A risk and cost management TECHNICAL PAPER

analysis for changes Journal of the South African

Institution of Civil Engineering
during the construction ISSN 1021-2019
Vol 58 No 4, December 2016, Pages 21–28, Paper 1375

phase of a project SUNÉ SCHOONWINKEL (Candidate Civil Engineer)

graduated from Stellenbosch University, South
Africa, in 2006 with a BEng degree in Civil
S Schoonwinkel, C J Fourie, P D F Conradie Engineering. In January 2007 she joined Jeffares &
Green (now JG Afrika) in their Cape Town office.
From 2010 to 2011 she took sabbatical leave to
In civil construction projects, changes are inevitable, impacting projects in terms of cost, time complete her MSc Eng degree in Engineering
Management in the Department of Industrial Engineering at Stellenbosch
and quality. It is nevertheless expected of project managers to effectively manage the impacts
University, focusing on the management of risk and cost during project
of project changes, and to complete the project within the project constraints, despite such management. In 2013 she left Jeffares and Green, and currently she is working
changes. This article explores the impact of changes on a project by comparing the findings for By Design, a consulting structural engineering firm in Stellenbosch.
from a South African case study to the impact of changes found in literature. The article further Contact details:
investigates how consulting engineers in the Western Cape deal with changes in projects, By Design
and how cost risk management is performed during changes. The findings are startling and Linton Street, Stellenbosch, 7600, South Africa
expose the shortage of necessary skills and competencies within project management. A fresh T: 080 012 8451
E: sune.schoonwinkel@gmail.com
approach is required for project managers to deal effectively with project change.
PROF CJ (NEELS) FOURIE (Pr Eng, MSAIIE,
MPMISA) graduated from the University of
Introduction in such a way that all the project objectives Pretoria in 1969 with a BSc degree in Industrial
Engineering. He started his career at ISCOR, and
One of the primary ways in which value is are obtained within the time, budget and
then moved to Datsun (Nissan) and later Pretoria
generated in modern societies, is through quality constraints. Metal Pressings (Armscor subsidiary) as a project
projects that create physical assets, such as Over and above the cost, time and risk manager, where he later became division head
factories, commercial buildings, hospitals, consequences, changes can also affect of Industrial Services. In 1987 he joined the Industrial Engineering Department
schools and highways, which can then be stakeholder relationships and team morale. at Stellenbosch University, where he obtained an MSc Eng degree in 1996 and
a PhD in 2003. He became a professor in 2004 and served as the chair of the
exploited to social and economic ends. Most The uncertainties associated with change are
Industrial Engineering Department from 2005 to 2008. Since 2011 he has been
of these assets are created through construc- often the result of iterative cycles or further chairing the university’s PRASA Engineering Research Chair. His research
tion projects, and as the size and complexity changes due to unanticipated side-effects of focuses on lean manufacturing / management, project and programme
of these projects increase, a more intensive the current change during the construction management, maintenance management, risk management and statistical
level of project management is required to process (Lee et al 2005). It is thus imperative reliability engineering. He is the author of 15 peer-reviewed journal papers,
three keynote papers and 41 papers delivered at international conferences. He
successfully meet the expectations of time, to understand change, the types of changes,
has supervised 27 postgraduate students.
cost and quality (Winch 2010). its impact on the project, and how to analyse,
Contact details:
However, managing a construction project manage and control it.
PRASA Engineering Research Chair
is difficult in that all the relevant information The aim of this article is therefore to Faculty of Engineering
is not always available at the initial stage of determine the following two aspects about Stellenbosch University
the project to plan and design the project changes made to the works during the con- P/Bag X1, Matieland, Stellenbosch, 7602, South Africa
accurately and make the best possible deci- struction phase of a civil engineering project: T: +27 21 808 4237
E: cjf@sun.ac.za
sions. As information becomes available ■■ What is the potential impact of project
during the construction phase of the project, change? PIETER CONRADIE (Pr Eng) graduated from
it can lead to various changes, which can in ■■ How are changes to the works currently Stellenbosch University in 1994 with a BEng in
turn affect productivity, planned schedules, managed in practice? Mechanical Engineering, and completed a
post-graduate diploma in Industrial Engineering
deadlines, work methodology, resource
in 1995. He started his career at Spoornet,
procurement and budget, all of which could whereafter he moved to the manufacturing
result in the project objectives not being Methodology industry as production manager for various
achieved. Design errors or variations, unfore- In order to determine the impact of project companies. He joined Stellenbosch University in 2011 as a research engineer and
seen site conditions and vagueness in the change, the relevant literature was reviewed received his MEng in Engineering Management in 2015. He is an Associate
Member of SAIIE and a Member of the Institute of Asset Management. His
original scope are merely some of the reasons and a case study was done on a civil engi-
research interests include physical asset management, reliability and
for change. neering construction project. The case maintenance management. He is the author of one international and one local
It is expected of a project manager to study comprised the construction phase of conference paper, and one peer-reviewed journal paper.
effectively manage the cost, time and risk a recently completed civil and structural Contact details:
impacts of all project changes, and complete construction project in South Africa, and Department of Industrial Engineering
the project within the project constraints the data for the case study was obtained Stellenbosch University
regardless of any challenges. To manage from the consulting engineers who designed P/Bag X1, Matieland, Stellenbosch, 7602, South Africa
T: +27 21 808 4210
projects more effectively, a fresh approach in and managed the project. For the sake of
E: pieterc@sun.ac.za
project management is required. A project confidentiality, all names of the stakeholders
manager must understand the implications involved in the project have been omitted Keywords: project management, risk management,
of changes and must manage these changes from this article. change management, civil projects, construction

21
Schoonwinkel S, Fourie CJ, Conradie PDF. A risk and cost management analysis for changes during the construction phase of a project.
J. S. Afr. Inst. Civ. Eng. 2016;58(4), Art. #1375, 8 pages. http://dx.doi.org/10.17159/2309-8775/2016/v58n4a3
 To be able to understand the project High
management environment and the state of
Stakeholder influence, risk, and uncertainty
change management in practice, the same
case study was used and various interviews
with project managers were done. The
case study was analysed to understand
how project finances were managed, the
reasoning behind the particular manage-
ment approach, its effectiveness, and its

Degree 
shortcomings.
To understand how the management
of cost and risk, as a result of changes, are
currently done in practice, 18 project mana­
gers were interviewed. These were mostly
directors of consulting firms who are actively
involved in the market place. The semi- Cost of changes
structured interviews consisted of a ques- Low
tionnaire to determine project managers’ Project time 
experience and modus operandi in managing
the costs and risks of change. The results are Figure 1 Impact of variables based on project time (Project Management Institute 2008)
reported in this article.
Table 1 The impact of changes on a project
Non-
Impact of Project Change No of events productive Total cost ($) Mean
Percentage
It is important that project managers under- Cause of time cost per
of contract
variation event
stand the impact of change on a project. value
% of % of Cost % of ($)
# Days
Project managers cannot make informed total total ($) total
decisions regarding change without knowing Client changes 49 18 10 26 105 620 13 2 155 0.96
what the effect of the change will be on the
User changes 132 48 14 36 235 440 29 78 2.14
project. Changes that are mismanaged could
prevent a project from achieving its objec- Design omissions 83 30 13 33 265 980 33 3 205 2.43
tives (Love et al 2002). Local authorities 5 2 2 5 146 080 18 29 216 1.33
Figure 1 illustrates the influence that var-
ious factors can have on the project life cycle. Extension of time 6 2 0 0 53 240 7 8 873 0.49

It indicates the relationship of stakeholders’ Total 275 (100) 39 (100) 806 360 (100) 43 527 7.35
influence, risk and uncertainty against
Note 1: Includes rates, taxes and fees
project time, as well as the cost of changes in
relation to project change. This graph dem-
onstrates that the impact of change becomes Table 2 The impact of rework on a project
greater as the project progresses in time. The Non-
influence of project stakeholders, uncertainty No of events productive Total cost ($) Mean
Percentage
and risk, reduces with time as the unknowns time cost per
Cause of variation of contract
event
become less and the objectives are more % of % of Cost % of value
# Days ($)
clearly defined. Changes that happen during total total ($) total
the construction phase of a project therefore Design change 65 30 20 29 182 893 53 2 814 1.67
have a greater cost impact on a project
Design error 12 6 13 19 59 233 17 4 936 0.55
than changes that happen during the initial
phases. Design omission 2 1 7 10 6 837 2 3 419 0.06
A study on the impact of project change Construction change 14 6 2 3 72 979 21 5 213 0.66
conducted by Ibbs (1997) concluded the
Construction error 120 55 14 20 19 514 6 163 0.17
following:
■■ As the number of changes increase, costs Construction omission 2 1 0 0 760 0 380 0.006
will also increase. Construction damage 3 1 14 20 3 288 1 1 096 0.03
■■ As change increases on a project, produc-
Total 218 70 345 504 1 584 3.15
tivity decreases.
■■ Change that occurs during the construc-
tion phase of a project has a more disrup- Case study by Love et al (2002) Table 1 indicates that there were 275
tive impact on the project than change Love et al (2002) did a case study on a resi- items of change which resulted in 39 non-
that occurs during the design phase of a dential construction project (two six-storey productive days and a 7.35% increase in the
project. residential apartment blocks, containing a cost of the works. Table 2 indicates that there
■■ A project that has a large number of total of 43 units) in order to better under- were 218 items of rework which resulted in
changes would have less efficient imple- stand change and rework in construction 70 non-productive days and a total additional
mentation of those changes. project management. cost of $345 504.00, which is 3.15% of the

22 Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016
Table 3 Information of item changes to the project and 212 pay items of the SOQ were never
claimed and were thus omitted from the
Item information
works. All these items were captured in the
Number of original pay items in the tender SOQ 753 VOs. This data is reflected in Table 3.
Number of new pay items added to the SOQ 445 Table 3 also indicates that the number
of tendered SOQ pay items increased with
Number of original pay items in the tender SOQ that were never claimed 212
a significant 59%, and that 28.2% of the
Total number of pay items that represent all the changes to the project 657 original pay items were never claimed dur-
Increase in rates claimed due to new rates added to SOQ 59.1% ing the construction period of the project.
These values clearly indicate that there were
Decrease in rates claimed due to omission of tender rates from SOQ 28.2%
a substantial number of changes made to
the project.
Table 4 Value of changes to the project In this specific case extensive design
changes were made to the project, due to the
Value % of tendered
Description impact of the design requirements from the
(R) project value
mechanical and electrical plant contracts,
Tendered value of project (excl VAT and contingencies) 135 660 389 –
which impacted the civil and structural
Cost of project at completion 133 150 703 98.2% works of the contract under revision. One
Value of new works added to project 17 741 498 13.1% main reason for such a large value of omis-
sions on the project was the reduction in
Extension of time cost 1 009 330 0.7%
the clients’ available budget for the works.
Total of additional costs to project 18 750 828 13.8% This only became known after receiving the
Value of pay items omitted from project –17 720 274 –13.1%
tenders, and therefore necessitated various
changes and omissions to the initial design.
Value of quantity changes to tendered items in the SOQ –3 540 239 –2.6% To determine the impact of changes to the
Total of omission costs to project –21 260 514 –15.7% project, the changes had to be quantified. The
value of all the works added to the pro­ject; any
Total cost of changes to the project –2 509 685 –1.8%
extension of time or cost to the project, all
omissions, as well as cost of variation between
total contract value. The changes and rework consulting engineers. The contract covered the tendered and claimed values of the sche­
of the project had a combined 10.5% cost the construction of the structures, civil works duled work had to be determined. These costs
impact on the project and resulted in 109 and infrastructure, as well as the building- could then be expressed as a percentage of the
non-productive days. related mechanical, electrical and electronic tendered contract value in order to determine
Change could also result in rework. works. Separate contracts covered the provi- the impact of the changes on the project, as
Construction is the physical manifestation of sion of specialised mechanical and electrical can be seen in Table 4.
a design, and thus rework usually entails the infrastructure. This contract was based on As seen in Table 4, the value of additional
demolition or modification of work already the General Conditions of Contract (SAICE costs to the project is 13.1% of the total
constructed. For this reason, rework is per- 2004), and the tendered civil and structural contract value, which is significantly higher
ceived to have a greater impact on construc- contract value was in the order of R160 mil- than the 10% contingency usually allowed
tion performance than change. When project lion (including VAT and contingencies), with a for additional works. However, there was an
managers are under time or resource con- construction period of 16 months. equal reduction to costs of 13.1% due to work
straints, they would rather avoid rework by For the purpose of the case study the omissions. Of the R17 720 274.96 saved due
modifying the design and specifications. In researchers reviewed all the site memoran- to omissions, R10 120 000.00 (7.46% of the
the case study under review, the value spent dums (SMs), requests and quote rates (QRs) tendered project value) was forced omissions
on changes is more than double the amount and variation orders (VOs) against all the due to a budget reduction by the client.
spent on rework. It is thus clear that change new work and changes made to the project There was also a 2.6% saving on the project
may have a greater impact on the works than during the construction phase. Other avail- due to changes to the initial tendered quanti-
rework (Park & Peña-Mora 2003). able data (such as documentation, minutes ties, resulting in an overall 1.8% decrease in
The case study therefore made the follow- of meetings, etc) was also perused for a the tendered value of the project.
ing findings: better understanding of the project. The data The cost impact of changes can further
■■ Change can have a significant cost and was used to determine how many changes be analysed by taking a look at the rate cat-
time impact on a construction project. occurred on the project, how these were egories of new items added to the project, as
■■ Change has a greater impact than rework. managed, and what the cost impact was. given in Figure 2, and the total value of the
For this project the main schedule of items per category, as given in Figure 3.
Case study conducted by the authors quantities (SOQ) had 753 original pay The majority of items (89% of the 445
The authors also did a case study to deter- items. Each pay item of the SOQ has a new items of work) have a value of less than
mine the impact of project change. The pro- tender quantity, rate and amount value 0.05% of the contract’s tendered value. They
ject reviewed for the case study was the con- (amount value is defined as the tendered represent only 28% of the value of additional
struction of a multi-million rand integrated quantity multiplied by the tendered rate). work added to the project, as shown in
industrial facility for a metropolitan munici- All the item amounts add up to the ten- Figure 3. Whereas only 1% of the additional
pality. The project was designed and managed dered value of the contract. items to the project have a value greater than
by civil and structural consulting engineers in During construction of this project, 0.5% of the contract’s tendered value, these
a joint venture with mechanical and electrical 445 new pay items were added to the SOQ, changes amount to 30% of the total value

Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016 23
of additional works. The ‘medium high’ and
X > 0.50% (R675 000)
‘high’ categories (as seen in Figure 2) amount [High]
to 5% of the number of additional items, 1%
but they represent more than 50% of the 0.10% < X ≤ 0.50%
total value of the items added to the project. [Medium high]
4%
These two categories thus have the greatest
impact on the finances of the project. 0.05% < X ≤ 0.10%
As stated in Table 3, there are 753 pay (R135 000)
items in the original tender SOQ. Of these [Medium]
6% X ≤ 0.05% (R67 500)
753 items, 212 items (28.2%) were omitted [Medium low]
89%
from the project, thus leaving 541 claimed
items from the tender. The quantity
­variance of these claimed items will be
broken up into further sub-categories. As
can be seen in Table 5, 146 (19.4%) of the
X=A
 mount value of item
claimed tender items show a 15% decrease as a % of tendered
in their tendered quantities, resulting in project value
a saving to the project. The investigation
shows that 138 claimed tender items (18.3%) Figure 2 Rate categories of new items added to the project
experienced more than 15% increase in the
original quantities. Only 257 items (34.1% of
the total) have a quantity variance between X=A
 mount value of item
Total value of items for as a % of tendered
–15% and 15%, which can be expected X > 0.50% project value
according to the industry standard. Of 30%
these 257 items, 177 items have no quantity Total value of items
variance. Thus only 23.5% of all tendered for X ≤ 0.05%
28%
items were claimed without any variance in
quantity or cost.
The contract allowed for all pay items
to be re-measurable. The tender quantities
listed are based on estimates done during the
design phase of the project. However, when
the design changes, the quantities might
also change.
Table 6 indicates a significant cost impli-
Total value of items for Total value of items for
cation for all tendered items with a decrease 0.10% < X ≤ 0.50% 0.05% < X ≤ 0.10%
or increase to the quantities of more than 28% 14%
15%. These changes to the item quantities
amount to more than 10% of the tendered Figure 3 Total value of new items
project value. It is thus clear that quantity
changes of more than 15% can have a signifi- Table 5 Quantity variance of items
cant impact on the project.
Quantity variance of items between the tender SOQ and the final claimed SOQ (represented by Y)
Based on the data given above, the find-
ings of the case study can be summarised as Number of items in the tender SOQ 753
follows: Number of original pay items in the tender SOQ that were omitted 212
■■ Projects can have a significant number of
changes. Number of items in the tender SOQ that were used 541
■■ Similar to Love et al (2002), the authors Number of items for which Y ≤ -15% 146
found that the impact of changes on cost
Number of items for which -15% < Y ≤ 15% 257
can be significant.
■■ Changes with a value greater than 0.1% Number of items for which -15% < Y < 0 42
of the total contract value have a huge
Number of items for which 0 < Y ≤ 15% 38
impact on the finances of the project.
■■ Quantity changes of more than 15% have Number of items for which Y = 0 177
a significant cost impact on the project.
Number of items for which Y > 15% 138

Change management in implication. Due to tight time constraints managers, decisions are often made on
CURRENT practice on most projects, every change requires intuition or experience, sometimes without
During a construction project there may quick, robust decision-making, so as to not an assessment of the risks involved or the
be quite a number of changes. Regardless delay the project, which therefore results influence on the cost of the project, and
of the size of the change, each alteration to in changes not being comprehensively often without applying well-known project
the works has a cost, time, quality and risk evaluated. Based on feedback from project management techniques. Mainly because of

24 Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016
Table 6 Cost implication of quantity variance of items items had both references, and 220 items
(49%) had no paper-based record at all (refer
Value % of tendered
Cost implication of quantity variance (Y) to Figure 4).
(R) project value
Table 7 indicates that for 68.5% of the
Value of quantity changes (Y ≤ –15%) –20 340 820 –15.0%
new items added to the SOQ, there is no
Value of quantity changes (–15% < Y < 0) –1 408 678 –1.0% record of any quote or information received
for the works from the contractor and no
Value of quantity changes (0 < Y ≤ 15%) 1 278 587 0.9%
indication of any form of review. These items
Value of quantity changes (Y > 15%) 16 930 671 12.5% amount to 31% of the value of all new works
added to the project. These rates are added
Total value of quantity changes –3 540 239 –2.6%
to the SOQ without any formal evaluation of
its fairness towards the client or the impact
Table 7 Cost reporting of new items on the project budget. It also implies that
no cost, time or quality analyses were made
Number As % of Value As % of
Description of the changes, and it can furthermore be
of items new items (R) new works
assumed that no risk analysis was done for
New items 445 100.0% 17 741 498 100.0%
these changes.
Items that have an SM 136 30.6% 6 465 132 36.4% Table 7 also indicates that SMs were
Items with no SM 309 69.4% 11 276 366 63.6%
issued for only 30.6% of the new works, and
thus the remaining 69.4% of the items (repre-
Items that have a CQ 140 31.5% 12 155 951 68.5% senting 63.6% of the value of the works) must
Items with no CQ 305 68.5% 5 585 547 31.5% have been initiated by another means, which
is in contradiction of the project plan. It can
Items that have either an SM or a CQ 174 39.1% 8 814 397 49.7%
therefore safely be assumed that the changes
Items that have both an SM and a CQ 51 11.5% 4 903 343 27.6% that necessitated these rates were not
properly reviewed before the contractor was
Items that have neither an SM nor a CQ 220 49.4% 4 023 758 22.7%
instructed to do the works, nor were alterna-
tive options investigated. The contractor
was also not given any written information,
instructions or specifications on the changes.
New items with no New items with both However, it must be noted that the
SM or CQ an SM and CQ
49% contractor’s certificate was evaluated each
12%
month, and no rate could be added without
the knowledge of the engineer. All items of
change were also recorded in the VOs sub-
mitted to the client, compiled once a month
in line with the monthly payment certificate
(MPC). Even though the rates were not
assessed in a formal, paper-based manner,
they would have been acknowledged and
reviewed at each MPC review. Certificate
reviews consisted of detailed comparison of
the changes between the quantities claimed
New items with either
an SM or CQ in the current and the previous months, in
39% order to assess the accuracy of the claim.
However, the review only examines items of
Figure 4 Cost reporting of new items work claimed in the certificate which have
commenced. This process would therefore
time constraints (Akintoye & MacLeod 1997) change and its implications, and is seen as an have identified any new works added to the
project managers use contingencies and important document to the engineer. If the certificate, after their initiation, which is a
construction buffers as the only mechanism change involves work where no rate is speci- reactive method and not the ideal way in
for dealing with unexpected change. fied in the tender SOQ, the engineer requests which to manage cost changes.
a quote for it in the SM. The contractor will The following concerns are raised for this
Change management practices then be required to supply the engineer with case study:
based on the case study a contractor’s quote (CQ) for the works, and ■■ The method of change management is
To determine how the changes were evalu- the CQ is then reviewed by the engineer to questionable.
ated and managed in the case study, the determine if it is fair and reasonable. These ■■ Not all changes are recorded in an
paperwork for all the changes was assessed. two references (SM and CQ) are important acceptable manner.
When a change is made to the project, it is for managing new items.
recorded by the engineer in an SM, which Table 7 summarises the project costs for Change management practices
gives a clear description of the change as well new items. Of the 445 new items added to based on interviews
as the cost implication thereof (if available). the SOQ, 174 items (39%) were documented To examine how change management is
The SM therefore serves as the record of the either in an engineer’s SM or a CQ, 51 (12%) currently being applied in practice, the

Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016 25
researchers also interviewed 18 project
Value of
managers, of whom more than two thirds are managed
directors of active firms in the market place. projects
They were asked questions regarding their (> R50 mil)
100%
experience in project management, and more
specifically, the cost and risk management of
80%
changes. The demographics of the group are
illustrated in Figure 5. 60%

How are changes managed in 40% Value of

Greater than
general by engineers? managed
25 years'
projects
Interviewees were requested to answer vari- experience 20% (> R100 mil)
ous questions with regard to their experience
of the management of changes based on 0%
the company procedure. The results are
shown in Figure 6. It is evident that changes
are predominantly managed in two ways –
through the requirements of the ISO 9000
certified quality management system (QMS),
and a paper-based exercise of issuing SMs,
VOs, QRs and MPCs (both these methods
were stated by 50% of the interviewees). This Less than Minimum
15 years' qualification
substantiates the finding of the case study, experience BSc Eng
which also found that changes are managed Degree
through the documenting and reviewing of
SMs, VOs, QRs and MPCs. The results also Figure 5 Demographic of interviewees
indicate that, though there is a methodol-
ogy or procedure in place, 33% of those
60
interviewed admitted to not always following
the set procedure prescribed by company
protocol. 50% 50%
50

How is the cost of changes managed?

Percentage of respondents (%)

From the research it was found that not all 40

changes are recorded in the appropriate
manner, and that the cost and risk 33% 33%
management of changes in most cases were 30
inadequate. The participants generally
regarded the following as methods by which 22%
they manage the cost of changes of new 20
17%
works:
■■ By doing a cost estimate of the proposed
works. 10
6%
■■ By asking for rates from the contractor
and then assessing if the QRs are fair and
0
reasonable. Don't always No Based on the Internal Paper-based Experience- Depends
■■ By determining the effect of the work on follow procedure ISO 9000 change (SMs; based on the
procedure certified management QRs; VOs; contract
the project budget and contingencies. quality system MPCs)
■■ By determining if there are any other cost system
implications of the works, such as life
cycle or time-related costs. Figure 6 Methods of change management
The results are shown in Figure 7, where
only 33% of all participants determined the don’t know how much of your contingencies ■■ By requesting that the contractor pro-
cost impact of the additional works on the you are going to use.” vides a breakdown of the QR.
overall project. The general opinion was that The interviewees were then questioned ■■ By acquiring supplier quotes for compari-
an initial cost estimate of the works is done on the process followed to determine how son to the QR.
and then the required rates are requested reasonable a rate was on a CQ for new ■■ By judging the reasonableness of the rate
from the contractor. If the rate is found to be works. The following main methods were based on experience.
acceptable and within the allowed contingen- identified: Refer to Figure 8 for the results of the study.
cies, it is added to the project. Quoting one ■■ By comparing the given rate to known A rate breakdown, or the comparison of rates
of the participants: “You seldom go out to rates from similar projects. against those from similar projects or the exist-
tender with a complete design, so you know ■■ By comparing the given rate to relevant ing SOQ, are similar methods to those identi-
there is going to be additional work, but you rates from the project’s SOQ. fied by the case study and were thus expected.

26 Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016
 100 How are the risks of the
changes managed?
90 89%
83% Risk management is a theoretical five-step
80 process of planning, identification, assess-
Percentage of respondents (%)

ment, determining the response, and moni-

70
toring and controlling the risks. However,
60 56% when the project managers were asked how
they manage risks, only 39% of interviewees
50
followed this process, with more than 50%
40 following no specific procedure. Project
33%
managers manage risks using the following
30
methods (refer to Figure 9):
20 ■■ Experience
■■ Crisis management
10
■■ Identification, analysis and mitigation
0 ■■ Preventing scope creep
Do a cost estimate Do a rate Determine impact on Determine other
of the work assessment budget effects on project (e.g.
■■ Professional insurance.
P&G/lifecycle costs) One of the respondents replied:
“Approximately 50% of our time is taken
Figure 7 Methods of cost management to manage things that go wrong, because
everything is such a rush and we don’t do
our planning properly. That goes for us as
90
engineers, architects and contractors. You
83%
80 have to keep correcting things and direct
them in the right way.”
70 This indicates that the risks pertinent
Percentage of respondents (%)

61% to civil projects are not properly identified

60
and managed, and most project managers do
50 not follow the theoretical risk management
44% 44%
process, rather relying on their experience
40 and crisis management abilities.
30 28%
What are the current difficulties with
20 cost and risk management of changes?
11% Most participants commented on the time
10 6% constraints of cost management. When
0 changes are requested, it often involves
Compared Compared Requesting Acquiring Experience Compared The design changes which must be implemented
to rates to relevant a rate supplier to BER responsibility
from similar SOQ rates breakdown quotes indices of the QS as soon as possible, and thus the change
projects management process delays the work.
Therefore the cost management has to be
Figure 8 Methods how new rates are assessed fast and effective so that works are not
delayed in the process.
A general finding was that for some par-
60
56% ticipants, cost management merely revolved
around ensuring that the budget is not
50 overspent and that there is enough money in
the contingency budget for the works. They
Percentage of respondents (%)

39% 39% also regard cost management as the assur-

40
ance that the rate is reasonable according to
the engineer’s judgement. The overall effect
30 of the works on the project, its indirect costs
22% (such as maintenance), and time-related
20 preliminary and general costs are rarely
considered.
Time constraints were found to be the
10
6% 6% biggest obstacle for not applying standard risk
management principles in practice. The two
0 other major obstacles were knowledge and
No specific Experience Crisis Identification Preventing PI
procedure management > Analysis scope creep insurance the practicality of risk management. When
> Mitigation asked about the biggest stumbling block for
performing risk management, an interviewee
Figure 9 Methods of risk management replied: “Time, and the lack of understanding

Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016 27
in the project team that there is value in doing ■■Doing a cost estimate of the proposed 3. Time, knowledge and practicality are fac-
risk management. There is never time to do it, works. tors hindering the application of standard
but always time to do it twice.” ■■ Requesting rates from the contractor risk cost and risk management principles.
and assessing their reasonableness. The results are disturbing, given the magni-
■■ Determining the effect of the work on tude of the projects discussed in this study,
Summary of Findings the project budget and contingencies. and the possible implications of changes. The
This article investigated the impact that ■■ Determining the indirect cost implica- results expose project managers’ and engineers’
changes can have on a project, as well as tions, such as life cycle or time-related lack of critical skills and competencies, aspects
the current state of change management of costs. which are prerequisites for the successful exe-
construction projects in practice. This was ■■ More than 50% of participants do not fol- cution of a project in terms of time, quality and
done by conducting a case study and vari- low a specific risk assessment procedure. cost. It is therefore recommended that project
ous interviews with project managers. The ■■ Time, knowledge and practicality are managers and engineers are carefully selected,
key findings of the case study and various hindering the application of standard risk not only based on experience, but also based
interviews with project managers, regarding management principles. on the necessary skills and competencies.
the impact of changes on the project, can be Most companies seem to have a QMS in
summarised as follows: place, but the practical application of that
■■ Change can have a significant cost and process is not clear. Changes to projects are References
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■■ Change has a greater impact than rework. of SMs, QRs, VOs and MPCs. Neither the management in construction. International Journal
■■ Projects can have a significant number of interviews, nor the findings of the case study of Project Management, 15(1): 31–38.
changes. indicated any current use of a formal change Ibbs, C W 1997. Quantitative impacts of project change:
■■ The bigger the changes, the greater the impact review methodology. size issues. Journal of Construction Engineering and
impact on the project. Most project managers do not follow Management, 123(3): 308–311.
■■ Changes with a value of more than the theoretical risk management process Lee, S, Peña-Mora, F & Park, M 2005. Quality
0.1% of the total contract value have a of planning, identification, analysis and and change management model for large scale
big financial impact on the cost of the mitigation. Time constraints were found to concurrent design and construction projects. Journal
project. be the biggest reason why project managers of Construction Engineering and Management,
■■ Items with a quantity change of more do not apply generally accepted cost and risk 131(8): 890–902.
than 15% have a significant cost impact management practices. They therefore follow Love, P E D, Holt, G D, Shen, L Y, Li, H & Irani, Z
on the project. no specific procedure and rely on their crisis 2002. Using systems dynamics to better understand
Based on the case studies and interviews management abilities. change and rework in construction project
conducted, current change management management systems. International Journal of
practices can be summarised as follows: Project Management, 20(6): 425–436.
■■ Project managers are not managing Conclusions Park, M & Peña-Mora, F 2003. Dynamic change
changes appropriately. The aim of the article was to determine the management for construction: introducing the
■■ Changes are not recorded systematically. impact of changes made to the works during change cycle into model-based project management.
■■ Project managers do not have a formal the construction phase of a civil construc- System Dynamics Review, 19(3): 213–242.
way in which they assess the cost, time tion project, and three main conclusions Project Management Institute 2008. A Guide to the
and risk impact of a change. were made: Project Management Body of Knowledge. ANSI/PMI
■■ Changes are mainly managed based on 1. Changes can have a significant cost and 99-001-2008, Philadelphia, PA: Project Management
the ISO 9000 certified QMS and a paper- time impact on a construction project, Institute.
based exercise. and changes have a greater impact than SAICE (South African Institution of Civil Engineering)
■■ Project managers make extensive use of rework. 2004. General Conditions of Contract for
their experience and engineering judge- 2. The current method of change manage- Construction Works, 1st ed. Midrand: SAICE.
ment for managing the cost of changes. ment is not adequate, as not all changes Winch, G M 2010. Managing Construction Projects, 2nd
■■ Other methods of cost management are recorded in the appropriate manner, ed. Oxford: Wiley-Blackwell.
include: and risk management is seldom done.

28 Journal of the South African Institution of Civil Engineering  •  Volume 58  Number 4  December 2016