Risks Allocation
in Construction Projects
By Mahmoud Fat'hi Bader (M.Sc. in Construction Law and
Dispute Resolution) Assistant Manager-Projects Engineer- DIB
One of the main feature of the
Principles of risk allocation:
manage these risks.
Risk manage-
Standard
Forms of Contracts like
Risks are usually shared between the
ment is defined in British Standard as:
FIDIC that the risks are fairly allocated
contracting parties involved in the
''the process whereby decisions are
between the contracting parties.
construction project. In traditional
made to accept a known or assessed
However, in many occasions the
construction contract this can be clas-
risk and/or the implementation of
parties used to modify those terms
sified as risks shared between the
actions to reduce the consequences
provided in the standard forms. It is
employer and the engineer from one
or probability of occurrence."
important to allocate the risks to the
side and risks shared between the
If the risk is not allocated in the agree-
party who can control them. In this
employer and the contractor form
ment then a dispute may arise
paper, the risk will be generally
another side.
between the parties then the following
defined and the criteria's for allocating
The risk can be measured based on its
criteria may be followed by Arbitrator
the risk will be highlighted. Then the
consequences which can be classified
to examine who will bear the risk: "1-
risks in construction industry will be
in to the following types: negligible,
which party could best foresee that
discussed. Next, the relationship
controlled, critical and catastrophic
risk? 2-Which party could best control
between the risk allocations and cost
consequences. Data available from
that risk and/or its associated conse-
will be pointed out. In addition to the
safety, meteorological and insurance
quences? 3- Which party could best
relationship between the Law and risk
records can be utilized for calculating
bear that risk? 4- Which party most
allocations will be highlighted. Finally
the probability of occurrence of desir-
benefits or suffers when that risk even-
conclusion will be provided.
able or undesirable hazards. After
tuates?"
measuring the risks it is important to
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Issue 70 September 2013 2013 70

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