Construction Contracts, Project Management, and Risk Mitigation

Owners, contractors, and other project participants must consider the complexity of construction planning, the potential for errors in construction, design defects, and contractual breaches. Contractors are limited by the narrow profit margins imposed by extreme competition in the marketplace. Subcontractors that do not meet contractual standards expose others to liability, require additional supervision, and can result in termination. Such terminations can be problematic. Finally, collections are risky when projects are undercapitalized or subcontractors have limited assets.

Owners, contractors and counsel must use risk management techniques in advance of projects to mitigate the risk as well as use those skills to resolve losses or other problems when they arise during and after projects.

Risk management at the onset of a project should include clear and understandable contracts with detailed risk transfer provisions, appropriate insurance requirements, and solid remedies clauses. Likewise, identifying issues early and determining the options for resolution can reduce liability exposure. Managers and counsel should anticipate training field personnel to evaluate potential issues on job sites and to know when to escalate the matter. When necessary, the timing and manner of notice to third parties, including insurance, may be important to mitigate risks.

Project documentation should be reviewed and updated during the project to address change orders, schedule changes, and to give notice properly of default when necessary. Contractual risk transfer and other risk-shifting should be managed proactively to avoid surprise and to ensure that the party responsible for the loss is the party that will cover the loss.

Listen as our expert panel discusses the best practices for effective risk mitigation and risk management. The panel will address how the elements of construction projects relate to one another and how to incorporate all of the necessary stakeholders.