Allocation of Risk on Construction Projects
The allocation of Risk in a Project mostly is biased towards the Main Contractors very rarely will the Client put his hand up to take a portion of the Risk for whatever it is , then the proverbial vultures are circling.
There are various levels of Risk and acceptable Risk for the Main Contractor and he will diligently make that Assessment at the time of Tender then clearly clarifying this in their Bid.
As the Project progresses various items, scope change , latent conditions etc are encountered during the Works and then various Instructions , Change Orders are issued accordingly but from time to time the Client sneaks in or just arrives at a point where he thinks for whatever reason that the Contractor should or needs to incur that Risk and should have either made it his business to find out about it, hardly fair and reasonable you would think.
The Client for most parts is responsible for providing;
- A Site suitable for constructing the Project on ,
- undertaking the various due diligence on ground conditions ,
- design and approvals.
- Providing compliant Design and Drawings to undertake the Works so as to comply with the necessary Standards.
- Providing a Consultant Team experienced in assisting the delivery of the Project.
The Contractor is responsible for delivering ;
- A Project that complies to the Design Drawings and the Intent of the Design.
- Deliver the Project in line with the Budget Estimate and in a timely Manner.
- Deliver the Project in a Tradesman like manner.
- Deliver the Project in a safe manner free of LTI’s.
There may be other points for both parties but generally this is accepted state of play. Then for whatever reason the Client insists on imposing additional Risk onto the Contractor and his Subcontractors, why you may ask as do the Contractors. Along with a Contract end date which does not change.
As Contractors are exposed on many fronts most of this exposure is related to Cash Flow , without cash the Contractor and his Subcontractors will slowly start to struggle and fall over leaving a path of destruction of lost jobs , unpaid debts etc.
You may ask what causes this “brain snap” is it lack of experience by the Clients Project team , may be its just greed from the Client or it could be that the relationship has soured so badly over the life of the Contract this is a way to squeeze the Contractor until he usually quits out of frustration.
Whatever the reasons from both sides it is an unsatisfactory position to get into, surely there is a safer way of delivering Projects for the benefit of all parties.
Australian Building and Construction Commission
The Australian Building and Construction Commission is the keeper of standards for the Building and Construction sectors. The ABCC promotes understanding and enforces compliance with Australia’s workplace laws in the Building and Construction Industry.
If you are an employee.
You have a set of rights and requirements that will protect you as you go about your work with intimidation from others. The ABCC monitors and promotes compliance with the BCIIP Act , designated building laws and the Code by building industry participants who perform building work.
If you are a Contractor or Subcontractor.
The Main contractor is the entity who manages or controls a building site.
Their responsibilities including engaging subcontractors and ensuring that all requirements of the Code are met, when they are contracted to undertake Commonwealth funded building work .
Subcontractors are entities or individuals engaged by a Main contractor, or another subcontractor, to undertake building work. They aren’t responsible for management or control of
There are other requirements that cover;
- Tendering
- Engaging Subcontractors
- Construction phase
- Compliance with the Code
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