The Sri Lankan Construction Industry

Published Date: 02 Nov 2017

Abstract

Proper management is essential for successful completion of any project, especially construction projects due to its unique and special characters compare with other industries. Value Management (VM) and Risk Management (RM) are the key areas to achieve project objectives by enhancing performance and reducing risks. VM deals with achieving benefits on resource spent in terms of monetary and as well as nonmonetary and RM dealing with handling uncertainties which affect the project adversely (and/or favorably???).

Since both processes have significant similarities among them, merging those two within the single framework is sensible and logical. Integration is useful in theory and applicability is depends on nature of local construction industry. Thus this research focused on the possibility of the integrated approach of RM and VM in the Sri Lankan construction industry.

By analyzing previous studies and publication on the particular subject the integration in theoretical was investigated. Further, current status of RM and VM in local construction industry was studied to verify the potential and applicability of integration to Sri Lankan construction industry and identify the upshots and obstructions for the integration. The interviewees were conducted from experts from construction industry, both Consultants and Contractors.

The research facts exposed currently formal RM practice is rare in the local construction industry and proper RM is essential for medium to large scale project. And application of VM is recognized more than RM by the industry, but not to Europe and American construction industry standards. Further, proper VM application is acknowledged by the experts since countries like Sri Lanka facing resource scarcity. And an integrated approach is welcomed by respondent, but is desperate unless the adequate measures have been taken. It was found that, it can be achieved by corporation of parties involve, especially Government by introducing hard and fast system. Finally, positive and negative side of the outcome and restrictions to integration are communicated in this study.

Keywords: Risk Management, Value Management, Integration of RM and VM

Chapter 01

Feasibility of Integration of Risk Management and Value Management practice in the Sri Lankan Construction Industry

Introduction

1.1 Background

Construct Industry professionals feel that conventional practice is inadequate due to it is shortfalls and increased complexity of construction Projects (Dey, 2009). As a result, ground-breaking thinking is compulsory for advancement of construction industry. Hiley and Paliokostas (2001) argue that, three aspects need to be focused to complete the construction projects successfully: well established objectives and approach to meet those objectives, and dealing with potential risks connected with the project. The first two thoughts are incorporated with Value Management (VM) and third one is fall in Risk Management (RM) context.

Risk is defined by various School of Management thoughts and researchers time to time, all are surrounding by two main criteria; first there must be a chance to minimum two effects and second, one of the upshots must affect the hope adversely (Okmen and Oztas, 2003). There is bewilderment about the definition of risk, because most of the articles, only talk about the negative side of the event. But OGC Guide (2007) challenged the general definition by considering positive side of the risk event. According to OGC Guide (2007) risk is uncertainty of outcome, whether positive opportunity or negative impact.

As we all know, risk is high in construction projects due to high capital involvement, contribution of multiple parties, characters various project to project; in terms of design, budget, geographical location, local government bodies’ rule, clement change, project team, resource availability, public intervention and Government direct involvement as Client and indirectly impact by its rules and regulations (Poh and Tah 2006). Need for systematic RM is strongly recognised by industry players since RM play major role to manage constrains; Cost, Quality, Time and Scope (Kangari 1995). However, Maximum output of formal RM is not consumed by the industry since proper RM procedure is seldom used (Dey 2009).

Project success is depend on implementation of appropriate management suit with nature of the project, especially RM and VM to manage the cost, quality and time which are key objectives of each and every project. According to Dillas (2006) some risk to be taken to maximize the value rather than go for risk avoiding option. Risk involve with construction projects are mostly dynamic; Impact and likelihood of occurrence various throughout project life cycle (Alfredo Del Cano et al, 2002). Further, Dillas (2006) argues VM also must be consider along with RM. VM is essential to satisfy client through achieving better value for money spent on, and it leads to satisfaction of the all the parties involved; Clients, Consultants, Contractors and Suppliers, general public and Government (Norton and McElligott 2004).

According to Norton and McElligott (2004), VM can be defined as "logical, multi-disciplinary endeavour focussed on evaluating the functions of product to achieving the best value at the minimum overall life cycle cost. Some other terms such as value engineering (VE) and value analysis (VA) are used by schools of management thoughts, but it is generally accepted that the term VM cover the all other value methodologies (Shen and Liu 2003, p.485).

Better VM supports to achieve Hard saving; easily measurable such as cost savings, Soft savings; indirect benefits such as buildability (Hiley and Paliokostas 2001). VM is a powerful tool to handle resource constrains involve with construction projects (Lin and Shen, 2007). OGC Guide (2007) have stated the positive outcomes that can be achieved by proper VM application such as provides room for entire project review, chance for build team cohesiveness among parties involve, establish the project constrains, and provides space for other project management aspect such as budgeting, cutting unwanted costs, project crushing, activity prioritisation and etc. Steven 1996 cited in Leung and Chu 2003, p.350) argues, VM should be implemented from the pre contract stage; inception, feasibility study, outline and detail design stage to post contract stage; construction and maintenance.

VM and RM contribute considerable segment in project management practice and both are practiced in industry up to certain level formally and as well as unconsciously. Since both practices are undergone through almost same kind of processes, possibility to combine under single roof is high and beneficial (Norton & McElligott, 1995). RM and VM in a premeditated shell could help the management to come for the optimum decision at the beginning stage of the project. A number of previous studies such as OCG (2007 Guide), Kirk (1995) and etc., proposed theoretical framework for integrated VM and RM process. Further, Norton & McElligott (1995) argue that RM can be enhanced by parallel application of VM. Rather than stick with a process of adding things in because of risk and eliminate them due to value, it is recommended that the both practices once put together will reduce the reprocess of ideas (Ellis et al. 2004). Theoretical benefits of integrated approach is welcomed by industry and practised in UK construction industry. But, according to Berawi et al (2007); research conducted perspective of UK infrastructure Projects, the benefits consume at actual situation are lesser than theoretically expected level. So, there is confusion on applicability of integrated approach in practical situation which is established in theoretical platform.

Areas related RM and VM independently studied in the past in context of Sri Lnankan construction industry. However there is a lack of comprehensive study in the concept of practicability of the Integration of RM and VM in the context of Sri Lankan construction industry. As we discussed early, nature and characters of construction projects various county to country. The construction industry in Sri Lanka covers a complex and comprehensive field of activities involving many operative skills and conditions, with the contribution of around 6%-7% to GDP over the past decade (Abeynayake, 2009). So, it is essential to offer best project management service to local construction industry. Thus this research anticipates in evaluating the possibility of integrating RM and VM processes in the Sri Lankan construction industry.

1.2 Problem Identification

Application of appropriate RM and VM enhance the successful completion of construction projects by managing project constrains properly. VM improve the worth of the output by adding value for money spent on and while RM support to achieve the objectives through identifying causes of uncertainty which adversely affect the success of project. Both are used in construction industry; even in Sri Lanka, up to certain level and have considerable similarities among them. So, treating both in a single framework is rational and theoretically favourable. Thus, the Study focus on scrutinize the possibility of integrating VM and RM in the context of Sri Lankan construction industry.

1.3 Problem Justification & Important of Study

Generally VM and RM is practised in construction projects all over the world; in local construction industry as well. Combining both process under one roof is acknowledge by a number previous researches, but practicability in the context of Sri Lankan construction industry is still suspicious. So, there is a vacuum for the question of "Feasibility of integration of RM and VM in Sri Lankan Construction Industry?" And better management is needed for countries like Sri Lanka which suffer from resource scarcity and political unstable. So, focus of this research is exploring the feasibility of integrating RM and VM to implement efficient project management service in Sri Lankan construction industries. Thus, studying the potential for integration in local construction industry is precious.

1.4 Aim and Objectives

The core endeavour of the research is to evaluate the possibility of the integration of the two key management practices known as RM and VM in the context of Sri Lankan construction industry. In order to reach this aim and objectives are set as follows,

Analyze the present stage of RM practice in the Sri Lankan construction industry.

Analyze the present stage of VM practice in the Sri Lankan construction industry.

Examine the practicability of the integration of RM and VM practices in context of Sri Lankan construction industry.

Identify the outcomes of the integration of RM and VM.

Identify the limitations of such and integration of VM and RM in Sri Lankan Construction Industry and provide insights for a better integrations of VM and RM strategies

1.5 Scope and Limitations

This Research was carried out in the context of Sri Lankan construction industry. This study focuses only on the analysing the potential of integration of the RM and VM. Also in this study design stage is considered. The processes is investigated in the sight of both consultancy and contracting organisation

1.6 Chapter breakdown

Chapter 1: Introduction

Chapter one presents the background to the study, problem identification, problem justification, aim & objectives, methodology, scope and limitation and research framework of the study.

Chapter 2: Literature Review

This chapter provides an overview of current thinking in RM and VM practices in the construction industry and the potential for their integration.

Chapter 3: Research Methodology

This chapter explains the research methodologies that will be used to achieve the aim and objectives of this study.

Chapter 4: Data Analysis

This chapter discusses the collected data and critically argue on subject matter.

Chapter 5: Conclusions, Recommendations and Further Research

This chapter concludes with the research findings, recommendations, basis for further research

1.7 Methodology

A wide-ranging literature survey was carried out by referring range of journals, articles, books, dissertations and World Wide Web to investigate the current view of RM and VM and to investigate possibilities to integrate both practices.

Semi-structured interviews was conducted with the professionals who have greater knowledge in the area of RM and VM to study the current status of both practice and the possibility of their integration in Sri Lanka, associated issues in the subject matter.

Data were collected through semi-structured interviews. The interview questions were designed based on the information gained from literature review.

Collected data were analysed through qualitative analysis techniques. data reduction was done through the developed interview transcripts and categorized sensibly to discussed on sub area of the studies.

1.8 Approaches to the Research Problem

Through the Literature Review it is clearly known that integration of RM and VM is theoretically beneficial and would enhance the results of both processes. As a theory it is acknowledge by industry players, but question is whether both can be treated within single structure in the real scenario or not. But some other previous studies tried to explore the practicability of integration of both process. According to Hiley and Paliokostas (2001), integration of VM and RM is already accepted by UK construction industry and performing it in practice. Further they state, UK clients have lack of interest to go for RM and VM practice due to their negative mind set; worry about additional consumption of time and money. This can be defeated by providing a combined efficient service through integration of both practices. From the above mentioned research findings, we can’t come to a decision that the outcomes fit with our local construction industry, because of its unique nature as disused early. So, it is better to check the feasibility in the context of local construction industry. For that, it is decided to investigate (a) current states of RM and VM application in industry (b) potential for integration and (c) outcomes and barriers for integration.

1.9 Hypothesis

1.10 Research Framework

Risk Management

RM Process

Risk Identification,

Risk Analysis,

Risk Evaluation,

Risk Response

Risk Monitoring

Risk Management

RM Process

Risk Identification,

Risk Analysis,

Risk Evaluation,

Risk Response

Risk Monitoring

Intergration

Theoretical Outcomes

Cost and time saving

Elimination of duplication of effort

Initial savings through the implementation of early in the project

Recognition of RM and VM

Economic projects

Increased value and reduced risk impact

Generation of innovative management tools

value Management

VM Process

Orientation

Information

Speculation

Analysis

Programme planning

Programme execution

Ranking

Summary & Conclusion

Cost and time saving

Uncertainty management

Effective project management

Recognition of RM and VM

Economic projects

Increased value and reduced risk impact

Generation of innovative management tools

Summary & Conclusion

Chapter 03

3.0 Research Methodology

3.1 Introduction

Research can be defined as journey of discovery whether no matter which is discovered or not. Appropriate data collection and methods to analyse data are key to achieve a trustworthy result in a research. The previous chapters completely scanned the literature on RM & VM process and potential to integrate RM and VM in single framework. This chapter describes the exact steps; research process, that were undertaken to address the developed research questions. The research process includes research design, sampling technique, data collection and data analysis techniques and which had been used are explained in this chapter. Finally the research process is illustrated and summary of this chapter has been given.

3.2 Research Framework

Conclusion and Recommendation

Identification of Area

Background Study

Establish Aims & Objectives

Literature Review

Sampling

Data Collection

Data Analysis

Figure 31 - Research Process

3.3 Research Approach

Research approach refers the approach or methodology that has to be adapted to successfully complete this research. Punch (2005) split research approach into four logical steps as bellow,

Framing the research in terms of research questions

Determining what data are necessary to answer those questions

Designing research to collect and analyze those data

Using the data to answer the research questions

Based on this model of research, there are two overall questions guiding the research planning process.

What? What is the research problem? What is it trying to find out?

How? How will the research answer these questions?

Answer for first question should be achieved by appropriate research approach; as framing the research problem and reviewing existing literature are two processes to accomplish this task. The processes research design, data collection, and data analysis were focused on answering the lsecond question.

3.4 Framing the Research Questions

According to Rudestam and Newton (2007) research problem and finding should really beneficial to the field and allow the researcher to express autonomous thoughts on subject matter.

The research question of this research is whether the integration of RM and VM is practically feasible in context of Sri Lankan construction industry, or not? A complete study had been done in the background of the research area and the research question was framed.

3.5 Reviewing Existing Literature

According to Fellows and Liu (2003), in near the beginning of a research, the results of previous research and relevant theories should be scanned and necessary information should be assembled.

Here a wide-ranging review had been done in the available literature about RM and VM as key practices in construction industry by reviewing the definitions, types, methodologies, outcomes and current state of practice. Then, it was found that up to what extent integration is possible theoretically and research problem was finalised.

3.6 Research Design

According to Fellows and Liu (2003), the main priority is to ensure that the research maximizes the chance of realizing its objectives. Therefore the research design must take into account the research questions, determine what data are required, and how the data are to be analyzed.

(1)

(2)

(3)

Depth of study

Breadth of study

Questionnaire

Interviews

Case Study

Area of the each figure is the same

When considering the research aim and the nature of this research, it is obvious that this study needs cautious observation of human interactions and behaviours. The aim and objectives of the research can be achieved only by the answers from the professionals practicing in the construction industry. Thus the survey method was used to this research. Also survey method was selected over case study because it reflects whole picture of the industry and gives priority to broader perspective rather than to in-depth analysis.

Figure 32 – Breadth vs. Depth in survey studies

Source - Fellows and Liu (2003)

For this research semi-structured interview guide has been design mainly three section, first two designed to analyze the state of current RM and VM practices in Sri Lankan construction industry and third one designed to examine the potential for the integration of RM and VM in Sri Lanka and identify the outcomes of integrated approach and barrier for integrating VM and RM in the context of Sri Lankan construction industry.

3.6.1 Data Collection

The sample for the survey was derived from Sri Lankan both contracting and consulting organizations. Surveys methods vary from very much structured questionnaires to unstructured interviews. Semi structured interviews has the flexibility to allow the researcher to do required modifications to explore more interviewees’ thoughts according to situation. For this research semi structured interview was held with professionals in order to collect sufficient data to achieve the objectives.

3.6.2 Data Analysis

Data analysis was done using the qualitative analysis techniques. The responses by the interviewees for the open questions were analyzed according to the content. The various types of expressions made by the respondents regarding to a specific question were analyzed by the content. The qualitative data collected should be properly recorded such as tape-recording, note-taking. Transcribing is the procedure for producing written version of the interview, readable version of interview transcripts to an exact word-to word translation. Data analysis starts with these collected and recorded data

Data analysis steps

Data reduction

process of selecting, focusing, simplifying, abstracting and transforming data that appear in written-up field notes or transcriptions

Data display

organised, compressed assembly of information that permits conclusion drawing and/ or action taking

Conclusion drawing

involves researcher in interpretation and drawing meaning from displayed data

Cross case analysis session was used to derive the findings effectively from the interview data. Specifically the interview data was analyzed according to above mentioned qualitative content analysis which includes data reduction, data display, and conclusion drawing. The interview transcripts were developed with professional way of answers in the word format based on the information gathered by informal interviewing conversation. Coding structure was developed according to choose out the information related to every objective from the whole interview and was used in a manual way to sort the data sets according to the objectives. Following this the gathered data sets were analyzed in above mentioned content analysis methods.

3.7 Summary

This chapter has described and justified the research process and the methodology adopted for the purpose of the research. Survey method was used to achieve the aims and objectives of the study. For that as data collection method semi-structured interviews were carried out to derive the data. Further the qualitative analysis techniques were used to analyze the data from the respondents.

Chapter 04

4.0 Data Analysis and Discussion

4.1 Introduction

Established aim and objectives of this study were achieved by analysing collected data through qualitative data analysing techniques. The interviewees’ experiences and view on the area of RM and VM were extracted and presented in logical manner to critically evaluate each and every objectives of this research.

First, current states of RM and VM application in local construction industry were disserved and analysed from the view point of experienced industry players. Data extraction was focused on relationship between both processes, and results were presented to evaluate the potential for integration of RM and VM in the setting of Sri Lankan construction industry. Further, outcomes of integrated approach; both positive and negative, and root to break barriers for integrating RM and VM are investigated at last of this chapter.

4.2 Application of Risk Management

The development of the Sri Lankan construction industry has influenced by the political and economic risk during the past few decades. At present construction industry is one of the most energetic, innovative and technically advanced of any sector in the Sri Lanka. Sectors like Sri Lankan construction industries with contribution of around 6%-7% to GDP and 7.7% of employment (Central Bank Report, Sri Lanka) of the total labour force of the country, to be managed properly for the advancement of whole nation through advanced project management practice. For the advanced project management service, risk should be managed in efficient manner, since risk involvement is high in construction project as per view of Poh and Tah (2006) as discussed early in Literature review.

RM and current states of RM are analysed from the respondents’ point of view under this section. Findings are evaluated and presented under separate sound classes; familiarity of RM practice, concept of RM, client interest in RM, present states of RM application, professional involvement in RM and benefits of RM, for clear understanding.

4.2.1 Familiarity of Risk Management in Practice

All ten respondents have knowledge on RM procedure, since most of them have undergone RM practice in their undergraduate and Master studies and as well as private workshops. But they are not familiar with formal RM practice in real situations, but risk are managed at site level by relevant professionals; Site Engineer, Material Engineer, Hydraulic Engineer, Mining Engineer, Services Engineer and etc with the supports of each others. All the respondents agreed that in industrial environment, they didn’t get a chance to practice deeply in RM practice even though they have adequate academic knowledge to perform.

According to gathered information from respondents, overall idea found that informal group discussion and progress review meeting are used to risk identification and shared experience is used for risk analysis. Further, relevant professionals respond to identified risks associated with their respective field of specialization. None of the professionals interviewed have undergone complete set of RM process with all the procedures and methodologies. All of them deal with risk in a number of projects throughout their career, but not systematically.

4.2.2 Concept of Risk Management

As per the view of Othman (2008) discussed in Literature Review, mainly three steps involve with RM process are identified; (a) risk identification, (b) risk analysis and (c) risk response from collected data of this particular research. All of our respondents considered risk as threat to the success of a project. In the literature, the views regarding risk are directed to the both negative and positive aspect also. But in this study, it was completely strange thinking for respondents and none of them consider positive side of the risk.

From the overall responses of interviewees, the RM can be defined in an innovative way; process of delegating obligations to the specialised divisions such Supervising & Site Engineering, QA & QC (Material & laboratory) Engineering, Hydraulic Engineering, Mining Engineering, Services (mechanical, Electrical & Plumping) Engineering and etc. As this kind of delegation of responsibilities is used to practiced in Sri Lankan construction industry through sharing previous experience among each other professions without any formal RM process, the above mentioned definition is obviously acceptable in the context of local construction industry.

4.2.3 Client Interest in Risk Management

Intention of clients towards implementation of formal RM process in Sri Lankan construction industry is the major force to determine endurance of RM application in industry. Clients’ financial and time delegation towards RM is analysed in this section.

Majority of respondents accepted the clients’ less demand for formal RM practice, even they aware of risks involve with construction projects. Further, clients have knowledge general risks such political, financial, environmental and etc, but they are reluctant to evaluate and quantify the effects of those risk. The major reason pointed out by respondents for less demand for formal RM application is clients mindset; clients feel money and time required for RM process is additional burden. The benefits of proper RM practice are not clearly communicated to clients, and respondents accepted their fault in honestly.

All the respondents said that clients never asked for separate RM service and they expect to include with basic consultancy service. Some respondents mentioned that technically qualified clients like to go for separate RM in some situation but not educated clients. There is a horrible argument on deference in-between technically qualified clients and educated clients. Further, most of the educated clients feel that contracts actor and consultants have the obligation to bear the risk effects by their own cost. Their awareness of RM process is the main problem imposing this status. As per majority respondents’ opinion, uneducated clients trust the guidance given by consultants and believe that they take care of them without a separate procedure to control the risk.

On the other hand, there is no construction consultancy firm which provide RM as its one of the main service. And one respondent argued that, this may be the reason for clients’ misunderstanding about importance of formal RM practice; clients feel that risk can be managed with the basic consultancy service, no need to go for separate RM service. Some of the clients tend to identify possible risks that badly affect the project, but they are reluctant to go further due to above mindset. Further he argued that, it is consultants’ duty to make clients aware.

One well experienced respondent conveyed his idea on the platform of condition of contacts used in construction industry such as FIDIC, JCT, ICTAD and etc. In his point of view, there two categories of risks, one should be bear contractor; technical risks, risks by site conditions, risks involve with supply of resources and technology & etc and other one by client; war, hostilities, insurrection, riot, commotion & etc. And he suggested to client to go for outsourcing to manage risks, but in real situation is not so due to unawareness of benefits of formal RM practice.

4.2.4 Presence state of Risk Management Application

Current state of RM in local construction industry is analysed through the respondents’ view on the present stage of RM and their considerations for that status. Involvement of professionals in RM is analysed through the respondents’ opinion on the adequate knowledge of professionals in the RM formal procedure in Sri Lankan construction industry.

Almost all of the participants agreed that the formal RM practice for a project is very uncommon in the Sri Lankan construction Industry. Anyhow, risks in projects are managed in industry, but not in a formal structured manner. Majority of the respondents said that they used their perception to evaluate the effect of the risks in most situations. Further they mentioned that the risk analysing techniques are used in some critical circumstances, but that was also limited to some extent. Further, need for proper RM practice for large scale projects is acknowledge by all respondents and separate RM practice for small budget projects; RM can be implement along with the basic project management service.

Further, three main causes have been point out by respondents for the lack of formal RM practice in Sri Lankan construction Industry as following...

Clients’ awareness

Professionals’ involvement

Regulations regarding RM

Majority of respondents’ view that lack of clients’ intention is the biggest restriction for implementing formal RM procedure in Sri Lankan construction industry. Normally clients consider RM as an additional burden for them. It requires additional time, involvement of multi disciplinary professionals and additional cost for conducting separate RM process. That resulted in clients’ avoidance in practicing RM. Most of the clients are actually unaware of the benefits that can be obtained by the RM practice. As strongly stated in literature review, the respondents also mentioned the difficulty of marketing the RM in the industry. However this problem is common to all consultancies. The main driving force for this problem is the unawareness of clients and professionals engagement in formal RM. So the unawareness of clients is the main reason for the lack of formal RM application in local construction industry.

Professionals’ involvement in the strict RM is another issue criticised by the respondents. In Sri Lankan construction industry, according to interviewees, the knowledge of most of the professionals in formal RM methodologies, techniques and procedures is insufficient to implement separate RM process, eventhough they undergone RM syllabus in their academic studies. This resulted in reduced professional involvement and considered as critical by the participants. To defeat this issue and to set up a work force with satisfactory knowledge and training in RM processes, techniques and concepts, some thought mentioned by respondents such as conducting seminars, workshops and awareness programs amongst professionals regarding formal RM.

Government of Democratic Socialist Republic of Sri Lanka has influence on construction industry as direct investor on public projects and indirectly by its rules and regulation. But, there is no regulation to direct effective RM practice. The interviewees’ suggestions to overcome the lack of formal RM usage and to help this discipline to achieve the recognition it deserves in the industry as follows,

Mandatory regulations by government

Training and seminars for professionals

Awareness programs

Standardization by relevant institutes

Cover with academic syllabuses

4.2.5 Benefits of formal Risk Management

The benefits that can be achieved by an formal RM practice can be categorized as hard benefits; which are the direct benefits and soft benefits; which are the indirect benefits. Interviewees’ view about the benefits of formal RM in local construction industry is scheduled in the table 4.1.

4.3 Application of Value Management

Resources are limited and developing countries like Sri Lanka need efficient VM practice to achieve optimum value on resources spent. VM and current states of VM are evaluated from the respondents’ point of view under this section. Findings are evaluated and presented under separate headings; familiarity of VM practice, concept of VM, client interest in VM, present states of VM application, and benefits of RM, for better understanding.

4.3.1 Familiarity of Value Management in Practice

Majority of respondents agreed that they have undergone VM in a number of previous projects. Some participants were engaged in a formal VM workshop for previous projects, but not all the respondents. Some of them are stated that they have practiced VM incorporated with other cost cutting methods for several projects, but not much got the chance to carry out a separate VM process. Majority of the participants said that they have adequate knowledge in the concept of VM. They further stated that they are familiar with all the stages; pre workshop, workshop, post workshop activities, and management tools used for VM workshops.

VM is now getting popular in Sri Lankan construction industry, but now its usage is limited to some extent. Clients ask for VM practice as cost cutting tool for trim down initial investment, rather than a separate management process to concentrate whole life cycle cost. For some large complex projects a complete VM study had been done in the past. After completion also some VM studies had been done to increase energy efficiency in World Trade Centre. So the VM is now getting the recognition among the industry, but still the awareness is needed among the industry.

4.3.2 Concept of Value Management

All the respondents are familiar with the concept of VM. As a definition, most of respondents tried to define VM as systematic management process to boost the value of the output while cutting down unnecessary cost. Value depends on the function of a project. One participant argued that, not only the initial investment but also the whole life cost to be taken in to account in a VM study. Simply as one respondent stated VM is to identify the best option which gives the best value for resources spent in accordance with set criteria.

Most of the respondents agreed with thoughts of Shen and Liu (2003); VM is the overall name given to all these activities, but VA, VE and VP are slightly deviate from each other and they are carried out in a project at different times, as discussed in Literature review early. However, one respondent disagreed with this argument and mentioned that VM is more a managerial process. It concerns more in strategic management rather than the technical aspects. But VE, it is more concerned with technical issues. VE is more like a cost cutting method. But VM is more concerned with increasing the value for a project.

The entire respondents accepted the misconception of VM as a cost cutting activity and their point of views VM is not only regarding low cost, but also focus on end products’ energy efficient, user friendly, technology soundness, society fascinate, and environmental aspects as well. Further they acknowledged that the early initiation of VM process along with the inception stage of the project with commitment of multi disciplinary professionals and corporation of clients. Until otherwise participation of client, optimum value cannot be achieved in terms of clients’ requirements. Modifications in mid of the construction increase the Variation cost and make room for conflict in between parties involve.

All the respondents agreed that brain storming is the suitable technique to raise the ideas among the workshop participants. One participant strongly recommended that project stakeholders participation in the workshop. Otherwise optimum value cannot be achieved in the view of all angles; energy efficient, technology soundness, user friendly, environmental aspects and society fascinate. Also the education of client and the workshop participants are the main influencing fact in the success of a VM study stated by the respondents.

4.3.3 Clients Interest in Value Management

Clients’ intention to perform the VM is the major driving force that determines the survival of the VM practice in the construction industry. Their financial and time assistance to the consultants to perform VM and their participation in VM will leads to successful achievement of project objectives. Respondents’ view in clients’ demand for VM, their awareness of VM are analysed in this section.

According to the respondents clients’ interest in VM is fairly noted among the industry. Clients actually wanted to complete the project within the lowest possible cost with required basic criteria. Most of the respondents mentioned that the clients demand the cost cutting services, but they do not care much about the value of the project, since they don’t have enough knowledge to deviate value from the cost.

However, all of the respondents agreed that demand for a separate VM process is less in the local construction industry. A formal separate VM practice had been done for few projects in the Sri Lankan construction industry. Normally, the clients think that the separate VM is a time consuming process which incur additional cost. Most of the clients are expecting the consultants to increase the value of project and stress the consultants to do it within the basic consultancy service, rather than go for additional practice. Even though the technically qualified and educated clients are asking for VM, they are unwilling to go for separate workshop for VM. Some respondents stated that the clients ask for a separate VM process when there is a critical situation like estimation of the project has exceeded the budget or to find an alternative with lowest cost. But in these circumstances the value cannot be optimised through the VM and the resistance to change is high thus the cost of change is high. Clients should be warned by the consultants about this risk occurrence due to change in scope of work in mid of the project.

4.2.4 Presence state of Value Management Application

Application of VM processes is practically ahead in Sri Lankan construction industry when compare with formal RM practice. VM is getting recognized in local construction industry, due to changes in lifestyle more towards energy efficient, technology soundness, User friendly, environmental. But, currently VM is considered as cost cutting process, rather than focus on other value addition criteria. The presence states of VM application and professionals’ involvement in VM practice are explored in this section in the view of well experienced respondents.

Entire respondents accepted the lack of formal VM application in Sri Lankan construction industry. But the awareness of VM among the contractors is high due to diminishing resources and inflating day to day construction cost. Further, clients concern about value addition is growing up along with changing lifestyle. Most of the respondents criticised that, even clients willing to implement value addition activities in their projects, but not ready to spend for additional VM service required for successful project management consultancy. VM is not only for remove unnecessary cost generating activities, but to raise the value of end product considering the life cycle cost. Although similar methodologies have to follow in both procedures, objectives and results are different. Anyway, the interviewees mentioned that the separate process of VM is getting familiar by the Sri Lankan construction industry fast, because of the worldwide recognition of VM in construction industry.

A number of reasons have been listed out by experienced respondents for lack of formal VM practice in Sri Lankan construction industry, as follows,

No government regulations

Lack of clients’ demand

Deficiency of professionals’ involvement

No institutions for VM

No standard procedures implied by authorities

Absence of adequate knowledge and training

Lack of coordination between different professional discipline to adopt best options and changes

As mentioned for RM practice related issues, there is no separate Acts or Ordinance for regulate VM methodologies. Entire respondents criticized the government that, if the policy makers identify the importance of VM and impose regulations in the construction industry, then there will be a rapid change in the situation. Since there are no institutions for Value Managers like Society of American Value Engineers (SAVE) and Institute of Value Managers (IVM) – UK in Sri Lanka. Moreover one of the respondent introduce a new profession called "Value Manger"; since VM play vital role in project management and as well as in whole nation’s development.

Further, major barrier for proper VM practice is found that, lack of coordination between different departments; in the context of Sri Lankan construction industry, professionals are more rigid with their discipline, it reduce potential to go for best option according to site conditions, environmental, political and economical changes time to time.

The valuable ideas proposed by industry players to practice formal VM methodologies at European level in Sri Lanka, are summarized as bellow,

Forming relevant institution

Gazetting government Acts and Ordinance

Conducting training and seminars

Standardization of procedures and definitions

Introducing separate course in academic studies

On the other hand, intention professionals towards formal VM practice is less in local compared with European construction industry. Expect one respondent, others accepted that, even they have undergone VM methodologies in their academic studies; practical knowledge is inadequate to apply in real situations. Further, they argued that, lack of chances to practice formal VM techniques reduce opportunity to develop their profession in the area of VM. Moreover, participants suggested few way to overcome this issues such as conducting seminars, workshops and training programs, introduce a separate stream for VM in Sri Lankan education system, forming a professional body for VM, forming a separate institute for Value Managers, and standardizing the procedures and definitions related to VM.

4.3.5 Benefits of Value Management

The direct and indirect benefits can be obtained through proper VM application is summarized in the view point of experienced industry players, as shown in table 4.2.

4.4 Integration of Risk and Value Management

Past Literatures on VM and RM studies show that, there is a strong relationship in-between both process and influence on each other. The managed risks through RM practice may enhance the value. Best options arrived through proper VM may be associated with more risks. Thus the literature review provides root to integrate RM and VM since the links between them are strong.

In this section, possibility for integrating RM and VM in local construction industry is evaluated under various sub division; links between RM and VM process, potential for integration of VM and RM, pertinence integrated approach, outcomes of integration, barriers for integrated approach, for understandings and continuity.

4.4.1 Consciousness of Links between Risk and Value Management

Most of the respondents agreed that VM and RM are interrelated and almost go through same kind of processes. Moreover, they argued, RM and VM should be started at the inception stage of the project and RM practice should be continued at the same endeavour throughout the project period, but that much effort is not necessary for VM after end of design stage. And one respondent stated that, even processes are almost same, but both processes have to done in different boundaries.

One respondent further argued RM as a cost management tool. The objective of RM is to reduce the impact of a risk. But in VM the main consideration has to be given to the function of the project thus increasing value. A different view was given by a respondent, considering RM as a part of VM. Further argued that, VM process overrides the efficient of RM when pay more attention on clients’ sophisticated requirements.

The common thinking of entire respondents reveal that VM ensure the project objectives are achieved successfully at the same time RM ensure that the project objectives are not affected by potential risks. Further they argued VM cannot be successful without the consideration of risks. To implement RM the consideration of value and function is needed. So both the processes cannot be accomplished without other process.

The similarities mentioned by the respondents are categorized as following,

Both associate with creativity; generating ideas

Both process need separate Workshops for success

Brain storming sessions are required

Involvement of multi disciplinary professions

Enhanced project management through formal VM and RM

Consideration and evaluation of alternatives in both practice

Better communication

All the respondents agreed that the clients’ awareness regarding the connection in-between RM and VM is very less. The educated and technically qualified clients also do not have much awareness regarding this sort of management aspects.

4.4.2 Potential for Integration of Risk and Value Management

None of the respondent agreed there is a total duplication of effort by carrying out separate VM and RM. Majority of the respondents agreed there is a duplication of effort of employing separate RM and VM processes up to some extent. Some of the process can be done at one time considering RM and VM, and while some of the processes need to be carryout separately for each RM and VM. But the extent of the duplication of effort they argued that is acceptable and necessary. One respondent mentioned that the duplication of effort is initiated by the failure of the proper management. He further argued since the RM is a part of VM, both must be considered together as much as possible. But another participant argued that, RM and VM processes start along with the inception of project concept and should be continued at the same effort throughout the project period, but that much effort is not needed for VM after completion of details specification framed.

All of the respondents rejected the using same team for VM and RM workshops. All of them have agreed that there should be a flow of information from one workshop to another. So, each process should be done through experts on particular field; RM and VM, but part of the panel should includes some members in both RM and VM workshop to maintain a flow of information one to another. The possibility of effort duplication can be eliminated by this interaction. Also it is noted that VM needs a positive approach and RM needs a negative approach. The mindset of participants required in each approach is different. So it argued that using same team for RM and VM workshops is not appropriate. Further argued that, whole integration is not necessary, since each processes requires different mindset and serve different purposes, so the whole integration is not necessary.

All the respondents agreed that there is a potential to integrate VM and RM. Especially in the early stages of design. Rather than focusing each process’s objectives, bearing in mind the whole project objectives, the processes need to be integrated. Thus the integration guides to a comprehensive picture of the project and allow to effective decision making.

Also there is an argument that the integration of RM and VM may reduce the success of ultimate aim of each process; it leads to less clarity of purpose, confused thinking and subsequently less effective results. However, majority of the respondents agreed that there must be integration of RM and VM. They argued the advantages of the integration overshadow the negative side and disadvantages. The most significant features for integrating VM and RM are that both are systematic processes, involving a multi-disciplinary team in creative workshops. They both use a brainstorming technique as means for decision making process. Therefore combining the two processes within a single roof is practical and logical as both share the same resources.

The advantages and disadvantages by integrating RM and VM expressed by the respondents are listed in the table 4.1.,

Table 41- Pros & Cons of Integrated Approach

Advantages

Disadvantages

Best option can be selected in VM in terms of risks, value can be increased in RM

Confused thinking

Elimination of duplication of effort

Lack of standard framework

Reduced cost of workshops

Limit the use of experts in both processes

Time savings

Tendency to reduce overall project performance

Initial savings through the implementation of early in the project

Contradiction between participants

Better management of uncertainty

Less clarity of purposes

Successful achievement of project objectives

Dominance of one process

Improved project management

4.4.3 Pertinence of Integrated Approach

The applicability of the integrated approach is the key part of this study. As several literature shows, integration of RM and VM is theoretically possible and its negative outcomes can be overshadowed by its number of positive outcomes. So, there is need for evaluate the practicability of the integration in the context of Sri Lankan construction industry. The applicability of the integrated approach of RM and VM and the practicability of achieving the positive outcome by integration is analysed in this section through the respondents’ opinion on the existence of integrated approach, the reasons for their consideration of integration as beneficial or unfavourable in the industry.

In the literature, it was found that in UK the integration exist while the theory was not fully developed. According to the respondents in the Sri Lankan construction industry, a formal integration is not in practice. However, the respondents further stated that, the integration happens sometimes not with intention to actually integrate the practices.

The entire interviewees agreed that the integration of RM and VM would be beneficial to Sri Lankan construction industry, but need some rigid frame and standardised procedures. Further, they argued that both practices are seldom used in the construction industry formally and knowledge on formal RM and VM processes is less. As a result the integrated approach may be harmful to the Sri Lankan construction industry without,

Adequate knowledge

Rigid framework

Participation of qualified professionals

Flexible framework according to project

Effective facilitation

Clients support

Stake holders’ participation

The practicability of obtaining positive outcomes which reduce the effects of negative side depends on the proper management. According to the respondents in the Sri Lankan construction industry, the practicability of obtaining benefits through the integrated approach is less. It is because they argued the present status of application of both; RM and VM practices in the Sri Lankan construction industry.

4.4.4 Outcomes of Integrated Approach

The possible outcomes; both positive and negative effects, of integrated approach in the context of Sri Lankan construction industry are analysed in this section.

In the respondents’ point of view, a number of positive results can be generated by integrated approach through better management, better coordination among various parties, better facilitation and under regulation of government and other relevant institutions. Otherwise the negative effects may prevail over the advantages and turns into greater threat to the successful achievement of the goals of the integration of RM and VM hence affects the total project performance.

Positive and negative results of integrated process are summarised in the respondents views as in table 4.2,

Table 42 - Outcomes of Integrated Approach

Positive outcomes

Negative outcomes

Cost and time saving

Confusion

Uncertainty management

Reduction of overall project performance

Effective project management

Dominance of one process

Recognition of RM and VM

Contradiction

Economic projects

Conflicts between RM expert and VM experts

Increased value and reduced risk impact

Difficulties in accepting one solution

Generation of innovative management tools

Reduced involvement of one process

4.4.5 Restrictions for Integrated Approach

The possible barriers for integration VM and RM exist in Sri Lankan construction industry is analysed in this section. Generally our local construction industry refuses to go along with new methodologies and management strategies because of dependency on industry’ traditional approach. Further, overall Sri Lankan citizens’ unresponsive mindset to groundbreaking thoughts; uphold traditions and cultures. Also, respondents agreed, the professionals’ unawareness and unwillingness to innovative approaches resists the integrated approach.

According to the respondents’ views, the restrictions for implementing the integrated approach are the involvement of various parties, professionals’ unawareness, lack of expertise, lack of researches, clients’ unwillingness, practice of traditional procurement systems, initial cost and the stake holders’ traditional way of thinking. Those are the human behavioural barriers exist in local construction industry reduce the practicability of integration.

4.5 Summary

In this chapter collected data; experiences and views of respondents, were critically evaluated and discussed related to each and every objectives of this study. The Status of current VM and RM practices are not in satisfied level in the Sri Lankan construction industry. Absence of recognition of RM and VM practice by Clients, consultants and contractors is the reason for less formal RM and VM application in local construction industry. The reasons identified for this status are the lack of clients’ demand due to less clients’ awareness and clients’ interest, greater fragmentation of the industry, less involvement of the professionals, missing of government regulations, no standard procedures, and no regulatory institutions. The awareness of the relationship between the RM and VM is less among the industry. It is accepted that there is a potential for an integrated approach of RM and VM in the Sri Lankan construction industry. The practicability of the integrated approach depends on the managing professionals from different backgrounds. However, it was expressed that the practicability of integration is less in local construction industry and it is noticed by some significant restrictions in the Sri Lankan construction industry.

Chapter 05

5.0 Conclusion and Recommendation

5.1 Conclusion

As a human being we all apply management tools in our day to day life. The required level and process of management techniques various according to the situation which to be handle from informal to advanced structure. From the small family structure to multinational organizations adapt their own management aspects to match with their requirements. Since complexity nature of construction industry and involve with high number of uncertainties, a well established formal management is mandatory for successful completion of a construction project. In that thought, advanced project management is practiced in construction projects all over the world; in Sri Lankan construction industry as well.

RM and VM are falls under project management aspects and have great significance on success of project management practice. VM enhance the project objectives in terms of monetary; quantifiable in terms of financial aspect, nonmonetary; assessable using Cost-Benefits analysis, and while RM concretes way to achieve project objectives by managing constrains. VM can reduce risk at the same time RM can provide openings to boost value. So, there is a strong thought in the literature that VM and RM are complementary processes that's why an integrated approach of VM and RM should be scrutinized. Theoretically, the integration is acknowledged and recommended as effective management tool. Practicability of the integrated approach was investigated up to some extent in Europe context, but there is no clear framework for integrated approach. Further, feasibility of integration depends on nature of construction industry; European context disparate Sri Lankan construction industry. Thus this study aimed to examine feasibility of the integrated approach in the Sri Lankan construction industry.

A complete literature survey was carried out to examine the potential for integration theoretically. Interviews were conducted based on knowledge gathered through literature review, among well experienced industry players. The present condition of VM and RM is explored and through that potential for integration is studied. Further, upshots; both positive and negative, and barriers for integration evaluated as well.

The data shown that practice of formal RM is rare in the Sri Lankan construction industry. Even though clients are aware of possible risk which may affect success of project, they are not prepared to go for separate RM service. The reason for less demand for formal RM practice is clients’ negative mindset regarding effort to be taken in terms of time and cost. And benefits of RM practice are not clearly communicated to clients, as it is consultants’ obligation to educate clients in the particular project subject matters. Further, it is found that, Sri Lankan Construction industry clients completely trust consultants and they don’t like to outsource additional RM service to manage risks which to be bear by clients.

Further, there is no construction consultancy firm to offer RM service as its main business. On the contractors’ side, well experienced project managers and contract administrator responded that, technical, site issues and project management risks are managed at site level through delegation of responsibility to relevant departments. But organizational risks; Project Dependencies Resources, Funding, Prioritization are managed at head office through some sort of formal RM practice. So, overall, RM practice is rare due to lack of clients’ demand and some sort of formal RM processes are followed at site level and top managerial level, in current of Sri Lankan construction industry.

As per there respondents’ point of view VM is more recognized than RM in Sri Lankan construction industry. Further, clients request for the VM practice to their projects with misunderstanding of VM concept as cost cutting activity; Further, interviewees criticised that, clients are expecting to do value optimising activities within the basic consultancy service, without any additional time and cost. But finally consultants forced to bear the losses after things went wrong. The reasons pointed out respondents’ for lack of formal VM practices are, missing of government regulations, Lack of clients’ demand, Deficiency of professionals’ involvement, no institutions for VM, no standard procedures implied by authorities, absence of adequate knowledge and training, lack of coordination between different professional discipline to adopt best options and changes and etc. moreover, the experienced professionals suggested to form relevant institution, Gazette government Acts and Ordinance, conduct training and seminars, standardize of procedures and definitions, introduce separate course in academic studies to overcome this issue and uplift application of formal VM practice to developed countries’ standard. And intention professionals towards formal VM practice is less in local compared with European construction industry due to inadequate knowledge to go through full set of formal VM processes.

However it was mentioned that the separate VM study and its benefits are getting recognized by the industry because of changes in lifestyle more towards energy efficient, technology soundness, User friendly, environmental. Further, contracting organizations go behind VM procedures for optimum utilization of resources, ease of construction, and improve buildability and technology applicability.

The data showed that there is a fewer knowledge among the industry about the links between RM and VM. The majority of interviewees accept VM and RM as interrelated processes. However there was a strong objection to this consideration as the both processes serve different purposes and represent different boundaries. The data revealed the acceptance of similarities between RM and VM. It was concluded that the consciousness regarding the links and similarities of RM and VM are in a satisfactorily level among the professionals and low among the clients. Data indicate that there was no total duplication of effort by implements separate formal RM and VM practice. Data revealed that there may be constant recycling of ideas and that can be managed by allowing interactions between RM and VM workshops. Interview data rejected the consideration of using same team for RM and VM workshops. There was a suggestion to use part of a team in both workshops thus the possibility of effort duplication can be reduced through information flow from one to another workshop. The data revealed that there is a potential to integrate RM and VM workshops. The process need to be integrated to consider the whole project objectives, rather than focus on single objective. Since the processes requi