Page 133 - Global Project Management Handbook

6-2 STATE OF THE ART OF GLOBAL PROJECT MANAGEMENT
6-2
STATE OF THE ART OF GLOBAL PROJECT MANAGEMENT
Construction is a major worldwide industry accounting for approximately US$3.5 tril-
lion, or almost ten percent of global gross domestic product. New markets, domestic
competition, and trade liberalization have impelled owners, contractors, and investors
to aggressively pursue business opportunities and projects outside their home juris-
dictions. While international projects may appear to be attractive investments, such
projects usually involve elevated levels of risk and uncertainty. International work
requires owners to assess a diverse set of political, geographic, economic, environmen-
tal, regulatory, and cultural risk factors. Moreover, contractors must consider a similar
set of risk factors in determining whether to take on such projects and how to price
and schedule the work once they have engaged in it. A limited amount of research has
been undertaken to address these unique issues, and most efforts to assess and
evaluate the risks associated with international construction are fragmented and
fail to provide adequate assistance to project managers. In short, poor cost and sched-
ule performance of international construction projects is more often the rule than the
exception, and the successful delivery of such projects has proven to be difficult for
the parties involved.
Industry practices and the academic literature are in agreement that risks should be
allocated to the party in the best position to manage them. However, evidence shows
that there is a gap between existing risk management techniques and their application
and use by contractors and owners (Han and Diekmann, 2001). The research suggests
that this gap is due in large part to the complexity of the ventures and the extensive
resource commitment necessary to perform good risk management. Complicating the
situation is the fact that no easy-to-use management tool is available to identify and
assess the risks specific to international construction.
The purpose and need for such a tool were identified initially and championed by
the Construction Industry Institute’s (CII) Globalization Committee. In 2001, the CII,
with additional support from the Center for Construction Industry Studies (CCIS) and
the Design, Procurement, and Construction Specific Interest Group (DPC SIG) of the
Project Management Institute (PMI), commissioned a research effort [Project Team
181, Risk Assessment for International Projects (PT 181)] to assist with the develop-
ment of a tool that could help owners and contractors to improve the performance of
international projects. Along with the authors, a research team composed of represen-
tatives from CII owner and contractor organizations and the DPC SIG participated in
this effort.
Completed in December 2003, PT 181 produced the International Project Risk

Assessment (IPRA) Tool (CII Implementation Resource 181-2; CII, 2003a). The tool
and its supporting documentation provides a systematic method to identify, assess, and
determine the relative importance of the international-specific risks across a project’s
life cycle and of the spectrum of participants needed to allow for subsequent mitiga-
tion. The reports generated from this study describe in detail the research performed,
including the methodology, data analysis, and value of the research to the industry (CII
Research Report 181-11; CII, 2003b).
The IPRA tool is unique because its baseline relative impact values were developed
using empirical data from industry experts reporting on actual projects. Subsequently,
the IPRA tool assists in identifying the risk factors of highest importance to a project
team. The IPRA tool also fits within the project risk management area of the project
management body of knowledge (PMBOK), specifically with regard to risk identifica-
tion and risk quantification and, to a lesser extent, risk response development and con-
trol (PMI, 2000).
In order to improve international construction project performance, it is critical that
consideration be given to the portfolio of risks that fall to all participants across the
life cycle of a project. Many of these risks are jurisdiction-specific. Because no com-
mon and overarching methodology to assess and manage these risks exists, owners,