IDENTIFICATION OF RISKS CAUSING TIME AND COST …...another reason for the failure of the PPP in...

http://www.iaeme.com/IJCIET/index.asp 683 [email protected]

International Journal of Civil Engineering and Technology (IJCIET)

Volume 9, Issue 3, March 2018, pp. 683–697, Article ID: IJCIET_09_03_070

Available online at http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=9&IType=3

ISSN Print: 0976-6308 and ISSN Online: 0976-6316

© IAEME Publication Scopus Indexed

IDENTIFICATION OF RISKS CAUSING TIME

AND COST OVERRUN IN ROADS AND

HIGHWAY PROJECTS IN INDIA

Siddesh Pai

Assistant Professor, National Institute of Construction Management and Research,

Research Scholar, UPES, Dehradun, India

Bijayanand Patnaik

Project Management Officer, Sai Consulting India private Ltd. India

Dr. Ankur Mittal

Associate Professor, University of Petroleum and Energy Studies (UPES), Dehradun, India

Dr. Neeraj Anand

Professor, University of Petroleum and Energy Studies (UPES), Dehradun, India

ABSTRACT

Roads and Highways are the most important infrastructure for the economic

development of any country since ancient times as roads and highways are necessary

for majority of freight and passenger movement but construction, operation and

maintenance of roads and highways is not as easy as it seems as development of roads

and highway projects requires huge funding and time. However, the government does

not have the funds required for the purpose. Public private partnership (PPP or 3P or

P3) is the solution of this problem but, highway projects involves higher degree of risk

for the private participant which demotivates private parties from investing in

highway projects.

This paper explores the existing literature on risks involves in roads and highway

projects and causes of time and cost overrun in roads and highway projects for the

purpose of identifications of major risks which results in time and cost overrun in PPP

based highway projects. This paper also determines the impact of identified risks

through questioner survey.

Keywords: Highway, Roads, PPP, Time and Cost Overrun, Risks, Construction

Management.

Cite this Article: Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj

Anand, Identification of Risks Causing Time and Cost Overrun in Roads and Highway

Projects in India, International Journal of Civil Engineering and Technology, 9(3),

2018, pp. 683–697.

http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=9&IType=3

Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India


1. INTRODUCTION

Roads and Highways are the most important infrastructure for the economic development of

any country since ancient times as roads and highways are necessary for majority of freight

and passenger movement. Compare to air and rail transport system roads and highways are

much economical for short distance and convenient for freight and passenger movement as it

is highly flexible (The route can be changed anytime) and facilitates door-to-door service. As

per the NHAI, (2016), about 65% of freight and 80% passenger traffic of India is carried by

the roads and highways.

Given the heavy reliance on roads for both freight and passenger movements, investment

in the road infrastructure in India can pave the way to growth and other economic objectives

of India. Such an investment has a multiplier effect on crucial sectors of the economy; for

example, cement, construction, steel, etc. [1] However construction, operation and

maintenance of roads and highways is not as easy as it seems as development of roads and

highway projects requires huge funding and time. But the government does not have the funds

required for the purpose. Public private partnership (PPP or 3P or P3) is the solution of this

problem. PPP involves a contract between a public sector authority and a private party, in

which the private party provides a public service or project and assumes substantial financial,

technical and operational risk in the project and the cost the service is borne exclusively by

the users of the service and not by the taxpayer.

In general PPP project offers following advantages:

Acceleration of infrastructure provision.

Increased efficiency.

Fast implementation.

Improved service quality.

Private financing can support increased infrastructure investment without adding to

government borrowing and public debt.

Reduce life cycle costs.

An alternative to full privatization.

Transfer of knowledge; know how, management skills and new technology.

However, highway projects have certain peculiar characteristics that lead to a higher

degree of risk for private participants. Some of such characteristics are as follows: -

The demand for a road cannot be accurately predicted even for a short period of time let alone

for a long period.

The willingness of the commuters to pay a toll for using a better quality road.

The services provided by a road can't move with the demand, i.e., unlike power projects where

the power can be wheeled from a place of low demand to a place of high demand.

The land acquisition for a road project takes long time and its cost is usually high.

Unlike most of the other infrastructure projects, the main asset of the project company

implementing the road project is not worth anything without the right to collect, manage,

appropriate the toll revenue. Thus, the lenders are also exposed to the traffic risk.

The management of a road project is very complex.

https://en.wikipedia.org/wiki/Public_sector

Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand


Risks are the variables or circumstances associated with the implementation of a specific

project that has the potential to adversely affect the development of a project, risks include

circumstances, factors, events or influences which will result in an adverse impact on any

aspect of the implementation of the project. In projects management terms the most serious

effects of risk can be summarised as follows: -

Failure to keep within the cost estimate that is cost overrun.

Failure to achieve the required completion date that is time overrun.

Failure to achieve the required quality and operation requirements.

1.1. Public Private Partnership in National Highways

The national highways are owned by the Government of India and the National Highways Act

1956, bestows the rights regarding construction, maintenance, operation and tolling of

highways only to the Government of India. Due to the constraints of public funding, Public

Private Partnership (PPP) has come to play a major role in the development of national

highways. The National Highways Act, 1956 was amended in 1995 with a view to enabling

private investment in development, maintenance and operation of highways. This amendment

has allowed government to provide concession to a private „person‟ to invest in NH projects,

levy, collect and retain fee from road users. Also a private person can be allowed to regulate

traffic on such highways in terms of provisions of Motor Vehicle Act 1988. Therefore, the

enabling legal framework has been in place for a decade and a half. However, the first policy

framework for PPPs was introduced in 1997 as decision of the Cabinet of the Central

Government. [2]Later on the Government of India initiated several other measures in this

direction such as declaration of road sector as industry to facilitate borrowing on easy terms

and reduction in the custom duties on construction equipment. [3] However, the initial policy

initiatives did not yield the desired results. Many researchers suggested that it was the due to

the lack of legal framework and policies for the implementation of based PPP projects. But

another reason for the failure of the PPP in India was the huge amount of risks associated with

it.

Lack of legal framework and policies as well as risks associated with PPP based roads and

highway projects are demotivators for private players to participate in PPP based road

development projects. In several cases, Engineering, Procurement and Construction (EPC)

contractors who had ventured into PPP based roads and highway projects are now trying to

sell their stake in PPP projects. Most of the existing players in this sector have now reduced

acquisition of new projects and are instead focusing on execution responsibilities for their

current order book. In response of this MORTH/NHAI is launching majority of highway

projects on EPC bases. In year 2016, NHAI awarded total 57 highway projects and out 57

only 8 were based on PPP. [4]

However, India can't stay away from PPP for very long as PPP is need as well as the

future and for successful implementation of PPP based highway projects it is necessary to

know the significant risks involved in PPP based highway projects and its management

strategy.

2. OBJECTIVES OF THE PAPER

To identify the risks which results time and cost overruns in PPP based roads and highway

projects through literature review.

To identify the most impact of risk factors from the identified the risks which results time and

cost overruns in PPP based highway projects.



3. LITERATURE REVIEW

As per NHAI, India‟s road network of over 3.3 million km is second largest in the world

consisting of expressways, national highways, state highways, major district roads and other

roads. These roads carry about 65 per cent of freight and 80 per cent of passenger traffic.

National highways constitute only 1.7 per cent of the road network, but carry about 40 per

cent of the total road traffic. Broadly, the road network in India is divided into the primary

system comprising national highways and the secondary system made up of state highways

and major district roads. In addition, the network comprises expressways as well as rural and

other roads.

Road Transport has emerged as the dominant segment in India‟s transportation sector with

a share of 4.7% in India‟s GDP in 2009-10. The number of vehicles on Indian roads has been

growing at an average pace of 10.16% per annum over the last five years. Hence,

development of road network assumes paramount importance in the context of a rapidly

growing economy.[5] At present road transport have3.19% share in India‟s GDP which is

around twice of the combine share of air, water and rail transport.

As per the data of NHAI and several other government reports the value of roads and

bridges infrastructure in India is projected to grow at a Compound Annual Growth Rate

(CAGR) of 17.4 per cent over FY12–17. The country's roads and bridges infrastructure,

which was valued at US$ 6.9 billion in 2009 is expected to touch US$ 19.2 billion by 2017.

The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the

period FY09-14. The plan outlay for 2015-16 stepped up budgetary support for Road

Transport and Highways to Rs 42,912 crore (US$ 6.43 billion) [6].

3.1. Risk Associated with Construction of Highway or Road

Risk is an inherent part of the roads and highway projects due to the size and cost involved.

Many studies have been conducted to identify the risks in roads and highway projects, all over

the world. According to [7] highway construction projects exposed to high risks which needs

special attention. They emphasized that highway construction projects carry high risks than

the traditional construction. They identified 10 significant risks factors in highway

construction projects in China. These are in macro and micro level areas. Macro level risks

are: Financial, market risk, political and cultural risk. The financial risk includes variations

and foreign exchange rate increases. The micro risks are: Emerging technology usage

(technical know-how of consultants and contractors), design stage, contract and legal issues,

resources, quality of work and weather conditions.

[8] Identified 10 most significant risks out of 42 in the UAE. These risks are:

Inflation and sudden changes in prices

Clients unreasonable imposed tight schedule

Subcontractor's poor performance and management

Delay of material supply by suppliers

Change of design required by clients

Clients improper intervention during construction

Shortage in manpower supply and availability

Delays in approval

Lack of departure of qualified staff

Shortage in material supply availability



[9] Concluded that PPP projects bears heavy risk during entire life span except initiation

and transfer phase and construction phase of PPP projects is most risky phase.

In PPP projects, both the concessionaire and the Government may be exposed to many

risks. Risk is defined as exposure to the possibility of economic or financial loss or gains,

physical injury or delay as a consequence of the uncertainty associated with passing a course

of action. The major risk factors of road projects under BOT can be classified into four

phases viz, Developmental phase, Construction phase, Operational phase, and Project life

cycle as listed below. Detailed assessment should be conducted on each of the above items

before the project is finally taken up for execution.[10].

Table 1

Risks in different phases BOT Based Highway projects

Project Phase Risk Category

Developmental

Phase

Pre-investment risk, Resettlement and Rehabilitation risk, Delay in land

acquisition, Permit / Approval risk, Delay in financial closure

Construction

Phase

Technology risk, Design and latent defect risk, Completion risk, and Cost

overrun risk.

Operation Phase Traffic revenue risk, Operation risk, Demand risk, Debt servicing risk

Project Life Cycle Legal risk, Political risk (direct and indirect), Partnering risk, Regulatory risk,

Financial risk, Environmental risk and Physical risk

Source: (Dr. G. RaviKumar, 2005)

3.2. Time and Cost Overrun in Highway Projects

To a project developer who counted on revenue from the project commencing from a

particular date in order to comply with the schedule for repayment of the project finance,

delay is not only a humiliation but also a serious risk of financial failure of the whole

enterprise. On the contractor‟s side, delay in completion entails increased overheads over

those budgeted.

As per the MOSPI (2016), 312 of 750 infrastructure projects were running behind their

original schedule at the end of September 2014. The time overrun in these projects ranges

from 1-247 months. The cost overrun in the delayed projects has resulted 18.75% increase in

original cost.

Table 2

Cost overrun in roads & highway project in India at the end of year 2014

Sector No. of

Projects

Cost

Original

Cost

Latest

Cost

Anticipate

d

Cost

Overrun

w.r.t

Original

Cost

Overrun

w.r.t

Latest

Road

Transportati

on &

Highways

136 102,321.44 102,692.4

5

104,388.4

4 2,067.00 1,695.99

Source : (MoSIP, 2016)

[11] identified several cause of cost overruns and schedule overruns in construction projects

through literature review. The major causes of cost overruns and of schedule overruns

include:



Cost of materials

Incorrect planning

Wrong method of estimation

Contract management

Fluctuation of prices of materials

Design error

Poor site condition

Delay in payment

Financial incapability of client

Financial incapability of contractor

Non-availability of subcontractor and supplier

In a study, [12] identified 10 significant causes of construction delays regarding road

infrastructure projects out of 101 causes of delay in Road Infrastructure Projects. There are:

Delay due to land acquisition

Environmental issues

Delay in progress payment

Ineffective project planning and scheduling

Poor site management and supervision

Rework due to errors

Delay in approving design documents

Poor coordination between owner and other parties

Financial closure

Change order by clients

4. RESEARCH METHODOLOGY Risk which results in cost and time overrun in PPP based highway project were identified from literature review.

Total 47 risk factors and 6 types of risk were identified and with this one of the objective of this paper were

accomplished, that is "To identify the risks which results time and cost overruns in PPP based roads and highway

projects through literature review." These risks are shown below in Table 3.

Table 3

Identified 47 Risk Factors and their Category

Sr.No. Risk Factors which Results in Time and Cost Overrun Category

1. Mismanagement by the contractor (Finance, Supplier,

Support, Sub-contract)

Technical

2. Cash flow during construction Financial

3. Political interference Political

4. Government policies (laws and regulations) Legal

5. Change in the scope of project/extra work Technical

6. Lack of equipment/labour efficiency Technical

7. Political situation of the country/state Political

8. Additional works Technical



9. Force majeure (Act of God) Environmental

10. Political Force majeure (War, riot, terrorism, strike, etc) Political

11. Inflation Economical

12. Underestimation Technical / Financial

13. Fluctuation in exchange rate Economical

14. Delay in land acquisition Legal

15. Design errors & omissions Technical

16. Effect of weather Environmental

17. Non payment of completed work Financial

18. Delay in confirmation from client on cost, quality, time,

etc

Technical

19. Technology transfer disputes Technical/Political

20. Inadequacy in documentation Technical/Legal

21. Increase in taxes/charges Economical

22. Shortage of material/labour Technical/Economical

23. Public interference and protest from environmental

activists

Social

24. Conflicting national and state laws Legal/ Political

25. Incomplete design scope Technical

26. Conflict in drawings and specifications Technical

27. Permit/Approval related delays Legal/Environmental

28. Decision making process Technical

29. Change in site conditions Environmental

30. Lake of effective communication among the stakeholders Social

31. Contractual relationship among stakeholders Legal

32. Discrepancies in contract Legal

33. Improper planning Technical

34. Prejudiced options and decisions Social/Environmental

35. Conflicts in execution of work order by subcontractor Technical

36. Mistake and errors during construction work Technical

37. Delay in dispute resolution Technical / Legal

38. Experience of project team Technical

39. Delay in financial closure Financial

40. Bureaucracy in tendering method Legal

41. Bureaucracy in the stakeholder's organization Social

42. Quality assurance and quality control Technical

43. Relationship between management and labour Technical / Social

44. Changing of bankers policy for loans Financial / Economical

45. Non availability of finance from equity participants in time Financial

46. Number of construction projects going on at the same time Technical

47. Commencement of work without proper site investigation Technical

4.1. Sampling Size

Sampling is defined as a process of selecting a section to represent a whole. In most instances

it is impractical to conduct a census as conducting a census could be very expensive and time

consuming.

The Sampling Technique

The sampling techniques adopted in this study for the selection of the respondents were

purposive and convenient. The respondents were purposively selected because specific data

and information were needed by the researcher to measure the involvement level of the

respondents. Significantly, the process of obtaining the members to be involved in the study



was very critical and central to ensuring that each unit within the sample population has an

equal chance of being selected. The core principle is that, the sample size should have features

which reflect the entire population, such that conclusions can be generalized for the entire

population. The sample size for the study was determined by using following formula:-

2

2

2/ )(

E

pqzn

Where

n = number of items in sample 2

2/ )( z = square of the confidence level in standard error

units p = estimated proportion of successes q = 1 – p, or estimated proportion of failures 2E

= square of the maximum allowance for error between the true proportion and the sample

proportion

Hence at 2/z = 1.645 (Z score 90% confidence interval is 1.645) ,2E = 10% and p= 0.5

65.671.0

)5)(.5(.645.12

2

n

A sample size of 68 professionals is the were obtained by using the above formula.

However, due to the time constrain a sample size of 53 professionals were used in this paper.

5. DATA ANALYSIS

Data analysis can be defined “as consisting of three concurrent flows of activity: data

reduction, data display and conclusion drawing/verification” Data analysis of this thesis was

based on the three steps defined by reduction, data display and conclusion. After completing

the data collection, the data was analysed using both descriptive data and adopting the relative

importance index to find the ranking factor among all the factors articulated from the

literature review. Relative importance index formula: -

NA

WRII

Where

W = the weight given to each factor by the respondents and ranges from 1 to 5

A = the highest response integer = 5

N= the total number of respondents

5.1. Data Collection Instrument

Questionnaire was prepared for the primary data collection. A questionnaire is a pre

formulated written set of questions to which respondents record their answers, usually within

rather closely defined alternatives [13]. The questionnaire was designed specifically to solicit

responses from professionals involved in PPP based roads and highway projects. Questions in

a questionnaire could be open-ended, close-ended or a mixture of the two, based on the

expected outcome. Due to the research paradigm adopted the main questions in the

questionnaire were designed to be close ended. The questionnaire used in this research was

consisting of two parts that is part A and part B. Both part combine contains 6 questions.

'Question 1' sought to investigate characteristics of the professionals; their institution of work;

position held amongst other issues. 'Question 2' investigate the professional's organization

type (Contractor, Client, and Consultant). 'Question 3' investigate the personal experience of

the professional about completion of highway projects within budget time and cost. 'Question



4' investigates which project phase of PPP based highway project is most risky and the

professional were asked to rank the phases on the bases on their experience. 'Question 5' and

'Question 6' investigates impact of the factors responsible for time and cost overrun in PPP

based roads and highway projects and the professional were asked to rank based on the likert

scale of 5 how significant the factors are.

6. FINDING AND DATA ANALYSIS

A total 800 questionnaires were distributed through online survey site, out of which only 65

were returned and only 53 were found valid for the data analysis. These valid questionnaires

used for the analysis yielded 6.625% response rate. This indicates that, the response rate was

quiet low. However, respondents were seasoned group of contractors, consultants and clients

having a average experienced of 20 years in roads and highway projects.

Table 4

Organization demographics

Organization Type Number of responses Percentage

Clients 12 22.64

Contractors 7 13.21

Consultants 34 64.15

Total Respondents 53 100

Table 4 shows that 63.46% of the respondents were consultants. Thus the findings of the study reflect

more of the views of those who are neither part of the public sector nor the private sector.

6.1. Findings and Analysis of Question 3

As mentioned above that the question 3 investigate the personal experience of the professional

about completion of highway project within budget time and cost. It was a open end question

and question was: -

"From past experience of respondent the percentage of roads and highway project

completed within budget time and cost?". From this question, it's been discovered that only

30.58% PPP based highway projects are completed within budget time and cost.


As mentioned above that the question 4 investigate which project phase of PPP based

highway project is most risky. In this questions respondent were asked to ranked the project

phases, that is development phase construction phase operation phase and project life cycle on

the bases of their experience, as 1=most risky, 2=very risky, 3=somewhat risky and 4=least

risky.

Table 5

Analysis of project phases of PPP based highway project w.r.t risk involved in them

Phase of roads and highway

projects

1=most risky, 2=very risky, 3=somewhat risky and 4=least risky.

1 2 3 4

Development Phase 36.54 28.85 13.46 21.15 Percentage of

respondent's rank Construction Phase 46.15 32.69 11.54 9.62

Operation Phase 5.77 26.92 51.92 15.38

Project Life Cycle 11.54 11.54 23.08 53.85



From the interpretation of the survey data, it's been found that construction phase of the

PPP based highway project is the most risky phase as 46.15% of respondent ranked it

1(1=most risky) while project life cycle phase is least risky as 53.85% of respondent ranked it

4. (4=most risky)


Question 5 investigates the impact of are factors(types of risks), that is financial factors, legal

factors, environmental factors, technical factors, social factors and political factors, on PPP

based roads and highway projects in relation to time and cost overrun and the respondent were

asked to indicate the impact of each factor on PPP based highway projects on a 'Likert rating

scale of 1 to 5'with 1 = 'Negligible Impact' 2 = 'Low Impact' 3 = 'Moderate Impact' 4= 'High

Impact' and 5 = 'Very High Impact'. This 5-point scale was chosen to prevent respondents

from providing neutral answers. The factors are ranked on the bases of their RII which is

calculated as per the formula mentioned earlier.

TABLE 6

Impact of type of risk on PPP based highway project in terms of time and cost overrun

S.No. Factors RII Rank

1 Financial Factors 0.80 1

2 Environmental Factors 0.72 2

3 Political Factors 0.71 3

4 Legal Factors 0.68 4

5 Social Factors 0.63 5

6 Technical Factors 0.62 6

Table 4.3 summarizes the results of the analyses. The table shows of all 'Financial

Factors‟ are the highest ranking factor with RII of 0.80. This is may be due the success of a

PPP based project depend upon its financial viability. In addition to that it matches with the

results of analysis conducted by researchers in different country. The table 4.3 also indicates

that the respondents ranked 'Environmental Factors‟ as second highest factor with RII of

0.72and „Political Factors‟ got the third rank with RII of 0.71. 'Legal Factors' and 'Social

Factors' got fourth rank with RII of 0.68 and fifth rank with RII of 0.63 respectively by

respondents while 'Technical Factors' is least impactful factor with RII of 0.62.


Question6 investigates the impact of are factors(risks) which may fall under financial, legal,

environmental, technical, social or political risks, on PPP based roads and highway projects in

relation to time and cost overrun and the respondent were asked to indicate the impact of each

factor on PPP based highway projects on a 'Likert rating scale of 1 to 5' with 1 = 'Negligible

Impact ' 2 = 'Low Impact ' 3 = 'Moderate Impact' 4= 'High Impact' and 5 = 'Very High

Impact'. In compare to analysis of question 5, analysis of question 6 is much deeper as total

47 factors were considered from all 6 types of risk categories. The factors are ranked on the

bases of their RII which is calculated as per the formula mentioned earlier.



Table 7

Impact of type of risk factors on highway project in terms of time and cost overrun

Factors RII Rank

Delay in land acquisition 0.88 1

Cash flow during construction 0.81 2

Mismanagement by the contractor (Finance, Supplier, Support, Sub-

contract)

0.77 3

Improper planning 0.76 4

Change in the scope of project/extra work 0.75 5

Underestimation 0.75 6

Commencement of work without proper site investigation 0.75 7

Permit/Approval related delays 0.74 8

Decision making process 0.73 9

Experience of project team 0.73 10

Political interference 0.72 11

Government policies (laws and regulations) 0.72 12

Lack of equipment/labour efficiency 0.72 13

Non payment of completed work 0.71 14

Non availability of finance from equity participants in time 0.70 15

Delay in dispute resolution 0.70 16

Delay in financial closure 0.69 17

Political situation of the country/state 0.68 18

Shortage of material/labour 0.68 19

Design errors & omissions 0.67 20

Public interference and protest from environmental activists 0.67 21

Discrepancies in contract 0.67 22

18.Delay in confirmation from client on cost, quality, time, etc 0.66 23

Incomplete design scope 0.66 24

Lake of effective communication among the stakeholders 0.66 25

Change in site conditions 0.65 26

Conflict in drawings and specifications 0.64 27

Contractual relationship among stakeholders 0.64 28

Additional works 0.63 29

Bureaucracy in tendering method 0.63 30

Conflicts in execution of work order by subcontractor 0.62 31

Bureaucracy in the stakeholder's organization 0.62 32

Inflation 0.61 33

Prejudiced options and decisions 0.61 34

Mistake and errors during construction work 0.61 35

Changing of bankers policy for loans 0.61 36

Force majeure (Act of God) 0.60 37

Quality assurance and quality control 0.60 38

Inadequacy in documentation 0.59 39

Political Force majeure (War, riot, terrorism, strike, etc) 0.58 40

Fluctuation in exchange rate 0.58 41

Number of construction projects going on at the same time 0.57 42

Relationship between management and labour 0.56 43

Conflicting national and state laws 0.55 44

Effect of weather 0.54 45

Technology transfer disputes 0.52 46

Increase in taxes/charges 0.51 47

Table 7 summarises that 'Delay in land acquisition', 'Cash flow during construction',

'Mismanagement by the contractor (Finance, Supplier, Support, Sub-contract)', 'Improper



planning' and 'Change in the scope of project/extra work' are the top 5 risk factors which have

the greatest impact on the PPP based highway projects while 'Increase in taxes/charges is the

risk factor which have least impact on PPP based highway project.

The table shows that 'Delay in land acquisition' is the highest ranking factor with RII =

0.88, which means it is the factor which have the greatest impact on PPP based roads and

highway projects in terms of time and cost overrun. As mentioned in the introduction part of

this thesis that the land acquisition is one of the factor that makes roads and highway projects

risky for private participants as land acquisition for road project takes very long time. In fact,

land acquisition is a major problem for any road construction project as a road project is not

like a port or an airport or a power plant which requires large continuous parcels of land, a

road would be along a specific route and only certain portions of the lands parcels would be

required. Therefore, the number of land parcels to be acquired is relatively higher in road

projects and a failure to acquire even one small segment of the required land parcels would

retard the progress in the implementation of the road project.

In India, NHAI have sufficient legal framework for land acquisition for National Highway

Projects while each state has their own legal framework for land acquisition for State

Highway Projects which may not be as efficient as NHAI's. However, delay in land

acquisition by NHAI tanks place may be due to the delay in approvals from forest department,

shifting of utilities and lack of coordination between NHAI and state authorities.

The respondents ranked 'Cash flow during construction' as second highest factor with RII

of 0.81. Maintenance of cash flow in PPP based roads and highway project is very difficult as

concessioner is spending on the construction of whole project from his own pocket and

construction of roads and highway projects takes huge amount of money and time. Therefore,

little change in economical and financial conditions such as inflation and fluctuation of

exchange rates can affect the cash flow during construction.

'Mismanagement by the contractor (Finance, Supplier, Support, Sub-contract)' got the

third rank with RII of 0.77. Any type of miss management by contractor may jeopardize both

cash flow and profits.

'Improper planning' obtained the fourth rank with RII of 0.76. As mentioned above that

roads and highway projects take huge amount of time and cost. Therefore, improper planning

at any phase of project by any participating party will result in time overrun, cost overrun or

change in scope.

'Change in the scope of project/extra work' acquired the fifth rank with RII of 0.75.

Change in the scope means alteration that requires a modification in a project's cost or

schedule, it depends upon many factors but the major reason behind change in scope are

improper feasibility study, faulty DPR, change in site conditions, environmental concerns,

discrepancy in contract documents and change in design.

From observation of analysis of results of question 5 and 6, it can be concluded that there

is very little agreement between them as the analysis of question 5 shows that 'Technical

Factors‟ are least impactful factors on the other hand analysis of question 6 shows that

'Mismanagement by the contractor (Finance, Supplier, Support, Sub-contract)', 'Improper

planning' and 'Change in the scope of project/extra work' are 'Technical Factors' and bottom 3

of top 5 most impactful factors. This may suggest that risk can't be quantified in broader

sense.

http://www.businessdictionary.com/definition/alteration.html

http://www.businessdictionary.com/definition/modification.html

http://www.businessdictionary.com/definition/project.html

http://www.businessdictionary.com/definition/cost.html

http://www.businessdictionary.com/definition/schedule.html



7. CONCLUSIONS AND RECOMMENDATIONS

The objective of this paper were to identify the risk factors which are responsible for time and

cost overrun in road in PPP based roads and highway projects and to identify which of them

have the most impact in terms of time and cost overrun over PPP based highway project.

Total 47 major risk factors which results in time and cost overrun were identified through

literature review and a survey was carried out to identify the most impactful risk factors

among these 47 major risk factors which results in time and cost overrun.

The analysis of results of the survey revealed that delay in land acquisition, cash flow

during construction, mismanagement by the contractor (finance, supplier, support, sub-

contract), improper planning and change in the scope of project/extra work are the top 5 risk

factors which have greatest impact on PPP based roads and highway project in terms of time

and cost overrun.

8. RECOMMENDATIONS

Following recommendations should be considered by the government and private participant

for the successful implementation of PPP based roads and highway projects:-

Government authorities should acquire the whole and or at least 80% of the required land

prior to concession.

Since land is a state subject in India, each state government should establish a land acquisition

authority for PPP projects which should take advance possession of the notified land, collect

development rights build rehabilitation centres, settle the land disputes etc.

Each state government should adopt NHAI's legal framework for land acquisition for highway

projects.

Government should establish financing facilities which provides temporary liquidity to

concession or contractor to deal with specific risks such as inflation and cash flow problem.

Developer and contractor should use cash flow management software to gain a general idea

about what income and expenses should be expected in the future.

Contractor should use proper labour, equipment and material management techniques as it

helps in maintaining cash flow and increases the productivity.

Developer and contractor should maintain contingency fund for emergency situations.

Developer and contractor should improve the managerial skills of their construction teams by

conducting proper trainings and workshops.

Developer and contractor should use proper project planning software such as PRIMAVERA

and MS Project

The Government should establish a single widow clearance system for PPP based highway

projects to minimize the permit/approval related delays

In order to understand the site conditions and for the preparation of estimate, the developer

and contractor should investigation the site properly before undertaking the work.

DPR should be made based on detailed survey and investigations, design and technology

choice with minimal errors, so that no time and cost overrun takes place due to changes in

scope of work or quantities during construction phase.

http://www.investopedia.com/exam-guide/cfp/financial-statements/cfp5.asp



9. FUTURE SCOPE OF RESEARCH

There are number of areas related to time and cost overrun in PPP based highway project

where of further research is required. The following recommendations are therefore made for

future research:

Future research on the identification of probability of occurrence of major risks which results

time and cost overruns in PPP based highway projects.

Future research on the impact of risk management practice on PPP based highway projects.

REFERENCES

[1] Anil Kumar Gupta, Dr. M.K. Trivedi and Dr. R. Kansal, (2013). Risk Variation

Assessment of Indian Road PPP Projects, International Journal of Science, Environment

and Technology, Vol. 2, No 5, pp.1017 –1026

[2] Asish Ram, Dr.Pratheeba Paul, (2015). Study on Construction Sequence Delay for Road

Infrastructure Projects, Journal of Mechanical and Civil Engineering, Vol. 12, No 2, pp.

15–21

[3] Dr. Indrasen Singh, PralhadKabra and Anand Kulkarni, (2013). Imperative of Risk

Management in Highway Projects, IRC Indian Highways, Vol. 41, No 3, pp. 12 –26

[4] El-Sayegh and M. Sameh , (2008). Risk Assessment and Allocation in the UAE

Construction Industry, International Journal of Project Management, Vol. 26, No 4, pp.

431– 438

[5] Ibrahim Mahamid, AmundBruland, (2011). Cost Overrun Causes in Road Construction

Projects: „‟Consultants‟ Perspective‟‟, 2nd International Conference on Construction and

Project Management,Vol. 15, pp. 6–10.

[6] Ibrahim Mahamid, (2013).„Common risks affecting time overrun in road construction

projects in Palestine: Contractor's perspective, Australasian Journal of Construction

Economics and Building, Vol.13, No 2, pp. 45-53

[7] M.S.Ramabodu and J.J.P. Verster, (2010). Factors Contributing to Cost Overruns of

Construction Projects, In the proceeding of ASOCSA 5th Built Environment Conference,

July 18-20, 2010, pp. 131–143

[8] Mukuka M.J, Aigbavboa C.O., and ThwalaW.D., (2014). A Theoretical Review of the

Causes and Effects of Construction Projects Cost and Schedule Overruns, International

Conference on Emerging Trends in Computer and Image Processing, Dec. 15–16, 2014,

pp. 112–115

[9] MuraliSambasivanYau Wen Soon, (2007). Causes and Effects of Delays in Malaysian

Construction Industry, International Journal of Project Management, Vol. 25, pp.517–526,

doi: 10.1016/j.ijproman.2006.11.007

[10] Nicholas Chileshe& Paul DansoBerko, (2010). Causes of project cost overruns within the

Ghanaian road construction sector, In the proceeding of ASOCSA 5th Built Environment

Conference, July 18-20, 2010, pp. 66–81

[11] Ram Singh, 2009. Cost and Time Overruns in Infrastructure Projects: Extent, Causes and

Remedies, Working Paper, Centre for Development Economics, No. 181. Retrieved from

Centre for Development Economics website http://www.cdedse.org/working-paper-

frameset.htm

[12] Tarek Zayed, Mohamed Amer and Jiayin Pan, (2008). Assisting Risk and Uncertainty in

Chinese Highway Project using AHP, International Journal of Project Management,

Vol.26, pp. 408–419, doi: 10.1016/j.ijproman.2007.05.012



[13] Uma Sekaran, (2003).Research Methods for Business: A Skill-Building Approach, Fourth

Edition, New York, NY, USA:John Wiley & Sons Ltd.

[14] Pankaj P. Bhangale, Analysis of Time and Cost Overrun To Key Success of High-Rise

Commercial Building Project - A Case Study. International Journal of Civil Engineering

and Technology , 7(4), 2016, pp.400–405.

[15] Asthana Kamla Kant, Bottlenecks in the Delivery Process of Government Buildings in

Uttar Pradesh (India) Causing Time and Cost Overrun, International Journal of Civil

Engineering and Technology, 9(2), 2018, pp. 693 – 704 .

Date post:	10-Apr-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

IDENTIFICATION OF RISKS CAUSING TIME AND COST …...another reason for the failure of the PPP in...

Documents