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Construction Cost And Electricity Infrastructure

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Discuss about the Construction Cost and Electricity Infrastructure.



Management of risk has become a serious problem in the current years and the organizations have to tread carefully so that they can become effective by mitigating the risks in an appropriate manner. The construction industry on a global level is also prone to risks, which may start during the launch of a new project. The start of a new venture project is one of the riskiest steps that may take place within the construction industry. The features that are present in the construction industry need to be considered such as its production that is non-serial in nature and is typically a customary type. The project has to be dynamic, complex and uncertain because the stakeholders are not convergent in nature. The factors such as climatic conditions need to be taken in to account during the process of construction so that it can help in carrying out the process in a smooth manner (McNeil, Frey and Embrechts 2015).

Construction on an international level accounts to an approximately US$ 3.5 trillion, which is nearly 10 percent of the total Gross Domestic Product (GDP) on a global level. The availability of new market, liberalization of the trade processes, investors who are willing to invest in the projects along with the competition has helps in making the industry sustainable in nature. The projects that are of international level helps in attracting better investments, which is subjected to high level of risks due to its international appeal. The owners of the projects need to assess the environmental, economic, political and geographical risks along with others so that it does not cause any hindrances while continuing with the projects (Lam 2014).

One of the major factors of risk in the construction industry is related to the history of the place where it can be seen that after a passage of time the new projects face more risks in the same place. This is due to the fact that the projects of the similar nature have posed greater problems to the owners and the success rate of the new projects may likely get affected due to the previous experiences (Chance and Brooks 2015).

The stability of management is yet another factor, as the management has to have the same direction and vision through which the project can be completed. The sharing of the same objectives will help the management in effectively carrying out the process so that the unrealistic situations that may crop up during the project can be averted (Hopkin 2017).

The experience of the employees is another factor where it can be seen that their inexperience may lead to delay in the project and incurring of huge expenditures. These delays that may take place for the project will result in the quality of the work to be poor and the wastage of resources, which may be difficult to be replaced. The size of the team who are working in the project needs to be adequate so that the projects can be completed on time. If the size is huge then it may cause a problem with respect to the proper tactics of communication (Pritchard and PMP 2014).

The availability of the resources needs to be taken in to account so that it can help in managing the projects in an efficient manner. If the resources are available instantly, then it allows the company to respond to the problems immediately, which will help in avoiding the risks. The easy availability of money for instance, will help in attracting the human capital along with other equipments so that it can help in completion of the project at a faster rate
(Reason 2016).

The factor of time also needs to be taken in to account, as limited time may increase the chances of risk in the process of construction. With the availability of more time, it helps the project in being more flexible and presents them with opportunities so that the impact of risks can be mitigated. A highly complex project may result in maximizing the chances of risks and problems within the construction industry (Wolbers et al. 2014).


Various types of risks

There are various approaches with which risks can be associated such as the operational and the technical risks, which may hinder the chances of completing the project within the stipulated time. The risks that are associated with the operations of the project may prevent the members of the team in working in a cohesive manner (Tang, Davarzani and Sarkis 2015).

The technical risk that may be present in the construction industry is the improper investigation of the site where the project will be completed. This is a major risk, as the wrong evaluation may result in hampering the process of construction, as the designs for the project t may be incomplete. The specifications that are associated with the project have to be measured in a proper manner so that it can help in appropriately carrying out the operations for the project (Zuiderwijk and Janssen 2014).

The logistical risks that are present within the construction industry is the unavailability of proper facilities that may help in transporting the goods and the materials from one place to another. The resources such as labor, fuel and the spare parts have to be present so that it can help in smoothly managing the process of construction (Douglas 2013).

The financial risks such as the changes and the fluctuations in the foreign exchange will have a major impact on the project, as the increase in the rate of foreign exchange will create a less amount to be invested in the project that was calculated while the blueprint was developed for the project. The rate of inflation may have an impact on the construction of the project, as a higher rate will mean that more money has to be shelled out to acquire the resources such as labor. The impact of local taxes also has to be assessed so that it does not create the possibility of stalling the project (Austin, Lee and Fine 2016).            

The other main risks that are associated with the construction projects are the change in the scope of the project, which may lead to a change in the requirements for the project. The errors that may take place during the designing phase may result in loss of resources, which may delay the completion of the project. The responsibilities and the roles have to be defined to the laborers so that they can focus on completing one process at a time, which will help in using the resources in an optimum manner (Eriksson 2013).

The risks that are political in nature may cause loss of financial resources in the business of international construction due to the poor projects that may be designed. The risks that may arise due to political pressure can be based on three threats such as the government of the host country, the society around which the project is being started and the relationship with the other states. The risks that are associated with the government may result in the termination of the contract that was given to the owners of the project along with the level of incompetence in converting the currency according to the rates that are available in the host country (Taroun 2014). The restrictions that are available with the complex rates of structure may result in hindering the completion of the project, as the new rate of taxes will cause the owners of the project in investing greater amount of money within the project. The presence of restrictions in the importing and the exporting of the goods may hamper the process, as the machineries that may be required for the completion of the project needs to be imported from other countries (Mahmoudi et al. 2014).

The society within which the project is being constructed may be a place of terrorist activity, which may cause problem in carrying out the project in a smooth manner. The risk of the site being prone to demonstrations and riots may cause the laborers to discontinue with their efforts within the business, which may cause a delay in the project. The upheavals that may arise in the society will create a risk of uncertainty among the owners of the project to discontinue with the project, as the customers may not be willing to show any interest within the project (Jato-Espino et al. 2014).

The relation with the other states also has to be taken in to account so that it can help in completing the project within the stipulated time. The ongoing conflicts with the other states have to be foreseen so that it does not hamper the construction of the project, which may result in the wastage of the resources and time by the owners (Zhou, Goh and Li 2015).

The social risk that may be associated with the construction industry on a global level is the level of pollution that may be created in the surrounding areas while constructing the project. The increase level of pollution may create a problem within the societies, as they may be unable to live in that place. This will in turn give rise to the chances of demonstrations and riots, which may have a huge impact on the completion of the project (Walker 2015).

The rise in the construction business has created an impact on the environment as well, as it is mainly associated with the control and the operation that is present in the construction business. The risks have also increased due to the strict laws that are present within the country that deals with the environment, which may result in closing down of the business. The main risks associated with this business is the decrease in the flora and the fauna of the place, as the construction sites have to be cut down, which may involve the loss of trees and the habitats associated with it. The fertile lands also have to be used up, which may create a shortage in the agricultural supplies for the country. The people who are living in that area and are mainly based on the land for their livelihoods have to be compensated and rehabilitated so that the construction can take place without any problems. This may increase the chances of conflicts with the local people and that of the owners of the business (Bygballe and Ingemansson 2014).

Problems and risks in projects

The construction business is on the rise and is expected to increase its growth in the near future as well. Apart from the growth, it can be seen that most of the contractors have reported that they find it difficult in acquiring skilled labors so that the work can be done in an organized manner. The unavailability of skilled workers makes it difficult in filling the vacancies that are present within the construction jobs make it difficult for the contractors in getting new employees. This is a concerning factor, as the shortage in the labor force will have a negative effect on the quality of work that is being presented in the construction industry (Hughes, Champion and Murdoch 2015).

The contractors can offer better pay and benefits to the employees so that they can attract the skilled laborers towards their projects. This will allow the workers in getting paid in a handsome manner so that they can sustain in the competitive market. The better wage rate that will be given to the employees will also result in the completion of the projects in time by using the resources in an optimum manner. This will help the owners in completing the project within the stipulated time (Sovacool, Nugent and Gilbert 2014).

The rise in the differences in the generations is another major risk that the construction industry is facing. The new work force that is entering the construction industry have different set of skills that may not be of any help in the construction industry. This may result in the conflict of the interests between the new and the veteran employees, which may cause a delay in the construction to be completed (Brege, Stehn and Nord 2014).

The owners need to hire the younger employees as well and provide them with better training facilities so that they can work with the superiors in an organized manner. This will help in combining the expertise of the veteran employees with the ability to work of the young employees, which will help in increasing the process of completing the projects within the available time (Deng, Pheng and Zhao 2014).


Technological advancements

The adoption of the new technologies in the construction industry will make the projects costlier in nature, as the new machineries are costly and proper techniques have to be used so that the machines can be used in an optimum manner. The use of cloud computing and mobile management of the projects will help in carrying out the tasks in an easier manner. The implementation of these technologies will help the owners in benefitting from its installation (Yang et al. 2015).

The installation of Building Information Modeling (BIM) along with laser scanning will help the owners in efficiently managing the projects. These machines are costly and the investment on an initial basis is huge. The construction companies will benefit due to these machineries in the long run, as it will help in streamlining the construction processes that will in turn help the employees as well. The use of the latest technologies will help in minimizing the pressure of work as well, which will in turn result in the smooth operation in construction of the project (Brege, Stehn and Nord 2014).

The level of pollution is adverse when construction of a project is carried out by the companies. It is seen that nearly 40 percent of the carbon emissions that are taking place on a global level is due to the construction business that is taking place globally. This is one of the major problems, which creates a problem for most of the construction companies (Yang et al. 2015).

The construction companies need to take care of the environment in a proper manner. The rise in the level of pollution within a particular area may result in the development of negative attitude among the local people with respect to the construction companies. The decrease in the carbon emissions may take place if the projects that are being developed in anew manner focuses more on reducing the consumption of water, which in turn will help in decreasing the rate of energy emissions. The companies have to have a social obligation in taking care of the environment so that it can help in the smooth process of carrying on with the construction process (Deng, Pheng and Zhao 2014).

The construction projects that are being formed newly are being demanded on a high manner due to the complicated designs in the current years. This has posed as a challenge for the companies, as the unavailability of skilled work force may create a negative impact on the companies. The projects that are not completed within the assigned deadline also hamper the goodwill of the company, as the customers are not willing to trust them for the future projects (Brege, Stehn and Nord 2014).

The companies need to take up few projects at a time so that it can complete those within the stipulated time. Over burdening themselves with numerous projects, may result in the diversification of the work force and the level of productivity may decrease. The completion of the projects will help the companies in gaining the trust of the customers, as they will be willing to invest in the future projects of the company as well. It will also be feasible for the companies to ensure that the entire work force is associated with one project at a time so that it can help in completing the constructions at a faster rate. This will also help the company in working within the budget that was drawn when the blueprint of the construction is made (Wu et al. 2015).

With respect to the construction industry that is situated in Malaysia, it can be seen that they face the risks that are related to time and finances. It can be seen that the companies are facing a major impact due to the high cost and the quality of the work is getting hampered as well. The companies are trying to handle these major risks along with the minor risks that are being associated with the construction industry. The highest level of risk is involved in the life cycle of the project, as it involves huge investment of money along with the time that will be required for the completion of the project (Ball 2014). The country lacks a basic understanding of managing the risks, as most of the local companies have issues with time. The companies are resistant in adapting to the changes, as most of the contractors are satisfied with the management system that is present within the current period, which is one of the contributing factors in spreading low level of awareness. The involvement of government is required, as they will help in encouraging spreading of awareness among the workers so that they can abide by the safety measures that are present in the construction business (Lu and Yan 2013).

The construction business that is present in New Zealand is also facing many risks where health and safety is one of the major risks. The employees have to be given proper inductions by allowing them to attend regular meetings so that they can be aware of the safety measures, which will be taken up by them. The compliances that are related to the environment causes delay in the construction business, as the increase in the level of pollution such as dust, run-offs and noises that may take place while the project is under process (Legg et al. 2015).

The issues that are present present with the cultural heritage of the country is getting damaged, as the endangered species are at risks along with the heritage sites that help in preserving the history of the country. The government has imposed burdensome contracts on the construction companies, which are unrealistic that are posing grave risks to the companies in talking up new projects (Guo et al. 2014). The Principal’s Contract Works Policy is making it difficult for the owners of the construction companies in setting up new projects within the country. There is a presence of incompetence as well from the part of the supervisory team and the contractors who are responsible for constructing the new projects. The fluctuations that are present in the foreign exchange rates creates a negative impact on the budget of the company, as the fluctuations may result in the change in the planning of the budget (Wu et al. 2015).

The Singaporean construction industry is facing risks regarding the payment that needs to be made to the employees. Due to the high turnover of labors, the owners of the businesses are facing problems while remunerating them for the services that they are providing within the organization. The prices of getting hold of the contracts are very high, which directly results in a low profit scenario (Lu and Yan 2013). The rising amount of debts and other factors of payments have creative a negative impact with respect to the safety and security within the work place and the training of the employees. The number of contracts has been on the decreasing side, as the competition is present from the international level as well who is controlling the labor market. The government is also pushing the construction companies in adopting the latest technologies, which has increased the cost of the companies (Guo et al. 2014).


These risks can be mitigated by appointing the right amount of labors for the project so that their set of skills can be maximized to a great extent. It will help the company to maximize the use of the resources so that it can help them in completing the projects in a faster way. The construction companies need to choose the projects in a careful manner so that they can use the labor in the optimum manner. The choice of the projects will help them in moving forward in the right direction so that the customers can rely on them with the future projects and will invest in their projects (Legg et al. 2015). The use of the machineries needs to be encouraged so that it will help in carrying out the work in a faster manner. The lack of man power can be handled in a better manner by providing the laborers better methods of training so that they can learn about the safety methods, which will be required during their process of work (Yang et al. 2015).

With respect to the construction companies that are present in America, it can be seen that they are facing low productivity, which has hampered their level of profits as well. The entry barriers in this industry are low due to the market being saturated and the presence of competition. The level of competition has helped in decreasing the margin of profit, which has lowered the rate of investment within the industry. The labor in this industry has become stagnant, which is creating problem for the companies and has halted the level of productivity as well (Brege, Stehn and Nord 2014). This has resulted in the lack of productivity within the industry that has caused the companies to look for other options. The complexity of the projects that are present in the US is another problem that they are facing due to the low availability of labor and the shrinking margin of profit. The designer projects require greater level of efficiency, which the companies find it difficult (Wu et al. 2015).

The shortage of skilled laborers is providing difficulties to the US companies, as the cost of hiring professional contractors is very high. Due to the period of recession, it has hampered the lives of skilled labors that have shifted to other industries due to the shortage of profit margins. The rise in the carbon emissions has attracted the environmentalists as well, which has led to demonstrations and riots within the country. The change in the climate and the ineffective use of water are the two primary issues that are causing challenges in the construction industry in the United States. The sustainable designs are costlier, which needs to be undertaken by the construction companies so that they can attract more number of customers (Lu and Yan 2013).


Examples of companies transforming the risks in to opportunities

The report by Pricewaterhouse Coopers (PwC) has stated that that the construction companies in the US like Thor construction and Skanska USA Building Inc. has adopted proper methods so that they can mitigate the risks in a better manner. The owners of the companies have been providing better training facilities to the employees so that they can learn about the safety procedures, which is necessary for them. The use of the latest technologies has been adopted by them so that they can work in an easy manner. The workers are also provided guidance regarding the new machineries so that it can help them in understanding the mechanisms, which results in the smooth operations of the construction project. Since the availability of skilled workers is low in the labor market, these companies try to provide a better wage structure so that the employees can be attracted towards them. This will help the company in getting a competitive advantage that the other organizations that are present within the market (Mahmoudi et al. 2014).

The Vinci Construction Ltd. that is present in the UK has taken sustainable steps so that the waste products can be minimized while new projects are being developed. The use of the resources is being done in a proper manner so that the surrounding environment can be maintained in a proper manner. The government has taken proper initiative so that it can help in curbing down the problems that are present with the construction of new projects by the companies. The employees of the company are provided training by experts who hold workshops on a daily manner so that it can help in updating the information to the workers on a constant manner (Bygballe and Ingemansson 2014).


Thus, it can be concluded that the construction companies that are performing on a global level are facing risks with respect to the shortages of workers and the environmental issues. The risks need to be identified by the companies so that it can help them in mitigating it. The risks related to workers need to be taken care of by providing them with better training facilities and adoption of modern technologies so that it can help in minimizing the amount of work done by them. The environmental risks need to be mitigated by using the resources in an optimum manner so that it can help in reducing the pollution around the local communities that are present close to the construction sites.


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Chance, D.M. and Brooks, R., 2015. Introduction to derivatives and risk management. Cengage Learning.

Deng, X., Pheng, L.S. and Zhao, X., 2014. Project system vulnerability to political risks in international construction projects: The case of Chinese contractors. Project Management Journal, 45(2), pp.20-33.

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Eriksson, P.E., 2013. Exploration and exploitation in project-based organizations: Development and diffusion of knowledge at different organizational levels in construction companies. International Journal of Project Management, 31(3), pp.333-341.

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Hughes, W., Champion, R. and Murdoch, J., 2015. Construction contracts: law and management. Routledge.

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Lam, J., 2014. Enterprise risk management: from incentives to controls. John Wiley & Sons.

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