Evaluation of government construction contract and contractors' risk philosophies in the Philippines

Abstract

Researchers of late have started to realize the significance in risk management of investigating the construction practitioners' risk philosophies. This study examined the risk philosophies of Filipino contractors with the aim of representing their judgements and standpoints as this study review the standard construction contract of the Philippines. The contractors' risk perceptions as regards criticality were initially identified to determine which risk factors are crucial and worth investigating. Twenty-six construction risks obtained from literature were included in the survey distributed to top local contractors. These risks eventually got critical ratings by the respondents and, in addition to this list, Rebel Tax and Political Intervention were put forward as other risks that could be relevant to the local industry. For all of these risks, the risk allocation preferences of the contractors were identified through interviews to confirm if they are in agreement with the actual risk allocation of the standard contract as well as risk principles. A deviation of one or every subject from each other was observed for some risk items suggesting that it is a potential cause of disputes and a more critical evaluation is necessary. Fifteen out of the twenty-eight risks were found to have these conflicts and were further evaluated objectively to determine the appropriate risk allocation to implement. Recommendations with justifications on which party/parties should bear the risks were provided in order to improve the contract implementation, especially when the risk event occurs.