RISK ALLOCATION IN PUBLIC ROAD CONSTRUCTION CONTRACTS IN CAMBODIA

Abstract

In recent years, the number of competitively bid contracts for road construction projects under the support of government budgets in Cambodia has been increasing and outnumbering the negotiated contracts being used. The nation strives for more efficient contracts, especially those with balanced risk allocation. This research proposes a guideline for improving the general conditions of public road construction contracts by focusing on risk allocation clauses. It begins with identifying risks in public road construction projects in Cambodia. It then compares the general conditions of the government contract with those of the FIDIC contract, especially their risk allocation clauses. This comparison results in many possible contract modifications, which are then verified with Cambodian related laws and regulations, as well as by experienced contract practitioners and university lecturers. It is found that there are 25 risks associated with public road construction projects in Cambodia. The comparison of the FIDIC and government construction contracts shows that the risk allocation clauses of the Cambodian construction contracts are unclear and inadequate to address several risks. This research suggests three possible alternatives for contract modifications, namely, delete unnecessary risk clauses, add new risk clauses, and modify existing risk clauses. The proposed contract modifications are in accordance with related laws and regulations. Yet, there are some issues that cannot include in the contract, namely, cost compensation, corruption, and contractor's financial guarantee. Moreover, the duration of some activities proposed in the modified contract is different from that in the FIDIC contract.