Evaluating Equitability of Risk Allocation

Abstract

The current Dutch infrastructure construction market faces various challenges in renovations and sustainability, while the global context shows its volatility. The rising construction demand strengthens the contractors’ bargaining power, while they previously had to be (over-)accommodating towards the client to stay in business. Bad experiences from the past and the complexity of larger projects require a new approach to collaboration between (public) clients and contractors. Attention to the equitability of risk allocation can be a first step towards improvement. This topic is studied by analysing literature and five recent rail construction case study projects between Van Hattum & Blankevoort (contractor) and ProRail (public client), as well as interviewing practitioners. This research has aimed to create a risk allocation equitability assessment framework for construction projects to define, apply, evaluate, and improve risk allocation equitability in this context.

Combining several justice and responsibility theories provides a theoretical overview of the concept of equitability. This distinguishes distributional, procedural, interpersonal, and informational factors. Additionally, it considers contexts, collaboration, experiences, and expectations. Comparing the theoretical with practice shows that not all of these are relevant or (explicitly) applied by practitioners. The use of model agreements, such as the UAC-IC2005, is very influential in defining, applying, and experiencing equitability. As a result, the relevance of primarily distributional factors and contexts is affected. And although the UAC-IC2005 can serve as a benchmark and indicator for equitability, it cannot cover all factors practitioners experience as relevant for equitability. Therefore, this study has identified two points during the risk allocation process in construction projects when equitability is best assessed. A list of questions to assess relevant factors is provided. The scoring of these questions can be translated into a scoring of nine categories and plotted on a heatmap. This provides a comprehensive overview of how equitability is perceived and where attention is required.

Unfortunately, it is concluded that the perception of equitability is too subjective and multi-faceted to absolutely and undisputedly define, apply, and evaluate equitability. However, the findings also show that the question of equitability can, therefore, be neglected. The assessment framework drawn up in this study can provide a better understanding of what constitutes to equitability perception, a measure to identify equitability issues, and a guide to starting and directing discussions on this topic. Although the framework has, to some extent, been validated by contractor practitioners, it is recommended that this be repeated with the client’s side and that the framework be applied and evaluated to real-world projects. Furthermore, a quantitative approach to the topic and variation of the scope could deepen the understanding of equitability.