Haddad, B (2007) Risk management in the contractual language in the construction industry: The effect of exculpatory clauses on contractor bid price. PhD thesis, Indiana State University, USA.
Abstract
Exculpatory clauses are often used in construction contracts to shift potential risks of construction from one party to another. Hartman (1998) suggests that Canadian contractors use a risk premium between 9% and 19% as part of their contingency plan to alleviate the risks associated with accepting exculpatory clauses. This study was conducted to identify and quantify risk premiums U.S. contractors use to mitigate the risk associated with accepting five exculpatory clauses. These clauses allocate risk for: design errors, differing site conditions, construction errors, risks of payments, no damage for delays. The study also examined the correlation among the contractor's years of experience, company size and percent of self completed work and the contractor's risk premium for each identified risk. Seven research questions were developed for this study. The study compared the bid prices obtained from two groups of contractors/estimators (group A and group B), with different bid packages for the same project. While results of this study indicated that there was no statistically significant difference between bid prices obtained from group A and group B contractors. The results did indicate that there was a reduction in the bid amount of 23% between group A contractors' lump sum prices and group B contractors' lump sum prices. Based on the reported results, an alternative approach was recommended with the goal of reducing project costs. Also, recommendations were made to owners to better control for the identified risks.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Dallman, B |
| Uncontrolled Keywords: | contingency; payment; project cost; estimator; owner |
| Index terms: | estimator, risk premium, project cost, risk management, construction contract, construction industry, package, design error, owner |
| Subjects: | sociology, industry analysis, economics, contractual arrangements, professional practice, economic analysis, profession, risk assessment, contract type |
| Topics: | Risk Management, Procurement, Design Practice, Business Strategy, Cost Management, Research Practice, Stakeholder Management, Roles and Professions |
| Descriptive scope: | 3 PCT |
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