Tiong, R L K (1992) Strategies in risk management of on-demand guarantees. Journal of Construction Engineering and Management, 118(2), pp. 229-243. ISSN 0733-9364
Abstract
When international construction expanded in the 1960s and 1970s, owners in countries in the Middle East demanded guarantees that they could draw on like cash. Contractors often had no choice but to comply. While this compliance is often a requirement and is sometimes an aid in obtaining contracts, it also exposes contractors to several types of dangers and risks, such as unfair calling of guarantees, the extend-or-call threat, and drain on their financial resources. These risks can be reduced if contractors would negotiate with the owners on the terms and conditions of the guarantees without touching the on-demand principle. For example, the guarantee should be drafted so that it cannot become effective until the construction contract is in full force and effect and the owner has carried out his obligations. A clause to reduce the guarantee amount in relation to the progress of the work will limit the contractor’s liability. If a contractor must face an unfair call, the contractor can attempt legal action to prevent the issuing bank in its country from honoring an unfair call on the guarantee.
| Item Type: | Article |
|---|---|
| Index terms: | risk management, international construction, face, demand guarantee, liability, compliance, strategy, construction contract, Middle East, guarantee, owner |
| Subjects: | psychology, physical geography and landforms, contract structure, economic analysis, management, contract type, strategic management, liability law, risk assessment, sociology, health safety and environment |
| Topics: | International Construction, Risk Management, Procurement, Organizational Design, Stakeholder Management, Business Strategy, Legal Issues, Health and Safety, Geographical Context |
| Descriptive scope: | 2 PC |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here