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Paper w78-1997-433:
Rejuvenating contract documentation- to reflect realistic risk allocations

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Yogeswaran K, Kumaraswamy M M

Rejuvenating contract documentation- to reflect realistic risk allocations

Abstract:Recent research in Hong Kong confirmed that many construction claims and disputes can be tracedback to ambiguities, omissions or non-specificities in long-used standard contract documents.Examples are cited of: (a) contradictions between clauses in 'Conditions of Contract' or between'Specifications' and 'Bill of Quantities'; (b) failures to anticipate common problem scenariosand/or to allocate risks appropriately; (c) lack of clarity that leads to misinterpretations ofresponsibilities in handling potential risks.Proposals are made to revise both standard and project-specific construction contractdocumentation on the basis of a databank of information on past and anticipated problems. Initialsteps to establish such a databank are illustrated, based on an analysis of the significant sourcesand causes of claims and disputes in Hong Kong. A proposal to expand and update the databankrelies on mobilising appropriate information technology techniques and tools to ensure itsviability, given the difficulties of collecting and analysing adequate data from constructionindustry personnel who are usually both busy and reluctant to release sensitive information.Confidentiality protocols and other precautions need to be incorporated into the proposed systemThe resulting structured approach to the formulation of contract documents for any constructioncontract is expected: (a) to help assign risks according to the more preached about but lesspracticed 'principle' of 'allocating risks to those best equipped to handle them'; and (b) to makeexplicit such risk allocation so that each party will take appropriate steps to price for, as well as tocontain and control such risks, rather than to seek reasons to avoid responsibility in retrospect ie.'after the event'.

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