Risk Management
Building contractors in Christchurch are inherently faced with risks given their situation, whereas contractors they have to be rewarded based on the risks they bear. Risks should be transferred to those who are in a position to manage them as the provisions of the various contracts that govern the rights as well as obligations of the parties involved in the most appropriate tool for allocating the inherent risks. In some instances, the contractual risks are only limited to the payments as well as the performance risks which are addressed through insurance or an indemnity within the contract and in such a case, the risks are reimbursed through other provisions (Gully, 2019). In this regard, this report will identify the risk management process, which is critical for the success of a construction project in Christchurch. Besides, the report summarizes the fundamental principles of risk management practice and gives recommendations for the identified risks incurred by building contractors in Christchurch. The primary purpose of this report is to understand how to manage risks at all levels, meso, macro, or micro and how the risks influence the contextual factors such as politics and the economy. Therefore, the risk assessment was conducted to demonstrate what would happen if the contraction project does not go on based on the plan and hence it acts as a warning system that alerts the building contractors of the possible uncertainties of the project.
Background and Definitions
The construction industry in most countries, especially in New Zealand is competitive. It is characterized by high risks as well as low-profit margins in comparison to other sectors within the economy. In the contraction industry in New Zealand, tendering is the most used means of which the company can secure the works as the price tag is the only instrument to earn revenue (Nielsen, 2014). In this regard, it is essential to consider the risks in the construction industry mainly for building contracts as there are set maximum marks that the companies need to achieve and increases chances to be profitable. Risk is defined as the multitude of unwanted effects and uncertainty that affects the activity of a project (Taylor, 2014). Risks are an inherent aspect of construction as it cannot be eliminated. However, it can be managed to reduce its impact on the health and operations of the project. Similarly, based on the New Zealand and Australian set standards, the risk is defined as the adverse effects of uncertainty. Hence, risk and uncertainty are synonymous with each other and reflect the opportunity that embodies the project. Risk in building contraction can manifest itself as a threat as it adversely affects the project and players or a chance as it may positively affect the project.
The risks
Health and Safety risks
The heart of the contraction industry lies in a mix of pragmatics as health and safety is a matter of intuition as the primary guiding factor. Besides, the contraction sector is regarded as a high-risk sector as and shares a common cultural feature with other areas as being driven by masculine hierarchies, pride, the pressure to deliver, and increased diversity (Ibrahim & Oyewobi, 2012). In this regard, health and safety are seen as a fluctuating risk that is dependent on personal pressure as it is also seen as a personal issue rather than an institutional problem with broad implications. In construction, health and safety is a risk that is dealt with in daily practice as the sector is complacent about health matters and lacks the urgency about the injury rates. For example, in Auckland, the Sky City conference centre caught fire due to the building contractors’ employees not following the laid down essential health and safety procedures such as turning off the blow touch while on break or not at work leading to a significant loss of profit as well as the company’s reputation as well as delay in future operations. Other businesses that were within the Sky City, such as the Casino run into loses from the fire mainly caused by the smoke and failure of the air conditioning system.
Further, a hazard in the construction industry refers to the potential harm that may cause health effects to the people while the risk of health hazard includes people who may suffer adverse effects. In this regard, the minimization of health risks of essential although the dangers are there as some form part of the contraction. For instance, in the case of Sky City Centre in Auckland, Australia, the blow torch is a necessity within any construction project. It is a hazard to the employees as well as the facility if safety precautions are not taken. Hence, as much as it poses a risk to the employees, it must be appropriately utilized to minimize the risk. According to Ministry of Business and Innovation (2019), the primary health hazards in the building contraction industry in Australia and New Zealand include physical injury caused by equipment’s used during the contraction as well as the machinery that require manual handling. These hazards may be severe and even cause death or physical impairments caused by the radiations, noise, or extreme temperatures. Also, chemical hazards are prominent in the construction works and include welding fumes, cutting oil, solvents, and spray paints which contain toxic chemicals. Therefore, health and safety risks are common in the building contraction in Christchurch.
Natural disaster risks
Natural disasters such as earthquakes and flooding among other natural occurrences are a risk to the building contractions in Christchurch. For instance, the earthquakes in Canterbury were a disaster on a large scale in New Zealand. Besides, the Christchurch, which was extensively destroyed by the earthquakes and its rebuilding, is the largest project in the history of New Zealand. According to Nielsen (2014), given the high risks of natural disasters to the building contraction, estimates the cost of rebuilding to be over $40 billion with the fortunes being made along the process although there will be failures along the way. There is a significant focus on the risk caused by the Christchurch geotechnical environment since the earthquakes which followed active faults that caused extensive ground damage that included surface rapture, rock falls, and lateral spread of the surface. The central business district of Christchurch area experienced massive groundbreaking as well as liquefaction, especially in the north-east part of the city. With these happenings, the building contractors face risks in their projects in the area and hence they need to improve the design foundation systems to enable rebuilding to take place and thus account for the increased risks of ground damage.
However, Christchurch is not a unique case given that it is located because they are prone to liquefaction due to the active seismic rocks. There are other cities around the globe, such as the earthquake in Kobe-Japan in 1995 had a higher seismic wave is more significant than that in Christchurch. Hence, the contractors have designed solutions that help in rebuilding their infrastructure (Baccarini & Towner, 2010). In this regard, shallow foundations set up by contractors cause a high risk as the un-uniform ground increases the sheer forces that imbalance the ground structural elements that rest on the foundation. In another natural occurrence in Christchurch, the 2011 earthquakes also interrupted the supply of water and power besides causing pollution and guizers that caused uncontrollable diseases. According to Taylor (2014), the earthquake measurements usually determine when the next earthquake may hit and hence the building contractors have an opportunity to minimize the risks and consequences of such a natural occurrence. Other issues and dangers facing building contractors in Christchurch in their rebuilding programs include increased competition such that several offshore companies have shown interest in the building works. Besides, the natural calamities, Christchurch also has a shortage of labour as it needs to find additional workers, including joiners and carpenters, to help in the rebuilding.
Risk management strategy
In the construction industry, there are high volumes of works that make the industry competitive and hence the need to manage the risks that arise. The employees in the construction industry work at speed to get the job done with some cases needing less experienced people while watching the cost-cutting procedures. In this regard, in managing contractor health and safety, first, the contractor should comply with the documents enshrined in the contractual agreement (Ministry of Business and innovation, 2019). For instance, all building contractors in Christchurch should adhere to the health and safety documents that relate to the site, such as the school health policy as well as the health requirements outlined in the contractual work. The second risk management strategy lies in the role of the project manager in the management of the health and safety of the contractors. In this case, the project managers have an essential role in influencing safety practices across the contraction of projects. For instance, there are the health and safety activities within the Australian construction laws that emphasize on business effectiveness. As such, since property projects involve multiple parties including the main contractors, suppliers, as well as the community, the risk management strategy put in place by the project managers are vital to ensuring health and safety at the site.
Another risk management strategy is engaging the contractors through contractor prequalification. The engagement of the contractors as well as the provider of the works on behalf of the government band the community involves the health as well as the legal safety duties. In this regard, the responsibilities include ensuring the health and safety of the contractor and the employee and others affected by the work carried out during the contraction besides, and the consultation also includes coordinating activities with the people conducting the business of rebuilding of Christchurch. According to Baccarini & Towner (2010), there are reasonable practices that need to be undertaken during the contracting process, including procurement and the delivery of reasonable practical steps to complete the projects. In this case, there is a need to ensure the health and safety of those involved to be put at risk. For instance, one of the steps in contractor tendering and selection process includes the contractor prequalification that determines the competency to be undertaken for the employees to work safely. Therefore, the engagement of the contractors is critical in ensuring that the risks such as the health risk and the risk of the natural disaster are well managed. However, some of the risks cannot be eliminated.
Further, the approach of using contractor qualification is essential in risk management in regards to the building contractors in Christchurch. According to Nielsen (2014), contractor prequalification forms part of selecting the contractor in a process that is appropriate for the construction activity developed. The implementation process involves the potential building contractor’s invitation in providing evidence of accreditation with the listed qualities, besides, in case the certification is not met, the contractor should give evidence directly as the process of tender. More so, if the suitable prequalification and accreditation system are identified, then they can be assessed against a set criterion such that the industrial providers after prequalified service. Another risk management process is the creation of site-specific and health safety plans which is an agreement between the working group players on how the health and safety of the employees are managed during the project (Ibrahim & Oyewobi, 2012). Also, to administer the risk, there is a need to have a site hazard and risk register where contractors should record site-specific hazards. Also, the registry should record the activities of the contractor, the processes, procedures, as well as the equipment, used that may affect the health and safety of the contractor and their affiliates including the protections against natural disasters.
Also, in managing the risks facing the building contractors in Christchurch and limiting any potential future issues, it is essential to ensure that the right contractors get the work. For instance, in avoiding the risks of project delays due to natural disasters, the contractors should get engaged in ensuring that the contractual terms are agreed within a set timeline. Once, the appointment of the building contractor is made, it becomes easier to allocate project risks to the contractor responsible for the project (Nielsen, 2014). For instance, in minimizing the potential defection in labour, it is essential to ensure that the contractor gets experienced contractors to provide proper supervision of construction, especially when building facilities in an earthquake-prone area such as Christchurch. According to Taylor (2014), in preventing potential risks, the building contractor should ensure that they adequately protect the facility when disasters happen through the arrangement of adequate insurance, among other interventions. Reduction of risk and realities draws the attention of the significance of retrofitting as a way of improving the seismic performance of the infrastructure assets. In this regard, the seismic performance of buildings is most at risk and hence poses a significant threat that should be reviewed as indicated by the building plans.
Conclusion
Overall, the program of seismic mitigation undertaken by the Christchurch lifeline serves as reducing the loses and facilitate emergency responses as well as recovery. The damage could have been adverse if the slower response to the risks and preparatory works fostered by the building contractors in the Christchurch area. Additionally, several studies indicate the net economic benefits for mitigating the risks, considering the losses that arise from the earthquakes. In this regard, the costs of seismic mitigation of risks in Christchurch should have been repaid many times over, although the rebuilding of the area has been slower (Gully, 2019). Further, new exposures encountered should be considered, and some of the factors include the underwriter and cannot become experts in rebuilding Christchurch. In comparing the common causes of construction in Christchurch, it is evident that there is a high chance of construction companies and more so the building contractors collapse. The existing knowledge gap in research of the matter of contractual tendering risks in New Zealand since there is a lack of practical risk response deployment that building contractors could utilize. Therefore, the literature lacks terms of knowledge of how the contractors, from their risk understanding, to set the price. Most risks, as well as contingencies of the studies, focus more on the theoretical aspects to determine the level of uncertainty rather than the scientific knowledge.
Recommendations
It is recommended that, given that the construction sector is limited to lack of awareness of health and safety issues, the excellent practice should employ more stringent rules in risk management. The general lack of confidence concerning the individuals who lead the contractual work in Christchurch. In this regard, it is recommended the building contactors should follow the rules and regulations, especially the controls that help mitigate the risks. Besides, it is recommended that good practice in the contraction works should ensure that the workers acknowledge their rights in regards to their safety and share the rights with other workers to minimize on the hazards that may be incurred. In regards to the earthquakes, the ground remediation is possible and helps strengthen the soil structure using methods like soil mixing to improve and reduce compressibility. Also, building re-levelling is another recommendation that would reinforce the slab foundations building which may be damaged, and it is economical to make repairs that are specialized. Several methodologies could be used to guard against the strong seismic waves, and this includes involving the wood industry in the provision of laminators that play a critical role in rebuilding Christchurch, especially the floors of houses within the areas.