Risk Management in
Construction Engineering
School of Engineering and Electronics Civil Engineering Management

• We have looked H&S legislation
– It must be remembered that legislation alone will not protect – it is merely the ‘rules’
• We have considered the behavioural and cultural aspects of H&S
Management
• We have looked at practical aspects of health & safety on construction sites
• We have considered specific areas where hazards occur
• We have also considered the identification of hazards
• Today we will consider
– how H&S management is implemented at a site level
– the wider concept of engineering risk management
School of Engineering and Electronics Civil Engineering Management

H&S Legislation
H&S File
Method Statement
Operation Plan
Risk
Assessment
School of Engineering and Electronics
General site safety management
Fundamental topic: covered in greater depth
Civil Engineering Management

• To recap:
– contains all H&S information about the project for those that follow (i.e. clients & users)
– should contain information about the design & construction of every structure
& element of the project
– responsibility lies with the CDM Coordinator who must
»keep it up to date
»deliver to client at end of project
School of Engineering and Electronics Civil Engineering Management

• A Method Statement defines the scope of the work to be performed in producing a significant section or phase of the project
• It is also produced as part of the Project Quality
Plan
– It is a statement about the desired level of quality
• As a definition of the work involved it allows assessments of the risks involved to be made
• Once prepared it should be passed to every person involved in that part of the project – whatever capacity they may have
School of Engineering and Electronics Civil Engineering Management

School of Engineering and Electronics Civil Engineering Management

Method Statements – areas covered
• A method statement is a large document and therefore cannot be prepared for all activities
• Work activities are therefore split into areas – usually geographic but also process areas
• The project manager is responsible for determining what method statements are required – he must find the right balance:
– too broad a scope and detail will be lost
– too narrow and the volume of paperwork will dominate
School of Engineering and Electronics Civil Engineering Management

Method Statements – examples
• On a road project we may have the following method statements:
– One for each major structure (e.g. bridges)
– One for a group of minor structures (e.g. culverts)
– Earthworks
– Fencing
– Site clearance
– Drainage
– Road surfacing
– Traffic management
– Safety fencing
– Any other specialist subcontractor operations
School of Engineering and Electronics Civil Engineering Management

Preparation of a method statement
• The project manager will decide which person in the team will prepare which method statements
• This person is usually the senior engineer for that area of work
– or the subcontractor
• Safety is just one (though major) part of a method statement
• All method statements should be set out on similar lines in order that the information contained can be easily identified
School of Engineering and Electronics Civil Engineering Management

Content of a method statement
• The operations concerned
• A risk assessment of the operations
• A listing of key drawings
• The direction and sequence of work
• The types of resources to be used
• A basic layout or sketch
• Delegated responsibility for the work
• Any other specific aspects of the work
School of Engineering and Electronics Civil Engineering Management

• The next level in the H&S hierarchy
• It is prepared for each discrete activity of work
• There may be a number of operation plans for an area of work already covered by a method statement
• The operation plan is usually drawn up by the site engineer looking after the work
• A pro-form is usually used
School of Engineering and Electronics Civil Engineering Management

Operation Plan
Activity No.
Activity Description
OP Ref
N.B. The activity number and location should be included on all allocation sheets
Sequence of Work & Resources
Material Requirements / Sequence of Work
Sequence of Work Material Description Quantity
Sketch Ref.
Required Output
Remarks
(e.g. access etc.)
Plant/Lab
Inspection and Test Plan Ref.
Principal Hazards
Risk Assessment
Hazard
Rating (H/M/L)
Opportunity Risk
Persons Affected
Control Measures Required
Permits Required (Y/N)
Permit to Dig
Permit to Pump
Permit to Work
Permit to Enter
Hot Work Permit
Permit to Load
Prepared By Approved By
Date Date
Ensure any applicable permits and sketches are appended to this sheet
School of Engineering and Electronics
Other
(Specify)
Civil Engineering Management

• ‘Risk’ is a large part of any project
– financial, technical & safety risk
• It is just one stage in the overall risk
management strategy prepared for every project
• We shall look at the subject in greater depth in a moment
• Each method statement will have detailed risk assessments:
School of Engineering and Electronics Civil Engineering Management

School of Engineering and Electronics Civil Engineering Management

Risk assessment only useful if the info in it is well considered...
School of Engineering and Electronics Civil Engineering Management

• Risks are ever present
• The management of risk is an area of significant expansion over the last decade.
• Within the construction and process industries the consequences of an accident can be significant (e.g.Piper Alpha)
• Detailed management of risks are routinely carried out, conducted at all stages of a project life cycle
• This lecture will:
– Define risk concepts
– Introduce the Risk Management Procedure
– Piper Alpha Case Study
School of Engineering and Electronics Civil Engineering Management

School of Engineering and Electronics Civil Engineering Management

School of Engineering and Electronics Civil Engineering Management

School of Engineering and Electronics Civil Engineering Management

(before)
School of Engineering and Electronics Civil Engineering Management

School of Engineering and Electronics Civil Engineering Management

Large Consequences: Hatfield & Ladbroke
Grove Rail Crash
School of Engineering and Electronics Civil Engineering Management

Harm
“ Physical injury or damage to health, property or the environment”
BS8444: Part 3: 1996
»In all aspects of project management, we want to minimise, if not eliminate any kind of harm
»Harm may be, for example:
 Employee accidents or death
 Financial collapse
 Environmental accident
School of Engineering and Electronics Civil Engineering Management

cont.
Hazard
“A source of potential harm or a situation with potential for harm in terms of human injury, damage to property, damage to the environment, or combination thereof”
– In project management terms, we need to control financial hazards as well as physical ones
– Examples may be:
» Falls from heights
» Collapse of excavations
» Dropped objects
» Poor environmental management
» Abnormal inflation
» Abnormal weather conditions
School of Engineering and Electronics Civil Engineering Management

cont.
Risk
“The combination of the probability of an abnormal event or failure and the consequence(s) of that event or failure to a system’s operators, users or its environment”
– Risk involves two aspects:
» Probability of a hazard taking place, and
» The severity of the harm that occurs
– Low probability, high severity = high risk
– High probability, low severity = intermediate risk
– Low probability, low severity = low risk
School of Engineering and Electronics Civil Engineering Management

cont.
Risk Management
“The systematic application of management policies, procedures and practises to the tasks of identifying, analysing, evaluating, responding and monitoring risk”
»Five stages:
School of Engineering and Electronics Civil Engineering Management

• The stage where all potential hazards in a project are identified
• Three main methods of identification
– Individual Consultation
» interviews with project personnel
» lengthy & time consuming
– Group discussions
» formal brainstorming
» requires motivation & teamwork
– HAZOP
» HAZard and OPerability studies
» Formal questioning of processes, e.g design
School of Engineering and Electronics Civil Engineering Management

• Potential hazards have been identified
• Now need to assess:
– Probability of occurrence
– Severity if occurs
• Can be done in two main ways:
– Qualitatively
»in a linguistic manner
»usually done first; high probability/severity cases then may be examined:
– Quantitatively
»in a numerical manner
School of Engineering and Electronics Civil Engineering Management

cont
Qualitative Techniques
– Fuzzy set analysis
»expresses the likelihood and consequences of a risk in readily understood language terms.
– Interviewing and Brainstorming
»is an extension of two of the techniques employed in the identification stage.
– Personal and Corporate Experience
»if it exists should be exploited.
– Engineering Judgment
School of Engineering and Electronics Civil Engineering Management

cont
Quantitative Techniques
– Expected Monetary Value (EMV)
»i.e. putting a financial value to the expected result of a risk.
– Expected Net Present Value (ENPV)
»is an extension of EMV by calculating the net present value of a probability state.
– Decision Analysis
»looks at possible outcomes and determining optimal choices
School of Engineering and Electronics Civil Engineering Management

cont
Quantitative Techniques cont
– Sensitivity Analysis
»tests how sensitive an event outcome is to slight changes on the input variables.
– Delphi peer groups
»attempts to put quantitative values to results obtained in a manner similar to discussion groups and brainstorming.
– Simulation
»creates a probable life history of an event and thus allows its outcome to be predicted.
School of Engineering and Electronics Civil Engineering Management

• 3rd part of Risk Assessment
• Need to combine the severity and probability of the identified hazards
• Can be done using a risk matrix:
Category of
Occurence
Frequent
Probable
Occasional
Remote
Improbable
Incredible
Frequency of
Occurence
/ year
>1
1 to 10 -1
10 -1 to 10 -2
10 -2 to 10 -4
10 -4 to 10 -6
< 10 -6
Catastrophic
H
H
H
H
H
I
Consequences
Major
H
H
H
H
I
I
Severe
H
I
L
L
L
T
Minor
I
L
L
L
T
T
Civil Engineering Management School of Engineering and Electronics

Practical Risk Assessment Procedure
1. Identify the principal hazards that will be present in the operation.
2. Assign a number 1 to 5 for both
Consequences of Hazard and Probability of
Occurrence.
• The Risk (i.e. the product of Consequence x
Probability), indicates the level of action.
3. Identify persons affected by the risk
4. Respond to the risk
5. Monitor and update as necessary.
School of Engineering and Electronics Civil Engineering Management

• If risks are identified as being
intolerable how can these be dealt with?
• There are four main methods of responding to such risks:
– Risk Avoidance
– Risk Transfer
– Risk Retention
– Risk Reduction
School of Engineering and Electronics Civil Engineering Management

Risk Avoidance
• Managing or developing a situation in which the identified risks do not occur, e.g:
– not proceeding with the project
– tendering at a very high bid
– placing conditions on a bid
– changing design
School of Engineering and Electronics Civil Engineering Management

cont
Risk Transfer
• Via Subcontractors
– a third party undertakes the high risk portion of the work and the responsibility that goes with it
• Via Insurance
– A pre-determined insurance premium is often better than unexpected costs due to risk
– may be done using a captive insurance company
– involves excesses
– some risks may result in premiums higher than the probable financial loss
School of Engineering and Electronics Civil Engineering Management

cont
Risk Retention
• Some risks may be better managed internally
• High frequency/low severity or very low frequency/high severity risks may be best retained
Risk Reduction
• The most usual way in which to manage common risks is to reduce either the severity, the chance of occurrence or both. E.g:
– early warning systems
– improved maintenance
– better housekeeping
School of Engineering and Electronics Civil Engineering Management

cont
• The choice of method used to respond to risk will largely depend on company policy
• Using the risk matrix model, a typical company scenario may be:
Category of
Occurence
Frequent
Probable
Occasional
Remote
Improbable
Incredible
Catastrophic
Transfer
Reduce
Reduce
Reduce
Avoid
Avoid
Consequences
Major
Transfer
Transfer
Transfer
Transfer
Transfer
Transfer
Severe
Retain
Retain
Transfer
Transfer
Transfer
Transfer
Minor
Avoid
Avoid
Retain
Retain
Retain
Retain
School of Engineering and Electronics Civil Engineering Management

• The final stage of risk management
• Risk situation will continue to change throughout the life of the project
– New hazards will become present
– Existing hazards will stop or change
• The management must be continually monitored, reviewed and improved
• Existing risks may be managed differently
»therefore
• Risk monitoring completes cycle back to risk identification
School of Engineering and Electronics Civil Engineering Management