Research On The Risk Analysis And Control Of The Contract Of The International Engineering Project

In the recent years, as China's "globally-oriented" strategy is implemented and the related industrial structures are adjusted and upgraded, more and more construction enterprises began to enter the international market. In our country, more and more enterprises are engaged in the international engineering contracting and their scales are expanded. Although the current financial crisis has a large negative impact on the international engineering contracting market, because of our traditional markets are in Africa and Asia, so they are stably relatively. In 2008 China's foreign contracted projects completed turnover of 56.6 billion dollars, up 39.4% than last year; a new contract amount are 104.6 billion dollars, up 34.8%. In 2009 China's foreign contracted projects completed turnover of 77.7 billion dollars, up 37.3% than last year; a new contract amount are 126.2billion dollars, up 20.7%.On the other hand, we must also see clearly that there are a large number of risk factors in the process of international engineering contracting. Since the international projects are generally large projects which need great investment and have a long period. So it is a very complex process. What is more is that the project site is in foreign countries and it is more vulnerable to unpredictable external factors and it is resulting in a large number of the risk. If we underestimate of these risk factors it will results in major losses to the enterprise. As an important part of project management, the contract management is linked closely with business interests, and the large international engineering contracting business is paying more and more attention to it. Strengthening the prevention and control of the contract risk is the base of improving the performance of the contract and achieve the benefits objectives. In a sense, whether it is success on the risk management of the contracts has become a key factor of the success of the projects. Therefore, how to manage and control the contract risk has become an important issue to the international engineering contracting business.There are still many problems for the contractors of our country in the process of risk management of the contracts. For example, their risk awareness was rather weak, and they did not pay enough attention to risk management of the contracts; before contracting, they did not do research comprehensive and detailed and it was lack of detailed project management plan, They often did not completed understand of the risks identified in the contract and as a result of that there are many negative terms in the contract. In the course of performing the contract, they can not monitor the contract risk timely; they are insensitive to the new emerging risks. They can not claim by the contract timely and effective that where the changing volume and price of the project is obviously inconsistent with the contract. After the completion of the contract, they do not summarize the experience in the risk management of the contract. They do not build their own database of the risk management. So it can not give strong support to the follow-up projects. The existence of these problems would make the contractors in great risk and the final results are often that the contractors suffered significant economic losses. Therefore, how to improve and strengthen the capacity in contract management and risk management and how to improve the capacity in coping with the risk of the contract are the urgent problems for the contractors in our country.At first, the paper will review the related theories such as the contract management and the risk management and analyze the problems of the contracts in our country in the risk management of contract and find out their defects. Then it will identify the contract risk which is divided into systematic risk and non-systemic risk and evaluated from the qualitative and quantitative. Then it proposes risk management system framework of the contract and discusses on how to conduct risk control and how to strengthen and improve the work of the contract management. At last, the paper will test the proposed theory by a case. This paper will give some advice to the contracts of our country on how to conduct risk management of the contracts by the studies on the risk management of the international contract.