Construction Risk Identification and Allocation: Cooperative Approach

Abstract

Over the past decades, numerous research efforts have been undertaken concerning the allocation of construction risks. Although the research currently available provides many valuable insights into the issue, industry participants remain concerned over risk associated with construction contracting. Based on this problem, a research product was developed to aid contracting parties in identifying, assessing, and allocating each construction risk. After a three-phase survey methodology for data collection, three worksheets were developed to identify construction risks with high potential for conflict and to aid in assessing and allocating these risks to the appropriate parties. To complement the model worksheets, three tools were developed: flowcharts, to help determine which party should carry each particular risk; legal research; and risk allocation principles, to help select appropriate contract language to address the identified risks. This paper discusses (1) the risk assessment and allocation model, including its accompanying tools, followed by a legal research discussion that will help parties to better understand construction contracts; and (2) the legal terms that often cause misallocation of risk with severe consequences.