Cost Risk Management of Public Construction Projects – Managing the management of project risk in practice

Research has shown that construction projects continually fail to live up to expectations, specifically in the areas of delivering on budget, time, and the intended benefits. However, there are no indications that the success rate of construction projects is improving. The purpose of project risk management is to help projects avoid failure and achieve success. This means that when projects are failing, project risk management is also failing. As one aspect of project management, project risk management has historically been guided by prescriptive literature on what to do, so-called “best practice,” with recommendations for universal application. If the focus on what practitioners should do in an ideal scenario does not improve actual project risk management and project performance, a different perspective may be needed.

This research adopts a pragmatic project-as-practice approach to focus on what occurs in the local, situated context of projects. The project-as-practice approach has been proposed as a potential avenue for gaining new insights and understanding of projects. Through qualitative research inquiring into practices, we embrace the everyday situations practitioners experience, with the aim of understanding not just the codified practices, guided by rules, standard procedures, and guidelines, but the actual practices performed in context, guided by norms and values.
The empirical setting for this project was the construction industry, specifically professional public construction client organizations. The research was conducted across several years as an industrial PhD project with the author situated in a public client organization, working and conducting embedded research into project risk management, alongside practitioners, with a specific focus on cost risk management practices.

The research shows that common perspectives on risk management activities, which focus on individual cognitive mechanisms, seem to overlook the actual practices performed by practitioners as they navigate the social complexity inherent in real-life projects. Through the research, some practices relating to the key risk management activities of risk identification and cost contingency allocation were identified. These include practices influenced by social dynamics such as discussing. Additionally, the research presents alternative perspectives, such as the Fraud Triangle, on how to understand these practices and explains them as an outcome of context. The findings contrast with the prevailing view of cost overruns as an outcome of delusion and deception of and by the practitioners, as present in the extant literature.
As the research explores what occurs in practice as well as why practices unfold as they do, utilizing the insight and understanding that new perspectives might uncover was a core aim. As a result, several pathways were identified concerning how to refine project governance structures, management of project risk management, and improving project cost risk management in practice.

Specifically, the results of the thesis suggest that:

1) actual practices of project risk management differ from codified practices prescribed in guidelines and regulations.
2) risk identification in project risk workshops consists of four practices; Voicing, discussion of the risk, discussion of the meta-risk, and documenting. These steps may lead to a lack of formal identification of risk in documentation and, by extension, ignoring risk.
3) the fraud triangle theoretical framework is useful in understanding actual practices in the risk management activity of cost contingency allocation, which derives from perceived pressures and opportunities, and acceptable rationalizations.
4) design research offers valuable insights into customizing risk management tools and procedures to suit specific contexts. Additionally, employing co-creation methods can enhance the perceived value of these tools among practitioners.