Comparison with other international Market

The third objective of this study was to compare the construction risks in the Egyptian market to other international markets. The study of Bing et al (1999) on China’s construction market was chosen for that purpose. The top eighteen (18) risks of this investigation had a mean critical score of 3.0 or greater. The list of risks in the study of Bing et al. includes nine (9) of these risks. A closer comparison between the results of both studies indicates that each study identified five (5) risks in the top ten (10) list of the other study. In addition, the most critical risk in both studies was the same, namely; Client Financial Ability.

Rank

ID

Construction Project Risks

N

Min.

Max.

Mean

Std.

Skewness

Statistic

Std. Error

1

D1

Client’s Financial Ability

37

2

5

4.19

.776

-.726

.388

2

B2

Improper Management

37

1

5

3.92

1.115

-.849

.388

3

A2

Inflation & Interest Rates

37

1

5

3.89

1.173

-.761

.388

4

A3

In-house Cash Shortage

37

2

5

3.81

.908

-.310

.388

5

A1

Foreign Exchange

37

1

5

3.68

1.292

-.575

.388

6

B1

Improper Design

37

1

5

3.49

1.044

-.194

.388

7

D3

Response to claims

37

1

5

3.49

1.017

-.296

.388

8

B7

Lack of Resources

36

1

5

3.33

1.146

-.468

.393

9

B6

Defective Work

36

2

5

3.31

.951

-.036

.393

10

E1

Subcontractors Technical Qualifications

36

1

5

3.28

1.003

-.064

.393

11

C5

Expropriation

37

1

5

3.22

1.669

-.097

.388

12

B8

Defective Material

37

1

5

3.19

1.050

-.400

.388

13

C4

Approvals & Permits

37

1

5

3.16

.928

-.119

.388

14

F4

Partnership Risks

34

1

5

3.12

.977

.166

.403

15

B5

Low Productivity

36

1

5

3.08

.967

-.174

.393

16

A4

Competition

36

1

5

3.03

1.134

-.057

.393

17

B4

Site Safety

37

1

5

3.03

1 .093

.349

.388

18

F3

Force Majeure

37

1

5

3.00

1.374

.204

.388

19

C2

Change in Laws

37

1

5

2.97

1.142

.410

.388

20

E3

Subcontractors Variation of Bids

37

1

5

2.95

.998

.290

.388

21

C3

Corruption

37

1

5

2.95

1.026

.602

.388

22

E2

Subcontractors Financial Ability

37

1

5

2.89

1.125

-.024

.388

23

F1

Differing Site Conditions

36

1

5

2.89

1.036

-.257

.393

24

D2

Client’s Changing Needs

36

1

5

2.89

1.008

.056

.393

25

D4

Possession of Site

37

1

5

2.84

1.167

.111

.388

26

B3

Constructability

36

1

5

2.72

.944

.818

.393

27

C1

Political Instability

37

1

5

2.68

1 .1 07

.437

.388

28

F5

Environmental Protection

37

1

5

2.54

.931

.422

.388

29

F2

Physical DamagesD

36

1

5

2.50

.811

.852

Table 4: The ranking of construction project risks according to their means

Risk Identification and Response Methods 789

ID

Response method description

Mean

Std.

Skew.

D11

Ensure that a reputable owner finances the project

3.84

0.834

.017

D12

Specify extension or compensation clauses in contract for

payment

3.78

0.917

-.228

D13

Enter into fixed rate loan contract with lending banks

2.86

0.918

-.175

D14

Finance the project from in-house sources

2.58

1.079

.495

Table 6: Risk Response Methods for Improper Project Management

ID

Response method description

Mean

Std.

Skew.

B21

Hire competent project manager and project team

4.00

0.882

-.514

B23

Undertake sound pre-project planning to minimize management risks

3.49

0.961

.040

B25

Establish a fixed standard project management system for all projects to follow

3.22

1.031

.021

B24

Subcontract project management to a specialized organization

2.70

1.051

.036

B22

Centralize project management activities at head office

2.56

0.939

-.279

Table 7: Risk Response Methods for Foreign Exchange and Convertibility

ID

Response method description

Mean

Std.

Skew.

A14

Include compensation clauses for exchange rate in the contract

3.46

1.095

-.628

A12

Use dual-currency contracts with certain portion to be paid in local currency and others in foreign currency

3.22

1.158

-.108

A11

Obtain government guarantees of exchange rate and convertibility, e. g. fixed rate for long period

3.03

1.500

-.310

A13

Use transfer tools to hedge exchange rate, e. g. forward and swap

2.57

0.979

.587

Table 8: Risk Response Methods for Inflation and Interest Rates

ID

Response method description

Mean

Std.

Skew.

A21

Secure standby cash flow in advance

3.47

1.158

-.454

A22

Incorporate escalation clauses for interest, inflation rates and delays in the contract

3.41

1.117

-.128

A24

Ensure that a reputable owner finances the project

3.30

0.996

-.114

A28

Sign fixed or pre-defined prices with material suppliers

3.24

1.140

-.034

A23

Obtain payment and performance bonds from banks

3.24

1.090

.028

A27

Adopt as much as possible domestic product/labor to reduce cost

3.16

1.014

-.005

A25

Specify extension or compensation clauses in contract for payment

3.11

1.008

-.056

A26

Enter into fixed rate loan contract with lending banks

3.05

0.998

-.290

Risk Identification and Response Methods

ID

Response method description

Mean

Std.

Skew.

A34

Ensure that a reputable owner finances the project

3.35

1.060

-.030

A32

Owner to secure standby financing (i. e. more than 100% financing commitments when needed)

3.35

1.274

-.116

A33

Obtain payment and performance bonds from banks

3.16

1.214

-.131

A31

Get Letter of Credit from government

3.05

1.353

-.174

A36

Specify extension or compensation clauses in contract for payment

2.78

1.124

.210

A35

Adopt alternatives to contract payment, e. g. land development rights, or resource swap

2.27

0.693

.110

The fourth objective of this research was to develop a simple spreadsheet file that summarizes the findings of this research. The findings of the study were collected and summarized in a Microsoft® Excel workbook. This workbook contains nine worksheets, the first worksheet is a welcome screen that gives the user two options: either (1) to view risks classified according to their nature or (2) to view risks ranked according to their criticality. The second worksheet lists the names of the six risk categories: (a) financial and economic risks; (b) construction and design risks; (c) political/government risks; (d) client-generated risks; (e) subcontractors-generated risks; and (f) miscellaneous risks. The third worksheet lists the 29 construction risks that were identified by this research in a descending order according to their criticality scores. The remaining six worksheets are for the six risk categories, one worksheet per each category and it includes the risks in this category and the response methods associated with each risk.

Conclusions

The following section presents an overview of this research and a summing up of its findings.

The most critical risks that the contractors working in the Egyptian construction industry experience in their projects were complied in a form of checklist. According to the results of the statistical analysis procedures employed, the most critical risks were found to be:

1. the financial inability of the clients;

2. the improper management of construction projects;

3. inflation and interest rates;

4. in-house cash shortage; and

5. Foreign exchange and convertibility.

According to the number of risk factors deemed critical, the international and multinational contractors perceive the Egyptian construction industry as being riskier than the domestic contractors do.

Under the four different utilized risk response techniques, 101 risk response methods were found to be effective from the 140 methods included in this research. Mainly, the most commonly used risk response technique was the risk reduction technique. The statistical analysis indicated no apparent difference of the perception of effectiveness of the different risk response techniques studied between different company types whether based on nationalities or ownership types was noticed.

197-207.