Research Article
Sep 1980
Allocating Risk and Incentive in Construction
Authors: Raymond E. Levitt, David B. Ashley, AM.ASCE, and Robert D. Logcher, M.ASCEAuthor Affiliations
Publication: Journal of the Construction Division
Volume 106, Issue 3
Abstract
The allocation of construction risks between owners and their contractors has a significant impact on the total cost of construction to the owners. Previous quantitative research in this area has looked only at the negative risk aversion consequences of accepting risk, and has usually concluded that owners, being less risk averse, should accept all risk. The writers present a quantitative risk analysis model that incorporates differing risk perceptions, the positive incentive value of accepting controllable risks, and alternative incentive systems. Application of this model results in a balanced allocation of controllable and uncontrollable risks between owner and contractor in such a way that the owner's expected total cost is minimized. An example application of the model to a large mass transit construction project is presented.
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Information
Published In
Journal of the Construction Division
Volume 106 • Issue 3 • September 1980
Pages: 297 - 305
Copyright
© 1980 American Society of Civil Engineers.
History
Published in print: Sep 1980
Published online: Feb 11, 2021
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Affiliations
Raymond E. Levitt
Assoc. Prof. of Civ. Engrg., Massachusetts Inst. of Tech., Cambridge, Mass.
David B. Ashley, AM.ASCE
Asst. Prof. of Civ. Engrg., Massachusetts Inst. of Tech., Cambridge, Mass.
Robert D. Logcher, M.ASCE
Prof. of Civ. Engrg., Massachusetts Inst. of Tech., Cambridge, Mass.
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Terms of Use: ASCE Library Cards are for individual, personal use only. Reselling, republishing, or forwarding the materials to libraries or reading rooms is prohibited.
Terms of Use: ASCE Library Cards are for individual, personal use only. Reselling, republishing, or forwarding the materials to libraries or reading rooms is prohibited.