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Developing and implementing balanced incentive and risk sharing contracts

Developing and implementing balanced incentive and risk sharing contracts
Developing and implementing balanced incentive and risk sharing contracts
An important aspect of stakeholder management in construction projects is the contractual approach to managing risk and uncertainty. Chapman and Ward (2002) develops a balanced incentive and risk sharing (BIARS) contract, drawing on earlier research on management contracts, which lead to publications on risk allocation and risk sharing generally. This paper develops the BIARS contract concept further. It addresses choice of contract decisions as risk efficient choices in a best practice project risk management process concerned with the whole project lifecycle. It sets this discussion in the context of a range of popular contract choices, like fixed price, design and build (D&B), and design, build, finance and operate (DBFO). It was stimulated by the need to explain these ideas to a client using target contracts with unbalanced risk sharing, a common practice. Best practice requires a balanced approach, and the difference is significant. Best practice also involves a number of other relevant features. This paper concludes that full integration of contract choice decisions and other aspects of a best practice approach to risk management is practical and advantageous.
contract conditions, risk management
0144-6193
659-669
Chapman, Chris
a4f4805b-b67d-4c4c-856b-78e01a2c89a0
Ward, Stephen
ac1bf683-4186-44e7-9f5e-4193ee4d03cd
Chapman, Chris
a4f4805b-b67d-4c4c-856b-78e01a2c89a0
Ward, Stephen
ac1bf683-4186-44e7-9f5e-4193ee4d03cd

Chapman, Chris and Ward, Stephen (2008) Developing and implementing balanced incentive and risk sharing contracts. [in special issue: Stakeholder Management in Construction ] Construction Management and Economics, 26 (6), 659-669. (doi:10.1080/01446190802014760).

Record type: Article

Abstract

An important aspect of stakeholder management in construction projects is the contractual approach to managing risk and uncertainty. Chapman and Ward (2002) develops a balanced incentive and risk sharing (BIARS) contract, drawing on earlier research on management contracts, which lead to publications on risk allocation and risk sharing generally. This paper develops the BIARS contract concept further. It addresses choice of contract decisions as risk efficient choices in a best practice project risk management process concerned with the whole project lifecycle. It sets this discussion in the context of a range of popular contract choices, like fixed price, design and build (D&B), and design, build, finance and operate (DBFO). It was stimulated by the need to explain these ideas to a client using target contracts with unbalanced risk sharing, a common practice. Best practice requires a balanced approach, and the difference is significant. Best practice also involves a number of other relevant features. This paper concludes that full integration of contract choice decisions and other aspects of a best practice approach to risk management is practical and advantageous.

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More information

e-pub ahead of print date: 16 June 2008
Published date: June 2008
Keywords: contract conditions, risk management

Identifiers

Local EPrints ID: 51742
URI: https://eprints.soton.ac.uk/id/eprint/51742
ISSN: 0144-6193
PURE UUID: a56475cd-1b37-4b99-93e1-b68d4ab41c7c

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Date deposited: 05 Aug 2008
Last modified: 13 Mar 2019 20:48

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