Conceptual framework for management of risks due to uncertainties in design-build brownfield projects
By: Goel, Ashish
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Publisher: Pune NICMAR 2015Edition: Vol.30(3), Jul-Aug.Description: 37-46p.Subject(s): Construction Engineering and Management (CEM)Online resources: Click here
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NICMAR Journal of construction managementSummary: Brownfield projects have some unique risks due to uncertainties which a contractor generally doesn't encounter in Greenfield projects. A contractor's bidding for brownfield projects on Design- Build (DB) basis mitigates such risk by including risk premium/contingency and high mark-up in their price bids which results in bids loaded with high premium and contingency as per the risks 'perceived' by the contractor. Accordingly, a client pays a higher bid price, irrespective of whether the perceived risk actually materialises or not during the execution. In the present study, a thorough literature review was carried out and content analysis was performed on ten project documents to check risks in brownfield projects executed in India. It has been found that 'ambiguous scope definition', 'non-availability of information regarding site's existing facilities', 'unclear details of interface of new construction with existing facility' are prominent design risks. 'space constraint for carrying out site activities', 'non-availability of shutdown as per construction plan', 'increased chances of accidents at site, 'frequent changes during execution' and 'increased chances of disputes during execution' are the prominent execution risks. Thereafter, a conceptual framework is suggested using both traditional and DB procurement systems. Adoption of this framework will reduce the contractor's risk & at the same time, it will also ensure that the client pays only for such risk which a contractor actually encounters at sites thus making the total bid package more economical for him and also reducing the contractor's risk.
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Brownfield projects have some unique risks due to uncertainties which a contractor generally doesn't encounter in Greenfield projects. A contractor's bidding for brownfield projects on Design- Build (DB) basis mitigates such risk by including risk premium/contingency and high mark-up in their price bids which results in bids loaded with high premium and contingency as per the risks 'perceived' by the contractor. Accordingly, a client pays a higher bid price, irrespective of whether the perceived risk actually materialises or not during the execution. In the present study, a thorough literature review was carried out and content analysis was performed on ten project documents to check risks in brownfield projects executed in India. It has been found that 'ambiguous scope definition', 'non-availability of information regarding site's existing facilities', 'unclear details of interface of new construction with existing facility' are prominent design risks. 'space constraint for carrying out site activities', 'non-availability of shutdown as per construction plan', 'increased chances of accidents at site, 'frequent changes during execution' and 'increased chances of disputes during execution' are the prominent execution risks. Thereafter, a conceptual framework is suggested using both traditional and DB procurement systems. Adoption of this framework will reduce the contractor's risk & at the same time, it will also ensure that the client pays only for such risk which a contractor actually encounters at sites thus making the total bid package more economical for him and also reducing the contractor's risk.
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