Rebalancing Risk And Rewards

The Australian construction industry is suffering from low and declining profits; caused in large part by the misallocation of risk and a misunderstanding of the forces driving further efficiencies and productivity. Whilst the minor ‘pain’ of low profits is borne primarily by the contractors, many clients are finding it impossible to escape the consequences of major problems such as their D&C contractor becoming insolvent, intractable or intransigent. Many of these clients are finding themselves under resourced to manage these major problems when they arise. This paper identifies some of the structures and assumptions creating risk within construction projects and suggests a strategy to better align risk and reward.