REDUCING CONTRACT RISK THROUGH THE RIGHT CONTRACTING STRATEGY

Abstract

The construction industry has different characteristics that may lead to claims and disputes between the different parties. The flexibility of Owners to make changes during the execution phase, the distribution of risks between Owners and Contractors and the degree of Owner’s involvement in the project control during construction time may vary from a Procurement strategy to another. Procurement strategy would be more concerned about defining the appropriate project delivery method and selecting the best contract type that suite the project environment and objectives. Project delivery methods include: Traditional way of delivery; Design then Bid then Build (DBB), Construction/Project Management at-Risk (CM@R), Design then Build (DB), Partnering options like Build-Operate-Transfer (BOT), Build-Own-Operate-Transfer (BOOT), Public-Private-Partnership (PPP), and Integrated Project Delivery (IPD). The contract main types include: Price given in advance contracts, Cost Reimbursement contract and Time and Material contracts or we can call it Re-measured contracts. This study willhelp decision-makers deciding the best delivery method to avoid project associated risks. This will be done through decision-support framework and auxiliary software to ease the selection process. The study will define clearly the criteria needed in deciding the best project delivery method. Then, develop a framework for the selection process. In order to state the most important criteria, a questionnaire survey was designed and distributed among different construction parties: clients, project managers, consultants, and contractors. The proposed framework uses weighted evaluation matrix to determine the best delivery method. The proposed framework was then implemented on three illustrative case studies to ensure its applicability in Egypt. Key Words: Contracting strategy, Delivery Methods, Selection Framework, and Risk Management.