Construction project failure due to uncertainties A case study

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1 Construction project failure due to uncertainties A case study Shahriari Mohammad 1, Sauce Gerard 2, Buhe Catherine 2 and Boileau Hervé 2 1. Correspondent author: Necmettin Erbakan University, Faculty of Engineering, Department of Industrial Engineering, Konya, Turkey. mshahriari@konya.edu.tr 2. Savoie university, LOCIE laboratory, Chambery,France. Campus Technolac Le BOURGET du LAC cedex France Abstract During recent years, there has been a major interest in managing uncertainties to increase the level of project s success. Among the engineering activities, construction is one of the projects which is associated with a high degree of uncertainty and risk due to the nature of its business character. Therefore managing of uncertainties, as the main causes of failure in construction has been recognized as a very important task in order to achieve the project objectives. The scope of this study is an attempt to make a more clear understanding of uncertainties in construction projects which may result in undesirable failures. This task has been supported by a decision model to define and understand more clearly the different concepts of risk including uncertainties in a decision process. Furthermore, the defined concepts have been validated in a historical case. Keywords: Uncertainty, Decision making, Risk management, building uncertainties, project risk management 1. INTRODUCTION In fact, construction is one of the most risky projects which is associated with a high degree of uncertainty and risk due to the nature of its business activities, processes, and the external environment. Late completion of projects, surpassing their estimated budgets and in some worse instances not even achieving the desired quality and operational requirements, due to uncertainties, has given a bad reputation to this sector. Thus, effective management of construction associated uncertainties and risks remain a big challenge to the industry stakeholders. The literature shows that the main problems in construction projects are: Lack of safety culture, Existing of different actors with different goals and lack of communication between them, Lack of knowledge, Climate changes, Lack of reliable data, Technology changes, Complexity, Self-confidence about the experiences, Project similarity, Lack of competence of the staff in the project manager s team, Lack of competence about future needs. Finding a solution to these problems, which may face the project with risk of failure and applying risk management, is one of the greatest challenges faced by the researchers. The main objective of the study is to see how uncertainty is related to variables, hazard and risk in a process of decision making in construction? The study is based on a literature review and interviews with some experienced project managers. In this study a conceptual approach developed by Shahriari (2011) was used in a construction project case to identify the risk relevant concepts including uncertainties and their roles in decision making and avoidance of failure. 2. UNCERTAINTY AND RELATED CONCEPTS IN DECISION MAKING PROCESS Decision model description: In this part of the study an attempt is made to show the relationship of the aforementioned concepts in the frame of a decision model. In fact, decision makers face variables along the project life cycle from the beginning up to the end. However, the type of variables might be changed, or new variables added to the decision making process through the project life cycle. These variables in general could provide a potential for project failure or deviation from the project objectives causing loss of capital investment, reputation, productivity, assets, human life, environmental problems, etc. The hazard situation could in turn result in a feeling of threat and an urgency to act against an uncontrollable and uncertain situation by finding some alternatives and to try

2 to make proper decisions. Once decision makers feel a threat they have to make a decision and choose the best options to prevent the hazardous situation. Decision makers analyze the received information and variables in order to identify, analyze and evaluate the alternatives. The lack of enough knowledge about the alternatives causes the decision makers to face an uncertain situation. To move from this uncertain situation, there is a need to improve the level of knowledge about the alternatives by quantification of uncertainties. In order to quantify the uncertainties, each alternative should be evaluated by estimating the relevant risk probabilities and consequences, calculating risk and comparing weaknesses and strengths of different alternatives. This process is referred to as risk assessment. The result of risk assessment is feedback to the decision maker as a decision support to choose the best option among the alternatives. In the following section a case study is given to define the decision making based concepts in a construction project. The model can be simplified follows in Figure 1. Feeling threat Uncertainty situation Goal (project) Goal related variables Potential of Failure/Hazard Searching for alternatives Evaluation of alternatives Decision Figure 1. The simplified decision model 3. A CASE STUDY 3.1. Project definition: A case can be dedicated to analyze a building for research activity in France. This building should be designed and built as the figurehead of a complex of advanced technology. The initial Investment Cost was estimated 8M, for 5000 m². In addition to the common objectives (quality in terms of adequacy of the usage, budget and time limits), the given context and the desire of the client was the most important issue to make an exemplary building regarding the energy aspect in terms of minimizing the needs of energy, increasing efficiency of the system as a whole and using renewable energy. But unfortunately, the project failed and the client couldn t gain the expected goal. As a case the project is analyzed on the basis of the decision model presented in the previous chapter of this paper (Shahriari, 2011). The main objective of the study is to identify the influencing uncertainty factors causing failure of the project. The goal is to learn a lesson from this case Variables: Obviously, there are a lot of variables associated with this project. But, here in this paper we will focus on four groups of variables as examples (Table 1). Table 1. Groups of variables associated with the project Group of Variables Explanations Group 1 Different activities involved in the building Group 2 Number of occupants Group 3 Operational organization: In this project three different companies are involved as the clients and future operators of the building. Group 4 Facility manager of the building: Establishing strategy for operation and maintenance at the beginning of construction and operation are essential for such technical buildings. Several design choices could depend on the level of maintenance. For instance a low strategy implies redundancy of devices Hazard: Ignoring variables at the beginning or during the inception phase of the project could provide a potential condition (Hazard) for project failure e.g. delay, extra expenses, deviation from the planning. This condition faced the managers with many uncertainties but no one took it seriously Uncertainties: In this project the uncertainties according to the above mentioned variables could be developed at three levels: Level 1: Basically, the two first variable groups were precisely defined, but uncertainties were not considered seriously at the beginning of the project. In fact, three main activities were defined in the project as: Research in the fields of building and energy consisting 130 persons, training including 10 teachers, and 15 administrative staff. According to the project, 155 persons should have a work place in this building. As far as the third and fourth variable groups are concerned the situation will be quite uncertain due to the behavior and interaction of the different operators.

3 Level 2: The definition of the third variable was postponed to the later stage by the client who said: we will define the operational organization later. This could cause an important uncertainty followed by a serious risk. Level 3: The fourth variable was totally ignored by the client, although the best practices identified this point as a very important issue which should be taken into account at the inception phase. Relationship between variables and uncertainties are shown as follows (Table 2): Table 2. Relationship between variables and uncertainties in different levels of the project Variables kind of uncertainties according to the designer real uncertainties Group 1 level 1 (No uncertainties) high Group 2 Level 1 (No uncertainties) medium Group 3 level 2 (knowledge of variable postpone) medium Group 4 level 3 (ignored variables) very high 3.5. Risks: There is risk in terms of probability of inadequacy of usage of the building, delay of the project, and failure to gain the goal regarding corporate image. Project risk due to uncertainties might be assessed as follows (Table 3): Table 3. Project risk due to uncertainties Project goals Risk assessment (qualitative values) Inadequate usage of building very high Project delay medium Corporate image high extra expenses medium 3.6. What happened? First unwanted event: During the project the organization of the client changed and a new directorship was in position in May The decision making process was affected by a new strategy and the client decided a rise of the budget for 5 M in December However the time limit of the project remained according to the same constraint for commissioning. This decision introduced a revision of the requirements. Accordingly, a new functional brief was delivered in February 2008, whereas the project was already defined. Consequently, values of variables 1 and 2 changed i.e, the usage of some of the rooms had to be modified. As no uncertainties were considered on these points before, designers now needed time taking into account these new requirements. The first direct consequence: It was no more possible to respect the previous time limit, it became as soon as possible. As a result, due to the delay, economic context evolved in a bad direction, this mean that costs increased a lot. In spite of a new budget, the financial constraint remained too strong regarding the functional brief. The second consequence: The client had to choose between his two objectives, usage of building or corporate image. The second one was finally downgraded. Second unwanted event: Whereas the building was built at 50%, the client defined the operational processes for the functioning of this building, in October This variable which was undefined until this date, led to new requirements concerning the spatial organization. Its strong impact on the project induced important consequences on the usage of the building. This variable was neglected by all the actors (client and designer), and consequently no alternative had been studied. Thus, risks due to inadequacy of usage of the building and the delay became very high And finally: In this project a better understanding of the uncertainties of the selected variables could allow to manage the evolution of the project. Furthermore, the probability of the first unwanted event was very high, and then a risk analysis, based on the identification of consequences, could show the client to specify alternative solutions. Although, in such a way the cost of design study would increase but at the end the objectives would be respected. Project goals with regards to level of satisfaction are shown as follows (Table 4):

4 Table 4. Project goals with regards to level of satisfaction of the realized building Project goals Level of satisfaction of the realized building Inadequate usage of building low ( not enough places) Project delay poor ( delay: 3 years) Corporate image medium ( efficiency to be prooved) extra expenses very poor (final cost : 2 times initial investment) 4. UNCERTAINTIES AND LIFE CYCLE ANALYSIS CONSTRUCTION SECTOR A GENERAL DISCUSSION BASED ON CONCEPTUAL APPROACH As for any product, the life cycle of a building goes through various stages from inception up to final deconstruction. Without going into details, some specific characters of such a life cycle are: every building is unique, attached to a site; its life may be very long, for decades with possibly heavy steps of rehabilitation; many actors are involved in the life cycle organized in complex processes of decision. Every decision during the life of the building is associated with some uncertainties as the results of technical, economic, environmental or social variables. These uncertainties do not disappear during the life of the building, but evolve for instance from qualitative (e.g. good soil) to quantitative judgement (soil bearing pressure = 0.2 MPa ± 20%). There are different types of uncertainties in building projects. Some of them depend directly on the environment and the site characters of the project and cannot be controlled due to lack of knowledge. This could lead many changes to the building e.g., renovating and renewing (ARJA 2009) which might create negative economic and environmental impacts. For this category of uncertainty no risk is assessed except for those which are related to major natural hazards. Some of these uncertainties are taken voluntarily by designers (especially for technological solution) in order to hold on the flexibility of the project. However, the designers do not carry out a detailed analysis to express the risks associated with these uncertainties which are voluntary (ARJA 2010). It doesn t mean that they accept or tolerate the risks, but because there is no culture to assess these kinds of risk. During the design phase, usually the first reaction of the different actors, especially engineers, is to try to identify and reduce uncertainties, which leads to freeze some solution choices at the expense of other concerns. The designers want to ensure performance in accordance with the customer requirements, without clarifying the various uncertainties related to the use, environment, etc (Carvalho 2008). As a result, lots of performances are evaluated according to references, often regulations, which do not reflect the present operation of the future building in an operational context. It should be noted that the design procedures are mostly based on conventional data and standards e.g., simplified scenarios of use, climatic environment type, etc. During the design phase, the uncertainties associated with architectural and technical choices (voluntary uncertainties) could be reduced and then disappeared. In this case the control of the evolution of these uncertainties is necessary to have an efficient design. A project manager has an important role to manage consistency and coordination between different specialists who should control uncertainties, But, usually they do not asses and communicate the risks with these specialist and even client or investor whose the risks are mainly on their shoulders. To avoid of such a problem, the project manager should have enough competence in building technology and risk assessment as well. The effectiveness of the implementation phase depends on the uncertainties related to final choices of devices and materials (BAZZANA 2010). Furthermore, the quality of the implementation leads to the achievement of real value to be compared with what has been designed to build. Thus, once the building is delivered, the information concerning with the real finished building is available and much more accurate. But it is still associated with new uncertainties, generally coming from the measures of the characters of the finished building. During the operating phase, some of the uncertainties concerning with design and implementation phases will remain and also new uncertainties will appear. Therefore, during this phase, the facility manager should make an attempt to control the uncertainties (Taillandier 2011). At this stage, the facility manager should be flexible enough in order to adapt the operation of the building in accordance to the requirements of the users in a real context. Thus, he will keep control on some uncertainty during the operational phase i.e., the uncertainties arising due to occupants requirements and behaviours in terms of the culture of the users (Taillandier 2009a). It is therefore important that the facility manager can cope with changes in

5 regulations, in use, and in technologies (unexpectedly) related to the previous phases. The facility manager must be able to steer the building and identify the occurrence of events that deviate from the planning and impact on the interests. As soon as he/she can identify any failure will have to be taken into account to minimize the effects. At this moment, the most important uncertainty is the lack of knowledge of the facility manager about the previous phases during the design and construction. Due to that and in order to minimise the risk due to these uncertainties it would be more effective if the facility manager could have an observation role on the project from the beginning. Although uncertainty is a source of risk, but it is also essential in order to guarantee the flexibility of actions and evolution of the building, in terms of providing alternatives, during its life cycle. A risk analysis can always let us know if there are needs to reduce the risks at tolerable level. The goal is to maintain a maximum of action strategy in the context of controlled risks, by identifying and managing uncertainties. The actors of the buildings are somehow aware of the uncertainties and the risk, but they do not have the culture to apply a methodology to assess these risks. In addition there is no any emergency planning and responses in case of occurrence of an unwanted event. This problem will cause unexpected economic losses and productivity problem. The reason is very simple; it would increase significantly the costs of the study. However, looking to the progress of current projects, it is questionable whether these investments would not be preferable in considerable financial excesses of the vast majority of projects due to uncontrolled changes. 5. Conclusion The conceptual approach was used to identify the different concepts of risk and their relationships. Life cycle investigation shows that a lot of variables produce uncertainties that affect decision making process. These could be divided in two main packages: Lack of knowledge about risks and the complexity of the project (Taillandier 2009b). Some of the most important findings in this study could be summarized as: 1). Lack of communication between the managers involved in different phases of the life-cycle, and lots of information and hypothesis are lost during the life-cycle, introducing discontinuity of risks analysis if is conducting. 2). There is no culture in risk assessment and identification of uncertainties in this sector. Moreover client is not informed of the existing risks. 3). Facility manager should be involved in the project from the beginning in some way, for instance as an observer from the beginning (Taillandier 2009c). 4). Though uncertainty has a bad face which brings losses but it has a good face as well. Because it could be used as a tool in construction projects for holding on flexibility. References ARJA M., SAUCE G., SOUYRI B., External uncertainty factors and LCC : a case study -Building Research & Information; May/Jun 2009, Vol. 37 Issue 3, p , 10p, Published by Routledge, Taylor & Francis Group ARJA M., SAUCE G., SOUYRI B., Integrating life cycle uncertainties for evaluating a building overall cost - International Conference on Building Science and Engineering - ICBSE July 28-30, Paris, France BAZZANA M. SAUCE G. HANS J. LAE L. MEHL C., Development of a product model for FMEA support of building products - CIB WORLD CONGRESS Building a Better World - 10th 14th May Salford, United Kingdom CARVALHO J., C MANGIN J., SAUCE G.,2008. Gestion de la qualité en phase de conception des opérations de construction - Annales du bâtiment et des travaux publics (ed.),, vol. 2, ed., 15-21, 2008 Shahriari, M. (editor), Decision under uncertainty, in chapter 1.5: Shahriari M., Bitaraf S.S., and Li Q. Loss prevention and safety A practical risk management handbook. Vol. 1. Guidelines for risk management and safety. Published by Chalmers University of Technology, Gothenburg, Sweden pp ISBN: TAILLANDIER F., SAUCE G., BONETTO R., Method and tools for building maintenance plan arbitration Engineering, Construction and Architectural Management pp , Vol 18, N 4, 201. Published by Emerald Group Publishing Limited, UK.

6 TAILLANDIER F., SAUCE G., BONETTO R., 2009 (a). Risk-based investment trade-off related to building facility management - - Reliability Engineering and System Safety - Elsevier - Vol 94, N 4 Avril p TAILLANDIER F., SAUCE G., BONETTO R.,2009 (b). The risk notion to transcend the real estate management complexity - ISEC-5 The Fifth International Structural Engineering and Construction Conference - September 21-27, Las Vegas, NV, USA TAILLANDIER F., SAUCE G., BONETTO R., 2009 (c). Apology of the risk as the key to drive the real-estate, International Conference in Industrial Engineering and Systems Management, may Montreal-CANADA,