Research On The Allocation Of Risks Inducing Contract Price Adjustment In The Construction Project

It has formed a unified understanding that proper risk allocation is positively related with project management performance in both theoretical research and practices. However, risk allocation process still exist the following problems in practices:(1) The contractor will act dutifully if they obtain reasonable premium on the same time they undertake some project risk, but they ignored the impact of behavioral factors—risk preference on the efficiency of the risk allocation.(2) Most clients considers risk allocation has completed after the contract be signed, the they rarely consider the problem that due to the incompleteness of the construction contract, the initial risk allocation need to be adjusted during the construction. A more scientific and proper risk allocation scheme can be formed, and thereby the disputes arose by risk sharing can decrease if the above two problems can be successfully resolved. Based on the literature review, 7 risk which could induce contract price adjustment was defined as the study research object in this paper,the risk allocation scheme embeding two contracting parties’ risk preference was developed, the system that could guarantee efficiency of above risk allocation scheme was draw up, and the effective adjustment mechanism corresponding to each kind of causes that lead initial risk allocation adjusted was identifies in this paper. This article mainly includes two contents as follows:Firstly, this paper establishes the index system of risk allocation with the basis of the literature research, and develops the quantitative model of the risk location using the fuzzy set theory and TOPSIS which could add the risk preference of the clients to the process of the risk location with the technology of fuzzy numbers transforming. Meanwhile,This model establishes the relationship between the proportion of the risk location and the contract types. To certify this model, this paper uses a specific case to show the calculation process and analyzes the difference between the risk allocation scheme with the condition of the different risk preference levels. The result of the case analysis will provide the advice to the client when dealing with risk allocation decisions.Secondly, the efficiency of risk allocation scheme can be guaranteed by the incentive and constrained contract terms that added on contract negotiation phase was brought forward in this paper. 17 staffs from client and contractor units were interviewed to form a set of incentive and constrained contract that could guarantee efficiency of risk allocation scheme. The finding are as followed:(1) The incentive contract terms such as economic incentives, contractor’s right guaranteeing can be added by two contracting parties’ on contract negotiation phase to guarantee efficiency of risk allocation scheme.(2) The constrained contract terms such as such as economic punishment, clearly defining the contents of the contract can be added to guarantee efficiency of risk allocation scheme.Thirdly,7 cases which has been adjustment of the initial risk allocation was analyzed in this paper,common causes that resulting in the adjust of the initial risk allocation was recognized, and the adjustment paths was analyzed,then the relationship between causes that lead initial risk allocation adjusted and the adjustment paths was built. On this basis, the risk allocation adjustment strategy was proposed in this paper. The finding are as followed:(1) The strategy such as contractor’s variation application could be adopted to avoid the loss which caused by the change of status.(2)Due to initial risk allocation is not applicable for the change of status or the unforeseen risk happened, the renegotiation mechanism that conclude variation, signing supplemental agreement and claim could be adopted to adjust the initial risk allocation.(3) Due to vagueness of the initial risk allocation and thereby the disputes arose, the self-fulfilling mechanism which mainly conclude negotiating settlement based on contract can be adopted.(4)The third-party fulfillment mechanism can be adopted in this case of the self-fulfilling mechanism failing to solve the disputes about adjustment of the initial risk allocation.Findings of the research will develop a quantitative model risk allocation embedding two contracting parties’ risk preference, and form a strategy set of risk allocation efficiency guaranteeing, both of them will contribute to establish a more proper and scientific risk allocation scheme; the findings will also built risk allocation adjustment strategy, which will be favorable for reduce disputes arose by risk allocation adjustment in practice.