Topic: Risk Allocation in construction projects

Topic: Risk Allocation in construction projects

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The conventional wisdom underpinning the risk management of construction projects is that risk should be assigned to the party in the best position to manage that risk.

Many project managers disagree with this approach and believe that risk should be allocated on the basis of cost-effectiveness, ie. it should be borne by the party best able to absorb and manage the risk at lowest cost.

Discuss risk allocation practices for conventional construction projects.

A starting point for this discussion would be the PMI Risk Management Standard, the United Kingdom’s Green
Book guidance material issued by H.M. Treasury, and the Partnerships Victoria/Infrastructure Australia PPP Risk Management Guidance.

You should also provide examples of poor risk allocation.

Examples of poor risk allocation can be found in reports of the Commonwealth and State Audit Commissions available on the internet. The Final Report of the Building the Education Revolution Task
Force (available on the internet) may also be helpful with this subject.