B. Contractor’s risk in performing project
Pool Yoke and Ong (2003) they found that most construction risks associated with labour, plant, materials, technology and management are controllable risks, and should be borne by the contractor. The local contractors perceived the following as significant risks during the construction phase :
• Inclement weather
The weather is a major risk for the contractor, because it has a major impact on productivity. However, almost all the construction activities take place in an unfavourable and uncontrollable external environment. Weather is unpredictable; due to the fact there is not anyone capable of predicting the weather correctly for the entire lengthy of the project. Similarly, contractors may also be unable to obtain an area's complete geological information needed for weather forecasting.
• Safety and accidents
Accidents can always happen and are inevitable on a construction site. Accidents are considered to be a part of the contractor's responsibility, because contractors have the most control over site conditions that can increase or decrease accident exposure during the construction stage. Usually, they will reduce the risk of accidents by transferring risk/blame to insurers. Before the construction stage, contractors need to choose the right insurance policy to cover accident risk. Besides, a safety plan should be prepared and a Safety Officer should be employed at the beginning of the construction phase so as to ensure safety on site.
• Latent condition
According to AS 2124 -1992 Clause 12, Latent Conditions are:
a) Physical conditions on the Site or its surroundings, including artificial things but excluding weather conditions, which differ materially from the physical at the time of the Contractor's tender if the Contractor had
- Examined all information, which is made available in writing by the Principal to the Contractor
- Carried out the investigation regarding the risks, contingencies and others which affect the tender, and by the making of reasonable enquiries;
b) Any other conditions specified on the contract under Latent Conditions.
A contractor is in a better position to assess the impact of the conditions stated above on the project cost and time. Without managing this risk properly, it may extend from something relatively insignificant to an issue that threatens the viability of construction and also involves significant additional costs and time. Normally, the contractor would have properly analysed and carried out detailed site investigations during the tender stage. Additionally, Contractors can transfer the risk to the client by using contract conditions.
• Availability of material and equipment, and labor
The availability of the resources necessary to construct the project is allocated to the contractor. The major risks of availability of resources are namely:
1. The delivery of required materials or equipment may be late;
2. Shortage of materials, equipment and labor;
3. Subcontractors allocate their labor force to different projects to achieve maximum profit. As a result, the main contractor has less control over the number of workers at the site.
This may cause the project to be delayed and be unable to be completed within the given time. Usually, there is some planning and controlling that can be done at the beginning of the construction stage to prevent unavailability of resources. Therefore, proper planning and selection of construction methods, equipment and prosecution of the work is very important for the contractor. Meetings should always be conducted so that the availability of resources can be determined.
• Labor disputes
Labor disputes are another risk allocation in favour of the contractor. Construction sites are very complicated, therefore, because there might be some labor unionists at the site, there is a possibility of a strike action occurring. As a result, it might affect the progress of the work and cause the project to be delayed. Normally, contractors will work closer with laborers to ensure they are satisfied with their job.
The results suggest that the contractors are more concerned about physical risk, performance risk and construction related risks. Therefore, the local contractors might need to focus more on management and the contractor documents.
Flanagan and Norman (1993), people can be generalised by their risk and creativity. From the Figure, it is clearly shown that contractors are subjected to high risk exposure.
From Flanagan and-Norman (1993), the following is a list of-Contractors' risks:
• Failure to complete within the stipulated design and construction time;
• Unforseen adverse ground conditions delaying the project;
• Exceptionally inclement weather delaying the project;
• Strike by the labour force;
• Unexpected price rises for labour and materials; ®
• An accident to an operator on site causing physical injury;
• Latent defects occurring in the structure through poor workmanship;
• Force majeure (floor, earthquake, etc)
Edward (1999) suggests that contractors' perceived risks are primarily associated with delays occasioned by adverse weather, client initiated changes, materials and labour supply or price changes, incorrect estimates, and subcontractor issue.
Roozbeh (1995) found that risks were allocated to contractors as follows:
• Labor and equipment productivity
• Quality of work
• Labor, equipment and material availability
• Safety Defective material
• Contractor competence
• Inflation
• Actual quantities of work
• Labor disputes
Morate and Vila (2010) they identify the risk of construction project as follows:
• Project management risks
- Lack of adequate process
- Lack of resource
- Inexperienced team members
- Lack of motivating attitudes
• Engineering risks
- Design errors
- Design changes
• Execution risks
- Mistake construction
- Low productivity
- Lack of previous experience
Accidents
• Supplier risks
- Technical problems
- Delays in supply
- Lack of quality