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Construction Contracts

The realistic assessment and capture of risk is a critical component of cost mitigation and is essential to the achievement of success in construction contracts generally. The Standards Australia standard on risk management has defined risk management as ‘the culture, processes and structures that are directed towards realizing potential opportunities whilst managing adverse effects’. Evidently, the concept of risk mitigation in construction projects is embodied inactions which are taken in order to lessen the probability of an event occurring and which reduce the impact on the project in the event that they do emerge. These principles have been broadly characterized by Professor Max Abrahamson and have been dubbed the ‘Abrahamson Principles’4 to risk allocation which provides that ‘a party to a contract should bear a risk where that risk is within that party’s control’. The ‘No Dispute’ working party report was the primary catalyst for the incorporation of these principles into AS2124-1992 and summarized them largely through three statements:

1. Each party should bear risk most appropriate to that party.

2. The Principal should not ask the Contractor to price unquantifiable risks within the control of the Principal.

3. The Principal can request that the Contractor manage and control neutral risks.

About ME

Tim Davis

Co-Founder & President of Modular, teaming up with Chris Lattner alongside a world class team who is rebuilding AI infrastructure for developers everywhere. Love being a dad, running, startups, product management, leadership, being an Aussie and living in California.