investment.
 Time overrun: Time postpone may have the incapacitating impact on contracts and
specialists in phrases of boom in antagonistic boom.

 Dispute and Claims: Disputes and claims get up due to the losses incurred via agenda
overrun (Winterstein, Péntek, and Wüchner,).
 Litigation: Disputes, because of agenda overruns, can result in courtroom docket
instances for decision in particular whilst huge consequences are at stake.
In fact, in keeping with the consulting corporation Accenture, through 2020, creation sports in
rising markets will account for 55% of worldwide output and contact USD 6.7 trillion. This is
highly promising, now no longer only for the architecture, engineering, and creation (AEC)
space, which will — pretty literally — ‘build’ the output, however aftermarket gamers too,
consisting of the neighbourhood assets control company, asbestos abatement contractors, and
others. However, alevin though a promising outlook, the AEC enterprise can have demanding
situations in making the maximum out of the upturn in infrastructure demand. The exam of a few
troubles is being mentioned below:
Poor Productivity:
Poor Productivity: This takes place from a huge variety of troubles, including:
 Idle time because of overdue or inadequate deliver shipments;
 Creation motors breaking down;
 Common inclement weather;
 Layout headaches bobbing up halfway at some stage in creation;
 Friction among the special stakeholders (e.g., proprietor and contractor) and others.
Though terrible productiveness cuts throughout many areas, the internet end result is perpetually
the identical: dwindling profitability and growing costs. Thus, regardless of the call for capability
for brand spanking new creation tasks worldwide, AEC organizations will face the identical
antique problems (Zareie, Issa, and Zabihollah, 2020). The effect of those troubles will have an
effect on AEC corporations in diverse ways. For example, set up gamers would possibly falter in
opposition to more modern competitors, in particular the AEC giants of China, the pinnacle 4 of
which earned a combined $238.five billion in 2010.On the opposite hand, smaller or more
modern entrants may also locate it extra tough to advantage traction. With fewer sources on
hand, those small AEC organizations can have problem matching the pricing and tempo in their
large competitors.
Rising Cost of Materials:

Be it tariffs, exchange conflicts, inflation, or growing worldwide demand, the value of creation
substances is rising. Between 2017 and 2018, cloth charges rose 5.3% (ABC). According to the
record published, besides for softwood lumber and crude petroleum, the value of all different
number one creation substances assets rose among 2017 and 2018. Moreover, the maximum vast
year-over-year (YoY) will increase had been in metallic mill products (along with beams, pipes,
plates, etc.) and iron and metallic at 19.8% and 17.6%, respectively (Zhang and Wang, 2020).
Poor Project Performance:
The elements above have extensive influences at the overall performance of production
initiatives: the hazard of going over price range and the hazard of failing to supply inside
targeted timelines. Rising and risky expenses and productiveness troubles pressure massive or
capital infrastructure initiatives to exceed budgets. The KPMG survey discovered that handiest
25% of production initiatives got here inside 10% in their targeted deadlines. The purpose of that
is manifold. It can end result from unique productiveness problems, inclusive of common
inclement weather, or systemic troubles, inclusive of change wars (Zhu, 2018).

CONCLUSION
Cost overruns are one of the vital troubles confronted withinside the production industry. A
challenge can be taken into consideration to be a hit challenge most effective while it's far
finished in the budgeted fee. Studies found out that the fulfilment and failure of any challenge
relies upon many elements. It is stated that the Project Manager is taken into consideration the
important thing contributor to the fulfilment of any challenge. Thus, the goal of this document
become to research the principal reasons of fee and time overruns. This document additionally
aimed to decide the important thing competency abilities vital for Project Managers to mitigate
in opposition to fee and time overruns. The become in addition tested the outcomes of challenge
delays and mitigation measures thereof. Based upon the numerous elements, key competency
elements required through the Project Manager to govern fee and time overruns had been
identified. Based upon the declaration referred to above it could be concluded that the important
thing abilities wished for fee overruns are corresponding to the important thing abilities had to
manipulate time overruns. This document determined that the important thing abilities for
stopping fee overruns had been economic control, making plans, and control, software of
challenge price range techniques, control of cashflow and strategic implementation. The key
abilities for time overruns had been making plans and scheduling, time control, software of
production methods, decision-making and threat control.

REFERENCES
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