Construction Risk Identification and Allocation: Cooperative Approach
Publication: Journal of Construction Engineering and Management
Volume 139, Issue 9
Abstract
Over the past decades, numerous research efforts have been undertaken concerning the allocation of construction risks. Although the research currently available provides many valuable insights into the issue, industry participants remain concerned over risk associated with construction contracting. Based on this problem, a research product was developed to aid contracting parties in identifying, assessing, and allocating each construction risk. After a three-phase survey methodology for data collection, three worksheets were developed to identify construction risks with high potential for conflict and to aid in assessing and allocating these risks to the appropriate parties. To complement the model worksheets, three tools were developed: flowcharts, to help determine which party should carry each particular risk; legal research; and risk allocation principles, to help select appropriate contract language to address the identified risks. This paper discusses (1) the risk assessment and allocation model, including its accompanying tools, followed by a legal research discussion that will help parties to better understand construction contracts; and (2) the legal terms that often cause misallocation of risk with severe consequences.
Get full access to this article
View all available purchase options and get full access to this article.
Acknowledgments
The Construction Industry Institute, particularly the CII Research Team 210, was instrumental in the success of this research study. Thank you to all involved in this team for your expertise and insight into the real-world implications of construction risk.
References
American Council of Engineering Companies, and Associated General Contractors of America. (1998). Enlightened risk allocation: The twenty-first century owner’s guide to cost-effectiveness, Associated General Contractors of America, Arlington, VA.
Ashley, D. B., Dunlop, J. R., and Parker, M. M. (1989). Impact of risk allocation and equity in construction contracts, The Construction Industry Institute, Univ. of Texas, Austin, TX.
Beacon Constr. Co. v. United States, 161 Ct. Cl. 1; 314 F.2d 501; 1963 U.S. Ct. Cl.
Construction Industry Institute (CII). (2003). IPRA: International project risk assessment, The Construction Industry Institute, Univ. of Texas, Austin, TX.
Gibson, E. G., Vines, E. F., and Walewski, J. (2004). Risk assessment on international projects: A management approach, The Construction Industry Institute, Univ. of Texas, Austin, TX.
Hanna, A. S. (2001). Quantifying the cumulative impact of change orders for electrical and mechanical contractors, The Construction Industry Institute, Univ. of Texas, Austin, TX.
Hartman, F. T., Patrick, S., and Rafi, A. (1998). “Appropriate risk allocation in lump-sum contracts—Who should take the risk?.” Cost Eng., 40(7), 21.
Ibbs, W. C. (1986). Determining the impact of various construction contract types and clauses on project performance, The Construction Industry Institute, Univ. of Texas, Austin, TX.
Jamsar, Inc. v. United States, 194 Ct. Cl. 819; 442 F.2d 930; 1971 U.S. Ct. Cl.
Jergeas, G. F., and Hartman, F. T. (1996). A contract clause for allocating risks, American Association of Cost Engineers (AACE) Int., Morgantown, WV.
Johnson v. Chicago & P. Elevator Co., 105 Ill. 462; 1882 Ill.
Jones, R. M. (2001). “Lost productivity: Claims for the cumulative impact of multiple change orders.” Publ. Contract Law J., 31(1), 2, 26, 28, 38, 40, 41.
Li, B., Akintoye, A., and Hardcastle, C. (2001). “VFM and risk allocation models in construction PPP projects.” Doctoral research, Edinburgh Univ., Edinburgh, UK.
Megens, P. (1997). “Construction risk and project finance—Risk allocation as viewed by contractors and financiers.” Int. Constr. Law Rev., 14(3), 5–32.
Merriam-Webster, Inc. (1997). The Merriam-Webster dictionary, 50th Anniversary Ed., Merriam-Webster, Inc., Springfield, MA.
Smith, R. J. (1995). “Risk identification and allocation: Saving money by improving contracts and contracting practices.” Int. Constr. Law Rev., 12(1), 40–71.
Swanson, J. R. (2006). “Contracting to appropriately allocate risk.” M.S. thesis, Univ. of Wisconsin-Madison, Madison, WI.
Sweet, J., and Schneier, M. M. (2004). Legal aspects of architecture, engineering, and the construction process, 7th Ed., Cengage Learning Inc.
Wilson, D. J. (1993). Allocation of insurance-related risks and costs on construction projects, The Construction Industry Institute, Univ. of Texas, Austin, TX.
Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 139 • Issue 9 • September 2013
Pages: 1098 - 1107
Copyright
© 2013 American Society of Civil Engineers.
History
Received: Jun 15, 2010
Accepted: Feb 17, 2013
Published online: Feb 19, 2013
Discussion open until: Jul 19, 2013
Published in print: Sep 1, 2013
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.