Managing Risk

Various educational publications provide educational insight into the issue of risk allocation. Among them are

• The Construction Industry Institute’s (CII) Contract Risk Allocation and Cost Effectiveness study
• AGC of America/Consulting Engineers Council’s jointly published Owner’s Guide To Saving Money By Risk Allocation and video Managed Risk or Wild Gamble: Getting on the Team.

Noted in these publications are the conclusions that

"widely accepted principles of risk allocation is that a given risk should be assigned to the party to the contract best able to evaluate, control, manage and bear it"

and that

"Misallocation and misperception of risks has resulted in owners paying more than necessary for many projects, due to bid contingencies and unanticipated involvement in dispute resolution by owner’s staffs, consultants and attorneys. Improper risk allocation can also cause additional costs in the form of delays to project utilization."

Click on the links below for discussions on some of the common areas where AGC NYS sees risk being improperly allocated.

• UNFORESEEN CONDITIONS
• DELAY DAMAGES
• DESIGN DELEGATION
• DESIGN ERRORS
• INDEMNIFICATION
• LIMITATION OF LIABILITY
• LIQUIDATED DAMAGES/BONUSES