Risk Management Practice (Case study: Sydney Opera House)

The Sydney Opera House The busiest performing arts centre in the world Owner: State Government of New South Wales Architect: Jorn Utzon – Ove Arup Engineering Consultant: Arup & Partners Funder: Public Works Department + Lottery fund Cost of construction: £60M (A$107 M) Construction started: 1959 Completed: 1973 Construction duration: 14 years Well known case for cost and time overrun

Design specifications There are 1000 rooms including 5 main auditoria Size of the building is 185m x 120m 588 concrete piles in foundation The roof is made up of 2,194 pre-cast concrete sections (each section weigh 15.5t), & covered with more than one million roof tiles from Sweden

Finance and construction Budget estimate was set at £4.1M, funded by the Government from profits from a series of state run lotteries. Three phases of construction Phase 1 - foundation and the building (podium) Phase 2 - roof; Phase 3 - interior fittings, furniture and equipments.

Risk management process Identify: Potential risks Assess: the risk in terms of its impact probability of occurring (Use appropriate scale e.g. 1- 4 scale, 1 is for low impact/probability and 4 is for critical impact/probability) Control: Avoid (eg. new sub contractor) – Transfer (eg. insurance) - Tolerate (eg. take actions to lessen the impact) – Accept (eg. contingency plan) Review: Continually monitor risks

Risk management @ SOH Financial risk– Political risk – Whole life cost covered by the proceeds of State Lotteries Budget estimate was £4.1M however final cost was £60M (1400% cost overrun) Political risk – Sydney Opera House was severely affected by political decisions £4.1M was political budget not the real one – to get approval from the Government system 100% cost overrun (i.e. £8.2M) was the realistic cost however the rest was political (£52M)

Risk management @ SOH cont.. Design risk – Poor buildability – complex roof design – load transfer and structural problems (no computer programme was adopted for load calculation and errors in manual methods) Roof shells were too heavy for the supporting columns and foundation that were already built, so these had to be demolished and rebuilt Original design (2 theatres) was revised up to 4 theatres Fit for purpose – poor acoustic properties and operation cost is £3.4M p/a only £1.1M can be covered from the income

Risk management @ SOH cont.. Construction risk – The construction was estimated to take about five years at a cost of £4.1M 3 tower cranes imported from France @ cost of £59,000 each This was the first building constructed in Australia using tower cranes

Identified risks Poor Cost Estimate. Incomplete design. Failure to keep within the cost estimate Failure to achieve the required completion date. Changes in project scope and requirements. Design changes. Pressure to deliver project on an accelerated schedule. Inaccurate contract time estimate Lack of communication between project participants. Inadequately defined roles and responsibilities. Insufficient skilled staff & technology. Political influences.

Assess risk Risk Probability of occurrence Impact Risk Importance 1 4 Low 4 Medium 8 High 12 Critical 16 Risk Probability of occurrence Impact Risk Importance   Poor Cost Estimate. 3 4 Critical Incomplete design. 2 High Failure to keep within the cost estimate. Failure to achieve the required completion date. Changes in project scope and requirements. Medium Design changes. Pressure to deliver project on an accelerated schedule. Low Inaccurate contract time estimate. Lack of communication between project participants. Inadequately defined roles and responsibilities. Insufficient skilled staff and technology. 1 Political influences

Assessment cont..

Control risk Risk Risk Control Poor Cost Estimate.   Poor Cost Estimate. Client and Contractor Incomplete design. Failure to keep within the cost estimate. Client Failure to achieve the required completion date. Changes in project scope and requirements. Architectural Engineers Design changes. Contractor Pressure to deliver project on an accelerated schedule. Inaccurate contract time estimate. Lack of communication between project participants. Architectural Engineers, Contractor, Client and Client Inadequately defined roles and responsibilities. Architectural Engineers, and Client Insufficient skilled staff and technology Political influence

Review controls Most of the risk could be avoided by: Working only after the design was completed. Estimating at a very detailed level. Not selecting an untested design approach. Clear communication between stakeholders. Using of an experienced architect. Using a fixed price contract will transfer construction risk to the contactor. Obtaining Insurance to cover costly risks.

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