EFFECTS OF RISK MANAGEMENT STRATEGIES ON TIME-COST OVERRUN IN SELECTED ROAD CONSTRUCTION PROJECTS IN KENYA

Abstract

Road infrastructure plays a crucial contribution to the socio-economic development of any country. This is true in the Kenyan context where road transport is the most widely used mode of transport. However, construction of some of these roads has led to both time and cost overrun due to poor risk management strategies used. Nairobi Expressway Road project (A8), a 27-kilometer four-lane dual carriageway had an initial budget of Ksh.65.2 billion, however, this cost surged by 33% in less than 2 years. Another road construction project is the Isebania-Kisii-Ahero (A1) Road Rehabilitation project. It’s a 172-kilometer road that connects Tanzania in the south and South Sudan in the north. Kenol-Isiolo Road (A2), the 219-kilometer highway is the third road under this study that is being built in two segments: Kenol-Marua (84km) and Marua-Isiolo (135km). There is a need to investigate risk management strategies the road construction firms implemented to mitigate, avoid, reduce, or transfer uncertainties during the execution of these projects. This study therefore was conducted to determine the relationship between risk management strategies and time-cost overrun. The specific objectives of the study were; to determine the effect of risk avoidance strategy; to assess the influence of risk reduction strategy; to examine the relationship between project loss control as a risk mitigation strategy, to determine the influence of insurance risk transference strategy; to assess the moderating role of dynamic capabilities of the construction sector on the relationship between risk management strategies and time-cost overrun in selected road construction projects in Kenya. This study used an explanatory research design. Target population was all employees at the management level of the three selected road projects. Respondents were selected using a purposive sampling technique. Primary data were collected using structured questionnaires, while secondary data were obtained from annual corporate reports, KeNHA database. Data analysis was a mixture of descriptive statistics and inferential statistics. A moderated hierarchical multiple linear regression model was fitted to assess the moderating role of dynamic capabilities on the relationship between risk management strategies and time-cost using SPSS version 28 software. The results indicate that the predictors explained 28.1% of the variance (R

2= .373, Adj R

2 = .281), F= (4,35) =5.73, p < .005; t=5.64 at 0.01 significance level. It was determined that risk avoidance strategy had a positive significant effect on time-cost overrun at 95% confidence level(β = 0.34,t(34) = 2.47, p = 0.019). This shows that the higher the company engages in risk avoidance, the higher the chances that they would deliver on the road construction project by minimizing the project cost and time overruns. It was also noted that Risk Reduction Strategy had a negative significant effect on time-cost overrun at 95% confidence level(β = −0.35,t(34) = −2.87, p = 0.007). This indicates that, the more a construction company invest in Risk Reduction, the lower the chances that they will deliver on the road construction project by minimizing the time and cost overruns. Project loss control (β = −0.10,t(34) = −0.79, p = 0.433), had negative insignificant effect on time-cost overrun. Insurance risk transference strategy(β = −0.25,t(34) = −2.47, p = 0.019), this indicates a negative but significant effect on time-cost overrun. Finally, Dynamic capabilities (β = −0.03,t(34) = −0.10, p = 0.924),had a moderating effect on risk avoidance, but not on risk reduction, insurance risk transference and project loss control. There is need by the road construction firms’ management to deepen the application and implementation of risk management strategies in the construction sector.