Construction Management and Economics

ISSN: 0144-6193 (Print) 1466-433X (Online) Journal homepage: https://www.tandfonline.com/loi/rcme20

How procurement options influence risk

management in construction projects

Ekaterina Osipova & Per Erik Eriksson

To cite this article: Ekaterina Osipova & Per Erik Eriksson (2011) How procurement options
influence risk management in construction projects, Construction Management and Economics,
29:11, 1149-1158, DOI: 10.1080/01446193.2011.639379

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Construction Management and Economics (November 2011) 29, 1149–1158

How procurement options influence risk management

in construction projects
EKATERINA OSIPOVA1* and PER ERIK ERIKSSON2
1
Department of Civil, Environmental and Natural Resources Engineering, Luleå University of Technology, Luleå,
Sweden
2
Department of Business Administration and Social Sciences, Luleå University of Technology, Luleå, Sweden

Received 7 April 2011; accepted 6 November 2011

Before proceeding with a project, a client has to choose an appropriate procurement option that facilitates
an effective project organization in general and a thorough risk management process in particular. By identi-
fying three procurement variables that have a major influence on risk management: project delivery method,
form of payment, and use of collaboration or partnering arrangements, the effect of each variable is studied.
An exploratory study and a series of interviews with clients, contractors and consultants involved in 11
Swedish construction projects, were performed in order to examine how risk management was carried out in
each project. Irrespective of the procurement option, many projects suffered from variations in cost affecting
one or more actors. Risk management was not carried out systematically throughout project phases.
However, in the projects with early involvement of the actors, their participation throughout the project, and
opportunities for open dialogue and collaboration, a more thorough risk management process was found.
While project delivery methods define formal risk allocation, the use of incentives and collaboration or
partnering arrangements help to establish a collaborative approach to risk management.

Keywords: Contract conditions, partnering, payment, procurement, risk management.

Introduction formed and if incentives are used), and use of addi-

tional collaboration or partnering arrangements.
Procurement is a combination of different methods for From the perspective of design responsibility there
purchasing construction objects and includes such are two major methods of project delivery: in general
variables as source of funding, partner selection contracts responsibility for design lies with client
method, price basis, responsibility for design, responsi- while in design-build contracts design responsibility
bility for management, and amount of subcontracting lies with contractor. As design is considered to be a
(Murdoch and Hughes, 2008). The client’s choice of significant source of risk (Akintoye et al., 1998),
procurement option, i.e. a combination of the above- responsibility for design may influence actors’
mentioned variables, implies different ranges of attitudes towards RM.
responsibilities and liabilities for the various actors, as Form of payment has a significant impact on risk
well as different degrees of their collaboration in the allocation and influences the behaviour of the project
project (Love et al., 1998; Eriksson and Westerberg, actors. Some forms, for example, fixed price, shift
2011) and may thereby influence risk management most risk and responsibility to the contractor and do
(RM). This study focuses on three procurement vari- not underpin possibilities for joint performance
ables, which are identified through the literature improvement (Floricel and Miller, 2001). In contrast,
review as having a large influence on RM. These are cost-reimbursement forms of payment imply that the
project delivery method (i.e. who has design responsi- contractors are compensated for their actual costs.
bility), form of payment (i.e. how contract price was However, the use of cost-reimbursement payments in

*Author for correspondence. E-mail: [email protected]

Construction Management and Economics

ISSN 0144-6193 print/ISSN 1466-433X online Ó 2011 Taylor & Francis
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1150 Osipova and Eriksson

Sweden, either with or without incentives or a bonus, reducing the probability and/or consequences of a risk
is scarce (Eriksson et al., 2008). event. Those risks that remain in the project after risk
Collaboration through partnering arrangements has reduction may be transferred to another party either
been increasingly adopted during the last decade in inside or outside the project. Risk retention or accep-
order to underpin relationships between project actors, tance indicates that the risk remains present in the
so that they are based more on openness, trust and project. Two options are available when retaining the
cooperation, rather than on sharp contractual formula- risk: either to develop a contingency plan in case a risk
tions (Dagenais, 2007). Collaboration through occurs, or to take no action until the risk is triggered.
partnering has been argued to bring several significant There are several approaches to classifying project
benefits to a project, especially when it is based on risks and risk sources. Baloi and Price (2003) study
early involvement of key project actors (Alderman and risk classification from the perspective of contractors
Ivory, 2007). The early involvement supports the utili- and focus on risks that are project-related and may
zation of actors’ skills and competences already at the affect project performance in terms of cost. By con-
beginning of the project. This enhances more thor- ducting an extensive literature review and interviews
ough risk identification and assessment but also reduc- with construction contractors, they identified the fol-
tion of risks related to poor constructability through lowing groups of risk: global risks (e.g. financial, eco-
design for manufacturing (Wynstra et al., 2001). nomic, political, legal and environmental), internal
Although previous studies have discussed project per- risks (e.g. design, construction, management and rela-
formance for different project delivery methods tionships) and force majeure risks. Several question-
(e.g. Konchar and Sanvido, 1998; Ernzen and Sche- naire surveys have been conducted among
xnayder, 2000; Miller et al., 2000; Hyun et al., 2008), construction industry actors in order to investigate
and how the use of partnering tools affects project suc- risk management practices in different countries. In
cess (e.g. Tang et al., 2006), there is a lack of investiga- 1997, Akintoye and MacLeod conducted a survey of
tions that focus explicitly on RM for the different 43 practitioners in the UK to explore the use of risk
procurement options from the joint perspective of cli- management techniques. In 1999, a similar survey
ents, contractors and consultants. The aim of this study, among 200 Australian construction practitioners was
therefore, is to investigate how procurement options conducted by Uher and Toakley. They particularly
influence RM in construction projects. The research focused on the use of risk management in early pro-
results are based on an exploratory study, including ject phases. Lyons and Skitmore (2004) conducted
questionnaire and document studies, and subsequently another survey of 44 Australian practitioners based on
a series of interviews with project actors involved in 11 the results of the above-mentioned studies. The sur-
Swedish construction projects. The results are expected vey covers the whole risk management process, i.e.
to increase the understanding of RM for the different risk identification, assessment and response through-
procurement options and, therefore, assist practitioners out all project phases. The most recent survey was
in choosing an appropriate option. conducted by Tang et al. (2007) who investigated risk
management in the Chinese construction industry.
The methods and results of the surveys were some-
Literature review what similar. All surveys studied practitioners’ RM
experiences in general rather than in specific projects.
Risk and risk management The results show that checklists and brainstorming
are the most often used techniques in risk identifica-
Project risks are uncertain events or conditions that tion. Subjective judgment, intuition and experience
may have an impact on project objectives (Project are cited as being the tools most commonly used in
Management Institute, 2000). A risk has a cause and, risk assessment. Risk reduction is the most frequently
if it is triggered, a consequence. RM is a formal pro- used technique for risk response. The treatment of
cess directed towards the identification of, assessment RM in this paper follows along the lines outlined
of, and response to project risks (Project Management above in terms of the recognized stages in that pro-
Institute, 2000). Risk identification is aimed at deter- cess. However, our study contributes with a project-
mining potential risks, i.e. those that may affect the level focus, investigating how procurement options
project. During risk assessment, identified risks are affect RM in 11 construction projects.
evaluated and ranked. The goal is to prioritize risks for
management. The risk response process is directed to Risk allocation through construction contracts
identifying a way of dealing with project risks and con-
sists of three main techniques: risk reduction, risk Risks are allocated to project actors through the
transfer and risk retention. Risk reduction aims at contractual arrangements. Many countries have
Risk management 1151

developed standardized conditions of contract to be struction projects can be very risky if the contractor
used in construction projects. In Sweden, all contracts lacks knowledge and experience of the DB system.
are based on the general conditions of contract that
formalize risk allocation. They assign responsibilities Risk allocation through forms of payment
and liabilities to each contracting party regarding job
performance, organization, timeframes, guarantees, The form of payment defines who takes a risk if the
insurances, errors and payments. General conditions final cost of construction activities is higher than the
of contract are developed and issued by the Building estimated cost. The most widely used forms are fixed
Contracts Committee (BKK), a non-profit association price and cost-reimbursement (Branconi and Loch,
of authorities and organizations in the construction 2004). Fixed price payment shifts the risk of cost
sector. There are two types of general conditions of overruns during the construction stage to the main
contracts for the two project delivery methods that contractor. In a study conducted by Floricel and
are mostly used in Sweden, i.e. general contracting Miller (2001), 60 large-scale engineering projects
(GC) and design-build (DB) contracts. ‘General Con- were investigated in attempt to develop a strategic
ditions of Contract for Building, Civil Engineering framework for dealing with project uncertainty. The
and Installation Work’ are used in GC projects. The results show that fixed price contracts do not under-
DB projects are regulated by ‘General Conditions of pin possibilities for joint performance improvement
Contract for Building, Civil Engineering and Installa- because the contractor keeps all savings or losses.
tion Work performed on a package deal basis’. When a cost-reimbursement form of payment is used,
General contracts are characterized by a separate the contractor is compensated for the actual cost dur-
appointment of a design team and a construction ing the project execution. Thus, it is the client who
firm. The client is responsible for the planning, design takes the risk of cost fluctuations. Branconi and Loch
and function of a construction and the contractor is (2004) report their experience with construction con-
responsible for the assembly. GC is the most widely tracts in a major engineering company and argue that
used project delivery method in many countries (Ling in the case of cost-reimbursement forms of payment
et al., 2004; Eriksson and Laan, 2007). the contractor has very little incentive to find solu-
In DB contracts, the contractor is responsible for tions that are more efficient or to cooperate with the
both design and construction. Since there is a single client. Both fixed price and cost-reimbursement con-
point of responsibility, the popularity of DB contracts tracts have adverse effects on communication between
has increased in recent years. Konchar and Sanvido client and contractor (Müller and Turner, 2005).
(1998) investigate 351 US construction projects using In order to overcome the problems with traditional
different project delivery methods in order to compare forms of payment, incentive-based contracts were
the performance of GC and DB projects. They dem- introduced. In incentive-based contracts, both client
onstrate that DB projects on average show a better and contractor share the risks and rewards (Floricel
performance than GC in terms of unit cost, construc- and Miller, 2001). The main purpose of incentives is
tion speed, delivery speed, cost growth and schedule to facilitate collaboration in problem solving, and
growth. A study by Ernzen and Schexnayder (2000) reward the actors on the basis of their performance. A
showed that the average profit margin for contractors case study conducted by Bubshait (2003) in Saudi
is higher in DB projects than that in GC. From a RM Arabia on perceptions of project actors about incen-
perspective, DB contracts may be more attractive to tive/disincentive contracting shows that the actors are
the client, as the responsibility for design implies that positive about the role of incentives in promoting con-
more risk is allocated to the contractor. On the other tractor performance. When incentives are used,
hand, the DB alternative may be more expensive com- rational decision makers tend to put effort into mini-
pared to GC, partly because of the contractors’ greater mizing risk so they can get a reward (Knight et al.,
responsibilities and partly because fewer contractors 2001). Moreover, they prefer to cooperate when tangi-
may be available for this larger and more comprehen- ble rewards for problem solving are provided (Wong
sive type of work (Lind and Borg, 2010). Further- et al., 2008; Cheung et al., 2009). Incentives motivate
more, the quality of the final product may be lower if actors to focus on joint objectives and significantly
the contractors use cheaper solutions in an attempt to reduce disputes. Turner and Simister (2001) therefore
decrease their own costs (Gransberg and Molenaar, argue that projects that are based on cooperation and
2004). This problem is particularly prevalent in con- not on conflict require incentivization of all involved
tracts with a fixed price form of payment. In terms of actors. Bayliss et al. (2004) support this argument
time, the DB system arguably provides an earlier start when reporting a story of a successful partnering pro-
for project execution than is the case for other sys- ject in Hong Kong, which showed that contract incen-
tems. From the contractor’s point of view, DB con- tive is an essential element of partnering projects.
1152 Osipova and Eriksson

Risk management in projects with partnering/ tive of RM in Sweden, the following requirements for
collaboration arrangements project selection were formulated:

Over the last decade, researchers and practitioners  the projects are located in large and small cities;
have recognized that relationships between clients and  they use different project delivery methods, i.e.
contractors play a significant role in successful project GC and DB;
implementation. It has been argued that traditional  the types of the projects are building and civil
contracts do not support effective cooperation in con- engineering.
struction projects (Kadefors, 2004). Thus, collabora-
tion through partnering has become popular during In the first stage, nine construction projects
the last decade. Partnering is a project governance (projects 1–9 in Appendix 1) adopting different pro-
form, based on cooperative procurement procedures, curement options were chosen, and an exploratory
that facilitates a stronger focus on cooperation than study was conducted. The aim of the exploratory
on competition (Eriksson, 2010). Cooperation study was to better understand the nature of the
between project actors is claimed to lead to fewer dis- problem and obtain a basis for further interviews with
putes, lower construction costs, and a better quality project actors. The objectives were to study how the
product. Several studies have shown that practitioners RM process was organized in the projects and to find
are positive about collaborative relationships and out what procurement variables identified in the liter-
believe they lead to cost and risk reduction (e.g. Black ature influence RM from the practitioners’ point of
et al., 2000; Akintoye and Main, 2007). view. The exploratory study included a questionnaire
In contrast with the UK, partnering does not survey and document studies.
have the status of a contract form in Sweden. A questionnaire was developed consisting of five
Instead, an additional collaboration or partnering sections, covering general questions about the respon-
agreement is used as a supplement to the contract. dent, the aspects of the risk management process
Overall, however, the use of partnering in Sweden through the different phases, and relationships and
is still scarce (Eriksson et al., 2008). Partnering is collaboration in RM between the actors. The respon-
not a well-defined methodology on how to organize dents were also asked to evaluate project performance
a project but rather a concept that requires a fun- in terms of time, budget and quality. The survey sam-
damental shift in thinking and culture (Alderman ple was composed of three groups of actors: clients,
and Ivory, 2007). Thus, to obtain the benefits of contractors and consultants. Within each group of
the partnering concept, a high degree of profession- actors, those persons who worked with RM in a par-
alism and very good knowledge of the project on ticular project were suggested by project managers to
the part of the client and of the contractor are participate in the survey. When the potential respon-
required. dents had been identified, they were invited to attend
a workshop organized by the researchers. During the
workshop, the aim of the study and the structure of
Research method
the questionnaire were presented and a pilot question-
naire was distributed. About 50% of potential respon-
The empirical investigations involved an exploratory
dents participated in the workshop. After the
study and an interview study of 11 construction pro-
workshop, the questionnaire was adjusted and sent in
jects (see Appendix 1). The projects were chosen by
electronic form to the 54 intended respondents in the
five practitioners who were involved in the research
nine projects. In total, 36 usable responses were
project as a reference group. As such, they participated
received, giving a response rate of 67%. For those
in interactive discussions and shared their perceptions
people who attended the workshop the response rate
and opinions about current RM practices and the find-
was 100%. Detailed information about questionnaire
ings of the study. Each member of the reference group
distribution and respondents’ profiles is shown in
was asked to choose two recently finished projects
Table 1.
within their own organization. The strength of the
In the second stage, 20 interviews across the nine
method is that the researcher does not have to spend
projects were conducted, based on the compiled
time contacting many organizations and trying to find
results of the questionnaire survey. The objective was
those who want to participate. Moreover, people share
to discuss how procurement variables, i.e. project
information more easily when they are aware of the
delivery method, form of payment and use of collabo-
research project and its aim. On the other hand, the
ration or partnering arrangements affected the RM
number of projects is limited and the researcher does
process. Interviews were conducted with the client’s
not influence the selection process. In order to obtain
project manager, the contractor’s site manager, and
a suitable sample that could provide a broad perspec-
Risk management 1153

Table 1 Questionnaire distribution and respondents’ profiles

Client Contractor Consultant Total

Number of questionnaires sent 18 30 6 54

Number of usable responses received 14 18 4 36
Response rate (%) 78 60 67
Average age (years) 50 50 48
Average experience in construction industry (years) 24 28 24

the architect (in GC) or design manager (in DB). planning phase. The design and production phases
Each interview took approximately one and a half were critical for RM. Risk identification, assessment
hours and consisted of three main parts. First, the and response processes were mostly performed in
main definitions in the research area were discussed. these phases.
Since the study dealt with the terms: risk, risk manage- Within the three groups of actors, contractors were
ment, risk identification, risk assessment, risk the most active in performing risk identification,
response, etc., it was important to understand the assessment and response. Moreover, contractors had
respondents’ perceptions of these terms. Next, the the largest influence on RM in the project. The
results of the questionnaire survey were presented and influence of clients varied for the different project
discussed. In particular, the interviewees were asked to delivery methods. In GC projects, where the clients
comment on the survey results, explain the answers, were responsible for design, they had a larger influ-
and suggest solutions for improvements. Finally, some ence on RM. Consultants were not involved suffi-
time was devoted to concluding remarks. All inter- ciently in work with risk and had a low influence on
views were taped in order to get a permanent record. RM. Owing to the limited participation of some
In the first two stages, only one project with collabo- actors in some project phases, the communication of
ration through partnering and a cost-reimbursement project risks between actors did not work properly.
payment form was studied. Thus, two additional pro- Many problems appeared when the consultant and
jects undertaken in 2008–09, adopting collaboration client were not involved in the production phase.
arrangements and incentive contracts were included in a Additionally, RM processes were carried out most
third stage of the study. Despite the fact that two intensively in the production phase, which implies
projects were added some years later, the economic, more responsibility in managing risks for the contrac-
political, legal and social situation in Sweden was similar tor and more passive behaviour by the other actors.
during these years. Fourteen interviews with a focus on Communication of known risks and opportunities
the RM process were conducted with the project man- between actors in the procurement phase varied
agers, site managers, consultants and architects. Hence, between ‘little detailed’ and ‘fairly detailed’. Both the
the 34 qualitative interviews included 11 projects with client and the contractor communicated known risks
different procurement options (see Appendix 1). as if they were of a low priority during the procure-
ment phase. This created conflicts during implemen-
tation in many projects.
Results

Results of the exploratory study—risk Interview results

management and actors’ involvement
Influence of project delivery method on risk management
Despite the fact that RM was a part of each project,
almost all projects suffered from variations in cost for The majority of the respondents argued that tradi-
one or several actors. Both identified and unforeseen tional general contracts do not create an opportunity
risks occurred in the projects and generally had a sig- for open dialogue and collaboration in RM between
nificant effect on project cost. In Appendix 1, the the client and the contractor. In the studied GC pro-
actors’ evaluations of the project performances are jects without a collaboration agreement, the contrac-
provided. tors executed the projects strictly according to the
RM was not carried out systematically in all phases clients’ construction documents and, therefore, did
of a project. Only in one project were risk identifica- not have joint discussions of the technical solutions
tion, assessment and response carried out systemati- and construction risks. Moreover, the contractors did
cally in each phase of the project. The absence of not participate in the design phase and, accordingly,
systematic RM was especially notable in the early had no collaboration with the architect. The respon-
1154 Osipova and Eriksson

dents described that each actor was focused on its additional insurance. The project actors argued that
own part of the project and tried to manage the asso- amendments make the contracts less clear for the
ciated risks. Absence of trust and collaboration in RM contractor and may result in conflicts and disputes.
led to a low level of risk communication during the
procurement phase and clients attempting to transfer Influence of form of payment on risk management
more risk to the contractor. From the contractors’
point of view, in GC projects the quality of The respondents mentioned the form of payment as a
documents and drawings was often insufficient, with very important factor influencing actors’ behaviour. In
many inaccuracies. For example, in Project 1, the fixed price contracts, there is a lot of financial pressure
poor quality of design documents increased the con- on the contractor and disputes are common. Project 5
tractor’s cost significantly. Because of the insufficient is one of the projects where the actors were very dis-
geotechnical survey in Project 3, the completion of satisfied by their work together because of the many
the road was delayed by several months. financial discussions associated with the fixed price
The architects, on the other hand, were positive payment form. Fixed price contracts require very
about RM in the GC projects. They argued that the detailed and specific technical documentation from
architect had more flexibility and cooperation with the contractor in the tender. In cost-reimbursement
the client in such projects than in DB. In the latter, contracts, there is less focus on financial aspects and
the contractor was a ‘filter’ between the client and the many problems can be solved during project imple-
architect. The contractor was focused on short-term mentation. Communication of risks in the procure-
financial results rather than on the life cycle cost and, ment phase depends heavily on the form of payment.
therefore, used cheaper technical solutions, which are The interviewees mentioned that the clients do not
not always optimal. However, general contracts assign communicate risks to a high degree when they procure
more responsibility to the architect, while in a DB fixed price contracts.
project the architect shares risks with the contractor. Fair distribution of opportunities through incentive
On the other hand, collaboration with the contractor arrangements (contracts) was recognized as an effi-
is worse in GC projects, because the consultant usu- cient instrument for RM. Incentive arrangements
ally does not participate in the production phase. stimulate better collaboration in finding the best pos-
From the perspective of dealing with risks, early sible solutions, and, therefore, lead to cost reductions.
involvement of the contractor in DB projects is con- The cost-reimbursement form of payment with incen-
sidered to be the main advantage of this project deliv- tives in Projects 9 and 10 increased the motivation of
ery method. Moreover, contractors’ RM was more the main contractor to decrease the project cost by
thorough in the studied DB projects since they are finding the best suitable solutions and cooperating
assigned the responsibility for design. The actors sta- with other project actors. Moreover, incentive-based
ted that the DB contract might lead to deviations in forms contributed to the RM process when all actors
the quality of the final product because of the client’s were interested in minimizing risk instead of shifting
inability to control the technical solutions chosen by it to one another.
the contractor. To avoid this situation, continual dis-
Influence of partnering or collaboration arrangement on
cussion of technical solutions between the actors is
risk management
required. Therefore, personal commitment of the cli-
ents is argued to be the most important factor in In traditional GC and DB projects with fixed price
securing the desired result. When the client is an payment the actors often think about different risks
active party, DB is claimed to create conditions con- and do not see the project as a whole. The contractor,
ducive to better collaboration because the clients and for example, is more interested in identifying risks that
contractors are forced to have a dialogue. Coopera- can influence cost, while the client is more interested
tion between architects and contractors is argued to in risks that affect quality of the final product. Great
result in better technical solutions and help in avoid- expectations in partnering were found among the pro-
ing many design and technical risks. Many actors are ject actors, including those who had no experience of
positive about more thorough RM in DB contracts. partnering. It was argued that partnering allows the
The general conditions of contract are well-devel- actors to see the project as a whole and influence RM
oped documents, which assign responsibilities and lia- throughout the construction process. A possible
bilities to each party. However, the client often advantage of partnering is that RM can be carried out
deviates from them by trying to transfer more risk to jointly from the earliest phases of the project. When
the contractor. In all 11 projects amendments to the the contractor is involved in the early planning phase
general conditions of contract were included; many of it makes RM more effective in terms of joint risk iden-
them were applied to the length of guarantee and tification and assessment. The consultant, in turn, has
Risk management 1155

an opportunity to assess technical solutions together This study also supports previous research that
with the client and the contractor, which results in highlights the benefits of coupling early involvement
better solutions and fewer risks in the production with partnering arrangements and incentive-based
phase. Factors that characterize partnering projects, payments (Bayliss et al., 2004; Alderman and Ivory,
such as open dialogue, trust, and cooperation, help to 2007) in order to further enhance a project environ-
achieve effective communication and information ment based on trust and joint commitment on which
exchange: all risks are ‘placed on the table’. a throrough RM can rely.
In Project 10, the client and the contractor together The production phase was where most interest and
developed a collaboration agreement in order to activity related to RM were found. These results con-
improve relationships among the actors. In the agree- firm the findings of two surveys (Uher and Toakley,
ment, they formulated the main principles of their 1999; Lyons and Skitmore, 2004), which show a
work together. The collaborative approach was then higher degree of RM in the production phase than in
used throughout the project in order to meet tough the early phase. Unfortunately, this can easily prove
deadlines and to jointly manage risks. to be too late to manage some risks, including those
design risks that might have been avoided in an earlier
phase. The majority of respondents feel that RM
Discussion should be more important in the early phases for sev-
eral reasons. First, early risk identification makes the
From a risk management perspective, a number of fac- client aware of project risks and facilitates the choice
tors influence the client’s choice of procurement of the optimal procurement option. Moreover, signifi-
option. Clients who want to minimize their own risks cant savings are possible in the early phases, since
choose DB contracts with fixed price payment because changes at the beginning of the project cost less
there is a single point of responsibility for both design money than in the production phase. Procurement
and construction and because of the possibility for options that allow early involvement of the actors can
transferring risks of cost overruns to the contractor. DB therefore contribute to more thorough RM.
creates opportunities for RM discussions between con- Most of the respondents see risk as a negative event
sultants and contractors, but may hamper the client’s that can affect the project and cause problems. Only a
involvement and influence on RM and project perfor- few people mentioned opportunity as the converse of
mance. Accordingly, this study illustrates the impor- risk. This confirms the results of a study by Akintoye
tance of personal commitment on behalf of the client in and MacLeod (1997), which show negative perception
order to achieve sufficient RM in DB projects. of risk among practitioners. Furthermore, when
Competent clients may favour general contracts describing their work on project risks, the actors often
partly because the cost may be lower and partly say ‘contractor’s risk management’ and ‘client’s risk
because they want to have a higher degree of influ- management’. ‘Joint risk management’ where all actors
ence on the project. However, general contracts often participate and perform identification, assessment and
result in a sequential construction process where response together is a weakness in the current practice.
many actors are involved in some project phases and This is probably a result of traditional procurement
focus on their own part of the work rather than on options that distinctly separate responsibilities and
the whole project. In particular, a general contract risks in time and space. When working jointly with
without any collaboration arrangement gives no space RM based on early involvement, incentives and part-
for discussion about technical solutions between the nering arrangements it will probably become more
client’s design team and the contractor. Moreover, natural to search for positive opportunities and not to
non-participation of the architect in the production focus on avoiding negative consequences.
phase brings additional design risks that the contrac-
tor must deal with. When a general contract with Conclusions
fixed price form of payment is used, a strong focus on
financial aspects prevents actors from seeking The aim of this study was to explore how
collaboration. In the case where neither partnering or procurement options influence risk management in
collaboration arrangements nor incentive schemes construction projects. This discussion is important
exist, the actors concentrate on formal risk allocation from both theoretical and practical perspectives as it
through the contract and shift risks to each other in provides clarity on how to improve RM by adopting
an attempt to optimize their own profits. In order to appropriate procurement options in terms of project
strengthen contractors’ contributions to technical delivery method, form of payment and use of collabo-
solutions and RM in early project phases in GC, key ration or partnering arrangements. Despite the use of
contractors can become involved at that early stage. general conditions of contract that formalize risk allo-
1156 Osipova and Eriksson

cation between the project actors, conflicts existed in References

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allocation through the general conditions of contract management in construction. International Journal of
is not sufficient for achieving the desired performance. Project Management, 15(1), 31–8.
Informal aspects affected by the use of collaboration Akintoye, A. and Main, J. (2007) Collaborative relation-
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changes the attitudes of the actors and creates oppor- analysis and management of Private Finance Initiative
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Appendix 1 1158

Project
Project Partnering Project performance in terms of
Project Type of delivery Collaboration
Short description Form of payment time budget quality
duration client method agreement

1 Rebuilding and additional 10 Public/ GC Fixed price No Very Very good for the client/ Very
construction of university months regular good fairly bad for the good
premises, located in the 2004–05 purchaser contractor
north of Sweden
2 New construction of a road 14 Public/ GC Fixed price No Very Fairly good Fairly
in the north of Sweden months regular good good
2005–06 purchaser
3 New construction of roadin 10 Public/ GC Fixed price No Fairly Fairly good Fairly
the north of Sweden months regular good good
2005–06 purchaser
4 Reconstruction of 3 years Public/ GC Fixed price No Very Very bad for the client/ Fairly
infrastructure facilities in 2004–07 regular bad very good for the good
Stockholm purchaser contractor
5 New construction of a 15 Public/ DB Fixed price No Very Very good for the client/ Fairly
house for meetings at the months regular good fairly bad for the good
university campus in the 2003–04 purchaser contractor
north of Sweden
6 New construction of 13 Public/ DB Fixed price No Fairly Fairly good Fairly
infrastructure in the north months regular good good
of Sweden 2006–07 purchaser
7 Construction of a residential 17 Private/ DB Fixed price No Fairly Very good for the client/ Very
building in Stockholm months regular good fairly bad for the good
2005–06 purchaser contractor
8 Reconstruction of a 12 Private/ DB Fixed price No Very Very good for the client/ Very
residential building in months regular good fairly good for the good
Stockholm 2004–05 purchaser contractor
9 Reconstruction of a 6 months Public/ GC Cost reimbursable Yes Partnering Very Very good Very
residential building, located 2005 regular good good
in Stockholm purchaser
10 Construction of laboratory 2 years Public/ GC Fixed price and cost- Yes Very Very good Very
facilities consisting of two 2007–09 regular reimbursement with Collaboration good good
buildings located in purchaser incentives/bonus agreement
Stockholm
11 Reconstruction of 2 years Public/ GC Fixed price with incentives/ Yes Partnering Fairly Fairly bad Very
infrastructure facilities in 2008–09 regular bonus bad good
the north of Sweden purchaser
Note: The characteristics of a project’s implementation are based on the assessments of the project participants. Four alternatives were available for assessment of project implementation: very
Osipova and Eriksson

bad, fairly bad, fairly good, very good.