Construction Risk Allocation

Improved Essays
6.0 Risk allocation:

The important and most crucial key point in construction project is risk. All the new methods researches and new innovations in construction management is to reduce the risk in project, to increase cost certainty, reduce time extensions in projects and satisfy the clients. Every procurement method has the risk allocations in different ratios depending up on method. While choosing the procurement methods the risk associated to every possible procurement method should be assed by the client. Risk is shared between the contractors and principal some times it may be recovered by the insurance and sometimes relocated by other parties. In the contract the client and the contractor or other partied describe how risk is shared
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The provision of contract shows who is liable of what risks and which parties take the responsibility for the risk arise in the construction. If the contractor is not given enough allocation of risk there may be a situation where contractor may face financial problems and gets into liquidation. Then the client cannot bare the cost of that associated amount though the work is completed by the contractor cost.

Looking into any procurement method risk is shared between contractor and client but in different ratios in different method. The below table b illustrates the ratio of risk in different procurement
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This decision is very crucial, so proper assessment and analysis should be done in choosing the right procurement method. In this contemporary construction industry constriction procurement methods are of many types. Different methods have different advantages and disadvantages. It is the knowledge of the client or the project manager that which procurement system is chosen for what construction project. The project success was not always because of the experience of the clients but the there ability to identify the role of the project management organization, which is the focal point for every project. All customers require their buildings on time, within budget and of the highest quality. However, some clients do stress that some criteria are more important than others. There are many derivatives of each method. (Walker, 1994) . Lack of improper involvement of client and not keeping the management informant about the changes required in the project leads to dissatisfaction of clients. This factor is noticed to be common in the type of clients who categorize themselves as having a good technical knowledge and knowledge in market factors but have limited awareness of the industry. (Bennett & Flanagan, 1983) And (Hewitt,

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