Understanding Risk Allocation In FIDIC Construction Contracts

Construction contracts do more than set out scope, price, and timelines – they also determine how risks are allocated between the parties.¹ Risk allocation is often described as the "soul" of a construction contract because it defines who bears responsibility when projects face design errors, cost overruns, delays, or unforeseen site conditions.²

The Fédération Internationale des Ingénieurs-Conseils ("FIDIC") suite of contracts, used widely in international infrastructure and energy projects, was designed to allocate the risks between the Employer and the Contractor in a fair, consistent, and predictable manner. Effective risk allocation promotes cooperation, reduces disputes, and supports successful project delivery. Poorly balanced risk allocation, by contrast, can increase costs, deter bidders, and lead to unnecessary disputes.