The management of risks in the procurement of very large construction projects (Britain and New Commonwealth): Comparative change in procurement methods for very large construction projects

Risk analysis is far more than an investment calculation. Simply put, risk analysis is a systematic study of the possible risks and consequences to the project or an analyses of the probability of success or failure and the consequences that may follow. Identification and measurement of risks must be an included element of pre-planning management. As there are so many risks whose consequences can occur in a nearly infinite number of combinations it is poor planning to decide on the implementation of major projects without a proper assessment of possible risks. While every risk carries with it the potential for a loss, this loss is not assured and there may be a potential for gain. Thus, risk containment efforts must be directed toward preventing losses and taking advantage of any gain potential. To achieve success in the procurement of large construction projects, it is necessary to look beyond the confines of the forms of contract and to carry out a structured evaluation of the whole project. Though risk management is important to the development of large projects worldwide, it is very crucial in the LDC's, where the consequences of projects exceeding time and cost constraints and being completed far below the expected standards can have far reaching ramifications nationwide. An example of risk management is given in the appendix.