Risky Business - A New Take On Allocating Risk In Construction Contracts

Construction contracts are, at their very heart, a written agreement of how risks are to be allocated between the parties to a construction project. Those risks can be categorised as legal, contractual and commercial by their nature.

Where standard form construction contracts such as the FIDIC suite have attempted to make that allocation within the conditions of contract, it is most often based on a consideration of who can best bear the obligation and consequences of any particular risk on a project, including the ability to insure in order to cover its occurrence.

At its simplest level, the Employer (and its designer) would be responsible for the design of the project and the contractor would be responsible for the construction of the project in a traditional construction contract. However, both the design and construction risk are passed over to the contractor in a 'design and build' situation and the Contractor will, quite properly, increase and build into