Project Costing and Risk Management for Road Construction Project

This project presents a comprehensive analysis of the risks and costs associated with a road construction project, specifically for XC, a consultancy firm seeking to diversify into the road construction sector. The executive summary highlights key risk areas such as defective materials, project timeline overruns, budget overspending, design changes, natural phenomena, poor stakeholder communication, and unstable soil conditions, along with proposed mitigation strategies. The project then delves into a detailed risk assessment table outlining potential consequences, probabilities, severities, and mitigation measures for each risk. Furthermore, the project provides a detailed cost summary for bid contract preparation, including costs for feasibility studies, surveys, testing, design, and other administrative activities. A schedule for bid preparation is also included, along with background information on three potential road construction projects. The project emphasizes the importance of effective project management, quality control, stakeholder communication, and proactive risk mitigation to ensure project success.

Project Costing for a Road Construction project
Name
Date

Executive Summary
XC is a consultancy firm that has been involved in various engineering and construction projects
mainly as the lead consultant. The business is in a growth phase and seeks to diversify into other
sectors of the construction industry, specifically the road construction sector. This is a lucrative
area that XC can leverage its experience to bid for. However, being a new area the company has
not been involved in, it is essential that the risks inherent to such a move are well understood.
To this end, a team undertook a risk management assessment for the envisaged road construction
project s before the company can successfully bid for these jobs. A risk assessment reveals that
defective materials used in road construction can have a high impact on such projects by
resulting in reworks, roads of poor quality that does not meet the set standards, and on occasion,
a failure by the client to accept the finished project. The risk has a high severity but the impact is
high. To mitigate the risk, effective quality management must be done. Another risk was
overshooting the project time duration, whose impact will be very high and can result in late
project delivery that can also cause increased costs. This risk can be mitigated through effective
project management systems and tools and plan the project well. Another major risk is
overshooting the project budget, which has a high impact and the consequences include high
project costs and the sponsor refusing to support the project, legal litigation or abandonment if
costs are too high. Mitigation measures include using costing methods that are accurate, effective
project management, and strictly controlling project scope.
Design changes while a project is in progress are another significant risk in road construction
that has a very high impact and can result in overshooting time and budget allocations. The risk
can be mitigated by using modern design techniques such as BIM and adhering to road design
standards and regulations, implementing a quality management plan, and simulating designs to
identify any problems. Natural phenomena such as weather conditions are another serious risk in
road construction projects with a very high impact due to effects such as damage to constructed
road sections. The risk can be mitigated by effectively planning construction times when weather
forecasts appear favorable and using high-quality materials for road construction. Poor
stakeholder communication is also another risk whose impact is high whose outcome can be
reduced or inadequate support by stakeholders. The risk can be mitigated using an effective
stakeholder management framework. Unstable or poor soil conditions is another risk with very

high impact as it can cause major reworks; mitigation is by exhaustive soil testing and using
additives to firm the soil. Preparing the budget will cost $ 27000 to cover feasibility studies,
surveys, testing, and road design. The project to be considered include the National Network
Program (Geelong Ring Road Stage 4B ‐ Anglesea Road to Princes Highway 22), the National
Network Programme (Goulburn Valley Highway ‐ Nagambie Bypass), and the National Network
Programme (Geelong Ring Road Stage 4A ‐ Anglesea Overpass)

Introduction
The organization, X Consult (XC) has primarily been involved in consultancy contracts in the
engineering and construction sector, mainly in design development and providing guidance to
various organizations on how to develop designs. However, as with all organizations, it is
important that the company evolves and continues to grow by taking advantage of existing
opportunities in the market. This calls for venturing into the complex but highly lucrative road
construction sector, which, in addition, to being lucrative, carries a new set of risks the company
must be conversant with. Because all projects have risks, this report provides an analysis and
evaluation of all the risks inherent to the road construction project that the company intends to
bid. The report commences by summarizing the risks inherent in road construction projects by
developing a risk assessment for contracting such work. This is then followed by a cost estimate
for preparing such a bid and the departments that will be involved to give the company and board
an understanding of the cost implication for bidding for such works. A schedule for the bid
preparation will then be prepared and an appendix that summarizes the three projects background
will be discussed, in the context of encountered risks for such a construction project.
Risk Assessment in the Road Construction Sector
The table below is a table detailing the risk assessment for road construction projects
Risk
Description
Consequences of
risk
Risk
proba
bility
Risk
severi
ty
Overall
Risk
profile
Mitigation measures against risk
Defective
materials
used in road
construction
Poor quality roads
that fail to meet
quality standards
leading to major
reworks or failure to
accept completed
project by client or
extensive reworks
H VH H Quality management plan
Inspection of raw materials
frequently before procurement
and after
Safe storage of materials to
ensure weather induced damage
is limited
Testing at various stages on
quality of roads (Asphalt quality

tests) (Muhamid 2011)
Overshooting
project time
line
Late delivery of
projects
characterized by
increased costs and
client displeasure
VH VH VH Use of project management
techniques and tools such as
project management software to
mitigate risks
Developing a detailed work
breakdown structure and
following a work progress plan
Effective planning of the project
scope and minimizing scope
changes
Meet regularly to discuss
progress of project on what has
been done and what is remaining
and compare to the project plan
(El-Sayegh & Mansour 2015)
Overshooting
cost/ budget
High project costs
and loss of support
from sponsor
leading to failed/
abandoned projects
or legal litigation
Abandonment of
project in extreme
cases
VH VH VH Use effective and accurate
costing methods and cost
estimations before project
commences when developing
project budget
Strict control of the project scope
Effective management and
communication with
stakeholders to ensure they
support changes (El-Sayegh &
Mansour 2015)
Changes in
scope/ design
during
Will lead to budget
and time constraints
being overshot
H VH VH Use modern design principles
such as BIM (building
information management) and

construction computer aided design
Adhere to all set road design
rules and regulations
Strict management of project
scope
Use simulation software to test
effectiveness of road designs
before proceeding with
construction
Quality management plan that is
strictly followed
Using quality materials that are
tested regularly to ensure quality
(Muhamid 2011)
Natural/
weather
conditions
that can
affect
construction
progress
Drastic changes in
weather, such as
heavy rains and
landslides/ mud
slides will cause
delays, result in
done work being
damaged, and lead
to re-works or
increased costs
VH VH VH Plan for construction when
weather forecast show good
weather
Using quality road construction
materials
Poor
communicati
on with
stakeholders
This will lead to
misunderstanding
and poor
management of
relevant
stakeholders,
resulting in reduced
H VH H Develop an effective stakeholder
management plan and meet
regularly with project team
(Muhamid 2011)

or loss of support for
the project
Unstable and
contaminated
soil
conditions
Can cause
constructed sections
to become damaged
requiring massive
reworks or occasion
massive revisions to
work program,
budget, and project
timelines
H VH VH Ensure the soils where the roads
are to be constructed are
effectively tested before design
begins to avoid future reworks
Using soil strengthening
additives to ensure the roads are
of a high quality/ standard
Cost Summary for Bid Contract Preparation
The costs for preparing the bid contract must be estimated in the context of the activities to be
undertaken and the stages involved in its construction. The first stage will entail a feasibility
study, after the purchase/ acquisition of the relevant project documents. This will be followed by
undertaking surveys in the subject areas and doing tests and surveys to help with the design of
the road. The information from the surveys, including traffic survey (Traffic count) and tests
undertaken on the site souls will then be used to outline proposals for the construction. The
proposals will then be used for developing preliminary designs for the road, followed by a
detailed road design. The detailed design will then be tested through simulations using computer
aided tools and systems. This will be followed by a cost estimation using relevant costing
techniques. The XC staff will then undertake the relevant documentation to attach to the design
to complete the tender document ready for submission, accompanied by visual presentations to
the client. These tasks and their costs are detailed in the table below; by department
Activity Department/
team to
Undertake
Activity
Duration Unit Cost (per duration such
as per hour)
Total
Costs in $
Acquiring tender Design One day @ 50 100

documents
Purchasing
project
equipment and
vehicles
Administration Five Days 25000
Feasibility
Study
Civil engineering
department with
a civil engineer
or two, civil
technicians,
foremen, and
road construction
technicians
Twenty
days
Civil engineer pay @ $ 22 per
hour
Foreman pay @ $ 16 per hour
Civil engineering technicians
@ $ 12 per hour
Road construction technicians
@ $ 12 per hour
16000
Site survey and
geotechnical
surveys
Survey
Department (8
quantity
surveyors) and 4
Civil Engineers
plus project
manager
Sixteen
days
Chief quantity surveyors @ $
18 per hour
Assistants @ $ 15 per hour
140960
Soil tests 2 civil
engineering
technicians
Twelve
Days
@ $ 12 for each per hour 76800
Traffic survey/
Count
Consultant and
survey
supervisors plus
surveyors
Seventeen
days
@ 25 per hour for consultant
@ $ 18 for survey supervisor
@ $ 10 for the surveyors/
traffic counting team
14480
Progress review
meeting
All staff in
bidding team
Two
Days
6000
Preliminary
designs
Civil engineers
(2)
Eight
days
@ $ 25 per hour 28000

Validating
Designs
Civil
Engineering,
Surveying,
Project
management
Four
Days
6400
Detailed road
design
Civil engineers
(8), Consultant
Thirty
days
@ $ 22 per hour for engineers
@ 25 for consultant
48000
Simulation and
testing software
(cloud SaaS),
Consultant input
Designers and
Consultant
Six days @ 50per hour for consultant
@ 25 $ Civil engineers
28320
Final
documentation
preparation
Administrator 2 days @ $ 14 per hour 3520
Miscellaneous
(Communication,
stationery,
refreshments)
8000
Total for Bid
Preparation
437620
Schedule for the preparation of the Bids

References
El-Sayegh, S. M., & Mansour, M. H. (2015). Risk Assessment and Allocation in Highway
Construction Projects in the UAE. Journal of Management in Engineering. 31, 04015004.
Mahamid, I. (2011). Risk matrix for factors affecting time delay in road construction projects:
owners' perspective. Engineering, Construction and Architectural Management. 18, 609-617.

Appendix I: Summary of background Research on the Three Possible Bids for Road
Construction
Project 1: National Network Program (Geelong Ring Road Stage 4B ‐ Anglesea Road to
Princes Highway 22)
This project entails the construction of a five km freeway standard road connection from
Angelesa road to join the Prices Highway West that is next to the Dayton’s Road. Undertaking
this project includes building an interchange to take care of traffic movement on and off the main
Geelong road and to allow for rest areas to be built for west bound and east bound traffic. The
allowance also requires constructing separate parking for trucks and cars, toilets, and a sheltered
area. The project is budgeted to cost $ 110 000 000 and took 27 months to complete between
October 22nd 2010 and February 23rd 2013. The road construction is because of the increasing
traffic. The road was envisaged because centers along the road will become a focus for industry
and population growth, based on a land use survey of areas along and around the ring road. The
areas around the road are rapidly growing hence the need for constructing the ring road.
Project 2: National Network Programme (Goulburn Valley Highway ‐ Nagambie Bypass)
This project entailed the construction of a seventeen km bypass on the Goulburn Valley Highway
and was undertaken in two sections. 3.5 km of road was duplicated in the northern section from
Weir Road to the Kirwans bridge- Longwood Road. The bypass section entailed constructing a
13.5 km road bypass east of nagambie from the Kirwan bridge- Longwood road to
Mitchellstown Road. The project cost $ 188 700 000 and took forty months and two weeks, from
December 14th 2009 to April 30th 2013. The road runs along the Goulburn river course and is a
national highway funded fully by the Australian government. The road is being upgraded to a
freeway standard road, albeit progressively so that the road will eventually bypass all towns from
between the Murray River and the Hume freeway. The road was converted into a dual
carriageway from Arcadia to the Hume freeway. The Nagambie bypass forms part of the Auslink
and bypasses Nagambie town with the bulk of funding provided by the Asutralian government to
the tune of $ 177.6 million, with the State government providing the rest.
Project 3: National Network Programme (Geelong Ring Road Stage 4A ‐ Anglesea
Overpass)

This project entailed constructing a 2.5 km four lane road that was a dual carriage freeway
running from The Princes highway on the Geelong Ring Road to the Angelesa Road terminating
at the Hams road. The project cost $ 125 000 000. The construction of the road commenced in
2009 after the contract was awarded to Fulton Hogan for a cost of $ 61.7 million in December
2008.