Case Study Of The Victorian Desalination Plant Project: Risks, Dispute Resolution And Management

Discussion

Outline a brief discussion on the popular Case study of The Victorian Desalination Plant project.

Risk management can be defined as the proper identification, evaluation and finally prioritization of any risk that is eventually followed by the coordination as well as economical application of various resources for the purpose of minimization, monitoring and controlling of the impact or probability of any unfortunate event (McNeil, Frey and Embrechts 2015). This particular phenomenon helps in maximizing the opportunity realization. The most significant objective of this risk management is to provide assurance of the fact that uncertainty never deflects the attempts from business objectives or goals. The risks could come from all sources like uncertainty in the financial sectors, credit risks, legal liabilities, various threats from the project failures, deliberate attacks from the adversaries, unpredictable root causes and many more. The positive events within any specific project are termed as opportunities; whereas the negative events within that project are known as risks (Cardona 2013). Each and every project comprises of both opportunities and risks and these should be managed by undertaking a proper risk management process within that particular project.

The following report outlines a brief discussion on the popular case study of The Victorian Desalination Plant project. This project is considered as one of the biggest as well as the most significant amongst all the rest of the projects in entire Australia. This report will be highlighting the various risks in the pre construction, construction and operational phases of the project, with two suitable dispute resolution approaches for the project. Moreover, the proper management of the disputes will also be given here.

Case Study

Victorian Desalination Plant project was started in the year 2007 by the Victorian Government, Australia. They wanted to construct a specific desalination plan as the part of their next stage Water Plan. They gave this particular contract to AquaSure for building, maintaining, operating and finally financing the entire project for next 30 years. The total cost of this project is 3.5 billion dollars. The construction of the desalination plant and the water transfer pipeline was completed in the year of 2012. This project was completed successfully and various inherent risks occurred during the project and there are ways to mitigate them.

There are few inherent risks that occurred in the project during the three phases of the project, which are pre construction, construction and operational.

1. i) Pre Construction Phase: This particular phase of pre construction mainly occurs before the project is being started (Lam 2014). There are various risks present in this phase. For the project of Victorian Desalination Plant, this phase suffered two important risks. The two risks that were faced in the pre construction phase are as follows:
2. a) Issues in Budgeting: The first and the foremost risk that this project faced within the pre construction phase is the issue in budgeting. This mainly occurred as the contract expenditure was overrunning in this case (Glendon Clarke and McKenna 2016). The budget estimation was done wrong and since the overall budget estimation was not correct, the overall management of the resources was not correct.
3. b) Project Scheduling: The second important inherent risk that the project of Victorian Desalination Plant faced during the pre construction phase is project scheduling. The time management was done wrong and thus the project was suffering through significant issues (Chance and Brooks 2015). Due to the lack of time management, this project became a significant problem for the Victorian government and all the stakeholders.

Six Inherent Risks in Pre-construction, Construction and Operational Phase

The consequences for the client and contractor of these two risks are as follows:

1. a) Issues in Budgeting: The client has provided the money and thus he has to invest more in this project (Hopkin 2017). Moreover, the contractor had to make a new budget for executing the project and thus time was lost and the resource expenditure was also overrun.
2. b) Project Scheduling: The main consequence for both the client and the contractor for this particular issue of project scheduling is the involvement of extra time. Due to the incurring of extra time, the expenses were also increased in the project (Wolke 2017). Being one of the most expensive projects, incurring of extra costs was an important issue for both the parties.
3. ii) Construction Phase: The second phase in the Victorian Desalination Plant project is the construction phase. The construction was completed in only 36 months (Pritchard and PMP 2014). The two inherent risks in the construction phase are as follows:
4. a) Technical Risks: The first and the foremost risk in the construction phase of the project of Victorian Desalination Plant is the technical risk. The incomplete design and the inadequate investigation of site are the main technical risks in this case (Wynne 2016). These risks majorly occurred when the stakeholders of the project decided some changes within the project requirements and scope. The errors in the design are another important reason for these technical risks.
5. b) Logistical Risks: The second type of risk that occurred within the construction phase of the Victorian Desalination Plant project is the logistical risk (Bolton, Chen and Wang 2013). This project had a wide range of stakeholders within the project and thus should have been managed more specifically. The transportation and the storage facilities of the project were mainly faced during this phase. More than 10,500 people were working in the project and thus the management of all these people were tough.

The consequences for the client and contractor of these risks are as follows:

1. a) Technical Risks: The consequences of this risk for the client and the contractor were dangerous as the design of the project was made wrong and erroneous (Sadgrove 2016). Moreover, these technical risks became extremely difficult as the stakeholders wanted to change the project scope and requirements during the construction phase. Due to these changes, the project manager had to make a brand new project schedule.
2. b) Logistical Risks: 100% of all the civil components over the site of the plant were eventually procured from all companies of Victoria or Australia and 50% of the total electrical as well as mechanical components were being procured from companies of Victoria or Australia (Brindley 2017). Often these companies were facing problems in supplying the components and thus the logistical risks were occurring within the project of Victorian Desalination Plant.

Operational Phase: The third phase is the operational phase. The two inherent risks in the operational phase of Victorian Desalination Plant project are as follows:

1. a) Cyber Risks or Data Security: The first and the foremost risk in the operational phase of Victorian Desalination Plant project is the cyber risk or data security (Olson and Wu 2017). Since the data was extremely vital or important for this particular project, the risk to the data security was dangerous for them.
2. b) Regulations: The second operational risk was the regulations. This project did not have proper rules or regulations and thus the project suffered major problems (Hillson and Murray-Webster 2017). There were no penalties for the non-compliance and hence various general rules were not followed.

The consequences for the client and contractor of these risks are as follows:

1. a) Cyber Risks or Data Security: Both the client and the contractor suffered through this risk  as hence the project faced loss of data. This was the major consequence of this risk.
2. b) Regulations: The consequence of this risk was that there were no rules and thus no rules were followed in this scenario (Wu, Chen and Olson 2014). For this problem, the project of Victorian Desalination Plant suffered various compliance issues.

The best ability to control for each of the above mentioned six risks are given below:

1. i) Issues in Budgeting: The contractor or the project has the ability to control this risk as he is responsible for making the budget estimation. Moreover, the client should also not change the project requirements (Soin and Collier 2013). Thus he is also responsible.
2. ii) Project Scheduling: The project manager is responsible for controlling this particular risk. The clients are also responsible in this case as they should not change the project scope and requirements and thus increasing the project time.

Technical Risks: This risk is controlled or managed by the project manager of the project (Glendon, Clarke and McKenna 2016).

1. iv) Logistical Risks: The contractor or the procurement manager are responsible for this project.
2. v) Cyber Risks or Data Security: The technical officer is responsible for controlling the risk.
3. vi) Regulations: Both the contractor and the client have the ability to control this risk.

The two dispute resolution approaches in this particular case study are given below:

1. i)  Negotiation: The first and the foremost approach for dispute resolution within the project of Victorian Desalination Plant is negotiation (Chance and Brooks 2015). It helps to set the differences between the two parties of the project. It is termed as the back and forth communication within them and thus resolving the conflicting between the two distinct parties. This approach helps in participating directly in various decisions that is affecting each party of Victorian Desalination Plant project. The requirements of both the parties are taken into consideration. A proper negotiated agreement becomes a contract and is enforceable (McNeil, Frey and Embrechts 2015). The main characteristics of this approach are that it is confidential and results in win-win solutions.
2. ii) Mediation: The second approach is mediation. It is the voluntary process where a specific impartial person, known as the mediator would help in communication as well as promotion of reconciliation within the two parties and hence allowing them in reaching to a mutually accepted agreement (Glendon, Clarke and McKenna 2016). The mediator describes the process to both the parties and thus the process is executed. The main characteristics of this approach are that it promotes cooperation and reduces hostility, resulting in win-win solution.

The occurrence or impact of the disputes can be easily managed by few ways. They are as follows:

i) Withdrawing: The first way is to withdraw. This approach is recommended for situations where withdrawing can bring better result and not preparing properly (Wu, Chen and Olson 2014).

ii) Compromising: The second way is compromising. Both the parties should get the chance to show their point of view and thus the scenario is compromised.

iii) Regular Meetings: When a large project is being executed, regular meetings should be undertaken for resolving such issues like occurrence of disputes (Soin and Collier 2013).

The above mentioned three ways would help to reduce the chances of disputes in a project.

Conclusion

Therefore, from the above discussion, it can be concluded that risks within a project are extremely common and thus should be mitigated on time. The management of risk is one of the most significant processes for properly identifying, managing and even assessing various threats or risks to the organizational earnings or capitals. All of these threats or risks could eventually come various sources like errors in strategic management, natural disasters, financial uncertainties, legal liabilities and many others. The risks related to information technology or data are given as the top priorities for any business. There are various strategies for the risk management and these strategies mainly involve the identification or control of threats to the various digital assets such as intellectual property, personal identifiable information or PIN of any customer or corporate data. The project risk management is the most significant aspect of the project management and this is utilized by the financial and operational project managers. The risk within a project is the likelihood, which states that any project would face failure while meeting all of its objectives. It is an event, an action or any hardware component, contributing in enhancing the chance of an uncertain event within the project. The above report has properly outlined the fundamental factors of the case study of Victorian Desalination Plant project. Two significant risks are provided each for three phases of pre-construction, construction and finally operational phase. The possible consequences are also given. For each of the risk, the party controlling it is given and two dispute resolution approaches are provided and the impact and occurrence of disputes are also provided

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