Contractual risks in the New Zealand construction industry: Analysis and mitigatioin measures

Jasper Mbachu, Samuel Taylor

Research output: Contribution to journalArticleResearchpeer-review

Abstract

While tendering for jobs, a contractor is expected to analyse the various risks in each prospective project and price them appropriately. Contingencies are included in the tender price to cater for the various risks based on their impacts on the project targets and profit margin. Currently in New Zealand (NZ), there is little or no information on the various contractual risks and their mitigation measures. This has led to contractors over compensating or under compensating for risks with costly consequences. This study aimed to establish priority
contractual risks in the NZ construction industry, and their mitigation measures. The research was based on a questionnaire survey of consultants and contractors. Descriptive statistics and multi-attribute techniques were used in the data analysis. Results showed 21 risk factors which were segregated into 6 broad categories in diminishing levels of significance as follows: Site conditions, main contractor, pricing, subcontractor, external and client- related risks. Putting tags and conditions to risky price items in the tender bids, and transferring the risks onto other parties were analysed as the 2 most effective out of the 5 key risk mitigation measures identified. Being cautious of the priority risks and application of the identified effective risk mitigation measures could guide contractors and the project team to more appropriately budget for and respond to risks, thereby ensuring more satisfactory project outcomes.
Original languageEnglish
Pages (from-to)22-33
JournalInternational Journal of Construction Supply Chain Management
Volume4
Issue number2
DOIs
Publication statusPublished - 31 Dec 2014

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