Contractual Risk Assessment Framework for Contractors in the Bidding Phase

Abstract Construction contract administrators play a key role in advising owners on the choice and drafting of contract conditions. On the one hand, industry practices may simply involve adopting standard forms of conditions because these are published and periodically updated by numerous professional organizations. On the other hand, drafting a fully customized set of conditions is also relatively common. Contractors who perceive risks or ambiguities in owners’ prepared conditions have limited leverage in negotiating them, and qualifying their bids may pose the risk of such bids being held unresponsive by owners. The objective of this research is to offer a structured approach for scrutinizing, during the bidding phase, the terms of the contract already decided upon by project owners and incorporated into the bidding documents. The adopted methodology involved reviewing the relevant literature, scrutinizing the stages of the bidding phase, and conceptualizing a framework that embeds the various courses of action that may be adopted by participating bidders and compares such actions against one another. The use of the proposed framework was then validated by examining several contract clauses that were identified as either ambiguous or unfair, or both, and that underlay a recently arbitrated construction dispute. The research outcome is meant to provide contractors with a structured process that allows them to undertake proper due diligence in reviewing and identifying the risks inherent in the conditions of construction contracts.