Risk allocation between main contractors and subcontractors in building projects in Sri Lanka

Abstract

Risk is identified as a probability of occurrence of an event which may have an adverse impact on the project objectives. Therefore, risk identification and allocation in a well-defined manner is a mandatory prerequisite for a successful project. An optimum risk allocation between main contractor and subcontractor becomes crucial as because in most projects, considerable amount of risk is usually being allocated to subcontractors, and success of a project hugely depends on risk allocation decisions. Hence the aim of this research was to identify and prioritise risks which are common and significant to the relationship between main contractor and subcontractor and to develop a guidance to allocate those risks to the party best placed to manage them. To achieve the aim of this research first, an extensive literature survey was carried out to identify the common risks and to review the concept of risk allocation and its application to the construction industry. A questionnaire survey was carried out to prioritize those short listed risk factors and to find the optimum risk allocation between concerned parties. Through the analysis of collected data using RII, a ‘risk register’ and a ‘risk matrix’ were developed. It is recommended that the developed risk register be used as a guidance during the risk identification phase and risk matrix when allocating those risks between concerned parties.