Heathrow Terminal 5 Risk Management Essay

2399 Words Mar 20th, 2010 10 Pages

Work on the London Heathrow terminal 5(T5) began in 2002 after a 4 year public enquiry. It took six years to build at a cost of £4.3bn. The facility, situated on a 251hectar site had 6000 people working on site at any one time (Health and Safety Executive, 2005). It boasts of 30,000 square meters of glass walls, has 60 new aircraft stands and includes 13km of tunnels which were bored for baggage handling and rail links (BBC, 2007a).
This report will be evaluating the project risk management in the construction of T5 airport. It will start with a brief background on Heathrow terminal 5. The report will then take a critical look at some of the British Airport Authority’s (BAA) method of risk allocation and identification. It
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It was of their opinion that any delays or cost overruns would still affect them in terms of lost revenue and tarnish their brand name. This was supported by studies which revealed that major UK construction projects and other international airports had suffered delays and costs had overrun due to disputes between the parties involved over responsibility. (Davies et al, 2009).
The inclusion of the open book cost reimbursable contract in the T5 agreement also meant that BAA was able to effectively control the project environment. In choosing to take on all the risk, BAA as the client had to ensure that all its suppliers and contractors were providing the best possible service. As suggested by Chapman and Ward (2003) one of the main disadvantages of this type of reimbursable contract is that contractors may not use a cost effective approach and may even be excessive in their testing and purchasing. Conversely, a fixed price contract where the contractor caries all the cost creates an adversarial environment and more often than not leads to legal disputes when it does not go as planned (Chapman and Ward, 2003). BAA’s approach was to incorporate a detailed ‘bottom up’ cost analysis which was outsourced to independent consultants as well as working with more than one supplier to encourage and maintain competition and this proved successful (National Audit office, 2005)

In any risk

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