Saudi Marine Construction Projects and Risks

Introduction

Project management refers to the process of developing a project idea, identifying the tasks involved, and mobilizing the necessary resources for the execution of the project. Projects follow different phases, with activities at each stage being unique to the phase (Almahmoud et al. 302). Turner identifies five basic stages of project management, as highlighted below (96).

1. Project definition and planning
2. Project conception and initiation
3. Project launch or execution
4. Project performance and control
5. Project close

Risk Management

Risk management refers to the process of identifying the challenges of project execution and finding ways to counter the setbacks. It involves the identification of risks and the assessment of their impact on the project execution (Al‐Kharashi and Skitmore 19). The impact informs the strategy formulation process of each alternative course of action examined to determine the best counter-strategy to adopt. Sweis et al. found that delays in the completion of projects lead to exemplified costs causing losses to both the contractor and the government (665). Good project management eliminates delays in the completion of projects and saves the construction firm lots of money. Thus, companies should embrace risk management tactics to avert the repercussions arising from poor management. Besides, project managers need to possess exceptional risk assessment skills to mitigate them effectively.

Construction Industry challenges due to risk

Assaf and Al-Hejji state that the construction industry faces more challenges than other sectors owing to the long completion period and the high cost involved (350). The risks can be broadly classified as:

1. Physical
2. Acts of God
3. Financial and economical
4. Political and environmental
5. Design
6. Construction-related

Under the Acts of God purview, challenges emanate from the occurrence of the unpreventable natural phenomena such as heavy rains and earthquakes (Baker, Murphy, and Fisher 679). Financial and economic constraints refer to financial shortages, which may cause delays in the execution of a project. Politics also plays a critical role in the execution of various projects. Politicians are the key policymakers; hence they have the ability to stop or delay the execution process. Delays in the completion of a project may have adverse financial implications for the contractor due to the imposition of fines and penalties.

The physical factors entail the injuries or harm to employees emanating from the dangerous working conditions in the project site. The machines involved in the construction can cause harm to the workforce and the residents if they are not handled well. The design-related challenges occur due to ineffective communication between the contractor and the designer. The late delivery of crucial information by the engineers may hamper the work of the contractors. Lastly, the construction-related risks arise in the construction site. The risks are related to poor planning, the lack of technical know-how by the workforce, and poor site controls.

Overview of Saudi Arabian Economic Sector

Saudi Arabia is one of the key exporters of oil in the globe, with most of its income derived from the sale of the product, as illustrated in Appendix 1. The presence of oil deposits in the country has sparked the growth of the country’s economy. The country’s oil reserves are the second largest in the world, and it is the leading exporter of petroleum products. The country’s economy is largely dependent on oil and revenues from oil accounts for roughly 92.5% of the Saudi budget. Additionally, oil accounts for 90% of export earnings and 55% of the nation’s GDP.

Saudi Construction Industry Sector

The existence of oil deposits in the country has led to rapid growth in the economy, evidenced by the huge investment in the infrastructure. The speedy growth of the country’s population has also shaped the construction industry’s works due to the increased demand for housing. Currently, the government has invested heavily in renewable energy infrastructure and the transport network. Construction of roads is ongoing to ease congestion and to enhance cross-border trade. It is estimated that by the year 2018, the construction industry shall record a 10.98% compound annual growth rate (“PRNewswire” 24).

Saudi Arabian Marine Construction Projects

The Saudi Arabian marine construction works revolve around the establishment of ports and harbors. The government seeks to improve the tourism industry to avoid overreliance on oil (Lyneis and Ford 163). Therefore, the ports must be constructed to facilitate tourist arrival. The region also serves as a destination for shipment of goods from different countries all over the world. This aspect necessitates the construction of ports to facilitate the delivery of cargos. Some of the major marine construction projects include:

1. Aramco Quay Development in Dhuba
2. Maritime Yard in Ras Al Khair
3. Waad Al Shimal Mining City – Expansion of Ras Al-Khair Port – Phase 4
4. Prince Abdulaziz bin Mosaed Economic City – Logistics & Supply Chain Zone
5. King Abdulaziz Port – Two Wharfs
6. King Fahd Industrial Port in Yanbu – New Wharfs
7. Reclamation Works in Ras Al Khair Port
8. King Abdulaziz Port – Second Container Terminal
9. Millennium Seaport – Phase 1: A&B
10. Container Terminal at Dhiba Port

Challenges on the above marine construction Projects

The marine projects face a myriad of challenges that leads to delays in their completion and cost upshots. The challenges are similar to those experienced by non-marine contractors. The challenges include delays caused by acts of God, poor design of projects, incompetent workforce, political interference, and financial constraints (Assaf and Al-Hejji 352). However, the effects of the risks are more adverse in marine projects than in other construction projects. In the former, the workforce uses vessels during the construction process. The risks of marine construction projects are also heightened by insecurity that has escalated in the past few decades (Tam and Shen 407). Terrorist attacks are an imminent danger for the constructors since the terrorist usually attack the vessels and ask for ransoms.

Problem Statement / Research Objectives

In the past few decades, the Saudi Arabian government has invested heavily in the construction industry to stimulate economic growth in the region. Most projects given to contractors are not finished in time, and the actual costs exceed the budgeted costs in most cases (Meredith and Mantel152). These variances, coupled with the delayed completion of the projects, necessitate research on this topic to unravel the risk factors associated with marine projects. This research shall use both quantitative and qualitative methods to collect and analyze data to gain insight into the nature of project risks and the measures to mitigate them. The qualitative method shall involve the use of interviews to collect data from contractors.

Sample population

The sample shall be comprised of the key stakeholders in the construction industry who will include contractors, construction firm owners, and consultants. The mentioned stakeholders shall be drawn from a cross-section of the Saudi Arabian cities, including Riyadh, Jeddah, Dammam, Abha, and Tabu (Kerzner 126). The specialists are selected for this research since they are well versed in the nature of the risks involved during the execution of the projects. Riyadh and Jeddah host the major construction firms, the reason they were selected for this study.

Approval

The law requires that research involving human subjects to be approved by the relevant bodies. In that regard, this study shall apply to the relevant authorities for approval before its commencement.

Procedure

This study shall be completed in phases. The first phase shall focus on reviewing the literature, regarding the topic, to report on other researchers’ view of the risks. The articles to be reviewed in this study will meet the following criteria:

1. They must be based on quantitative or qualitative research
2. They must have been written within the past five years

The next phase shall involve the use of questionnaires and interviews to collect data from the key stakeholders in the construction industry. The questionnaire shall be divided into three parts. The first section shall be designed to capture the participants’ information. Such data shall include:

1. The type of construction
2. The participant’s role
3. Personal experiences

The second part of the questionnaire shall seek to gather data regarding the performance of construction projects over the past ten years. The final part shall collect data on the risk factors inherent in the execution of the projects. Six risk factors shall be listed in this section, and the participants shall be required to rate each factor according to the frequency of occurrence and the degree of impact. The risk factors to be assessed are acts of God, physical factors, financial and economic, political, environmental, design, and construction-related risk factors. Each factor shall be rated on a scale of 1 to 5 where 1 represents “occurs too often,” while 5 represents “rarely occurs.”

Interviews

Qualitative research involves the use of interviews to collect data for the study (Turner, 109). In this research, interviews shall target the construction firm owners, the employees, and consultants. The interviews shall seek to identify the main risk factors associated with marine projects. The interviews shall be 45 minutes long, and they will be conducted on a face-to-face basis or through Skype, depending on the convenience of the respondent.

Analysis of the data

Data collected from the questionnaires shall be analyzed using the Importance Index (IMPI) consisting of the Frequency Index and the Severity Index (Sweis et al. 669). The following statistical formula will be relevant for this analysis:

Importance Index = (F.I x S.I) / 100

Where,

• Frequency Index (F.I.) = Σ [a. (n/N)] × 100/5
• Severity Index (S.I) = Σ [a. (n/N)] × 100/5

Where (a) is a constant of weighting given to each despondence (1=unknown, 2=never, 3=low, 4=middle, and 5=high) and (n) is the frequency of responses and (N) is the total number of responses for this study

Significance of the study

The topic of the risk factors associated with construction projects has attracted numerous researchers who seek to unearth the nature and the impacts of such risks. However, marine project risk factors have not received the necessary attention from researchers. This study seeks to establish a platform on which future researchers may base their research to unravel marine-specific risk factors.

Study limitations

Large sample size may be required for this research to facilitate the generalization of the results. However, due to financial constraints, the sample size will not be big enough to give accurate information regarding the topic under investigation. The study shall form the framework for future research on the topic. The other limitation of the study is that it is limited to risk factors associated with marine construction projects. Future researchers should use a larger sample and expand their research to explore the risks inherent in other construction projects apart from the marine ones.

Appendices

Appendix 1

The Saudi Arabian economy is largely dependent on oil, as illustrated by the fluctuations in GDP because of the changes in the oil prices.

Works Cited

Al‐Kharashi, Adel, and Martin Skitmore. “Causes of delays in Saudi Arabian public sector construction projects.” Construction Management and Economics 27.1 (2009): 3-23. Print.

Almahmoud, Essam, Salem Hemanta, Kumar Doloi, and Kriengsak Panuwatwanich. “Linking project health to project performance indicators: Multiple case studies of construction projects in Saudi Arabia.” International Journal of Project Management 30.3(2012): 296-307. Print.

Assaf, Sadi, and Sadiq Al-Hejji. “Causes of delay in large construction projects.” International Journal of Project Management 24.4 (2006): 349-357. Print.

Baker, Bruce, David Murphy, and Dalmar Fisher. “Factors affecting project success.”

Project Management handbook. Ed. David Cleland and Richard King. New York: Van Nostrand Reinhold Company, 1988.669-685. Print.

Kerzner, Harold. Project management: a systems approach to planning, scheduling, and controlling, Hoboken: John Wiley & Sons, 2013. Print.

Lyneis, James, and David Ford. “System dynamics applied to project management: a survey, assessment, and directions for future research.” System Dynamics Review 23.2‐3 (2007): 157-189. Print.

Meredith, Jack, and Samuel Mantel. Project management: a managerial approach, Hoboken: John Wiley & Sons, 2011. Print.

PRNewswire: Saudi Arabia Construction Industry: 10.98% CAGR Forecast to 2018 2014. Web.

Sweis, Ghaleb, Rahman Sweis, Abu Hammad, and Abdallah Shboul. “Delays in construction projects: The case of Jordan.” International Journal of Project Management 26.6 (2008): 665-674. Print.

Tam, Vivian, and Liu Shen. “Risk management for contractors in marine projects.” Organization, Technology & Management in Construction 4.1 (2012): 403-10. Print.

Turner, Rodney. The handbook of project-based management, New York: McGraw-Hill, 2014.Print.