Contractual uncertainty and risk allocation

Abstract

In order to be fulfilled, civil engineering projects usually entail allocation of huge resources of different types. But in the same time, financing large resources for a project means assigning of great responsibilities. So it is common that a single contractor will not take the whole responsibilities corresponding for a big project, but these will be shared through an ample selection from the multitude of existing types of contracts nowadays.

In the same time, sharing the responsibilities represents sharing the risks corresponding to the specific parts of the civil engineering projects. I personally do show a particular interest towards the manner construction business deals with risk management, risk identification, risk quantification and the way risk is controlled throughout the project and allocated to different parties by means of contracts.

This report will be focused on analyzing different existing types of contracts, how they serve the involved parties and how responsibilities and benefices are shared in order to achieve a common goal. Hereinafter the choice between basic types of complex contracts (lump sum contract, unit rate contract, guaranteed maximum price contract, pure incentive contract, guaranteed maximum liability contract, percentage fee contract, cost reimbursable contract) will be further discussed.