Risk sharing in Ghanaian construction contracts

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The aim of this study is to identify the major risk factors associated with Ghanaian construction contracts and to develop a tool for risk sharing by participants of a construction contract to improve management practices in the construction industry. The study identified some thirty-four (34) risk factors that are inherent in Ghanaian construction contracts. Samples of clients, consultants and contractors were surveyed, using structured questionnaires supplemented with interviews with the aim of identifying the most important risk factors perceived by contract participants. The participants also indicated, through the questionnaire survey, their preferences of how risks should be shared in selected clauses of the Ghana Government Conditions of Contract for Building Works (the Pink Form). The study revealed that clauses in the Conditions of Contract that relate to disputes, variation, fluctuation, degree of inspection and compliance, limited time and funding for design and subsurface investigation, damages and delays during construction, materials and workmanship, contract administration, weather variations and payments are considered to contain the most important risks inherent in the Ghanaian building construction industry. It also revealed that even though contract participants agree that there are risks inherent in the contracts, they have divergent opinions on how these risks should be shared. A risk sharing mechanism has been developed, in the study, as a tool to help contract participants of the construction industry in Ghana to allocate risks. The mechanism allows a contract to evolve, which optimally distributes the risk elements, reduces the contingencies in mark-up, cut down disputes and improves management practices generally.
A Project report presented to the Board of Postgraduate Students, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfilment of the requirements for a Degree of Master of Science in Construction Management, 2000