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MANAGING THE RISKS IN CONSTRUCTION PROJECT BY COMPARING MOSPI AND FIDIC K Shobana 1 *, D Pradeep Kumar 2 and J Suresh Kumar 3 The construction industry is subjected to greater risks and uncertainties than other industries. To avoid risks and manage the projects smoothly, there are lots of tools and techniques are being adopted. Among those, most of the civil engineering professionals believe that the contract document is the best tool to manage most of the construction risks. The contract document will allow the contracting parties to manage the risks properly and allocate the balanced risks between them during the initial stage of the project itself. This research project is aimed to compare the risk management clauses from the developed country construction contracts with the Indian construction contracts. Finally this research will recommend the changes required in the Indian construction contracts for better risk management to meet the current requirements in the Indian Construction Industry. And in this project it is decided to identify the popular form of procurement method and construction contract adopted from the developed country construction industry and in the Indian construction industry. Then the risk factors associated with the popular form of procurement method will be identified and the risk mitigation clause associated with those risks will be compared with the popular form of construction contract adopted in developed country construction contracts and in the India. 1 Department of Civil Engineering, Nehru Institute of Technology, Coimbatore. 2 Department of Civil Engineering, Anna University of Technology, Chennai 600 025, Regional Centre, Coimbatore. 3 Department of Civil Engineering, Shree Shakthi College of Engineering, Coimbatore. *Corresponding author:K Shobana [email protected] ISSN 2319 – 6009 www.ijscer.com Vol. 3, No. 1, February 2014 © 2014 IJSCER. All Rights Reserved Int. J. Struct. & Civil Engg. Res. 2014 Research Paper Keywords: Contract, Risk, Design/build method, Procurement route, MOSPI, FIDIC INTRODUCTION A construction project is composed of various construction works. The work may involve design and construction or demolition. Each project will have a specific scope, program and budget. There are projects which failed to meet these scope, delayed and run over the budget. A project could be failed due to various reasons. These reasons lead to risks in the projects. Construction projects are normally labor intensive with long period of work and high financial intensity. Risks in a construction projects are avoidable by better risk allocation and management. By avoiding the risks in a project, a project can be made successful. Contract conditions are generally used in a project to manage these risks. Different forms of standard contract condition are used in the construction industry to manage the construction projects smoothly.

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MANAGING THE RISKS IN CONSTRUCTION

PROJECT BY COMPARING MOSPI AND FIDIC

K Shobana1*, D Pradeep Kumar2 and J Suresh Kumar3

The construction industry is subjected to greater risks and uncertainties than other industries.To avoid risks and manage the projects smoothly, there are lots of tools and techniques arebeing adopted. Among those, most of the civil engineering professionals believe that the contractdocument is the best tool to manage most of the construction risks. The contract document willallow the contracting parties to manage the risks properly and allocate the balanced risks betweenthem during the initial stage of the project itself. This research project is aimed to compare therisk management clauses from the developed country construction contracts with the Indianconstruction contracts. Finally this research will recommend the changes required in the Indianconstruction contracts for better risk management to meet the current requirements in the IndianConstruction Industry. And in this project it is decided to identify the popular form of procurementmethod and construction contract adopted from the developed country construction industryand in the Indian construction industry. Then the risk factors associated with the popular form ofprocurement method will be identified and the risk mitigation clause associated with those riskswill be compared with the popular form of construction contract adopted in developed countryconstruction contracts and in the India.

1 Department of Civil Engineering, Nehru Institute of Technology, Coimbatore.

2 Department of Civil Engineering, Anna University of Technology, Chennai 600 025, Regional Centre, Coimbatore.

3 Department of Civil Engineering, Shree Shakthi College of Engineering, Coimbatore.

*Corresponding author:K Shobana � [email protected]

ISSN 2319 – 6009 www.ijscer.com

Vol. 3, No. 1, February 2014

© 2014 IJSCER. All Rights Reserved

Int. J. Struct. & Civil Engg. Res. 2014

Research Paper

Keywords: Contract, Risk, Design/build method, Procurement route, MOSPI, FIDIC

INTRODUCTION

A construction project is composed of variousconstruction works. The work may involvedesign and construction or demolition. Eachproject will have a specific scope, programand budget. There are projects which failed tomeet these scope, delayed and run over thebudget. A project could be failed due to variousreasons. These reasons lead to risks in theprojects. Construction projects are normally

labor intensive with long period of work andhigh financial intensity. Risks in a constructionprojects are avoidable by better risk allocationand management. By avoiding the risks in aproject, a project can be made successful.Contract conditions are generally used in aproject to manage these risks. Different formsof standard contract condition are used in theconstruction industry to manage theconstruction projects smoothly.

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Purpose and Objectives of theResearch

1. To understand the risks observed by theconstruction professionals in their contractdecision making process. It will help toensure whether the construction risks aregenerated due to the type of procurementmethod and contract condition adopted ina project.

2. To identify the popular form of constructioncontract and procurement method adoptedfrom developed countries and Indianconstruction projects (Comparing all formsof procurement method and contractcondition available from developed countryand India is not possible).

3. To identify the risks involved with thestandard form of procurement method andprioritize those risks (Managing all the risksin a construction project will be moreexpensive and time consuming, so thesignificant risk factors associate with thepopular form of procurement route will beidentified and prioritized for further dataanalysis process).

4. Compare the popular form of contractconditions used in India and developedcountries for better risk mitigation andrecommend the suitable contract conditionclauses to the Indian construction industry.

This research output will help to improve theIndian construction industry’s contractual riskmanagement practice. There are manydifferent forms of procurement methods andcontract types are adopted in the developedcountries and the Indian construction industry.Hence, it is not possible to do such anextensive comparative study; so it is decidedto identify the popular form of constructioncontract and procurement method adoptedfrom developed countries and Indianconstruction industry. The risk mitigationmechanisms/risk allocation clauses from theidentified popular form of contracts from Indiaand developed countries will be compared.

EXISTING METHODOLOGY

Construction Contracts

A construction contract may be negotiated forthe construction of a single asset such as abridge, building, dam, pipeline, road, ship ortunnel. A construction contract may also dealwith the construction of a number of assetswhich are closely interrelated or interdependentin terms of their design, technology andfunction or their ultimate purpose or use;examples of such contracts include those forthe construction of refineries and other complexpieces of plant or equipment.

The flow chart below shows the ConstructionContracts in India.

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About Indian Construction andConstruction Contracts

In India construction industry is the secondlargest industry next to the agriculture. Most ofthe government projects in India are executedunder the Central Public Works Department(CPWD) and Military Engineering Services(MES) contract conditions. The language in themost of the standard form of contracts availablein India is considered difficult to comprehend.Disputes in a construction project are mostlyaroused due to this reason.

Government of India along with the Indianconstruction industry has set up theConstruction Industry Development Council(CIDC) to solve the problems in Indianconstruction industry and to standardize theIndian construction contract. This council isstarted functioning from 1996. On October 4,2001; the government has released theapproved document of unified constructioncontract condition, which was drafted byMinistry of Statistics and ProgramImplementation (MOSPI). For the wideradoption this MOSPI contract condition hasbeen circulated to various central and stategovernment departments and they wereencouraged to adopt this contract.

About Ministry of Statistics andProgramme Implementation

Projects are the cutting edge of development.Projects not only provide industrial and socialinfrastructure but also create capital base foremployment, services, generation ofresources for further development with a chainof linked activities. Successful implementationdepends largely on carrying out the constituenttasks in a proper sequence, deploying theresources to the best advantage. In the last 20

years, the Project Management Division of theMOSPI has monitored a few thousandinfrastructure and industrial projects of theCentral/Public Sector enterprises andGovernment agencies.

It emerges from the analysis of the CentralSector Projects by the MOSPI that many of theprojects suffer from inadequacies in projectformulation and implementation, resulting inlarge time and cost overruns, affecting the veryviability of the projects and acting as drag onthe economy. The analysis has also identifiedseveral factors responsible for time and costoverruns some within the control of theenterprises and some beyond their control. Asan apex institution for monitoring, the MOSI hasinitiated several measures to improve thesystem and procedures relating to projectformulation, implementation and monitoring.

Time and cost overruns in projects in theenvironment of uncertainties, inadequatefunding, delay in land acquisition, law and orderproblems, general escalation in costs, and,high cost of capital cannot be eliminatedaltogether; but these can be controlled bysuitable measures. Measures highlightedabove have definitely brought aboutimprovement in the project implementationscenario.

Selection of Contract for RiskMitigation

In this project MOSPI construction contractconditions from the developing country (India)is selected. In developed countries there arelot of selfgoverning organizations arefunctioning to deal with project managementand contract management practices, forexample (NEC, JCT, ICE). The developed

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countries construction industry has very goodreputation on successfully managing the risksthrough construction contracts. So, from thedeveloped countries the popular form ofconstruction contract condition FIDIC ischoosed. By comparing these two contractclauses (i.e., from the developed countries andthe developing country (India)) the risks in theprocurement method are mitigated properly.So this comparative study will help to improvethe contract management system in India.

DATA COLLECTION METHOD

For this research study it is decided to useboth primary data and secondary data.

• The primary data were collected throughreviewing the literatures of descriptivedocuments and statistical information fromthe different authors.

• The secondary data refers to the dataobtained from the e-survey research bysurvey questionnaire method.

Procurement Method

Definition

• A procurement system can be defined asan organizational system that assignsspecific responsibilities and authorities topeople and organizations, and defines therelationships of the various elements in theconstruction of a project.

• Procurement describes the merging ofactivities undertaken by the client to obtaina building.

Types of Procurement

In the British construction industry acquisitionor ordering of properties or their elements isdefined as “procurement”. It refers to a wide

array of strategies, rules, forms of procurementand responsibilities arising from material,services and construction equipment.

There are several forms or methods ofproperty procurement. Each of those involvesa different type of contract, contractualrelationships, information flow, roles andresponsibilities within a planning team.Available procurement forms are:

1. Traditional (lump sum)

2. Design & Build (D&B)

3. Construction Management

4. Management Contracting

5. Private Finance Initiative (PFI)

6. Public-Private Partnership (PPP)

7. Framework Contracting

8. Prime Contracting

A standard form of contract condition fromone of the developed countries and one of thedeveloping countries will be considered herefor risk management in construction projects(India – The developing country is consideredin this project).

Popular Form of ProcurementMethods used for Indian ConstructionProjects

The aim of this research is to compare the riskmitigation clauses from Indian constructioncontract and developed construction contractfor the risk factors which are associated withthe popular form of procurement method.

To make this comparative study successful,it is important to identify the most popular formof construction contract and procurementmethod which is been adopted from the Indian

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and developed construction industry.

The data to identify the popular form ofprocurement method is obtained from theChartered Institute and Statistical Reportpublished by the government.

• The Survey report (Contracts in use-2007)published by the Royal Institute ofChartered Surveyors (RICS).

The RICS (Contracts in Use) survey reportis published by the Royal Institute of CharteredSurveyors at the interval of every three years.The survey is conducted among the civilengineering professionals, who working indifferent trade, for example contractor’sorganization, Client’s organization,Architectural, Engineering; this makes thereport to be more valid. This is a veryauthoritative report produced from the surveyconducted by RICS, to identify the mostpopular form of procurement method.

The report enclosed the survey result thatthe design build method is one of the mostcommonly used procurement method in India.

Risk Identification

The top 20 risk factors associated with designand build method are identified from thevarious literature reviews are given below:

1. Cost involved with changes in design andscope of work.

2. Delays due to changes in government andstatutory regulations/delay due togovernment action.

3. Estimation errors or design errors.

4. Poor quality of work done by the contractor.

5. Changes in quantity.

6. Exceptionally inclement weather.

7. Owner delays (lack of payment, unable toget approvals, delayed progresspayments).

8. Delays in availability of labor, material andequipment.

9. Force majeure.

10. Exchange rate fluctuation.

11. Inflation

12. Unforeseen ground condition.

13. Inadequate specification andrequirements.

14. Delay in agreeing variations /Delaycaused by settling contractual disputes dueto variation.

15. Fossils and antiquities.

16. Time overrun by the contractor.

17. Changes in legislation.

18. Permits and licenses (Environmentalagency, etc.).

19. Site access, site security.

20. Contract termination for economic risk.

Risk Categorization

The risk factors identified from the literaturereview is categorized for simplifying theresearch process. Different authors havedeveloped various types of categorizationapproaches for risk analysis process. These20 risk factors are classified into six groupsfrom the various literature reviews, they are:capability risks, contractual and legal risks,economic risks, physical risks, political andsocietal risks, third party risks.

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a. Contractual and Legal risks (A1) Costinvolved with changes in design and scopeof work (A2) Estimation errors or designerrors (A3) Changes in quantity (A4) Ownerdelays (lack of payment, unable to getapprovals, delayed progress payments(A5) Delay in agreeing variations/Delaycaused by settling contractual disputes dueto variation

b. Capability risks : (B6) Poor quality of workdone by the contractor (B7) Inadequatespecification and requirements (B8) Timeoverrun by the contractor (B9) Site accessand Site security.

c. Economic risks (C10) Delays in availabilityof labor, material and equipments (C11)Exchange rate fluctuation (C12) Inflation (C13)Contract termination for economic risks.

d. Physical risks (D14) Exceptionallyinclement weather (D15) Force majeure(D16) Unforeseen ground condition (D17)Fossils and antiquities.

e. Political risks: (E18) Delays due to changes

in government and statutory regulations/delay due to government action (E19)Changes in legislation.

f. Third party risks : (F20) Permits andlicences (Environmental agency etc.).

Risk Significance in the PopularProcurement Route

The identified risks which are associated todesign and build procurement method wereevaluated by working out a risk level bycategorizing the likelihood of the risks and theimpact severity. These risk factors can befurther evaluated by plotting them in the riskexposure matrix. Plotting the risk level in a riskexposure matrix decides which risk factors areworthy to further attention. A typical exampleof risk matrix adopted for the calculation of therisk significance level is shown in the Table 1.Five point Likert scale for severity and sevenpoint Likert scale for likelihood is convertedinto numerical. The model risk matrix tableshowed in the Table 1 shows the calculation ofrisk significance index. The risk factors will beranked by using this index score.

Table 1: Risk Exposure Matrix Model- Calculation of Risk Significance Index

Likelihood (βββββ) Severity (ααααα)

Very Low (1) Low (2) Medium (3) High (4) Very High (5)

Very Very Low (1) 1 2 3 4 5

Very Low (2) 2 4 6 8 10

Low (3) 3 6 9 12 15

Medium (4) 4 8 12 16 20

High (5) 5 10 15 20 25

Very High (6) 6 12 18 24 30

Very Very High (7) 7 14 21 28 35

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Risk significance score is calculated bymultiplying the likelihood of occurrence with theimpact severity. The significance score will becalculated for all the twenty risks which areassociated to the design and buildprocurement method, by using the Equation(1).

Sij = αij x βij ...(1)

Sij Significance score assessed by thesurvey respondent i for the risk j

αij Likelihood of the risks i assessed by thesurvey respondent j

βij

Severity of the risk i assessed by thesurvey respondent j

Risk significance index score for each riskfactor is calculated by averaging the scoresfrom all the responses. These results can beused for ranking the risks. The equation for risksignificance index (RS) score is given by theEquation (2).

RSi = ΣSij /N ...(2)

RSi Risk significance index score for risk i

N Total number of responses

SECONDARY DATA

COLLECTION

Empirical Web Based SurveyQuestionnaire

In this project research an e-survey isconducted among the civil engineeringindustry professionals from Tamil Nadu. Thelist of members were scrutinized from thedirectory of civil engineering association.

Data relevant to the background of therespondents and their organizations, impactseverity, likelihood of occurrence the risks and

party best capable to manage the risksassociated to the design and buildprocurement method were gathered througha comprehensive questionnaire. Toaccomplish this purpose, internet based surveyquestionnaire was found very essential tocollect the data. The survey data collectionmethod was preferred over other datacollection method because of the followingreasons,

• Mail surveys have special value if thetarget is to address a widely spread sample.

• Mail surveys have the advantage of apossible large sample size giving moreauthoritative ground for generalization.

• The main advantage is, the respondents cancomplete this survey at their leisure time.

• Another advantage is the relatively low costto collect data through this method.

Sample Size and Composition ofthe Survey Respondent

The survey questions were distributed to theconstruction industry professionals from thedirectory of Coimbatore civil engineeringassociation through e-mail. The surveyquestionnaire was sent to 42 constructionprofessionals in random. In the closed endedquestions section, the survey respondentswere asked to rate the risk factors accordingto their perception over the identified risksfactors which are associated to design andbuild procurement method and in the openended question the respondents were askedto write the practical risk mitigationmechanism for the give risk factors. Sincethese open ended questions were notmentioned as compulsory questions, the

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Int. J. Struct. & Civil Engg. Res. 2014 Jayant Damodar Supe and M K Gupta, 2014

survey participants were not showed theirinterest to fill this part of questions. To increasethe response rate the participants were beencommunicated by sending remainder mailsand calls. Finally a total 19 survey responseswere gathered for the survey questionnaire.The response rate was 45.23% for the survey.

Results of the Survey Questionnaire

Characteristics of the SurveyRespondents

In this part of the questionnaire, therespondents were requested to tell the type oforganization they are working for. Thisinformation gathered in the section A of thequestionnaire is to understand the backgroundof the respondent. Table 2 shows thebackground of the survey respondents by typeof organization they are working.

Size of the Organization

Table 3 shows the survey response count No’sbased on the size of the survey respondent’s

Table 2: Characteristics of the Survey Respondents – Type of Organisation

Type of Organization Response Count (No’s) Response Percent (%)

Client organization 0 0%

Main Contractor 1 5.3%

Sub-Contractor 0 0%

Site Engineer 1 5.3%

Executive engineer 4 21%

Architectural Consultant 0 0%

Engineering Consultant/ General engineer 8 42.1%

QS Consultant 0 0%

Project Management Consultant 4 21%

Planning Engineer 1 5.3%

organization. From Table 3 it is clear that,around 53% of the respondents in survey areworking for the organizations with staffsstrength of more than 300. Despite the someother respondents are working for theorganization with less than 300 staffs themajority of the respondents are working withmore than 300 staffs. This states that themajority of the respondents were from theorganization who are doing multi and largeprojects.

Experience of the SurveyRespondents

Table 4 shows the professional experience ofthe respondents who took part in this survey.This table shows that the survey participantshave the working experience ranges from belowfive years to above 20 years. In the surveyaround 47% of the respondents were from thegroup of people who have experience rangebetween 5 and 10 years.

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Table 3: Characteristics of the Survey Respondents – Size of the Organisation

No of People Working in a Organization Response count Response Percent

gh, 88u eh (No’s) (%)

Below 50 1 5

50-100 2 11

100-200 4 21

200-300 3 16

Above 300 10 47

Table 4: Characteristics of the Survey Respondents- Professional Experience

Work experience in construction industry Response count Response percent

(No’s) (%)

Below 5 years 3 16

5 - 10 yrs 9 47

10-15yrs 4 21

15-20yrs 0 0

20-25yrs 1 5

Above 25yrs 2 11

PRIORITIZING THE RISK

FACTORS

A total of 20 risk factors associated to thedesign and build procurement method wereidentified from the literature review. In thesurvey questionnaire, the participants wereasked to rank the risk factors according to theirlevel of agreement against the (Impact severity,Likelihood of occurrence of risks and party bestcapable to manage the risks). From that risksignificant score index the top 10 risksassociated with design and build method wereidentified and shown in the Table 5.

These prioritized top 10 risk factors will beanalyzed in the contractual mechanism and itwill be qualitatively analyzed by comparing therisk mitigation mechanisms stated in the

popular form of contract condition from India-MOSPI and FIDIC.

CONTRACTUAL MECHANISMS

Risk 1 – Delays in availability of labor,material and equipment

a) FIDIC

If the Contractor fails to comply with Sub-Clause 8.2 [Time for Completion], theContractor shall subject to Sub-Clause 2.5[Employer’s Claims] pay delay damages tothe Employer for this default. These delaydamages shall be the sum stated in theContract Data, which shall be paid for everyday which shall elapse between the relevantTime for Completion and the date stated in the

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Taking-Over Certificate. However, the totalamount due under this Sub-Clause shall notexceed the maximum amount of delaydamages (if any) stated in the Contract Data.

These delay damages shall be the onlydamages due to the Contractor for suchdefault. Other than in the event of terminationunder Sub-Clause 15.2 [Termination byEmployer] prior to completion of the works.These damages shall not relieve the Contractorfrom his obligation to complete the works, orfrom any other duties, obligations orresponsibilities which he may have under theContract.

b) MOSPI

Early Warning

Clause 32.1 says that, the contractor is to warn

the employer at the earliest opportunity ofspecific likely futures or circumstance that maydelay the execution of work. The employer shallask the contractor to provide an estimate ofthe expected completion date.

Liquidated Damages

In the case of a delay in completion of thecontract, according to Clause 9A of MOSPI,the contractor may need to pay the LiquidatedDamages (LD) at the rate of (0.5%) of thecontract price per week of delay. And the sameclause says that the LD rate may be increasedup to 10% of the contract price upon thedecision of the employer. Clause 9A (i) saythat if the owner is satisfied with the works canbe completed by the contractor within areasonable time after the specified time forcompletion; the owner may allow further

Table 5: Top Ten Risk Factors Associated with Design and Build Procurement Method

Rank of Risk Factor Risk Factor No. Risk Factor Risk Sig. Score Index (Rs.)

R1 C10 Delays in availability of labour, material 28.4

and equipment

R2 B8 Time overrun by the contractor 21.1

R3 B6 Poor quality of work done by the contractor 17.7

R4 D16 Unforeseen ground condition 16.6

R5 F20 Permits and licenses (Environmental 14.1

agency etc.)

R6 A1 Cost involved with changes in design and 8.7

scope of work

R7 A3 Changes in quantity 7.7

R8 A4 Owner delays (lack of payment, unable to 3.7

get approvals, delayed progress payments)

R9 D14 Exceptionally inclement weather 3.4

R10 A2 Estimation errors or design errors 3.3

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extension of time at its discretion with orwithout the levy of liquidated damages. Clause9A (ii) says that the owner if not satisfied thatthe works can be completed by the contractor,and in the event of failure on the part of thecontractor to complete work within furtherextension of time allowed as aforesaid, shallbe entitled, without prejudice to any other right,or remedy available in that behalf, to withdrawthe contract. Clause 9A(iii) says that the owner,if not satisfied with the progress of the contractand in the event of failure of the contractor torecoup the delays in the mutually agreed timeframe, shall be entitled to terminate thecontract.

Risk 2 – Time overrun by the contractor

a) FIDIC

According to the Clause 8.7 If the Contractorfails to comply with Sub-Clause 8.2 [Time forCompletion], the Contractor shall subject toSub-Clause 2.5 [Employer’s Claims] pay delaydamages to the Employer for this default.These delay damages shall be the sum statedin the Contract Data, which shall be paid forevery day which shall elapse between therelevant Time for Completion and the datestated in the Taking-Over Certificate. However,the total amount due under this Sub-Clauseshall not exceed the maximum amount of delaydamages (if any) stated in the Contract Data.These delay damages shall be the onlydamages due from the Contractor for suchdefault, other than in the event of terminationunder Sub-Clause 15.2 [Termination byEmployer] prior to completion of the Works.These damages shall not relieve the Contractorfrom his obligation to complete the Works, orfrom any other duties, obligations or

responsibilities which he may have under theContract.

Employers Claim: Sub-Clause 2.5

If the Employer considers himself to be entitledto any payment under any Clause of theseConditions or otherwise in connection with theContract, and/or to any extension of the DefectsNotification Period, the Employer or theEngineer shall give notice and particulars tothe Contractor The notice shall be given assoon as practicable after the Employerbecame aware, or should have become aware,of the event or circumstances giving rise to theclaim. A notice relating to any extension of theDefects Notification Period shall be givenbefore the expiry of such period. Theparticulars shall specify the Clause or otherbasis of the claim, and shall includesubstantiation of the amount and/or extensionto which the Employer considers himself to beentitled in connection with the Contract. TheEngineer shall then proceed in accordancewith Sub-Clause 3.5 [Determinations] to agreeor determine (i) the amount (if any) which theEmployer is entitled to be paid by theContractor; and/or (ii) the extension (if any) ofthe Defects Notification Period. This amountmay be included as a deduction in the ContractPrice and Payment Certificates.

The Employer shall only be entitled to setoff against or make any deduction from anamount certified in a Payment Certificate, orto otherwise claim against the Contractor inaccordance with this Sub-Clause.

b) MOSPI

Early Warning

Clause 32.1 says that, the contractor is to warn

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the employer at the earliest opportunity ofspecific likely futures or circumstance that maydelay the execution of work. The employer shallask the contractor to provide an estimate ofthe expected completion date.

Liquidated Damages

In the case of a delay in completion of thecontract, according to clause 9A of MOPSI,the contractor may need to pay the LD at therate of (0.5%) of the contract price per weekof delay. And the same clause says that theLD rate may be increased up to 10% of thecontract price upon the decision of theemployer. Clause 9A (i) say that if the owner issatisfied with the works can be completed bythe contractor within a reasonable time afterthe specified time for completion; the ownermay allow further extension of time at itsdiscretion with or without the levy of liquidateddamages. Clause 9A (ii) says that the owner ifnot satisfied that the works can be completedby the contractor, and in the event of failure onthe part of the contractor to complete workwithin further extension of time allowed asaforesaid, shall be entitled, without prejudiceto any other right, or remedy available in thatbehalf, to withdraw the contract. Clause 9A (iii)says that the owner, if not satisfied with theprogress of the contract and in the event offailure of the contractor to recoup the delays inthe mutually agreed time frame, shall beentitled to terminate the contract.

Incentives: Clause 50.9.B (Option Clause)Clause 50-9(B) articulates that, for earlycompletion of the contract before the stipulateddate of completion, the contractor may get anincentive amount at the rate of half per cent(0.5%) of the contract price per week of early

completion or it may be subject to maximumof five percent (5%) of the contract price.

Risk 3 – Poor quality of work done by thecontractor

a) FIDIC

According to the clause 4.9 Quality ofAssurance, The Contractor shall institute aquality assurance system to demonstratecompliance with the requirements of theContract. The system shall be in accordancewith the details stated in the Contract. TheEngineer shall be entitled to audit any aspectof the system. Details of all procedures andcompliance documents shall be submitted tothe Engineer for information before eachdesign and execution stage is commenced.When any document of a technical nature isissued to the Engineer, evidence of the priorapproval by the Contractor himself shall beapparent on the document itself.

Compliance with the quality assurancesystem shall not relieve the Contractor of anyof his duties, obligations or responsibilitiesunder the Contract.

b) MOSPI

Under clause 33.1 the employer may checkthe contractor’s work and notify the contractorif defects are identified. The employer has therights to ask the contractor to search for defectsand to uncover and test any work that theemployer considers may have defects. UnderClause 34.1 the employer may instruct thecontractor to carry out the tests which are notmentioned in the contract specification, if thereare no defects identified during this test, it willbe considered as compensation event. Theemployer shall notify the contractor about the

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any defects, before the defects liability period(Clause 35.1).

According to the Clause 3B, the contractorshould submit 5% of the contract amount asperformance guarantee and under Clause 48.1the employer shall retain money from the eachpayment (the % of the retention money will bementioned in contract data). This retentionmoney will be released to the contractor uponthe completion of total work. 5% PerformanceGuarantee should be refunded within 14 daysof the issue of the defect liability Certificate(taking over Certificate with a list of defects).Retention money should be refunded afterissue of no defect certificate. Under Clause32.1 the contractor is to warn the employer atthe earliest opportunity to specific unlikelyfuture events may affect the quality of the work.Under Clause 12 (g) the contractor is eligibleto get compensation for any loss or damagedue to the use or occupation by the Employerof any Section or part of the Permanent Worksexcept as may be provided for in the contract.

Risk 4 – Unforeseen ground condition

a) FIDIC

Clause 4.12 unforeseeable physicalconditions, In this Sub-Clause, physicalconditions means natural physical conditionsand manmade and other physical obstructionsand pollutants, which the Contractorencounters at the Site when executing theWorks, including sub-surface and hydrologicalconditions but excluding climatic conditions.

If the Contractor encounters adversephysical conditions which he considers to havebeen Unforeseeable, the Contractor shall givenotice to the Engineer as soon as practicable.

This notice shall describe the physicalconditions, so that they can be inspected bythe Engineer, and shall set out the reasons whythe Contractor considers them to beUnforeseeable. The Contractor shall continueexecuting the Works, using such proper andreasonable measures as are appropriate forthe physical conditions, and shall comply withany instructions which the Engineer may give.If an instruction constitutes a Variation, Clause13 [Variations and Adjustments] shall apply.

If and to the extent that the Contractorencounters physical conditions which areUnforeseeable, gives such a notice, andsuffers delay and/or incurs Cost due to theseconditions, the Contractor shall be entitledsubject to Sub-Clause 20.1 [Contractor’sClaims] to:

a. An extension of time for any such delay, ifcompletion is or will be delayed, under Sub-Clause 8.4 [Extension of Time forCompletion], and

b. Payment of any such Cost, which shall beincluded in the Contract Price.

After receiving such notice and inspectingand/or investigating these physical conditions,the Engineer shall proceed in accordance withSub-Clause 3.5 [Determinations] to agree ordetermine (i) whether and (if so) to what extentthese physical conditions were Unforeseeable,and (ii) the matters described insubparagraphs (a) and (b) above related tothis extent.

However, before additional Cost is finallyagreed or determined under sub-paragraph(ii), the Engineer may also review whetherother physical conditions in similar parts of the

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Works (if any) were more favorable than couldreasonably have been foreseen when theContractor submitted the Tender. If and to theextent that these more favorable conditionswere encountered, the Engineer may proceedin accordance with Sub-Clause 3.5[Determinations] to agree or determine thereductions in Cost which were due to theseconditions, which may be included (asdeductions) in the Contract Price and PaymentCertificates.

However, the net effect of all adjustmentsunder sub-paragraph (b) and all thesereductions, for all the physical conditionsencountered in similar parts of the Works, shallnot result in a net reduction in the ContractPrice.

The Engineer may take account of anyevidence of the physical conditions foreseenby the Contractor when submitting the Tender,which may be made available by theContractor, but shall not be bound, by any suchevidence.

b) MOSPI

Clause 7.1 encourages the bidders to visit thebefore entering into bidding. The same clausesays that it is bidder’s responsibility toexamine the site of works and its surroundingto obtain information for preparing the bid.Clause 44.1 (f) says that the following situationmay be considered for the compensationevent. Ground conditions are substantially moreadverse than could reasonably have beenassumed with the ground investigation report.Under Clause 11.1 (c) the contractor isresponsible for any loss or damage to theextent that it is due to the design of the Works.

Risk 5 – Permits and licences (Environmentalagency etc.)

a) FIDIC

Clause 2.2 Permits, Licenses or Approvals -The Employer shall (where he is in a positionto do so) provide reasonable assistance to theContractor at the request of the Contractor:

a. By obtaining copies of the Laws of theCountry which are relevant to the Contractbut are not readily available, and

b. For the Contractor’s applications for anypermits, licenses or approvals required bythe Laws of the Country:

i. Which the Contractor is required toobtain under Sub-Clause 1.13[Compliance with Laws];

ii. For the delivery of Goods, includingclearance through customs; and

iii. For the export of Contractor ’sEquipment when it is removed from theSite.

b) MOSPI

Under Clause 32.1 the contractor is to warnthe employer at the earliest opportunity tospecific unlikely future events may delay thescheduled completion date. Under Clause 9A-i, if the owner is satisfied, that the works canbe completed by the contractor within areasonable time after the specified time forcompletion, may allow further extension of timeat its discretion with or without the levy ofliquidated damages.

Risk 6 – Cost involved with changes indesign and scope of work (Changes madeby client)

a) FIDIC

Under the Clause 13.1 Right to Vary, Variations

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may be initiated by the Engineer at any timeprior to issuing the Taking-Over Certificate forthe Works, either by an instruction or by arequest for the Contractor to submit a proposal.

The Contractor shall execute and be boundby each Variation, unless the Contractorpromptly gives notice to the Engineer stating(with supporting particulars) that the Contractorcannot readily obtain the Goods required forthe Variation. Upon receiving this notice, theEngineer shall cancel, confirm or vary theinstruction.

Each Variation may include:

a. Changes to the quantities of any item ofwork included in the Contract (however, suchchanges do not necessarily constitute aVariation);

b. Changes to the quality and othercharacteristics of any item of work;

c. Changes to the levels, positions and/ordimensions of any part of the Works;

d. Omission of any work unless it is to becarried out by others;

e. Any additional work, plant, materials orservices necessary for the permanentWorks, including any associated Tests oncompletion, boreholes and other testing andexploratory work; or

f. Changes to the sequence or timing of theexecution of the Works.

The Contractor shall not make any alterationand/or modification of the Permanent Works,unless and until the Engineer instructs orapproves a Variation.

b) MOSPI

According to Clause 4 A the owner canpropose the variation up to ±25% in quantityof each individual item, and ±10% of the totalcontract.

Under Clause 4 A (b) the contractor canclaim the rate of material and labor, plus 10%for overheads and profit for the items/workincluded extra. If there is delay in the ownerand the contractor coming to an agreementon the rate, under Clause 4C the employer willpropose the provisional rate and this rate willbe paid until the rates are finally determined.Under Clause 44.1 (c) the contractor is entitledfor compensation event if any variation in thedesign is proposed by the employer.

Risk 7 – Changes in quantity

a) FIDIC

Under the Clause 13.1 Right to Vary,Variations may be initiated by the Engineer atany time prior to issuing the Taking-OverCertificate for the Works, either by aninstruction or by a request for the Contractorto submit a proposal.

b) MOSPI

The following are the clauses under thechanges in the quantities, Clause 38 Changesin the Quantities

38.1 If the final quantity of the work donediffers from the quantity in the Bill of Quantitiesfor the particular item by more than +25%provided the change exceeds + 10% of initialContract Price, the Nodal Officer or hisnominee shall adjust the rate(s), to allow forthe change.

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38.2 The Nodal Officer or his nominee shallnot adjust rates from changes in quantities ifthereby the Initial Contract Price is exceededby more than 15% except with the Priorapproval of the Employer.

38.3 If requested by the Nodal Officer or hisnominee where the quoted rate (s) of anyitem(s) is abnormally high, the Contractor shallprovide the Nodal Officer or his nominee witha detailed cost breakdown of such rate in theBill of Quantities.

Risk 8 – Owner delays (lack of payment,unable to get approvals, delayed progresspayments)

a) FIDIC

According to the clause 14.8 Delayedpayment, If the Contractor does not receivepayment in accordance with Sub-Clause 14.7[Payment], the Contractor shall be entitled toreceive financing charges compoundedmonthly on the amount unpaid during theperiod of delay. This period shall be deemedto commence on the date for paymentspecified in Sub-Clause 14.7 [Payment],irrespective (in the case of its sub-paragraph(b)) of the date on which any Interim PaymentCertificate is issued. Unless otherwise statedin the Particular Conditions, these financingcharges shall be calculated at the annual rateof three percentage points above the discountrate of the central bank in the country of thecurrency of payment, and shall be paid in suchcurrency. The Contractor shall be entitled tothis payment without formal notice orcertification, and without prejudice to any otherright or remedy.

b) MOSPI

The general contract conditions state that,

a. Bills should be prepared and submitted bythe Contractor. Joint measurements shouldbe taken continuously and need not beconnected with billing stage. System of 4copies of measurements, one each forContractor, Client and Engineer, and signedby both Contractor and Client can be tried.

b. 75% of bill amount should be paid within14 days of submission of the bill. Balanceamount of the verified bill should be paidwithin 28 days of the submission of the bill.

c. For delay in payment beyond these periodsspecified in B) above, interest at aprespecified Rate (suggested rate 12% p.a.) should be paid.

Risk 9 – Exceptional Inclement Weather

a) FIDIC

Clause 4.12 unforeseeable Physicalconditions, in this Sub-Clause, physicalconditions means natural physical conditionsand manmade and other physical obstructionsand pollutants, which the Contractorencounters at the Site when executing theWorks, including sub-surface and hydrologicalconditions but excluding climatic conditions.

If the Contractor encounters adversephysical conditions which he considers to havebeen Unforeseeable, the Contractor shall givenotice to the Engineer as soon as practicable.

This notice shall describe the physicalconditions, so that they can be inspected bythe Engineer, and shall set out the reasons whythe Contractor considers them to beUnforeseeable. The Contractor shall continueexecuting the Works, using such proper andreasonable measures as are appropriate forthe physical conditions, and shall comply with

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any instructions which the Engineer may give.If an instruction constitutes a Variation, Clause13 [Variations and Adjustments] shall apply.

a. If and to the extent that the Contractorencounters physical conditions which areUnforeseeable, gives such a notice, andsuffers delay and/or incurs Cost due to theseconditions, the Contractor shall be entitledsubject to Sub-Clause 20.1 [Contractor’sClaims] to:

b. An extension of time for any such delay, ifcompletion is or will be delayed, under Sub-Clause 8.4 [Extension of Time forCompletion], and

c. Payment of any such Cost, which shall beincluded in the Contract Price.

After receiving such notice and inspectingand/or investigating these physical conditions,the Engineer shall proceed in accordance withSub-Clause 3.5 [Determinations] to agree ordetermine (i) whether and (if so) to what extentthese physical conditions were Unforeseeable,and (ii) the matters described in sub-paragraphs (a) and (b) above related to thisextent.

However, before additional Cost is finallyagreed or determined under sub-paragraph(ii), the Engineer may also review whetherother physical conditions in similar parts of theWorks (if any) were more favourable than couldreasonably have been foreseen when theContractor submitted the Tender. If and to theextent that these more favorable conditionswere encountered, the Engineer may proceedin accordance with Sub-Clause 3.5[Determinations] to agree or determine thereductions in Cost which were due to these

conditions, which may be included (asdeductions) in the Contract Price and PaymentCertificates.

However, the net effect of all adjustmentsunder sub-paragraph (b) and all thesereductions, for all the physical conditionsencountered in similar parts of the Works, shallnot result in a net reduction in the ContractPrice.

The Engineer may take account of anyevidence of the physical conditions foreseenby the Contractor when submitting the Tender,which may be made available by theContractor, but shall not be bound, by any suchevidence.

b) MOSPI

According to Clause 11.1 (d) the employer isresponsible for the unforeseen event occurreddue to the nature of force. Under Clause 12 A(f) the contractor is entitled to havecompensation for the event of flood,tornadoes, earthquakes and landslides andunder Clause 28.1 the intended completiondate shall be extended by the employer.Clause 13.1 says that the contractor has toprovide the insurance cover for the followingevents; loss or damage to the works, plantsand machineries, loss or damages to theequipment, loss of or damage to the propertyin connection with the contract, personal injuryor death.

Risk 10 – Estimation errors or design error

a) FIDIC

The Clause 1.9 Delayed Drawings orInstructions, The Contractor shall give noticeto the Engineer whenever the Works are likelyto be delayed or disrupted if any necessary

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drawing or instruction is not issued to theContractor within a particular time, which shallbe reasonable. The notice shall include detailsof the necessary drawing or instruction, detailsof why and by when it should be issued, anddetails of the nature and amount of the delayor disruption likely to be suffered if it is late. Ifthe Contractor suffers delay and/or incurs Costas a result of a failure of the Engineer to issuethe notified drawing or instruction within a timewhich is reasonable and is specified in thenotice with supporting details, the Contractorshall give a further notice to the Engineer andshall be entitled subject to Sub-Clause 20.1[Contractor’s Claims] to:

a. An extension of time for any such delay, ifcompletion is or will be delayed, under Sub-Clause 8.4 [Extension of Time forCompletion], and

b. Payment of any such Cost plus profit, whichshall be included in the Contract Price.

After receiving this further notice, theEngineer shall proceed in accordance withSub-Clause 3.5 [Determinations] to agree ordetermine these matters.

However, if and to the extent that theEngineer’s failure was caused by any error ordelay by the Contractor, including an error in,or delay in the submission of, any of theContractor’s Documents, the Contractor shallnot be entitled to such extension of time, Costor profit.

b) MOSPI

Clause 11 (c) says that the contractor isresponsible for the damages or loss that iscaused due to the design of the work.According to Clause 32.1 the contractor has

to inform the employer about the event that maycause adverse effect to the quality of the workand under Clause 32.2 the contractor shallcooperate with the employer to find out thesolution to minimize that adverse effect.

RESEARCH DISCUSSION

Key Findings

The risk mitigation measures of FIDIC form ofcontract derived from the data analysisprocess were compared and contrasted withthe risk mitigation measures of MOSPI formof contract. The findings of the comparativestudy are detailed below.

In this chapter, the risk mitigationmechanisms derived out for the 10 key riskfactors from the data analysis process is usedfor making a comparative observation. Suchobservations after making a criticalinterpretation were presented in this chapteras key research findings.

Risk 1 – Delays in availability of labor,material and equipment

a. To mitigate this risk, both MOSPI and FIDICsays that the contractor is responsible toarrange labor, material and equipment tocarry out the work. Under both the contractconditions the contractor is entitled to getcompensation if the employer is not providesomething which he is to provide by the datefor providing it shown on the acceptedprogramme. Both the contract conditionsallow the contractor to get compensationevent, if there is any delay caused by theemployer nominated subcontractors.

b. FIDIC contract clearly mentioned that thecontractor shall subject to (Employer’sclaim) pay delay damages to the Employer

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for every day which elapse between therelevant Time for Completion This clausemakes the contractor to feel moreresponsible to get work done from thesubcontractors rather than blaming others.

c. From the survey response the participantsfeel that the contractor is better positionedto manage this risk. (Mean=0.8125;contractor 100%).

Risk 2 – Time overrun by the contractor

The risk mitigation mechanisms adopted byboth the contracts have an early warningclause; under this clause the contractor cangive early warning about the event that mayaffect the planned completion date. And boththe contracts have the clause to get liquidateddamages from the contractor, if he failed todeliver the project within the time mentionedin the contract data. Under MOSPI contractliquidated damages shall be fixed between0.5% and maximum of 10% of the project valuefor a week of delay until the completion of thework. But in FIDIC there is a flexibility providedto do negotiation to finalize the percentage ofdelay damages to be fixed. It allows thecontractor and the client to talk and think aboutthe situation to finalize the delay damage tobe fixed for that particular project.

a. Incentive clause is provided in the contractMOSPI; it supports to encourage thecontractor to complete the project within thetime. In MOSPI contract incentive rate isfixed, it can be ½% to 5% of the project valueper week of early completion. But in FIDICthe incentive rate for early completion of theproject is not mentioned.

b. From the survey response the participants

feel that the Contractor is better positionedto manage this risk (mean=0.75; contractor>client).

Risk 3 – Poor quality of work done by thecontractor

a. In FIDIC contract it is mentioned that thecontractor shall institute a Quality assurancesystem to demonstrate compliance with therequirements of contract. But in MOSPI, ifthe contractor fails to correct the defectsbefore end of the defects correction period,the employer may correct that defects andthe amount will be collected from thecontractor.

b. In MOSPI contract the performance bondis mentioned that the contractor shouldsubmit 5% of the contract value asperformance guarantee to the employer. Butin FIDIC this is in option clause, but inMOSPI performance guarantee iscompulsory. It increases the financial burdento the contractor.

c. It is clear that the survey respondents feelthat, the contractor is best positioned tomanage the risk to the work performance(mean = 0.86; contractor > client).

Risk 4 - Unforeseen Ground Condition

a. MOSPI clearly indicates that it iscontractor ’s responsibility for anyinaccuracies in the topographical dataprovided by the contractor and thecontractor is encouraged to ascertain theground condition at his own risk and costbefore entering into the contract. Howeverthe contractor is entitled to havecompensation, if the ground condition issubstantially more adverse than could

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reasonably have been assumed with theground investigation report.

b. FIDIC seems to be more efficient thanMOPSI, in allocating this risk fairly. UnderFIDIC the contractor can get compensationfor the event that may stop the contractor tocomplete the work at mentioned time. Thisclause prevents the contractor to avoidpaying liquidated damages, in case of anydelays caused due to the adverse groundcondition.

c. The survey respondents feel that thecontractor should involve to manage thisrisk (mean=0.8; contractor 100%).

Risk 5 – Permits and licenses(Environmental agency, etc.)

a. Both the contract MOSPI and FIDIC saysthat the contractor can issue an earlywarning to the employer about the event andprocess which may affect the estimatedproject completion date. The full risksrelated to obtaining permits and licensemight be transferred to the contractor.

b. The survey respondents feel that thecontractor is highly responsible to managethis risk (mean=0.87; contractor > client).

Risk 6 – Cost involved with changes indesign and scope of work (Changes madeby client)

a. In MOSPI there is flexibility provided to theemployer to make variation up to ±25% inquantity of each individual item, and ±10%of the total contract. For the extra work thecontractor can claim the current market ratefor material and labor, plus 10% foroverheads and profit for that item of work.In MOPSI the profit percentage for the extra

work carried out by the contractor is fixedby 10% it may not sufficient to the contractor,since the extra work may require additionaleffort to complete that work. Such variationlimits are not observed in FIDIC andmoreover in FIDIC contract variations maybe initiated by the Engineer at any time priorto issuing the Taking over Certificate for theworks, either by an instruction or by arequest for the contractor to submit aproposal.

b. The survey participants feel that the clientis best positioned to manage this risk(mean=0.733; client > contractor).

Risk 7 – Changes in Quantity

a. In MOSPI there is flexibility provided to allowfor the changes if the Bill of Quantities forthe particular item by more than ± 25%provided the change exceeds ± 10% ofinitial contract price. The changes inquantities cannot be adjusted if the rateschanges in quantities are the initial contractprice is exceeded by more than 15%. Suchvariation limits are not observed in FIDICand moreover in FIDIC contract variationsmay be initiated by the Engineer at any timeprior to issuing the Taking over Certificatefor the works, either by an instruction or bya request for the contractor to submit aproposal.

b. The survey respondents feel that both thecontractor and the client should involve tomanage this risk (mean=0.71;client=contractor).

Risk 8 – Owner delays (lack of payment,unable to get approvals, delayed progresspayments)

a. In FIDIC contract, if the Contractor does not

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receive payment, he shall be entitled toreceive financing charges compoundedmonthly on the amount unpaid during theperiod of delay. But in MOSPI, Bills shouldbe prepared and submitted by theContractor. 75% of bill amount should bepaid within 14 days of submission of the bill.Balance amount of the verified bill shouldbe paid within 28 days of the submission ofthe bill.

b. The survey participants feel that the clientis best positioned to manage this risk(mean= 0.83; client 100%).

Risk 9 – Exceptional Inclement Weather

a. Both the contract clearly mentioned that thecontractor should make insurance againstthe loss or damage to the works, plant,materials and also the contractor is liableto do insurance against death or bodilyinjury to employees of the contractor.

b. Both the contract forms allow the contractorto claim the compensation for the eventwhich damages very extremely.

c. The survey participants feel that thecontractor and the client both are equallypositioned to manage this risk (mean=1;client= contractor)

Risk 10 – Estimation errors or designerrors

a. MOSPI completely transfers this risk to thecontractor, making contractor liable for allthe risks that arise from any design errorsor inaccuracies in the design irrespectiveof design inputs given by the client. ButFIDIC saves the contractor from any ofdefects in the works due to his design so

far he proves that he used reasonable skilland care to ensure his design is compiledwith the works information.

b. Both the contract says that the contractorcan issue an early warning to the employerabout the design error which may affect thequality of the work and timely completion ofthe work.

c. The survey participants feel that thecontractor is best positioned to manage thisrisk (mean= 0.83; contractor > client).

RECOMMENDATIONS TO THE

INDIAN CONSTRUCTION

Industry

In India, MOSPI form of contract is used as astandard document as well as a guidingdocument for preparing bespoke contract. Theother form contract conditions available in Indiawere drafted to deal with the more specificprojects. MOSPI is the only standard form ofconstruction contract published by the Ministryof Finance India, for adopt in any generalprojects in the domestic market. Hence it isimportant to analyze its risk managementcapabilities by comparing with the DevelopedCountries popular form of contract condition(FIDIC). The comparative study conducted inthis chapter would assist in makingrecommendation to the contractual practicesadopted in Indian construction industry. Thesuggestions and observation gathered fromthe different survey participants and theresearch findings are presented below asrecommendations.

a. MOSPI form of contract is not speciallydrafted to deal with any specific

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procurement method. It is essential to draftspecialized contract forms to deal with thespecific procurement method to achievemore efficiency in contract managementsystem in India.

b. After a detailed comparison of riskmitigation clauses from FIDIC contract withMOSPI contract it indicates there is a majorlevel of inequity situation in MOSPI. Fromthe comparison it is observed that thecontractual clauses in MOSPI are draftedmore in favor of the client rather than thecontractor. MOSPI contract transfersmaximum risks to the contractor.Transferring maximum risks to thecontractor is not a good practice, it willincrease the burden to the contractor(financial and responsibilities). Ultimatelythe contractor will consider morecontingencies at the time of bidding. It isconsidered as the financial loss to theemployer. So it is wise to share the risksoptimally when it happens, rather thanpaying more premiums to the contractor forthe risks which are expected to happen inthe future. Hence it is important to modifythe contract clauses in the MOSPI form ofcontract to make more balanced contract.

c. From the detailed study of MOSPI form ofcontract, it is observed that it is framed todeal with only the domestic projects. For themajor international funded projects FIDICcontract conditions are used. Constructionindustry in India needs to frame anindigenous contract condition to deal withthe international projects with more relevantto the socioeconomic conditions of thecountry.

CONCLUSION

The successful completion of a projectdepends on many factors of which proper riskallocation is one of the most important. Thisresearch undertaken to perform a comparativestudy of the risk mitigation clauses frompopular form of contract conditions adoptedfrom India and Developed Countriesconstruction industry. Such a comparativestudy has helped to make the critical analyzeof the risk mitigation capability of thedeveloping contract management system inIndia with the developed contract managementsystem.

To make the comparative study moreeffective, this research has identified thepopular form of contract condition andprocurement method adopted from DevelopedCountries and India, i.e., FIDIC contract inDeveloped Countries and MOSPI contract inIndia along with design and build procurementmethod are most popularly adopted. The 20significant risks associated with design andbuild procurement method were identified fromthe literature review and the top 10 risks wereprioritized through a comprehensiveassessment of their impact severity, likelihoodof occurrence established through theresearch survey. The contractual risk mitigationmechanism for the top 10 risk factors wasidentified through the data analysis process.

The key findings obtained from thiscomparative study of FIDIC (DevelopedCountries) with MOSPI (India) for mitigatingthe risks associated with the design and buildprocurement method shall help to improve thecondition of the risk allocation mechanismadopted in the Indian construction industry.This comparative study helps to get to know

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about the risk mitigation capacity of the Indianconstruction contract and it enabled to makerelevant recommendation to improve theefficiency of the Indian construction projects.However the recommendations made by thisresearch project is not conclusive, but toprovide a comparative list of risk mitigationtechniques adopted by both the contractualand industry perspective. Hence the readersof this research shall consider theserecommendations as a guide note to mitigaterisks rather consider as a conclusive solutionfor mitigate risks.

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