Risk management in procurement of construction industry in Lebanon

Abstract

Given the high complexity of construction projects, these projects carry numerous inherent risks and uncertainties. Such risks if managed properly can turn threats into opportunities. With the current decline in the construction and economic sectors in Lebanon, the application of risk management in construction projects has become imperative and more needed than ever. This master’s thesis looks into the current state of-the-practice of risk management in construction projects in Lebanon focusing on procurement methods in these projects to identify the main obstacles in its application. The thesis is three-fold: the first aims to assess the state of the practice of risk management in the Lebanese construction industry and the attitude of civil engineers towards the application of risk management through the use of a large-scale online survey after a proper literature review & bibliometric analysis is done. The second fold of the thesis aims to qualitatively assess the most important risks as identified by the Lebanese civil engineers while taking into consideration design-bid-build lump sum projects by using the result of the previous large-scale online survey and conducting in-depth interviews with procurement experts working in this field. The outcome pinpointed the level of each risk and the important role of the risk priority number. The third fold of the thesis is a case study of quantitatively analyzing risks of a real design-bid-build lump sum infrastructure project using Primavera Risk Analysis software. The case study analyzed the risks quantitatively while using the outcome of the questionnaire and the in-depth interview for identifying various risk responses and owners. This research reveals the perception of Lebanese civil engineers of risks and compares the impact of risks after the application of specific response strategies. It was found that they are mostly risk-averse or risk-neutral while the most occurring risk is the poor risk identification where it is the most occurring and hardest to detect. In addition, the research indicates that the main obstacles of applying risk management in the Lebanese construction procurement are the lack of awareness of the benefits of risk management and the lack of knowledge in risk management, thus, highlighting the importance of annexing a third-party risk analysis consultant in construction projects which would provide specialized training to procurement engineers, and the need for more innovation in procurement and bidding practices.