QUESTIONS ONE AND TWO ARE BASED ON THE FOLLOWING CASE STUDY: A risk and cost management analysis for changes during the

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QUESTIONS ONE AND TWO ARE BASED ON THE FOLLOWING CASE STUDY:
A risk and cost management analysis for changes during the
construction phase of a project
One of the primary ways in which value is generated in modern
societies, is through projects that create physical assets, such as
factories, commercial buildings, hospitals, schools and highways,
which can then be exploited to social and economic ends.
Most of these assets are created through construction projects,
and as the size and complexity of these projects increase, a more
intensive level of project management is required to successfully
meet the expectations of time, cost and quality.
However, managing a construction project is difficult in that
all the relevant information is not always available at the initial
stage of the project to plan and design the project accurately and
make the best possible decisions.
As information becomes available during the construction phase
of the project, it can lead to various changes, which can in turn
affect productivity, planned schedules, deadlines, work
methodology, resource procurement and budget, all of which could
result in the project objectives not being achieved. Design errors
or variations, unforeseen site conditions and vagueness in the
original scope are merely some of the reasons for change.
It is expected of a project manager to effectively manage the
cost, time and risk impacts of all project changes, and complete
the project within the project constraints regardless of any
challenges. To manage projects more effectively, a fresh approach
in project management is required. A project manager must
understand the implications of changes and must manage these
changes in such a way that all the project objectives are obtained
within the time, budget and quality constraints.
Over and above the cost, time and risk consequences, changes can
also affect stakeholder relationships and team morale.
The uncertainties associated with change are often the result of
iterative cycles or further changes due to unanticipated
side-effects of the current change during the construction process.
It is thus imperative to understand change, the types of changes,
its impact on the project, and how to analyse, manage and control
it.
Change could also result in rework. Construction is the physical
manifestation of a design, and thus rework usually entails the
demolition or modification of work already constructed. For this
reason, rework is perceived to have a greater impact on
construction performance than change.
When project managers are under time or resource constraints,
they would rather avoid rework by modifying the design and
specifications. In the case study under review, the value spent on
changes is more than double the amount spent on rework.
It is thus clear that change may have a greater impact on the
works than rework.
Source:
http://www.scielo.org.za/scielo.php?scr ... 6000400003
QUESTION ONE [25]
1.1 With regards to the case study, analyse the relationship
between cost of risk and risk management. Your answer should
focus on examples such as insurance costs and unreimbursed
losses.