A Conceptual Model for Risk Allocation in the Construction Industry

Abstract

Appropriate risk allocation influences positive project delivery on construction projects while inappropriate allocation results in disputes, quality shortfalls, time and cost overruns. The existing body of knowledge provides guides on how risks should be allocated between the contracting parties. Nevertheless, the full appreciation of risks allocation is rarely given as risk allocation is more than just which party should bear a risk. This study provides a conceptual model of the various ways risks could be allocated. Furthermore, the FIDIC-Redbook (1999), NEC3 (2005/2006) and JCT Major building contract (2005), JBCC (2014), JLC (1972) and open national bidding contract (2013) are used to demonstrate the practicality of the conceptual model. An understanding of risk allocation prerequisites might help to mitigate risks that influence project performance negatively. The use of this conceptualization may help to assign a risk with more than one treatment option to maximize a positive outcome of a negative risk factor.