Evaluation of global risk factors affecting cost performance in Mozambique

The effective management of risk is critical to the success of any construction project and the importance of risk management has grown as projects have become more complex and competition has increased. Contractors have traditionally used financial mark-ups to cover the risk associated with construction projects but as competition increases and margins have become tighter they can no longer rely on this strategy and must improve their ability to manage risk. This paper presents the results of a survey conducted to evaluate the impact of global risk factors on cost performance of construction projects in Mozambique. The survey reported upon forms part of a larger study that aims to develop a fuzzy logic decision framework for contractors to better manage global risk factors affecting the cost performance of construction projects. Major global risk factors affecting cost performance were identified through an extensive literature review followed by a workshop and a questionnaire survey of construction contractors in Mozambique. The findings of the questionnaire form the basis for the repertory grid interviews aimed at eliciting relevant knowledge so as to develop a knowledge-based decision support system. There are several approaches to categorising risks permeating construction projects. This paper groups risks into three main categories, namely organisation-specific, global and Acts of God. It focuses on global risk factors because they are ill-defined, less understood by contractors and difficult to model, assess and manage although they have huge impact on cost performance. Generally, contractors, especially in developing countries, have insufficient experience and knowledge to manage them effectively. The surveyed contractors identified the following global risk factors as having significant impact: project size, project location, project complexity, estimator bias, market conditions, level of competition, fraudulent practices, construction, economic and political risk factors. The findings stress the need to depart from traditional approaches and to explore new directions in order to equip contractors with effective risk management tools.