ASSESSING BUILDING CONTRACTOR'S CONTRACT RISKS: THE CASE OF GRADE ONE TO GRADE THREE CONTRACTORS

Construction projects are subjected to several risks driven from multiple risk factors. For example, projects are often delivered by several parties (stakeholders) under different circumstances which by itself induces risk on each other. Among the various stakeholders, the contractor has been identified to be the party that carries the highest number of risks, including many which originate from parties other than him/herself. In this regard the contractor is exposed to contractual risks which occur as a function of contract provision and clauses. This research study seeks to identify and evaluate potential risk factors contractors are exposed to while executing a contract. Using a questionnaire based survey research methodology; the study identifies major risks and determines their likelihood of occurrence as well as their impact. Further to this, the study also investigates the allocation of each identified risk factors from contractors perspective, and the risk management approach as perceived by local contractors. Based on their likely of occurrence, the research identified inadequacy of time or finance, late supply of information/ design data/ drawing, defective design, financial constraint, delay in payment, and inflation risk factors as the most common contract risks in the local construction industry. Key risk factors are also identified based on the level of impact, inadequacy of time or finance, exchange rate, delay in settling claim on overall performance, time and cost performance. Defective design, financial constraints, inflation on overall, time, cost and quality performance. Similarly, delay in payment and mistakes in document on time, cost, and quality performance, and time and cost performance respectively. In addition, the result shows that the allocation of risk to the parties to the contract is different to what is recommended in the literature. Regarding management practice in the industry, the study shows that contractors in the study do not conduct formal risk identification and analysis in their project management activities. The research concluded that to solve identified risks, as most of identified risk factors cannot be controlled or managed by grade one to three contractors. In addition, contractors working in this contract is expected to accept some of the risks. It is important to put additional conditions within the construction contract which is designed to solve the problem. Risk allocation should be done based on accepted principles. The risk management approach (identification, analysis, and response) being employed by the contractor is below average or not up to the accepted practice