رسائل ماجيستير
English
2023
Contractors’ financial risks in construction projects in Oman
Ali Said Al Nuaimi, Ashraf El Azouni, Shumoos Zahir Ahmed Al-Busaidiyah
كلية الهندسة-جامعة السلطان قابوس · عمان
This research aimed to identify the most significant financial risk factors faced by contractors inOman's construction industry and propose strategies to eliminate or at least minimize theiroccurrence and solutions to mitigate their impact. The literature review led to 50 popular financialrisk factors that are globally recognized. A presurvey study -made by the researcher- that includedseven professionals in the construction industry revealed that 46 factors are relevant to Oman'sconstruction industry while the rest are of the less effectiveness. The 46 factors were consideredin a field survey via a structured questionnaire, and interviews with senior contractors’professionals after a pilot study was conducted to ensure clearness and easiness of thequestionnaire set. The questionnaire comprised of three main parts; professional information,evaluation of the risk factors based on likelihood, and assessment of the risk factors based on thefinancial impact on contractors in Oman using a Likert 5-point scale. The participant was giventhe chance to select the type of project he/she is more involved in out of four types i.e. residentialand commercial, industrial and infrastructure, oil and gas, and multiple construction projects. Thequestionnaire was distributed to more than 300 practitioners (clients, contractors, consultants, andquantity surveyors) in different construction projects; residential and commercial, industrial andinfrastructure, and multiple construction projects. The valid responses were 101 and the calculatedCronbach’s coefficient was 0.973 which shows an excellent internal consistency of thequestionnaire. The questionnaire results were analyzed using the Relative Importance Index (RII)and concluded using the risk rating that considered the likelihood RII and impact RII of eachfinancial risk factor. The ranking of each significant financial risk factor from the questionnairewas based on the risk rating that considers the likelihood and impact RIIs. After the analysis of thequestionnaire answers, face-to-face interviews with four senior professionals from the contractors'side who have more than 20 years of experience and involved in making financial decisions wereconducted. The aim was to substantiate the findings, in-depth discuss the interpretation of theresults, and get opinions on strategies to eliminate or at least minimize occurrence and solutionsto mitigate the impact of the top ten factors in each field of the construction projects. This researchmixed-methods approach confirmed the significance of these financial risk factors and providedadditional insights based on the interviewees' extensive experience, and ranked the significance of financial risk factors based not only on their likelihood and impact but also on their priority to the contractors.It was found that the overall top ten risk ratings of contractors’ financial risk factors in Oman'sconstruction industry based on the questionnaire responses from all different construction projectsare as the following order: poor schedule management (15.91), delayed payments or non-receiptof payments (15.57), poor performance/delays in sub-contractors’ work or suppliers (15.45),contractor’s poor financial status/ financial management (15.27), change orders duringconstruction (15.17), contractor’s poor site management and supervision (15.06), escalation inmaterial prices (14.91), poor coordination with subcontractors (14.83), inaccurate estimates(14.76), and delay in the delivery of materials (14.63).According to the likelihood RII from the survey results, poor schedule management factor wasranked as the top most prevalent financial risk factor from the perspective of residential andcommercial, industrial and infrastructure, and multiple construction projects. This factor wasconsidered to have a lower possibility to face contractors in oil and gas construction projects asfifth prevalent factor. Based on the impact RII, contractors’ poor financial status/financialmanagement appeared to be more financially burdensome on contractors as the first financial riskfactor that could affect contractors financially in all different construction projects. Thesignificance of both financial risk factors to the contractor was approved by the interviewed foursenior contractors as part of the first ten significant financial risk factors to the contractors inOman’s construction projects.The research findings contribute to a better understanding of contractor’s financial risks in theconstruction projects in Oman and offer valuable recommendations to contractors to enhance theirrisk management strategies. By proactively addressing these financial risk factors, contractors canminimize the potential financial impact and ensure the success of the project.