At a time when “mega projects” dominate the U.S. highway design, construction, and maintenance landscape, it is imperative that an evaluation of such projects be undertaken to identify the risks involved and how best to manage and allocate those risks at the outset of a project. While risks exist at every stage of a project, a properly negotiated and drafted contract that correctly allocates risks can help entities manage their potential liability and limit their possible exposure.
The risk of events that would impact the construction price or schedule can be assigned in the contract to one party or the other, or shared between the parties. Express and clear allocation of risk is particularly important in alternative delivery projects, such as design-build (DB), where the DB contractor typically has greater control over risk factors than in the traditional design-bid-build project. Once the risks are allocated, strategies can be developed to manage those risks, such as through the use of performance and payment bonds, warranties, damages limitations, and a myriad of other ways.
In light of the ever-expanding magnitude of these highway construction projects—which can easily exceed $1 billion—research is needed to identify successful ways to manage and allocate the risk of these mega projects.
Status: Research Completed. Published as NCHRP Legal Research Digest 86.