A proposed framework for contractual risk assessment by contractors during the bidding phase.

Abstract

Construction contract administrators play a key role in advising owners on the choice and drafting of contract conditions. On the one end, industry practices may simply involve adopting standard forms of such conditions, as these are published and periodically updated by numerous professional organizations. On the other end, practices such as drafting a fully customized set of conditions are known to be not uncommon. Contractors who perceive risks or ambiguities in owners’ prepared conditions have limited leverage in negotiating them, and qualifying their bids may pose the risk of such bids being held unresponsive by owners. The objective of this research work is to offer a structured approach for scrutinizing during the bidding phase the terms of the contract already decided upon by projects’ owners and incorporated as part of the bidding documents. The adopted methodology involved reviewing the relevant literature, scrutinizing the stages involved in the bidding phase, conceptualizing a framework embedding the various courses of action to be possibly adopted by participating bidders and comparing such actions against one another, validating the use of the proposed framework through examining several contract clauses that were identified as either ambiguous or unfair, or both, and underlying a recently arbitrated construction dispute. The research outcome is meant to provide contractors with a structured process for allowing them to undertake the proper due diligence in reviewing and identifying the risks inherent in the conditions of construction contracts. The proposed courses of action are expected to minimize the likelihood of eventually getting into disputes that could otherwise arise in connection with those contract conditions characterized with clarity and-or fairness issues.