Abstract:
Proper management of risk by contractors is essential from the viewpoint of the long-term
ability to survive in a highly competitive bidding environment. An understanding of the
various elements of the risk assessment process is critical for contractors and their impact on
the bid/no-bid and the mark-up decisions. The paper examines allocation of construction
versus business risk and the quantification of risk involved at the bidding stage of projects.
The research found that contractors are aware of the impact of different types of procurement
systems on their risk exposure. The fact that contractors carry an additional business risk
under the design and construction procurement method is a further important fmding of this
research. This additional business risk can be as high as 50% of the total risk for design and
construct projects. Specific individual characteristics of the contractors surveyed play a
significant role affecting the size of the project risk contingency, which tends to fall as
knowledge and experience of contractors improves.
It was also found that contractors have varying expectations of profit, depending on company
characteristics. These expectations vary with economic condition and need to obtain the
contractor's work.
