The Crossrail Project’s Construction Process

Abstract

The case study report is of the Crossrail project in London, which provides the current issues that have been faced during the development and the construction process. The Crossrail project was developed to significantly reduce commuting times. Despite this, since its inception in 2009, Crossrail has been plagued by delays and overspending. The current report looked at the strengths and weaknesses experienced during the project development and provided an argument on the Crossrail project.

Executive Summary

Crossrail is an infrastructure project aimed at increasing bandwidth in the UK. It constitutes the building of an advanced 118-kilometer railway that will connect Wokingham and Heathrow throughout the west to Shenfield and Old Oak Common along the eastern. The site’s realization will allow an additional 1.5 million people to transit throughout London’s major economic areas in 45 minutes. Trips from northern Kent to downtown London are roughly an hour, and these would be reduced by about a third, thanks to Crossrail. Crossrail was marketed by Cross London Train Lines, a strategic partnership business founded by public Transport for London (TfL) and the Systemic Rail Authorities (SRA). The initiative is estimated to generate a £20 billion lift for the UK economy. Although the approval of Crossrail has been universally applauded, some features of the project continue to spark debate.

Connectivity with lengthy UK operations is impossible because Crossrail is planned as a take operation. Preserving the Heathrow railway network as an extension instead of allowing lengthy connecting is seen as a missed chance to boost train transit, like the LGV eastern metabolic end of Paris across Charles de Gaulle airport or the plans for Berlin Brandenburg Terminal. The London City council Municipality governing body then offered to assist in closing a £400 million financing gap touting the proposal before formal confirmation in October 2007. In this case, Crossrail Act 2008 gained Royal Prerogative in July 2008, and the Committee was reorganized immediately afterward.

Terms of Reference

The case study report was written to review and analyze the current scheme of the Crossrail project in London to assist the Infrastructural Planning Committee of the Crossrail project. The report’s purpose was to oversee the strength and weaknesses of the project and develop an argumentative view.

Scale

The report did take much time as it involved studying, reviewing, and analyzing the articles on the Crossrail project progress.

Scope

The scope of this study was to look at the background information on the Crossrail project in London and give the argumentative views of this project. Also, the strengths and weaknesses of the Crossrail project were analyzed, and recommendations were given.

Background information on Crossrail project

Crossrail is a huge infrastructure development in London that links the western and eastern sides of the city. This Tunnel connects Berkshire and Heathrow in the west to Shenfield and Abbey Wood in the eastern. It has impacted the city’s most vital sectors of the economy. Fast connections have become available from Heathrow to the west end, via the city and Canary Wharf. Crossrail is well-known for its several advantages. (Williams et al., 2018) On the economic side, it has reduced commuter travel time, particularly in the east end and southeast. Crossrail has increased the number of people within 45 minutes of commuting distance of London’s major economic centers by 1.5 million (Milillo et al., 2018).

Crossrail has been noted to have agglomeration and clustering effects because it has connected London’s banks and financial sectors. Cross rail appears to be on the right track inside the complicated British infrastructure delivery system. The development has conquered numerous challenges. The crossrail project, which has been under development since 2009, is not a novel concept (Lundrigan et al., 2018). This new route was conceived in the nineteenth century, revived in the 1940s, and identified as an important project for London’s growth in numerous publications, including the Central London Rail Study (CLRS) of 1989 (Newlove-Eriksson, 2020). The final ‘go-ahead’ for the development of Crossrail took over 40 years. Crossrail was given the green light and got Royal Assent in 2008 after overcoming the numerous challenges those British megaprojects typically confront.

Building a large-scale project like this in the heart of a bustling city like London is fraught with danger. Crossrail contemplated using the layout delivery technique, which would pass the risk to the developers. However, such a suggestion was rejected since it could have resulted in huge cost increases due to uncertainty. Instead, Crossrail used the usual construction management technique, which includes detailed design for the project’s major structures and solicited production bids for specific packages (Macchiarulo et al., 2019). To control and limit risk, the corporation maintained contingency costs and paid special attention to the procurement process. The railway systems and tunneling were all handled by expert committees. On all significant contracts, the procurement process mandated a full performance review every six months. The Performance Assurance Framework, is a process that involve detailed assessment, measured performance, encouraged teamwork, and information sharing.

Management and funding to the Crossrail project

Crossrail was managed by Crossrail Limited, a joint venture in 2001 to build and promote the system. Crossrail appeared to be on schedule and within budget, and its funding structure seemed to be stable (Loo et al., 2018). Crossrail, which was initially anticipated to cost £16 billion, cost £14.8 billion, thanks to a mix of public and private financing from TfL, the government, and the private sector. The funding system was separated into three thirds, each representing £5 billion. One-third of the funding comes from users, particularly travelers who pay a surcharge on their tickets. A second third comes from the private sector, e.g., employers, proprietors, and developers, who contribute to the GLA’s financial package (Giardina et al., 2019). The remaining five million dollars comes from government subsidies. The BRS was first collected in 2010, followed by the CIL in 2012. In the first year of the BRS, about £200 million was collected, close to the aim. Some stations, such as Canary Wharf, were built with the help of developers. Crossrail will provide specific transportation benefits like time savings, congestion alleviation, and broader economic benefits (Seidu et al., 2020). Several specialists used various appraisal approaches to quantify the future impact of Crossrail on central London skills of the workforce, that is, agglomeration benefits, increase in employment (Muchatuta & Brooke-Turner, 2021). The UK’s economic status is set to expand from Crossrail to the tune of £42 billion. Twenty-four trains every hour between Paddington and Whitechapel at peak times also create new work opportunities and reduce travel times. According to estimates, Crossrail will raise the value of buildings along the Crossrail line by 15%.

Argumentative view of the Cross-rail project

To explain Crossrail’s favorable trajectory, it is contended that the project has profited from the emergence of a coalition representing many interests (Schumacher, 2018). This coalition resembles a growth coalition in many ways because a significant objective of the actors was to contribute to London’s expansion and promote the upgrade of London’s existing infrastructures. The argument of the development the London’s rail project is the Elizabeth line. The Elizabeth line would make it much simpler to get about London and the South East and operate a business. It will minimize congestion on the area’s transportation system and improve connectivity between London’s main commercial business centers, such as Heathrow, the West End, the city, and Canary Wharf, than ever (Cocconcelli & Medda, 2021). When operating at total capacity, the Elizabeth route will increase core

London’s Crossrail is an infrastructure project aimed at increasing bandwidth in the UK. The £16 billion development was supposed to open in 2017; however, due to the latest budget, it has been postponed until 2018. Trips from northern Kent to downtown London are roughly an hour, and these would be reduced by about a third, thanks to Crossrail (Fowler, 2019). The period it covers to get to Heathrow, which is now over an hour and a half, would be reduced by up to a fourth Crossrail was marketed by Cross London Train Lines, a strategic partnership business founded by public Transport for London (TfL) as well as the Systemic Rail Authorities (SRA), which is perhaps disbanded with the Department of Transportation taking up its responsibility.

Crossrail would render future projects in the Metropolitan area, Isles of Dogs / Canary Wharf, and the Thames Gateway convenient from many other locations as London’s role as an entrepreneur grows, without adding to the overburdened Tunnel and urban traffic networks. The initiative is estimated to generate a £20 billion lift for the UK economy (Chodorowski et al., 2021). Although the approval of Crossrail has been universally applauded, some features of the project continue to spark debate. Connectivity with lengthy UK operations is impossible because Crossrail is planned as a take operation (Biesenthal et al., 2018). Preserving the Heathrow railway network as an extension instead of allowing lengthy connecting is seen as a missed chance to boost train transit, like the LGV eastern metabolic end of Paris across Charles de Gaulle airport or the plans for Berlin Brandenburg Terminal. The London City council Municipality governing body offered to assist in closing a £400 million financing gap touting the proposal before formal confirmation in October 2007 (Whyte et al., 2022). The Crossrail Act 2008 gained Royal Prerogative in July 2008, and the Committee was reorganized immediately afterward.

The Crossrail scheme also helps societies along the Elizabeth line regenerate, and the new concept is intended to permit the building of roughly 90,000 new homes. Nearly half of all development choices inside a kilometer of an Elizabeth line terminus identify the anticipated rail as a motivation for pushing forward, equating to nearly 5.3 million cubic kilometers of residential, commercial, and warehouse space (Williams et al., 2018). Crossrail and its supply-chain in management are obligated to assist the approximate 55,000 job growth throughout the country during the project’s duration. Over 10,000 employees are reportedly operating more on than 41 locations across London at the height of development (Ting et al., 2021). The project’s supply chain extends the length and breadth of the United Kingdom, with businesses of various sizes competing for project tasks (Mboumoua, 2017). Three out of every five companies that supported the project are headquartered outside of London, and more than half (58 percent) are small and medium-sized enterprises.

Strengths and weaknesses of the Cross-rail project

The London cross rail project was costly that is it received funding from the UK government public and private sectors from TFL. Millions of funds that could have been used to finance other projects in London were channeled to support the construction of the Cross rail. Also, the project took a lengthy period to come to completion, and it has been faced with many crises, such as the COVID-19 pandemic (Jallow et al., 2020). The construction of the cross rail brought several impacts on the surrounding environment and people living around the Tunnel. Some of the adverse effects that might be obtained due to the construction are that the vibration caused by the moving rail can negatively affect the surface tension and the structures surrounding the Tunnel.

Despite the challenges faced by the cross rail during its stages of development, the construction of the cross trail was beneficial to the government, community, and UK investors. This is evident by the job creation realized during the project’s construction economic flourishment. It provided a means of fast transport to cope with London’s forecast population and, in turn, the growth of many businesses carried out along the cross trail. In addition, there were new interchange opportunities with the services of TFL’s underground and overground services, which led to the decrease in volume in the present concentration at the terminus (Roehrich & Kivleniece, 2022). The construction of the cross trail eradicated the need of retailers and business people to use other modes of transport like ferries when carrying out their business activities.

London cross attracted many foreign investors to the country to carry out their investment activities, thus boosting the economy of London. The proposed railway will provide enterprises and residents with shorter travel times, decreased roadway and local transportation congestion, more productivity, and increased wages (Pollalis & Lappas, 2019). Minimizing energy utilization throughout Cross rail’s design and maintenance seems to have been a priority for the program. Heating, elevators, staircases, conditioning, circulation, and power use on trains have all evolved over the course of the program to help achieve project goals.

The weakness of the London cross rail project is that Crossrail, which runs through the heart of London, may have an impact on the structures above that will be felt someday, or just never at all (Inayathusein & Cooper, 2018). The persistent shaking of rails could potentially damage this underground stratum and cause instability above by tunneling in specific spots adjacent to surface soil. The other thing that disappointed me with the London cross rail project was TfL’s failure to respond to commuters’ demands for onboard toilets (Whyte, et al., 2022). When elderly and individuals with disability travel, worries about accessing usable bathrooms and toilets are a significant source of problems and tension, Crossrail revealed that the train’s building had taken longer than expected, with “reduced than intended performance in the completion stage and transmission of the tunnels and terminals.” It also admitted that it had miscalculated its time to complete and deliver from over new sites in central London. Properties values have increased by 65 percent over the same period throughout all parts of London within one kilometer of a cross rail terminal, thus contributing to cross rail failures.

Conclusion

For London and the United Kingdom, Crossrail provides enormous financial and social benefits. The costs and benefits analysis demonstrates that the project has a strong business case on a regional scale, notably in terms of congested motorways on London’s existing transportation network and helping the city to generate jobs. The new railway will cost £16 billion to construct, but the advantages to the UK economy will be worth at least £42 billion. Crossrail was not only the “right project,” but it was also “done correctly.” Megaprojects tend to stick on attempted procedures by avoiding fresh or by providing a comprehensive review, with a perspective of them being risky and costly. Crossrail, on the other hand, emphasized growth and creativity from the start, establishing a blueprint for large-scale transportation.

Recommendations

It is recommended that:

  1. In the monthly Crossrail briefings to the Transport Committee, the Crossrail Chief Executive should explain Crossrail’s high-level project timeline, including any underpinning assumptions altering the timeline.
  2. The Crossrail should be analyzed if any tensions are subjected to the surrounding environment by this rail project and to assess if there is any pollution to the environment.
  3. Also, TFL and the transport committee should look into consideration constructing on board toilets so that the elderly and the people with disability will not have problems looking for toilets when they are commuting.
  4. The proposed cross rail train should offer food to the passengers while they are on board.

Specifications of the objectives

Specifications of the objectives for action required and the recommended method of approach to implementing the recommendations are:

  1. To determine the Crossrail high level and the underpinning assumptions.
  2. To investigate the levels of pollution brought about by the Crossrail, if any.

An observational approach should be used to implement the above specific objectives.

References

Biesenthal, C., Clegg, S., Mahalingam, A., & Sankaran, S. (2018). Applying institutional theories to managing megaprojects. International Journal of Project Management, 36(1), 43-54.

Chodorowski, A., Ingram, P., & Black, M. (2021). Crossrail project: The impact of 4–18 Bishop’s Bridge Road on the new Elizabeth line, London, UK. Proceedings of the Institution of Civil Engineers-Geotechnical Engineering, 174(1), 83-90.

Cocconcelli, L., & Medda, F. (2021). Innovative financial mechanisms for transport infrastructure in a time of crisis: The case of London Crossrail. Urban Form and Accessibility (pp. 307-325). Elsevier.

Fowler, J. (2019). Modern relevance. In London Transport: A Hybrid in History 1905–1948. Emerald Publishing Limited.

Giardina, G., Milillo, P., DeJong, M. J., Perissin, D., & Milillo, G. (2019). Example applications of satellite monitoring for post-tunnelling settlement damage assessment for the Crossrail project in London. Structural Analysis of Historical Constructions (pp. 2225-2235). Springer, Cham.

Inayathusein, A., & Cooper, S. (2018). London’s accessibility indicators: Strengths, weaknesses, challenges.

Jallow, H., Renukappa, S., & Suresh, S. (2020). The impact of COVID-19 outbreak on United Kingdom infrastructure sector. Smart and Sustainable Built Environment.

Loo, B. P., Bryson, J. R., Song, M., & Harris, C. (2018). Risking multi-billion decisions on underground railways: Land value capture, differential rent and financialization in London and Hong Kong. Tunneling and Underground Space Technology, 81, 403-412.

Lundrigan, C., & Gil, N. (2018). Strategic capabilities for megaproject architects: Sequencing network growth and bottleneck removal. Megaprojects: A Design and Strategy Perspective, 127.

Macchiarulo, V., Giardina, G., Milillo, P., González Martí, J., Sánchez, J., & DeJong, M. J. (2019). Settlement-induced building damage assessment using MT-InSAR data for the Crossrail case study in London. International Conference on Smart Infrastructure and Construction 2019 (ICSIC) Driving data-informed decision-making (pp. 721-727). ICE Publishing.

Mboumoua, I. (2017). Revisiting the growth coalition concept to analyse the success of the Crossrail London megaproject. European Planning Studies, 25(2), 314-331.

Milillo, P., Giardina, G., DeJong, M. J., Perissin, D., & Milillo, G. (2018). Multi-temporal InSAR structural damage assessment: The London crossrail case study. Remote Sensing, 10(2), 287.

Muchatuta, P., & Brooke-Turner, T. C. (2021). RAM in an Interconnected World.

Newlove-Eriksson, L. (2020). Accountability and patchwork governance in urban rail interchanges: Junctions of London Crossrail and Stockholm City Line compared. Public Works Management & Policy, 25(2), 105-131.

Pollalis, S. N., & Lappas, D. (2019). Crossrail-Elizabeth Line London, UK.

Roehrich, J. K., & Kivleniece, I. (2022). Creating and distributing sustainable value through public-private collaborative projects. Handbook on the Business of Sustainability. Edward Elgar Publishing.

Schumacher, L. S. (2018). House of Music and Assembly.

Seidu, R. D., Young, B., Robinson, H., & Michael, R. (2020). The impact of infrastructure investment on economic growth in the United Kingdom. Journal of Infrastructure, Policy, and Development, 4(2), 217-227.

Ting, C., Gilson, B., & Black, M. (2021). Developing the 3D geological model for Crossrail 2, London, UK. Quarterly Journal of Engineering Geology and Hydrogeology, 54(2).

Whyte, J., Davies, A., & Sexton, C. (2022). Systems integration in infrastructure projects: Seven lessons from Crossrail. Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 40(XXXX), 1-7.

Williams, R. V., & Black, M. (Eds.). (2018). Crossrail Project: Infrastructure design and construction. ICE Publishing.

Appendix

The Crossrail route map
Figure 1: The Crossrail route map

Risk Management in Fly-Fishing and Construction Projects

Alaska Fly-Fishing Expedition

In this case, it is possible to think of the following risks: bad weather conditions, traumas, delays, damage to a boat, misroute (Larson & Gray 237). The most serious risk is bad weather conditions as the weather can hardly be foreseen. The weather can change even during the trip. These risks should be analyzed and taken into account.

Analysis of the Risks

Risk Event Likelihood Impact Detection Difficulty When
Bad weather conditions 3 4 4 Entire period
Trauma 3 2 1 Entire period
Delays 2 4 1 Entire period
Damage to a boat 2 5 1 Entire period
Misroute 2 4 2 Entire period

Risk Response Matrix

Risk Event Response Contingency Plan Trigger Who Is Responsible
Bad weather conditions Retain Put off the expedition. The weather sets in for more than a week. The developer of the expedition.
Trauma Mitigate: Provide the necessary instructions on safety measures. Call for medical assistance, wait until the help comes. The condition of the injured worsens. The head of the group.
Delays Mitigate: Introduce fines for delays, or notify everyone that the group may leave without those who are late. If the delay is not crucial, it is possible to wait. If the delay is significant – leave without the one who is late. The delay is significant. The head of the group.
Damage to a boat Mitigate: Make sure the boats are fine (choose a reliable rental company). Call for help. Continue the trip when the boat is mended, if possible. The boat cannot be repaired. The head of the group.
Misroute Mitigate: Choose reliable guides and ask about the route at the beginning of the trip. Contact the other group. The group cannot come to the arranged place to meet the other group. The guide and the head of the group

Silver Fiddle Construction

Potential Risks

It is possible to think of the following risks: bad weather conditions, gas furnace malfunctioning, supplies delays, rising prices, overload (Larson & Gray 237). Notably, the customer is ready to wait, so it is possible to postpone some works, which can help address possible risks. All these risks should be analyzed and taken into account.

Analysis of the Risks

Risk Event Likelihood Impact Detection Difficulty When
Bad Weather Conditions 3 3 2 Initial part of the construction
Gas Furnace Malfunctioning 2 3 2 Installation
Supplies Delays 2 4 2 Entire Period
Rising Prices 2 5 2 Entire Period
Overload 4 4 2 Entire Period

Risk Response Matrix

Risk Event Response Contingency Plan Trigger Who Is Responsible
Bad Weather Conditions Retain Put off the construction. The weather sets in for more than a week. The president of SFC.
Gas Furnace Malfunctioning Mitigate: Work with reliable suppliers. Contact the supplier and get another system. The new system also malfunctions. The president of SFC.
Supplies Delays Mitigate: Sign contracts where fines for delays are included. Put off some works. The delay is too lasting (more than two weeks). The president of SFC.
Rising Prices Retain Address the Czopeks and discuss what costs can be reduced and whether the cost can exceed the $500,000. The prices will continue going up. The president of SFC.
Overload Mitigate: hire someone to delegate some responsibilities. Put off some works as the Czopeks are ready to wait. The delay is too lasting (more than two weeks). The president of SFC.

Works Cited

Larson, Erik, and Clifford Gray. “Managing Risk.” Project Management, New York, NY, McGraw-Hill Companies, Inc., 2010, pp. 237–38.

Risks in International Construction Projects

Introduction

The construction industry is one of the largest and most stable industries in the world, with the overall value of the industry ranging between 2.27 and 7.5 billion USD, or around 13.6% of total global output. The construction industry experiences continued growth even in times such as the economic crisis of 2009, and is expected to increase 1% by 2020 (Kerur and Marshall 2). As such, construction is a highly lucrative and profitable venture. The abundance of professional construction companies has been key to the highly developed infrastructures of Western Europe and the United States. However, as it stands, the demand for large-scale construction projects has diminished in first-world countries due to various budgetary constraints and a lack of government support. At the same time, developing countries offer significant opportunities for construction ventures, since they are interested in developing their own infrastructure to support tourism, sports events, and other activities. Some examples include FIFA- and Formula One-related projects, which both require significant investments by the host countries. Every host is required to provide airports, hotels, roads, stadiums, and entertainment facilities in order for the events to be successful.

Despite its size and success, the construction industry has always faced risks. Even in domestic projects, a contractor must deal with issues ranging from project delivery demands to jurisdictional risks. Performing construction outside of one’s country of origin adds to these by including greater transportation, political, cultural, and socio-economic difficulties as well. Risk management is therefore critical to the success or failure of any given construction venture. The purpose of this paper is to analyze the risks existing in international construction, provide mitigation strategies, and offer information regarding construction risk mitigation in the scope of UAE regulations.

Risks Faced by International Construction Companies Across the Globe

Construction is a complex and dangerous process that involves the efforts of hundreds of people. In order for a construction company to succeed, rigorous planning and execution are required. Due to the inherent danger posed by construction, it is one of the most highly regulated industries in the world. Some of the risks in construction projects include prolonged contract periods, complications with the process, environmental factors, funding issues, and organizational dynamics (Kerur and Marshall 4). Of course, there are many other risks, which will be further elaborated on in the scope of this paper. However, all risks can be split into two large subgroups based on their nature: jurisdictional risks and construction delivery risks (Kerur and Marshall 5).

Modern construction risk management generally concerns itself with construction delivery risks, as these issues constitute the majority of situations that can threaten the project. Mechanical failures, supply non-deliveries, lack of coordination, project design flaws, weather, and force majeure situations are detrimental to most projects (Kerur and Marshall 5). Jurisdictional risks, however, are typically considered to be the same as generic business risks and are expected to be solved at corporate policy levels. While this approach may work in domestic markets, following the same course of action in foreign countries would likely be ruinous to construction ventures by not accounting for various jurisdictional risks caused by unfamiliar legal systems. It must be noted that construction delivery risks and jurisdictional risks are interconnected, as a construction delivery risk can effectively trigger the process of legal action. Some examples would include neglect of various safety regulations and protocols and the potential consequence; loss of human life. Jurisdictional action, in turn, can cause the project to stop and thus impose additional project delivery risks.

International jurisdictional risks include economic barriers to entering the market (such as extensive competition or government actions), higher taxes and tariffs set up for foreign business ventures, currency exchange risks, insurance risks, political and social instability risks (including wars, rebellions, demonstrations, and government expropriation), and the economic agendas of changing governments (Kerur and Marshall 5). Other risks include differences in traditions and customs between the market country and the country of origin, significant differences in legal systems, lack of proper infrastructure to manage jurisdictional risks, importation and customs issues, and, finally, international labor issues (Kerur and Marshall 5).

Risk analysis for international construction projects requires the separation and analysis of both project delivery risks and jurisdictional risks. Simply writing off jurisdictional risks for common business risks in a globalized venture will not be enough, as the number of unique instances within the construction industry is significant. Handling all of them within the framework of corporate policies is impossible, as that framework is primarily geared towards the domestic market. While project delivery skills are universal and can be analyzed by the company’s engineers and construction specialists without the need for specific knowledge and adaptation, dealing with jurisdictional risks would require assistance from local legal advisors.

Risk Identification

Types of Risks

The article by Kerur and Marshall is useful in identifying the various types of risks inherent in an international construction venture. The following list offers the most likely issues that might be encountered in the scope of the project as well as explanations into what these risks represent (Kerur and Marshall 7):

  • Economic feasibility. Every project is conducted with the goal of paying off the expenses and bringing substantial profits in order to make the effort worthwhile. Before a construction project is initiated, a business plan and financial estimations are necessary. The risks lie in inaccurate predictions of the project’s current and future worth.
  • Taxation. Different countries have different regulations regarding taxation of domestic and foreign companies. Not accounting for these differences involves a risk of miscalculating the feasibility and profitability of the project.
  • Currency risks. In order to conduct operations in a foreign country, a company requires foreign currency. Profits are also derived from foreign currency and must be transferred to domestic currency in order to be utilized elsewhere. Thus, changes in currency rates pose a potential risk for the profitability of the project.
  • Market conditions and practices. Market analysis is an essential part of any business plan. Some of the risks associated with entry into foreign markets include competition, relations with suppliers, and general views towards foreign companies within the population.
  • Insurance. It is necessary for construction ventures to secure the company from any anticipated risks as well as to ensure the protection of customers by purchasing insurance. However, some domestic insurance companies may be reluctant to make deals with companies who are planning to conduct construction abroad.
  • Legal entity establishment. While some countries allow companies to establish foreign offices, others do not. Instead, they require legal entities to be present and fully responsible for the construction under regional laws and customs. This may pose additional risks and difficulties for the construction company.
  • Expropriation. In some countries, where the rule of law is not as certain as in the majority of western states, expropriations for criminal or political reasons is a significant risk.
  • National employment. In most scenarios, companies are required to hire a certain number of national workers to perform labor. This may be an economic necessity or a legal requirement. It also poses certain risks, such as finding workers and adding them to the project.
  • Political stability. This is a prominent risk in certain countries in Africa and the Middle East. Political instability can result in expropriation, nationalization of assets, withdrawal of permits, or even war.
  • Government relationships. Depending on the company’s relationship with government officials, construction may or may not face additional scrutiny or even purposeful sabotage from various legal entities.
  • Regional traditions and religious practices. Although this rarely becomes a problem, sometimes a failure in understanding regional practices may undermine a construction venue by alienating customers and investors.
  • Governing law. In some areas, governments prefer that regional laws outweigh international laws and customs. This must be accounted for during risk analysis.
  • Dispute resolution and enforcement. Disputes are an inevitable part of a construction process, as there are many risks of legal action initiated by or against the company. Depending on the country, laws and regulations pertaining to disputes may be different.
  • Regional forms of contract. Many nations implement their own variations of construction contracts. Knowing the differences between these is necessary to avoid any contractual pitfalls.
  • Health and safety regulations. The construction industry is inherently dangerous to human life, so safety precautions must be taken to avoid injury and the loss of life. Any major incident has the potential of shutting down the project.
  • Subcontractors and supply chains. In many instances, construction companies have to rely on either internal or external chains of suppliers and subcontractors to conduct certain operations and deliver materials. Both are associated with their own risks.
  • Imports, customs, and visa issues. Not all technologies are readily available on foreign markets. Specialists, instruments, and materials may need to be imported. Risks associated with transportation across borders may cause delays in project times.
  • Climate. Materials, instruments, and people are sensitive to the environment. Depending on the severity of the climate, these risks may cause additional expenses necessary to protect personnel and ensure the stability of the structure. In addition, situations of force majeure are frequently related to extreme weather or climate changes.

Some or all of these factors must be accounted for during the process of risk assessment, which will be discussed in the following section.

Risk Identification Matrix

Kerur and Marshall (6) state that the process of risk management typically starts with the identification and assessment of risks pertaining to each particular international construction project. Many risks are unique to a particular project, most especially regarding the region where construction is being held, but some are relatively universal as well. Kerur and Marshall (7) provide a list of twenty potential risks that need to be covered in a standard risk analysis matrix:

Risk Description Category (operational, environmental, financial, etc.) PESTEL type Likelihood score Impact score Total Risk level (high, medium, low)
Business case/economic feasibility Financial Economic 3 9 12 Medium-High
Taxation Financial Economic 3 5 8 Low
Currency Financial Economic 5 5 10 Medium
Market conditions, standards, and practices Operational Economic, Legal 6 4 10 Medium
Insurance Financial, Legal Legal 5 9 14 Medium-High
Legal Entity Establishment Legal Legal 4 6 10 Medium
Expropriation Political Political 1 10 11 Medium
National employment Operational Social 7 4 11 Medium
Political Stability Political Political 3 7 10 Medium
Social Stability Social Social 3 7 10 Medium
Government Relationships Operational Political 5 5 10 Medium
Regional Traditions and Business Practices Social Social 7 2 9 Low-Medium
Cultural and Religious Issues Social Social 7 2 9 Low-Medium
Governing Law Legal Political 3 5 8 Low
Dispute Regulation and Enforcement Legal Legal 4 8 12 Medium-High
Regional Forms of Contract Legal Legal 7 2 9 Low-Medium
Health and Safety Operational Legal 5 4 9 Low-Medium
Subcontractor and Supply Chain Quality Operational Technological 5 5 10 Medium
Climate Environmental Environmental 5 3-10 8-15 Low-High

This matrix presents an approximation of risks for a typical developing country located in a relatively stable economic and socio-political environment. The majority of the risks for such locations are in the medium range and are manageable. However, depending on the project and the precise location of construction, these risks can change from low to very high. Construction ventures in war zones, countries with serious political instabilities, or dangerous environments are much riskier. Typically, there are specialized companies that undertake these high risk/high reward projects. They usually demand payment up-front in order to cover some of the risks associated with unstable economic and political situations.

Strategies for Risk Mitigation in Construction

All of the risks mentioned in the risk identification matrix above require a solid strategy in order to minimize their potential impact on the successfulness of the venture. It must be noted that no risk can be completely eliminated, as it is impossible to predict the outcomes of the thousands of variables that are at play during construction. Therefore, all mitigation strategies revolve around the idea of acceptable risks. Risks that can be feasibly avoided through proper planning and deliberate preparation can be dealt with within the scope of a mitigation strategy.

There are four risk mitigation strategies, each of which is based on a different set of principles. These strategies are avoidance, reduction, transfer, and retention (Bernstein et al. 27). Risk avoidance strategies seek to completely eliminate the chances of risk by avoiding situations that are associated with the potential risks (Walker 58). For example, choosing to opt for frost-resistant concrete would allow the company to avoid incidents with concrete being damaged in low temperatures, which would completely eliminate the issue of not being able to perform construction during the winter period. Although this strategy does not eliminate all the risks associated with construction, it is capable of eliminating some of them.

Risk reduction strategy, as the name suggests, purposes to keep risks at an acceptable level. When this strategy is implemented, planners accept that the elimination of risks is impossible. However, if everything is done right, potential risks can be avoided and their probability significantly reduced. All health and safety standards are risk reduction strategies. While a worker remains in danger of falling, misusing a tool, or harming themselves or others in a myriad of different ways, the presence of scaffolding, safety nets, rails, and barriers significantly reduce the chances of injury or death (Walker 59).

Risk transfer strategies are most commonly used for the legal aspects of construction. Risk transfer strategies exist to ensure that the burden of responsibility is held by organizations other than the construction company (Walker 56). All insurance operations are, in essence, risk transfer strategies. Other potential risk transfer strategies include setting up joint ventures or national entities to hold the majority of responsibility in case of an incident.

Lastly, there are risk retention strategies. These strategies assume that certain risks cannot be feasibly reduced or avoided. Instead, the company develops methods of dealing with the responsibility and prepares the necessary resources and materials in order to deal mitigate the aftermath of the risks when they happen (Walker 62). Instances of force majeure, such as earthquakes, tsunamis, tornadoes, or similar environmental upheavals, can be used as examples of risks where risk retention is the only valid strategy.

A risk mitigation strategy for a construction venture will have to borrow from all four of these concepts, as none of them is individually capable of answering the needs for risk mitigation completely. Not all risks can be effectively avoided, delegated, or reduced. Fully facing all eventualities, however, would considerably drain the resources available for the project. Providing scaffolding and safety nets is much less expensive than paying a large fine for potential loss of life and facing the country’s criminal justice system for negligence. However, every individual strategy can be applied to a particular risk. In some situations, several are used in conjunction to maximize the mitigation potential of a strategy.

Implementation of Risk Strategies

Kerur and Marshall (12) offer several examples of implementation of the aforementioned risk strategies in construction. These examples include joint venturing, learning from past mistakes, and obtaining legal counsel from entities in the target country. In the scope of this paper, these examples shall be examined, and new ones shall also be considered.

Joint Venturing

Since jurisdictional risks in international construction projects are much more potent when compared to domestic ventures, it is necessary to be able to assess and detect these risks upon entering any given foreign country (Kerur and Marshall 12). However, identifying jurisdictional risks without prior experience in the market can be complicated, and mitigation options for construction companies will be limited due to lack of knowledge. In these situations, there is the option of conducting joint ventures with companies that are already established in the region. This strategy offers plenty of risk mitigation options, as representatives of the local company will provide much-needed knowledge regarding legislation, contracts, documentation, subcontractors, and other important aspects of the construction operation. Through a joint venture, an international company may gain access to the joint company’s full list of contacts and suppliers. In addition, managers and representatives of the construction company would be able to gain experience in the field and eventually be able to operate on their own, once their knowledge of existing risks and conditions becomes complete. However, joint ventures present their own set of risks, as the reputation and good name of the international venturing company will be tied to the practices of the local company. This could create potential complications in maintaining a unified corporate policy, as the companies would argue over whether they should adhere to international standards or operate based on local customs alone.

Personal Experiences Model

If a company does not wish to pursue a joint venture, it can attempt to enter the market by opening a smaller project in order to learn the ins and outs of the system they intend to operate in without facing the potential critical failures of large-scale venturing. This model involves completing projects and then analyzing the mistakes made and difficulties encountered during their completion, both operational and jurisdictional (Kerur and Marshall 12). Based on these lessons, the company is capable of assembling a comprehensive list of major risks that could potentially harm larger projects. In other words, operating a small firm at first would allow the company to train its employees on site and learn how to deal with risks, while at the same time avoiding any major losses.

Though this strategy is efficient and self-reliant, it does have several flaws. One of the most significant flaws is the amount of time necessary to carry out these minor projects before moving on to larger ones. Due to the competitive nature of construction, there is a chance that by the time the company moves in, all the available construction projects would be already taken by other international players. Another flaw is the inevitability of losses. Even a small project can become a failed venture without proper prior knowledge of the target market, legal aspects, and other aspects of the undertaking. The company is forced to pay to learn from mistakes. Lastly, experience from minor projects does not always translate well into larger venues. The possibility of underestimating risks remains.

Legal Counseling

In terms of mitigated risks in comparison to required costs, legal counseling is potentially one of the best strategies for mitigating jurisdictional risks. It involves contacting legal entities within the target country in order to provide the construction company with information and expertise regarding local matters, including governmental regulation, laws, contracts, dispute management, local customs, and other fields of knowledge that could help mitigate construction risks (Kerur and Marshall 12). These legal entities tend to have experience in the field and a significant base of knowledge that they areableto access in order to find solutions pertaining to the client’s situation. The only risk that the use of legal counseling offers is the fact that a third party is trusted with potentially sensitive corporate information. However, with the use of non-disclosure agreements, this risk can be substantially mitigated. All in all, the benefits of using a dedicated advisor far outweigh the disadvantages.

National Employment

As suggested by Ashworth and Perera (208), one effective risk management strategies involves hiring professionals and construction managers from within the country. These employees are expected to be familiar with the market and able to offer instructions and information similar to counseling services and joint ventures, while at the same time lacking the obvious tradeoffs of both due to not being as centralized. Many construction companies hire on location in order to avoid any issues with licensing and visas. It enables the company to conduct projects and ventures similar to the personal experiences model, while at the same time coming out vastly more prepared for the conditions and inherent risks of the market. However, this approach has several weaknesses to it as well. The information provided by individual specialists is fragmented at best, meaning that the company faces more difficulties when trying to piece it all together. In addition, information can be contradictory or inaccurate, which offers additional risks during construction. Lastly, without any solid knowledge about various risks and knowledge requirements, the company cannot accurately determine the qualities of the professionals it needs to hire in order to establish itself in the market.

Managing Construction Risks in the UAE

The UAE is a prospective market for many international construction companies due to its sprawling and quickly-developing infrastructure. The government is interested in building business centers, new airports, telecommunications towers, oilrigs, stadiums, and various other large-scale constructions. At the same time, the UAE has many legal aspects of construction that are foreign to international contractors and require solid risk management plans to overcome.

The UAE regulations for construction companies are useful tools, as they enable international contractors to avoid certain issues and jurisdictional risks on their own. One of the largest issues for foreign construction companies in the UAE revolves around legal entity establishment. Under the existing UAE regulations, foreign companies can establish branches to operate on the country’s territory. However, establishing a branch company generates a variety of jurisdictional and financial risks—a branch is not treated as a separate legal entity, which creates issues with taxation, dispute management, and monetary exchange. One possible way to avoid this issue is to create a separate legal entity through a joint venture. However, under existing UAE law, an Emirati shareholder musts have the control package of shares (51%), which effectively removes the international company from active decision-making (DLA Piper 1111).

Another major risk related to UAE construction regulations exists because of dispute-establishing mechanisms. According to El-Sayegh (435), some of the most frequent risks associated with construction in the UAE are subcontractors’ poor performance and unreasonably tight scheduling. Dealing with these issues requires the opening of disputes. Many foreign construction companies include dispute resolution mechanisms in their contracts with customers, subcontractors, and suppliers. However, despite these precautions, disputes have been a difficult issue in the UAE due to the deletion of the Dispute Adjudication Board from the FIDIC standard (DLA Piper 1112). As such, there are many issues regarding the enforceability of judgments and arbitral rewards. While a company may opt to request arbitration from the Dubai International Arbitration Center, the process takes a long time due to overcrowding, and even then, there is still a risk of being unable to effectively enforce an award.

The last major risk associated with construction work in the UAE is due to currency fluctuations. According to El-Sayegh (435), currency risks are among the most likely to occur, and they have a significant impact on the project, resulting in price changes and additional expenses. One of the tools proposed to foreign companies by UAE regulatory bodies is to use hedging as means of minimizing inflation and currency exchange risks. The existing regulations on hedging are similar to Europe’s Bazel and MIFID standards, on which they were modeled, with adjustments for regional requirements and standards. Although the UAE has several limitations on industries in regards to hedging (in particular, oil hedging), it does not have any significant barriers for the construction industry, thus enabling companies to avoid currency risks by building hedge funds in local currencies (DLA Piper 1113).

Conclusions

Risk management is an important aspect of the international construction business. Although construction is in general an expensive and risky venue due to the amounts of money, resources, and people that must be involved in the long-term process, these risks are increased when a company decides to go global and discover potential markets outside of its country of origin. In addition to various operational risks, the large body of jurisdictional risks that can no longer be dealt with at a solely corporate policy level. While the company may be prepared to deal with legal, contractual, and dispute aspects of construction process back at their home country, the differences between the legal systems have the potential of exposure to sets of completely new risks. These risks have the potential of stalling the construction process, adding additional expenses, and causing various inconveniences that would increase the total cost of the project.

Several strategies can be used to deal with these risks, based on the theories of avoidance, mitigation, transfer, and retention. Every effective strategy employs all four approaches, as the number and nature of construction risks are too broad and varied for any company to be able to encompass all of them with a single strategy. Some of the more familiar strategies used by construction companies include joint ventures, learning from mistakes, legal counseling, and local employment. The UAE construction regulations provide solutions to some of the risks involved, especially regarding hedges and legal entity establishments. However, the proposed solutions generate more issues than they solve, which is why the UAE remains a lucrative but risky market for international construction companies. Companies planning to work in the UAE are recommended to create joint ventures with local companies as means of avoiding issues in establishing legal entities and be able to solve disputes in adherence to the local laws.

Works Cited

Ashworth, Allan, and Srinath Perera. Contractual Procedures in the Construction Industry. 7th ed., Routledge, 2018.

Bernstein, Harvey, et al. Mitigation of Risk in Construction: Strategies for Reducing Risk and Maximizing Profitability. 2011, Web.

DLA Piper. Real World Law: Full Handbook. 2018, Web.

El-Sayegh, Sameh Monir. “Risk Assessment and Allocation in the UAE Construction Industry.” International Journal of Project Management, vol. 26, no. 4, 2008, pp. 431-438.

Kerur, Sachin, and William Marshall. “Identifying and Managing Risks in International Construction Projects.” International Review of Law, vol. 8, 2012, pp. 1-14.

Walker, Anthony. Project Management in Construction. 6th ed., Wiley, 2015.