Identification of Recurring EPC Contract Risks and

Identification of Recurring EPC Contract Risks ... 21 Lack of proper construction techniques/defective work ... in the nature and characteristics of E...

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Identification of Recurring EPC Contract Risks and Mitigation Strategies Benyamin Sadeghi, MSCS, Mohammad Mehdi Mortaheb, Ph.D., CPC and Hamed Kashani, Ph.D., CPC Sharif University of Technology Tehran, Iran EPC contracts are generally used for the construction of mega projects including oil and gas production facilities. Mega projects are usually subjected to many uncertainties. EPC contractors often assume most of such project risks. Several studies have focused on the identification and analysis of EPC project risks. However, they generally fail to identify appropriate and effective risk management strategies. The objective of this study is to identify a novel category of risks, named "recurring risks”. This category includes the risks that are inherent in the nature of EPC projects as well as the risks stemmed from common external issues. Several effective risk mitigation strategies that can be utilized in EPC oil and gas projects are also defined. A comprehensive review of literature was conducted to identify the risks in EPC projects. Experts’ opinion was used to analyze and categorize these risks. The recurring risks were classified in eight groups. For each risk group, appropriate risk management strategies were determined and effectiveness of each strategy was evaluated using a survey. Among recurring risks "inflation or sudden fluctuation of prices and foreign currency", "inadequate conceptual design", "financial deficiency and delayed progress payments ", and "easing quality of work" are the most prominent. Key words: Recurring Risks, EPC Projects, Risk Identification, Risk Response

Introduction In Project Management, risk can be defined as an uncertain event or condition that, if it occurs, has a positive or negative effect on at least one project objective, such as time, cost, scope, or quality (PMI, 2004). Risk management is a formal and orderly process of systematically identifying, analyzing and responding to risks throughout the lifecycle of a project to obtain the optimum degree of risk elimination, mitigation and/or control (Wang et al., 2004). Risk and risk management has become an important and urgent issue in mega projects, specifically in the turbulent markets. Without considering the risk and its management, mega projects may result in failure. Many owners and contractors are unaware of the full range of project risks, and few have demonstrated the expertise and knowledge to manage them effectively (Walewski, 2005). Engineering, Procurement and Construction (EPC) project delivery system is commonly used in mega projects including oil and gas industries. In EPC contracts, the contractor is responsible for engineering and design of the project, procurement of all materials and equipment, and fabrication or construction of the project. Long lasting complicated processes and organizational features generate abundant risks in EPC projects (Tavakkoli et al., 2011). Although previous research studies have identified and evaluated risks in various types of construction projects, few have filtered out the risks that are very common in EPC projects. Past studies have generally focused on significance, source and ranking of risks in EPC projects. They have often failed to consider the frequency of risks that affect EPC projects. Therefore, there is a need for research to consolidate various perceptions of EPC contract risks and categorize them. In this research, based on the literature review and interview with professional experts, “Recurring risks” is defined as common and high frequent category of risks that can significantly affect the outcome of EPC projects. Frequency of occurrence of many EPC risks is the result of specific inherent characteristics of EPC project delivery system as well as nature of EPC projects. To be more focused, in this study the common characteristics of EPC projects in oil and gas sector are considered in order to introduce a novel category of risks that are the most common and recurring in EPC projects. When the understanding about recurring risks in EPC projects and effective risk management techniques to manage these risks are well defined, then it will be easier to handle them. The objective of this study is to contribute to the

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project management body knowledge by introducing a novel category of common and frequent risks called “Recurring Risks” that are inherent in the nature of EPC contracts in Iran, and identifying appropriate response strategies to manage these risks.

Method In this study, comprehensive literature review and interviews were conducted in order to identify recurring risks and their appropriate mitigation strategies. Firstly, an extensive literature review were made to compile a comprehensive list of risks and their response strategies. Secondly, comprehensive interviews with experienced experts involved in EPC projects in Iran were performed. Their opinions of recurring risks were gathered. Their proposed risk response strategies were evaluated and the less effective strategies were omitted. Combining the results, common EPC risks listed and filtered in order to introduce a new category of risks named “recurring risks”. Furthermore, corresponding appropriate risk response strategies were developed on the basis of literature review and interviews. Then, a survey was conducted to evaluate the effectiveness of the mitigation strategies proposed for any given recurring risk. Finally, analysis was conducted in order to see if there is any difference in the perceptions of owners, contractors and consultants about effectiveness of strategies and then these strategies were ranked according to their effectiveness.

Literature Review A comprehensive review of literature was conducted with the focus on the risk identification, risk evaluation and risk response strategies. Various risks and their corresponding mitigation strategies were identified. The focus was on reliable papers from prominent journals. Primarily, highly qualified papers about EPC projects, construction risks and industrial fields were considered. Then, papers in the field of Oil and Gas industry, Design-Build and Mega projects on various countries were used as references. As written (see table 1) comprehensive list of 26 frequently identified risks was prepared based on these literatures. Then, the most identified and the most effective corresponding mitigation strategies were also extracted from these literatures: (Al-Bahar and Crandal,1990), (Zhi, 1995), (Kangari, 1995), (Ernzen and Schexnayder, 2000), (Kartam, 2001), (Wang et al., 2004), (Fang et al., 2004), (Öztaş and Ökmen, 2004), (Andi, 2006), (Iranmanesh et al., 2007), (Liu et al., 2009), (Bi and Hai-tao, 2010), (Tsai and Yang, 2010), (Ogunsanmi et al., 2011), (Tavakkoli et al., 2011), (Eybpoosh et al., 2011 ), (Bakr, et al., 2012), (Wang and Li, 2013), (Tran and Molenaar, 2013) and (Tang, 2015).

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Table1

Economic Legal- Political Natural-Physical Third Party

Internal Risks

Contract and Scope Design O wner

Construction

Risk factors

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Inflation or sudden and unforeseen fluctuation of price Currency exchange rate Fluctuation Sudden rise in equipment and materials because of economic sanction Modification of government policies Changes in laws and regulations (pollution, safety, etc.) Force majeure (Earthquake, fire, flood) Unforeseen physical conditions (Geotechnical, environment, pollution) Bureaucratic problems (delays or rigidity in obtaining permits) Poor communication between JV partners Inadequate specification and detailing Vagueness of contract clauses and documents Inadequate conceptual design Unfamiliarity with EPC contract conditions for claims and litigations Incomplete and unclear Scope definition because of insufficient feasibility study Errors and omissions in contractor's design Contractor doesn't meet owner's demands (design changes) T oo many change orders by owner Financial problems or bankruptcy like lack of payment or delayed progress Owner default or delay in delivering the construction site or jobsite Owner Delay in approvals/change orders Lack of proper construction techniques/defective work Insufficiency of contractor management skills and experience Easing quality of work to scoop out profit Default/incapability of sub-contractors or suppliers Disturbance/shortage in availability of labor, material and equipment Different site conditions

Total

External Risks

Risk group

Al-Bahar and Crandall (1990) Kangari (1995) Zhi (1995) Andi (2004) Oztas and Okmen (2004) Fang et al. (2004) Iranmanesh et al. (2007) Dai (2009) Liu et al. (2009) Tsai and Yang (2010) Tavakkoli et al. (2011) KSK (2011) Ogunsanmi et al. (2011) Bakr et al. (2012) Tran and Molenaar (2013) Wang and Li (2013) Tang (2015)

Identification of recurring risks from literature

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

16 11 10 15 11 15 9 11 9 12 10 9 11 10 12 9 13 14 9 10 10 14 12 10 13 11

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

* * * * * * * *

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

* * * * * * * * * * * * * * * * * * * * * * *

Interview In order to filter out recurring risks, the identified risks in the literature needed to be evaluated by professional experts. Ten comprehensive interviews were conducted with experts in the field of oil and gas production in the country. The criteria for selecting these experts included an advanced degree in civil engineering, management and related fields, at least 25 years of experience in oil and gas EPC projects, experience in developing contracts, and management experience in the oil and gas industry. As a result, several identified risks were identified as nonrecurring and few of them were combined as one. Furthermore, In order to find appropriate risk response strategies for recurring risks, the list of risk management strategies obtained in the literature were discussed and evaluated during the interviews with experts. Some responses in the literature were omitted by expert's opinion because it was believed that they were not effective enough in this country. The experts also proposed some strategies that they have found effective in their past experience.

Identified Recurring Risks Considering the nature of EPC projects, these projects are subjected to many risks. Attempts to consider every risk are doomed to failure (Andi, 2006). The challenge is to identify the most critical risks and control them (El-Sayegh, 2015). In fact, only some of the project risks can affect multiple stages of the project life cycles. These risks have the high possibility and high impact on the project cost, time and scope. Because the nature of these risks are repetitive, parties can be very sure of their occurrence. These risks are either stemmed from external factors like economic conditions or have roots in the nature and characteristics of EPC contracts. In this research this novel category that is called "recurring risks", was proposed by combining the risks that were both identified in the literature review and the expert's opinions. After identification of 53 risks in the literature, comprehensive interviews with the experts who has experienced more than 30 EPC projects were made and their opinion about the risks that were identified as recurring risks gathered. Three criteria were utilized in order to filter out the recurring risks:  

More than half of the experts in the interview verify the risk as a recurring risk. More than half of the references in the literature include this risk in their list.

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The references which worked on risk evaluation, asserted that this risk have above average or high impact on the project objectives.

In addition, identical risks and the risks that had the common roots were omitted. As a result, 26 recurring risks were identified which categorized in eight groups. These risks are either external or internal. External risks are usually the results of the conditions that are out of control of the project participants. These situations are not limited to EPC projects. Internal risks are in fact the results of choosing of EPC as the project delivery system. In other words, EPC delivery system bring about several risks within itself. Table 1 presents classification of recurring risks.

Results To understand the effectiveness of the response strategies for the identified recurring risks, a questionnaire survey was carried out based on the knowledge obtained from literature review and expert's opinion in interviews. The questionnaire consisted of two parts. The first part comprised background questions about the respondents’ individual and organizational information. Table 2 provides an overview of respondents. The second part dealt with the efficiency of risk response strategies. The sampling technique used for data collection was a selective sample rather than a randomly chosen sample. 150 questionnaires were sent out, and a total of 83 were returned, of which 71 were acceptable. These amounts of data collected were sufficient for analysis. The respondent were carefully selected and all of them were highly educated and experienced individuals in the field of EPC. The questionnaire survey forms were distributed to professional owners, contractors and consultants, all at high management level in their respective companies and have concrete experience in Iran oil and gas industry. They have all shown great interests in the research and have filled in the questionnaire carefully and provided several valuable comments.

Table 2 Overview of Respondents Res ponents Dis tribution

Category 5-10 10-15

Experience

Project types

Project cos t $ (million) Degree

15-20 20-25 25-30 >30 Oil&gas Buildings Water and s anitary Power and energy Trans portation <10 10-50 50-100 >100 Bachelor Mas ter PhD

owner 23 2 9 5 4 1 2 11 6 1 4 1 8 13 1 1 13 10 0

contractor cons ultant 39 5 9 4 10 7 4 22 3 11 2 1 7 14 8 10 23 14 2

9 5 1 0 2 1 0 4 0 0 2 3 3 6 0 0 7 1 1

Total

Percent

71 12 19 9 16 9 6 37 9 12 8 5 18 33 9 11 43 25 3

100.00 16.90 26.76 12.68 22.54 12.68 8.45 52.11 12.68 16.90 11.27 7.04 25.35 46.48 12.68 15.49 60.56 35.21 4.23

The objective of this part of the research was to identify strategies that have these characteristics: effective, feasible, appropriate and agreed by project participants. To improve the preciseness and reliability of the strategies, a 5-point Likert type rating system for the effectiveness of mitigation strategies were proposed in the survey. (1=very low, 2=low, 3=average, 4=high, 5=very high). In order to better understand the prioritization of risk responses, the score given by respondents was considered. The perception of owners and contractors was also compared. Requirements of Kruskal-Wallis test were met. So, Kruskal-Wallis was conducted for comparison between owners, contractors and consultants (sig. = 0.05). The suitable descriptive statistics for the ordinal data is mode (Tran and Molenaar, 2013). The mode of data is the measure of efficiency, if there is consensus between perceptions of this three groups (sig.> 0.05). So, if the efficiency of a strategy (mean) has not significant differences between three groups, the efficiency of strategy is acceptable. As a result, the strategies were divided into five groups: very high, high, average, low and very low. If these criteria were not satisfied, the efficiency of strategy is classified as unknown.

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Prioritization of Response of External Risks Table 3 demonstrates the ranking of external risks responses according to their degree of effectiveness. Also, each response is labeled in one of five groups on the basis of mode. The results of effectiveness of each group is discussed in this part. Economic risk: Result shows that generally, the most effective strategies for sudden economic fluctuation is transferring these risks to owner. Political-Legal Risks: the most appropriate tool for managing these risks was identified as comprehensive and clear contract clauses. Natural-Physical Risks: Since both of project participants generally try to quail these risks, the most common effective strategy is transferring them to the insurance coverage. Third-Party Risks: the best strategy is that such approvals be obtained before the bid from the owner, so that the time and cost schedule will not be threatened.

Table 3 Effectiveness of Responses of External Recurring Risk

4 5 6 7 8 9 1 2 3 4 1 2 3 4 5 1 2 3 4 5 6 7 8

High High

4.0 3.9 3.6 3.9

0.573

4

High

3.6 3.3 3.7 3.4

0.375

3

Average

3.4 3.3 3.4 3.4

0.966

4

High

3.2 3.5 3.1 2.3

3.2 3.0 2.8 2.5

0.986 0.031 0.235 0.567

3 3 3 2

Average Unknown Average low

3.9 4.0 4.0 4.0

0.895

4

High

3.7 3.6 3.7 3.7

0.912

4

High

3.5 3.7 3.2 3.6

0.464

4

High

3.5 3.5 3.2 3.5 4.2 4.3 4.6 4.3

0.795 0.609

4 5

High Very High

3.7 3.9 4.8 3.9

0.007

4

Unknown

3.7 3.5 3.1 4.0 3.7 3.4 3.6 3.9 3.5

3.7 3.5 3.1 4.1 3.9 3.8 3.8 3.7 3.7

0.778 0.802 0.975 0.509 0.203 0.045 0.581 0.449 0.469

4 4 3 4 3 4 4 4 4

High High Average High Average unknown High High High

3.2 3.6 4.0 3.5

0.045

3

Unknown

3.4 3.6 3.2 3.5

0.51

4

High

3.2 2.8 2.6 2.6

3.6 3.5 3.1 4.2 4.0 4.0 3.8 3.6 3.7

3.2 2.6 2.8 2.2

3.9 3.2 3.0 3.8 4.3 3.8 4.0 3.8 3.9

Total

4 4

Consultant

0.702 0.655

Contractor

3.9 4.1 4.1 4.1 3.9 4.0 4.2 4.0

Owner

Efficiency

3

Owner cover t he cost of sudden fluct uat ion in t he prices Considering price adjust ment in t he fixed-price cont ract s Foreign currency payment t o cont ract or for procurement t hat t heir prices are dependent on foreign currency. Cost cont ingency (specifying compensat ion clauses in cont ract for payment ) Owner purchase t he crit ical equipment having possibilit y of increase in t heir price P erforming feasibilit y st udy in t he Specified int ervals of project life cycle "Guarant eed Maximum P rice" Forward cont ract s t o hedge economic fluct uat ions T erminat ion of cont ract in t he case of heavy and sudden financial fluct uat ion Include clauses for updat ing t he cont ract for delays and addit ional payment s which occur due t o new rules or change in law Specifying all of t he rules and st andards before t he project by owner Clarificat ion t hat t he crit erion of design and const ruct ion is always t he laws t hat were est ablished in t he t ime of signing t he cont ract Specifying all of t he rules and st andards before t he project by owner Insurance for force majeure Include clauses for delays and addit ional payment s in cont ract , which occur due t o happening of unexpect ed event s Developing cont ingency plan Owner should undert ake comprehensive sit e invest igat ion Sensit ive analysis of "During Recovery" of disast ers and weat her models P repare t he crit ical approvals and permissions by owner before t ender P re-package all approvals when signing cont ract wit h owner Commit ment of owner in cooperat ion wit h cont ract or in providing licenses Choosing compet ent and t rust wort hy JV part ners by owner Choosing a cont ract or who has good relat ionship wit h t he aut horit ies Defining all of t he required permit s and approvals in RFP Defining each st aff’s scope of work, aut horit y and responsibilit y under t he whole responsibilit y of one of t he project part icipant s Having Cont ingency plan for delays in permit s

Mode (total)

Third-party

NaturalPoliicl-Legal Physical

Economic

1 2

Response Strategy

Sig.

Me an

Risk Group

Prioritization of Response of Internal Risks The prioritization of internal risk responses and their degree of effectiveness which was obtained by mode are presented in the appendix. The results of effectiveness of each group are discussed in this part. Scope and Contract Risks: The best strategy for managing these risks is utilizing experienced consultant in the phase of contract and conceptual development. Engagement of contractor in this phase, complete observation of the site and clarification briefing between projects parties are also found to be very effective. Design Risks: the most appropriate tool for mitigation of these risks is incorporating all of the project in contract and documents and developing FEED (FrontEnd Engineering Design). Owner Risks: the best tool for managing this risk is that owner should always provide some documents proving his financial strength. In addition, appropriate means of payment, like LC (Letter of Credit) should be opened before the beginning of the project. Liquidated clauses has been proven to be an effective tool for preventing the payment delays. .Construction Risks: as result shows the best mitigation strategy is that a competent and experienced contractor should be selected by owner. Acquiring a professional project manager by the owner and builder's insurance is second tool of owner for managing these risks.

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Discussion and Conclusion In this research a novel category of most frequent and common contract risks was identified, named “Recurring Risks” that were inherent in the nature of EPC projects. This was accomplished through literature review and interviews with experts. The risks that: 1) More than half of the experts in the interview verify the risk as a recurring risk, 2) More than half of the references in the literature include this risk in their list, and 3) The references which worked on risk evaluation, asserted that this risk have above average or high impact on the project objectives, were determined and called “Recurring Risks”. These risks are either stemmed from external or internal factors. 26 identified risks were categorized in eight groups. It was found that among the above recurring risks; "inflation or sudden fluctuation of prices and foreign currency", "inadequate conceptual design", "financial deficiency and delayed progress payments ", and "easing quality of work" are found to be the most prominent. A survey was also conducted to determine appropriate risk mitigation strategies for each group. Through the survey, effectiveness of proposed risk strategies for each of eight groups was measured. In addition, using descriptive and inferential statistics, a comparison was made between perception of owners, contractors and consultants. The mode was used as a measure that show how much a strategy is effective. On the basis of mode of survey, strategies were divided into five groups according to their effectiveness: very high, high, average, low and very low. It was found that; "implementing FEED before bid", "extensive clarification meetings between project participants", "providing comprehensive project definition package trough Request for Proposal", "Adding provision in the contract for coverage of unpredictable fluctuation by the owner", and "right selecting of contractor" are found to be the most prominent risk management strategies for recurring risks of EPC contracts in mega projects. Hopefully the above findings will contribute to the enhancement of project management body of knowledge by identifying practical risk responses for each of eight recurring risk groups that can be beneficial in oil and gas EPC projects.

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Iranmanesh, H., Jalili, M., & Pirmoradi, Z. (2007, December). Developing a new structure for determining time risk priority using risk breakdown matrix in EPC projects. Industrial Engineering and Engineering Management, 2007 IEEE International Conference (pp. 999-1003). IEEE. Kangari, R. (1995). Risk management perceptions and trends of us construction. Journal of Construction Engineering and Management, 121(4), 422-429. Kartam, N. A., and Kartam, S. A. (2001). Risk and its management in the Kuwaiti construction industry: a contractors’ perspective. International journal of project management, 19(6), 325-335. KSK Energy Ventures Co. (2011), Annex 4 – Risk Matrix– KSK Gas Field Development Project [WWW document]. URL http://www.ecosn.org/Portals/0/Workshops/PRM/07-Annex-VII-Presentation-5Case_Study_2.pdf. Liu, J. E., Wu, S. Y., Zhao, X. Y., & Liu, B. W. (2009, December). Application of Fuzzy Theory in Contractor Risk Assessment under EPC Model. Information Engineering and Computer Science, 2009. ICIECS 2009. International Conference (pp. 1-5). IEEE. Ogunsanmi, O. E., Salako, O. A., and Ajayi, O. M. (2011). Risk classification model for design and build projects. Journal of Engineering, Project, and Production Management, 1(1), 46-60. Öztaş, A., and Ökmen, Ö. (2004). Risk analysis in fixed-price design–build construction projects. Building and Environment, 39(2), 229-237. Project Management Institute Standards Committee. (2004), A Guide to the project management body of knowledge, PMI, Pennsylvania USA. Tang, T. (2015). Research on the Risk Identification for the International Engineering Contracting EPC Projects. Proceedings of the 21st International Conference on Industrial Engineering and Engineering Management (pp. 477482). Atlantis Press. Tsai, T. C., and Yang, M. L. (2010). Risk assessment of design-bid-build and design-build building projects. Journal of the Operations Research Society of Japan, 53(1), 20. Tavakkoli-Moghaddam, R., Hashemi, H., & Mousavi, S. M. (2011). A fuzzy comprehensive approach for risk identification and prioritization simultaneously in EPC projects. INTECH Open Access Publisher. Tran, D. Q., and Molenaar, K. R. (2013). Impact of risk on design-build selection for highway design and construction projects. Journal of Management in Engineering, 30(2), 153-162. Walewski, J. O. H. N., & Gibson, G. (2003). International project risk assessment: Methods, procedures, and critical factors. Center for Construction Industry Studies, University of Texas at Austin, Report, 31. Wang, S. Q., Dulaimi, M. F., and Aguria, M. Y. (2004). Risk management framework for construction projects in developing countries. Construction Management and Economics, 22(3), 237-252. Wang, J., and Li, Y. (2013). Research on EPC project risk evaluation based on FAHP and TOPSIS. Journal of Networks, 8(2), 445-452. Zhi, H. (1995). Risk management for overseas construction projects. International journal of project management, 13(4), 231-237.

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Appendix

Construction

5 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Efficiency

4

Mode (total)

6 7 8 9 10 11 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3

Sig.

5

Total

4

Consultant

3

Contractor

Owner

Design

Scope and contract

1 2

Response strategy

Owner

Me an

Risk group

An experienced consult ant firm provide t he cont ract document s and requirement s Using experienced cont ract ual expert s t o writ e clear cont ract clauses Ut ilizing t he consult ant firm for ident ifying t he exact needs of owner and det ailed scope definit ion Owner should undert ake comprehensive sit e invest igat ion Holding enough briefings bet ween project part ies for clarificat ion of document s and st at ement s Beginning t he project aft er "Front -End Engineering Design" P roviding t he comprehensive project definit ion package t hrough RFP Cont ract or's part icipat ion in clarificat ion and complet ion of t he concept ual design Owners exceed concept ual design and specify t he exact object ives of t he project Spending enough t ime and precision in concept ual design phase Owner's consult ant become manager of cont ract s (MC) in const ruct ion phase Owner should specify all of t he rules and st andards before t he beginning project Beginning t he project aft er "Front -end Engineering Design" Specifying t he crucial and cost ly requirement s in t he cont ract document s Increasing t he coordinat ion and int eract ion bet ween cont ract or and consult ant P roviding t he comprehensive project definit ion package t hrough RFP Owner should have accurat e supervision of t he cont act or's design Evaluat ion /appraisal of design crit eria by one independent and reliable consult ant Making a rigid framework t hat prevent violat ion of t he owner's design QC/QA programs Defining t hresholds for t he possible change orders based on t he value engineering Adopt able design-const ruct ion met hods in t he case of uncert aint ies P erforming value engineering in different phases of project Commit ment of owner for compensat ion of cont ract or's loss Opening required account s like LC by owner before t he beginning of project T erminat ion of cont ract in t he case of owner's financial failure Liquidat ed damages clauses (specifying ext ension or compensat ion clauses in cont ract for delays) Owner should present proof of having enough financial resources t o cont ract or in t he specified int ervals of project durat ion T erminat ion of cont ract if owner have no proof of financial resources At t ent ion and accuracy in select ing and evaluat ion of cont ract or Hiring a professional project manager by owner Builder's insurance P roper qualit y cont rol procedures by owner P roviding t he comprehensive project definit ion package t hrough RFP Increasing t he cooperat ion bet ween cont ract or and consult ant Owner should specify all of t he st andards before t he beginning project Comprehensive and det ailed concept ual design Beginning t he project aft er "Front -end Engineering Design" Clear cont ract clauses for dealing wit h different underground condit ions Cont ract or should undert ake comprehensive sit e invest igat ion and make enough meet ings t o clarify sit e uncert aint ies before t ender P roviding good opport unit y for cont ract or t o examine and gat her informat ion about sit e and underground condit ions P requalificat ion of sub-cont ract or QC/QA programs Enough cont ract bond Owner's consult ant in t he concept ual design phase become manager of cont ract s (MC) in const ruct ion phase Owner should provide a vendor list of compet ent supplier Obt ain enough payment bond and performance bond

4.2 4.3

4.3 4.3

4.2 4.0

4.3 4.2

0.823 0.691

4 5

High Very High

4.2

4.3

4.2

4.2

0.936

5

Very High

4.0

4.2

4.4

4.1

0.387

4

High

3.9

4.3

4.1

4.1

0.229

4

High

4.0 3.8 3.9 3.5 3.5 3.3 3.9 4.0 3.8 3.9 4.0 4.1 3.9 3.7 3.8 3.4 3.7 3.6 3.9 3.8 3.7

4.1 4.0 4.0 3.7 3.8 3.4 3.8 3.9 3.8 3.8 3.8 3.7 3.7 3.6 3.4 3.4 3.4 3.3 4.2 3.9 3.5

3.9 4.1 3.7 4.0 3.2 4.3 3.7 4.2 3.7 3.8 4.0 3.3 3.4 3.9 2.9 3.1 3.2 3.0 4.4 4.2 3.6

4.0 4.0 3.9 3.7 3.6 3.5 3.9 3.9 3.9 3.8 3.8 3.8 3.7 3.7 3.5 3.4 3.4 3.3 4.1 3.9 3.6

0.678 0.49 0.662 0.528 0.262 0.022 0.682 0.343 0.638 0.882 0.772 0.086 0.525 0.698 0.064 0.213 0.854 0.374 0.152 0.589 0.811

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 3 3 3 4 4 4

High High High High High Unknown High High High High High High High High High Average Average Average High High High

3.4

3.7

3.1

3.5

0.33

4

High

3.5

3.3

3.3

3.4

0.885

3

Average

3.5 4.2 4.4 3.8 4.4 4.0 4.1 4.1 3.8 3.8 3.9

3.0 4.3 4.2 4.0 3.7 3.9 3.7 3.6 3.6 3.6 3.6

3.3 4.3 4.4 4.8 3.7 3.9 4.1 3.8 4.0 3.9 3.9

3.2 4.3 4.3 4.0 3.9 3.9 3.9 3.8 3.8 3.7 3.7

0.264 0.851 0.499 0.053 0.026 0.809 0.265 0.134 0.565 0.686 0.469

3 5 5 5 4 4 4 4 4 3 3

Average Very High Very High Very High High High High High High Average Average

4.0

3.6

3.4

3.7

0.164

3

Average

3.9

3.5

3.6

3.6

0.277

4

High

3.4 3.9 3.8

3.6 3.4 3.2

4.0 3.4 3.9

3.6 3.6 3.5

0.21 0.145 0.016

4 3 3

High Average Unknown

3.6

3.2

3.7

3.4

0.238

3

Average

3.6 3.5

3.2 2.7

3.4 2.9

3.3 3.0

0.346 0.011

3 3

Average Unknown