Risk in construction subcontracting

Abstract

Risk is inherent in every aspect of the construction industry. This risk is allocated by the contract documents which establish the relationships between the parties in a construction contract. Often, when risk is not appropriately proportioned in a contractual agreement, contractors and subcontractors add significant premiums, or risk allowances, to their bids to reduce the potential negative consequences if the risk event occurs. This paper investigates the risks in construction contract agreements which general contractors and subcontractors indicated most affects their bids as suggested by the frequency with which a contingency for risk is included. It also investigates the contractor's success in gaining a time extension or claim for additional cost for the same conditions. Survey results indicate that both general contractors and subcontractors generally feel that contract provisions are fair; however, they often include an allowance for risk in their bids depending on their level of perceived risk