Managing Construction Risks

Abstract

Construction is a process governed by complicated contracts and involving complex relationships in several tiers, and there are many risks involved in construction projects. Generally, there are three kinds of construction risks. They relate to construction finance, construction time, and design. The present paper addresses these risks in detail in light of the different contractual relationships existing among the functional entities involved in the design, development, and construction of a project, and identifies the proper steps to be taken in the analysis and management of construction risks. Surprisingly, although there are individual contracts between the owner and the contractor and between the architect/engineer and the owner, there exists virtually no official contractual relationship between the architect/engineer and the contractor. Examination of such relationships, or lack thereof, reveals that responsibility is not equally shared among all entities involved in building design and construction. Moreover, the present paper identifies the various entities involved in risk generation and management, and proposes strategies that can curb such risks at different construction phases.