Au, Chung Yu Maria (2013) An optimal contract strategy in managing extension of time provisions in building contracts. PhD thesis, Hong Kong Polytechnic University, Hong Kong.
Abstract
Some employers tend to transfer as much time-related risk as possible to contractors by removing contractors' entitlements to Extension of Time (E. O. T. ). However, not all these risk aversion provisions are legally enforceable or cost effective. This study aims at developing guiding principles for employers) to include legally sound E. O. T. provisions in contracts and providing a model for assessing the cost for transferring delaying risks for employers' consideration. The first part of this study addresses the legal concern. Support is drawn from the literature and principles of law. In addition, eight professionals have been interviewed to understand their pragmatic considerations in practice. This part reveals that for delays caused by employers, omission of E. O. T. provisions may render time 'at large' and inappropriate deletion may be classified as unfair contract terms which may be unenforceable in courts. Employers should be aware of the legal rules and strike a balance between fairness to contractors and attainment of employers' project goals. Risk allocation through contractual provisions involves financial considerations. In the second part addressing the financial concern, deletion of E. O. T. due to inclement weather is selected as the illustrative example. As contractors' pricing for risks in tenders determines how much the employers have to pay, a model is developed to find out contractors' behavioral pattern in pricing weather risk. This is done by investigating the relationships among the weather history, contractors' risk perception, attitudes and behaviors. The term 'situational variables' is further introduced to fill in the gaps between risk attitude and behavior. Questionnaire data was collected from building contractors in Hong Kong. The survey reveals that contractors of different sizes would have different patterns of risk behaviors. Their behaviors would also be affected by different situational variables, however, they generally consider employers' reputation to honour payment on time, reasonableness of the amount of liquidated damages, etc. as very important factors. Regression formulae have been formulated to enable employers to assess the number of delaying days priced in tenders. The high predictability of the model has been confirmed by interviewing three contractors and by substituting the data of three real projects into the model.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Chan, E H W and Shen, L Y |
| Uncontrolled Keywords: | contract terms; building contract; liquidated damages; payment; pricing; building contractor; employer; professional; Hong Kong; weather; interview |
| Index terms: | interview, risk attitude, survey, liquidated damages, risk perception, questionnaire, contract strategy, risk behaviour, weather, history, contract term, building contract, building contractor, pricing, Hong Kong, risk allocation, fairness |
| Subjects: | data collection methods, air quality, architectural and construction history, contractual condition, contract type, practitioner, contractual arrangements, economic analysis, decision-making and reasoning, contractual remedy, Geography, financial risk, leadership, environmental hazards |
| Topics: | Geographical Context, Procurement, Sustainability, Research Practice, Business Strategy, Cost Management, Roles and Professions, Organizational Design, Contract Administration |
| Descriptive scope: | 5 PCTEA |
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