Construction Risk Management: Keys to Sound Contract Administration Best Practices

Abstract

Murphy's Law: "if something can go wrong - it will" For those of us who practice Construction Law, we have learned that Murphy actually invented two other secret laws, which he maliciously and deliberately failed to disclose: i. The first secret law holds that, "just when you think things have gotten back on track, they get worse". ii. The second secret law holds that, "just when you think things can’t get any worse, they will". Clearly Murphy was an optimist. The unhappy truth is that construction projects are very complex undertakings and, as a result, things rarely, if ever, go as planned. Unlike an industrial or manufacturing process, each construction project is a "one of a kind" undertaking. The construction budget and schedule are based upon unique drawings prepared by architects and engineers, which drawings are not detailed to the last nut and bolt and which quite often, given the fast track nature of the process, may contain missing, incomplete or contradictory information, interferences among drawings, and/or be based upon inadequate site investigation/assumptions. In the face of all of that, the contractor has to compete to win the project in a tender process which is based upon an estimate of all of the "ingredients" including, materials, labour hours and productivity, quantities and contingencies, which will all be included in a fixed price where the low bid wins. This process is a recipe for disaster.