Laryea, S A and Hughes, W P (2006) The price of risk in construction projects. In: Boyd, D (ed.) Proceedings of 22nd Annual ARCOM Conference, 4-6 September 2006, Birmingham, UK.
Abstract
Construction projects are risky. However, in practice, contractors may be unable or unwilling to make appropriate allowances for the risk. Formal risk models that contractors can incorporate into the bidding process have proliferated in recent years but they are not used in practice. Introducing more models may, therefore, not necessarily help. A better understanding is needed of how contractors arrive at a price, and how that price is influenced by the apportionment of risk. This question is the starting point for an ethnographic investigation into how contractors price risks. The purpose is to develop a model for assessing risk and opportunity in construction projects for the purpose of contingency allocation in a risk and reward sense. As risks can be spread, the price of building up a contingency will generally be smaller than the impact of a risk. Price of risk is smaller than the impact of risk.
| Item Type: | Conference Paper (Paper) |
|---|---|
| Uncontrolled Keywords: | contingency; contractors; risk apportionment; risk assessment; tendering |
| Index terms: | risk assessment, construction project, bidding, risk apportionment, investigation |
| Subjects: | bidding, financial risk, data collection methods, production management |
| Topics: | Procurement, Project Management, Cost Management, Research Practice |
| Descriptive scope: | 3 PCA |
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