Construction Management and Economics (November 2011) 29, 11491158

How procurement options influence risk management

in construction projects
EKATERINA OSIPOVA1* and PER ERIK ERIKSSON2
1

Department of Civil, Environmental and Natural Resources Engineering, Lulea University of Technology, Lulea,
Sweden
2
Department of Business Administration and Social Sciences, Lulea University of Technology, Lulea, Sweden
Received 7 April 2011; accepted 6 November 2011

Before proceeding with a project, a client has to choose an appropriate procurement option that facilitates
an effective project organization in general and a thorough risk management process in particular. By identifying three procurement variables that have a major influence on risk management: project delivery method,
form of payment, and use of collaboration or partnering arrangements, the effect of each variable is studied.
An exploratory study and a series of interviews with clients, contractors and consultants involved in 11
Swedish construction projects, were performed in order to examine how risk management was carried out in
each project. Irrespective of the procurement option, many projects suffered from variations in cost affecting
one or more actors. Risk management was not carried out systematically throughout project phases.
However, in the projects with early involvement of the actors, their participation throughout the project, and
opportunities for open dialogue and collaboration, a more thorough risk management process was found.
While project delivery methods define formal risk allocation, the use of incentives and collaboration or
partnering arrangements help to establish a collaborative approach to risk management.
Keywords: Contract conditions, partnering, payment, procurement, risk management.

Introduction
Procurement is a combination of different methods for
purchasing construction objects and includes such
variables as source of funding, partner selection
method, price basis, responsibility for design, responsibility for management, and amount of subcontracting
(Murdoch and Hughes, 2008). The clients choice of
procurement option, i.e. a combination of the abovementioned variables, implies different ranges of
responsibilities and liabilities for the various actors, as
well as different degrees of their collaboration in the
project (Love et al., 1998; Eriksson and Westerberg,
2011) and may thereby influence risk management
(RM). This study focuses on three procurement variables, which are identified through the literature
review as having a large influence on RM. These are
project delivery method (i.e. who has design responsibility), form of payment (i.e. how contract price was

formed and if incentives are used), and use of additional collaboration or partnering arrangements.
From the perspective of design responsibility there
are two major methods of project delivery: in general
contracts responsibility for design lies with client
while in design-build contracts design responsibility
lies with contractor. As design is considered to be a
significant source of risk (Akintoye et al., 1998),
responsibility for design may influence actors
attitudes towards RM.
Form of payment has a significant impact on risk
allocation and influences the behaviour of the project
actors. Some forms, for example, fixed price, shift
most risk and responsibility to the contractor and do
not underpin possibilities for joint performance
improvement (Floricel and Miller, 2001). In contrast,
cost-reimbursement forms of payment imply that the
contractors are compensated for their actual costs.
However, the use of cost-reimbursement payments in

*Author for correspondence. E-mail: [email protected]

Construction Management and Economics
ISSN 0144-6193 print/ISSN 1466-433X online 2011 Taylor & Francis
http://www.tandfonline.com
http://dx.doi.org/10.1080/01446193.2011.639379

1150
Sweden, either with or without incentives or a bonus,
is scarce (Eriksson et al., 2008).
Collaboration through partnering arrangements has
been increasingly adopted during the last decade in
order to underpin relationships between project actors,
so that they are based more on openness, trust and
cooperation, rather than on sharp contractual formulations (Dagenais, 2007). Collaboration through
partnering has been argued to bring several significant
benefits to a project, especially when it is based on
early involvement of key project actors (Alderman and
Ivory, 2007). The early involvement supports the utilization of actors skills and competences already at the
beginning of the project. This enhances more thorough risk identification and assessment but also reduction of risks related to poor constructability through
design for manufacturing (Wynstra et al., 2001).
Although previous studies have discussed project performance for different project delivery methods
(e.g. Konchar and Sanvido, 1998; Ernzen and Schexnayder, 2000; Miller et al., 2000; Hyun et al., 2008),
and how the use of partnering tools affects project success (e.g. Tang et al., 2006), there is a lack of investigations that focus explicitly on RM for the different
procurement options from the joint perspective of clients, contractors and consultants. The aim of this study,
therefore, is to investigate how procurement options
influence RM in construction projects. The research
results are based on an exploratory study, including
questionnaire and document studies, and subsequently
a series of interviews with project actors involved in 11
Swedish construction projects. The results are expected
to increase the understanding of RM for the different
procurement options and, therefore, assist practitioners
in choosing an appropriate option.

Literature review
Risk and risk management
Project risks are uncertain events or conditions that
may have an impact on project objectives (Project
Management Institute, 2000). A risk has a cause and,
if it is triggered, a consequence. RM is a formal process directed towards the identification of, assessment
of, and response to project risks (Project Management
Institute, 2000). Risk identification is aimed at determining potential risks, i.e. those that may affect the
project. During risk assessment, identified risks are
evaluated and ranked. The goal is to prioritize risks for
management. The risk response process is directed to
identifying a way of dealing with project risks and consists of three main techniques: risk reduction, risk
transfer and risk retention. Risk reduction aims at

Osipova and Eriksson

reducing the probability and/or consequences of a risk
event. Those risks that remain in the project after risk
reduction may be transferred to another party either
inside or outside the project. Risk retention or acceptance indicates that the risk remains present in the
project. Two options are available when retaining the
risk: either to develop a contingency plan in case a risk
occurs, or to take no action until the risk is triggered.
There are several approaches to classifying project
risks and risk sources. Baloi and Price (2003) study
risk classification from the perspective of contractors
and focus on risks that are project-related and may
affect project performance in terms of cost. By conducting an extensive literature review and interviews
with construction contractors, they identified the following groups of risk: global risks (e.g. financial, economic, political, legal and environmental), internal
risks (e.g. design, construction, management and relationships) and force majeure risks. Several questionnaire surveys have been conducted among
construction industry actors in order to investigate
risk management practices in different countries. In
1997, Akintoye and MacLeod conducted a survey of
43 practitioners in the UK to explore the use of risk
management techniques. In 1999, a similar survey
among 200 Australian construction practitioners was
conducted by Uher and Toakley. They particularly
focused on the use of risk management in early project phases. Lyons and Skitmore (2004) conducted
another survey of 44 Australian practitioners based on
the results of the above-mentioned studies. The survey covers the whole risk management process, i.e.
risk identification, assessment and response throughout all project phases. The most recent survey was
conducted by Tang et al. (2007) who investigated risk
management in the Chinese construction industry.
The methods and results of the surveys were somewhat similar. All surveys studied practitioners RM
experiences in general rather than in specific projects.
The results show that checklists and brainstorming
are the most often used techniques in risk identification. Subjective judgment, intuition and experience
are cited as being the tools most commonly used in
risk assessment. Risk reduction is the most frequently
used technique for risk response. The treatment of
RM in this paper follows along the lines outlined
above in terms of the recognized stages in that process. However, our study contributes with a projectlevel focus, investigating how procurement options
affect RM in 11 construction projects.
Risk allocation through construction contracts
Risks are allocated to project actors through the
contractual arrangements. Many countries have

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Risk management
developed standardized conditions of contract to be
used in construction projects. In Sweden, all contracts
are based on the general conditions of contract that
formalize risk allocation. They assign responsibilities
and liabilities to each contracting party regarding job
performance, organization, timeframes, guarantees,
insurances, errors and payments. General conditions
of contract are developed and issued by the Building
Contracts Committee (BKK), a non-profit association
of authorities and organizations in the construction
sector. There are two types of general conditions of
contracts for the two project delivery methods that
are mostly used in Sweden, i.e. general contracting
(GC) and design-build (DB) contracts. General Conditions of Contract for Building, Civil Engineering
and Installation Work are used in GC projects. The
DB projects are regulated by General Conditions of
Contract for Building, Civil Engineering and Installation Work performed on a package deal basis.
General contracts are characterized by a separate
appointment of a design team and a construction
firm. The client is responsible for the planning, design
and function of a construction and the contractor is
responsible for the assembly. GC is the most widely
used project delivery method in many countries (Ling
et al., 2004; Eriksson and Laan, 2007).
In DB contracts, the contractor is responsible for
both design and construction. Since there is a single
point of responsibility, the popularity of DB contracts
has increased in recent years. Konchar and Sanvido
(1998) investigate 351 US construction projects using
different project delivery methods in order to compare
the performance of GC and DB projects. They demonstrate that DB projects on average show a better
performance than GC in terms of unit cost, construction speed, delivery speed, cost growth and schedule
growth. A study by Ernzen and Schexnayder (2000)
showed that the average profit margin for contractors
is higher in DB projects than that in GC. From a RM
perspective, DB contracts may be more attractive to
the client, as the responsibility for design implies that
more risk is allocated to the contractor. On the other
hand, the DB alternative may be more expensive compared to GC, partly because of the contractors greater
responsibilities and partly because fewer contractors
may be available for this larger and more comprehensive type of work (Lind and Borg, 2010). Furthermore, the quality of the final product may be lower if
the contractors use cheaper solutions in an attempt to
decrease their own costs (Gransberg and Molenaar,
2004). This problem is particularly prevalent in contracts with a fixed price form of payment. In terms of
time, the DB system arguably provides an earlier start
for project execution than is the case for other systems. From the contractors point of view, DB con-

struction projects can be very risky if the contractor

lacks knowledge and experience of the DB system.
Risk allocation through forms of payment
The form of payment defines who takes a risk if the
final cost of construction activities is higher than the
estimated cost. The most widely used forms are fixed
price and cost-reimbursement (Branconi and Loch,
2004). Fixed price payment shifts the risk of cost
overruns during the construction stage to the main
contractor. In a study conducted by Floricel and
Miller (2001), 60 large-scale engineering projects
were investigated in attempt to develop a strategic
framework for dealing with project uncertainty. The
results show that fixed price contracts do not underpin possibilities for joint performance improvement
because the contractor keeps all savings or losses.
When a cost-reimbursement form of payment is used,
the contractor is compensated for the actual cost during the project execution. Thus, it is the client who
takes the risk of cost fluctuations. Branconi and Loch
(2004) report their experience with construction contracts in a major engineering company and argue that
in the case of cost-reimbursement forms of payment
the contractor has very little incentive to find solutions that are more efficient or to cooperate with the
client. Both fixed price and cost-reimbursement contracts have adverse effects on communication between
client and contractor (Muller and Turner, 2005).
In order to overcome the problems with traditional
forms of payment, incentive-based contracts were
introduced. In incentive-based contracts, both client
and contractor share the risks and rewards (Floricel
and Miller, 2001). The main purpose of incentives is
to facilitate collaboration in problem solving, and
reward the actors on the basis of their performance. A
case study conducted by Bubshait (2003) in Saudi
Arabia on perceptions of project actors about incentive/disincentive contracting shows that the actors are
positive about the role of incentives in promoting contractor performance. When incentives are used,
rational decision makers tend to put effort into minimizing risk so they can get a reward (Knight et al.,
2001). Moreover, they prefer to cooperate when tangible rewards for problem solving are provided (Wong
et al., 2008; Cheung et al., 2009). Incentives motivate
actors to focus on joint objectives and significantly
reduce disputes. Turner and Simister (2001) therefore
argue that projects that are based on cooperation and
not on conflict require incentivization of all involved
actors. Bayliss et al. (2004) support this argument
when reporting a story of a successful partnering project in Hong Kong, which showed that contract incentive is an essential element of partnering projects.

1152

Osipova and Eriksson

Risk management in projects with partnering/

collaboration arrangements

tive of RM in Sweden, the following requirements for

project selection were formulated:

Over the last decade, researchers and practitioners

have recognized that relationships between clients and
contractors play a significant role in successful project
implementation. It has been argued that traditional
contracts do not support effective cooperation in construction projects (Kadefors, 2004). Thus, collaboration through partnering has become popular during
the last decade. Partnering is a project governance
form, based on cooperative procurement procedures,
that facilitates a stronger focus on cooperation than
on competition (Eriksson, 2010). Cooperation
between project actors is claimed to lead to fewer disputes, lower construction costs, and a better quality
product. Several studies have shown that practitioners
are positive about collaborative relationships and
believe they lead to cost and risk reduction (e.g. Black
et al., 2000; Akintoye and Main, 2007).
In contrast with the UK, partnering does not
have the status of a contract form in Sweden.
Instead, an additional collaboration or partnering
agreement is used as a supplement to the contract.
Overall, however, the use of partnering in Sweden
is still scarce (Eriksson et al., 2008). Partnering is
not a well-defined methodology on how to organize
a project but rather a concept that requires a fundamental shift in thinking and culture (Alderman
and Ivory, 2007). Thus, to obtain the benefits of
the partnering concept, a high degree of professionalism and very good knowledge of the project on
the part of the client and of the contractor are
required.

 the projects are located in large and small cities;

 they use different project delivery methods, i.e.
GC and DB;
 the types of the projects are building and civil
engineering.

Research method
The empirical investigations involved an exploratory
study and an interview study of 11 construction projects (see Appendix 1). The projects were chosen by
five practitioners who were involved in the research
project as a reference group. As such, they participated
in interactive discussions and shared their perceptions
and opinions about current RM practices and the findings of the study. Each member of the reference group
was asked to choose two recently finished projects
within their own organization. The strength of the
method is that the researcher does not have to spend
time contacting many organizations and trying to find
those who want to participate. Moreover, people share
information more easily when they are aware of the
research project and its aim. On the other hand, the
number of projects is limited and the researcher does
not influence the selection process. In order to obtain
a suitable sample that could provide a broad perspec-

In the first stage, nine construction projects

(projects 19 in Appendix 1) adopting different procurement options were chosen, and an exploratory
study was conducted. The aim of the exploratory
study was to better understand the nature of the
problem and obtain a basis for further interviews with
project actors. The objectives were to study how the
RM process was organized in the projects and to find
out what procurement variables identified in the literature influence RM from the practitioners point of
view. The exploratory study included a questionnaire
survey and document studies.
A questionnaire was developed consisting of five
sections, covering general questions about the respondent, the aspects of the risk management process
through the different phases, and relationships and
collaboration in RM between the actors. The respondents were also asked to evaluate project performance
in terms of time, budget and quality. The survey sample was composed of three groups of actors: clients,
contractors and consultants. Within each group of
actors, those persons who worked with RM in a particular project were suggested by project managers to
participate in the survey. When the potential respondents had been identified, they were invited to attend
a workshop organized by the researchers. During the
workshop, the aim of the study and the structure of
the questionnaire were presented and a pilot questionnaire was distributed. About 50% of potential respondents participated in the workshop. After the
workshop, the questionnaire was adjusted and sent in
electronic form to the 54 intended respondents in the
nine projects. In total, 36 usable responses were
received, giving a response rate of 67%. For those
people who attended the workshop the response rate
was 100%. Detailed information about questionnaire
distribution and respondents profiles is shown in
Table 1.
In the second stage, 20 interviews across the nine
projects were conducted, based on the compiled
results of the questionnaire survey. The objective was
to discuss how procurement variables, i.e. project
delivery method, form of payment and use of collaboration or partnering arrangements affected the RM
process. Interviews were conducted with the clients
project manager, the contractors site manager, and

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Risk management
Table 1

Questionnaire distribution and respondents profiles

Number of questionnaires sent

Number of usable responses received
Response rate (%)
Average age (years)
Average experience in construction industry (years)

the architect (in GC) or design manager (in DB).

Each interview took approximately one and a half
hours and consisted of three main parts. First, the
main definitions in the research area were discussed.
Since the study dealt with the terms: risk, risk management, risk identification, risk assessment, risk
response, etc., it was important to understand the
respondents perceptions of these terms. Next, the
results of the questionnaire survey were presented and
discussed. In particular, the interviewees were asked to
comment on the survey results, explain the answers,
and suggest solutions for improvements. Finally, some
time was devoted to concluding remarks. All interviews were taped in order to get a permanent record.
In the first two stages, only one project with collaboration through partnering and a cost-reimbursement
payment form was studied. Thus, two additional projects undertaken in 200809, adopting collaboration
arrangements and incentive contracts were included in a
third stage of the study. Despite the fact that two
projects were added some years later, the economic,
political, legal and social situation in Sweden was similar
during these years. Fourteen interviews with a focus on
the RM process were conducted with the project managers, site managers, consultants and architects. Hence,
the 34 qualitative interviews included 11 projects with
different procurement options (see Appendix 1).

Client

Contractor

Consultant

Total

18
14
78
50
24

30
18
60
50
28

6
4
67
48
24

54
36

planning phase. The design and production phases

were critical for RM. Risk identification, assessment
and response processes were mostly performed in
these phases.
Within the three groups of actors, contractors were
the most active in performing risk identification,
assessment and response. Moreover, contractors had
the largest influence on RM in the project. The
influence of clients varied for the different project
delivery methods. In GC projects, where the clients
were responsible for design, they had a larger influence on RM. Consultants were not involved sufficiently in work with risk and had a low influence on
RM. Owing to the limited participation of some
actors in some project phases, the communication of
project risks between actors did not work properly.
Many problems appeared when the consultant and
client were not involved in the production phase.
Additionally, RM processes were carried out most
intensively in the production phase, which implies
more responsibility in managing risks for the contractor and more passive behaviour by the other actors.
Communication of known risks and opportunities
between actors in the procurement phase varied
between little detailed and fairly detailed. Both the
client and the contractor communicated known risks
as if they were of a low priority during the procurement phase. This created conflicts during implementation in many projects.

Results
Results of the exploratory studyrisk
management and actors involvement

Interview results
Influence of project delivery method on risk management

Despite the fact that RM was a part of each project,

almost all projects suffered from variations in cost for
one or several actors. Both identified and unforeseen
risks occurred in the projects and generally had a significant effect on project cost. In Appendix 1, the
actors evaluations of the project performances are
provided.
RM was not carried out systematically in all phases
of a project. Only in one project were risk identification, assessment and response carried out systematically in each phase of the project. The absence of
systematic RM was especially notable in the early

The majority of the respondents argued that traditional general contracts do not create an opportunity
for open dialogue and collaboration in RM between
the client and the contractor. In the studied GC projects without a collaboration agreement, the contractors executed the projects strictly according to the
clients construction documents and, therefore, did
not have joint discussions of the technical solutions
and construction risks. Moreover, the contractors did
not participate in the design phase and, accordingly,
had no collaboration with the architect. The respon-

1154
dents described that each actor was focused on its
own part of the project and tried to manage the associated risks. Absence of trust and collaboration in RM
led to a low level of risk communication during the
procurement phase and clients attempting to transfer
more risk to the contractor. From the contractors
point of view, in GC projects the quality of
documents and drawings was often insufficient, with
many inaccuracies. For example, in Project 1, the
poor quality of design documents increased the contractors cost significantly. Because of the insufficient
geotechnical survey in Project 3, the completion of
the road was delayed by several months.
The architects, on the other hand, were positive
about RM in the GC projects. They argued that the
architect had more flexibility and cooperation with
the client in such projects than in DB. In the latter,
the contractor was a filter between the client and the
architect. The contractor was focused on short-term
financial results rather than on the life cycle cost and,
therefore, used cheaper technical solutions, which are
not always optimal. However, general contracts assign
more responsibility to the architect, while in a DB
project the architect shares risks with the contractor.
On the other hand, collaboration with the contractor
is worse in GC projects, because the consultant usually does not participate in the production phase.
From the perspective of dealing with risks, early
involvement of the contractor in DB projects is considered to be the main advantage of this project delivery method. Moreover, contractors RM was more
thorough in the studied DB projects since they are
assigned the responsibility for design. The actors stated that the DB contract might lead to deviations in
the quality of the final product because of the clients
inability to control the technical solutions chosen by
the contractor. To avoid this situation, continual discussion of technical solutions between the actors is
required. Therefore, personal commitment of the clients is argued to be the most important factor in
securing the desired result. When the client is an
active party, DB is claimed to create conditions conducive to better collaboration because the clients and
contractors are forced to have a dialogue. Cooperation between architects and contractors is argued to
result in better technical solutions and help in avoiding many design and technical risks. Many actors are
positive about more thorough RM in DB contracts.
The general conditions of contract are well-developed documents, which assign responsibilities and liabilities to each party. However, the client often
deviates from them by trying to transfer more risk to
the contractor. In all 11 projects amendments to the
general conditions of contract were included; many of
them were applied to the length of guarantee and

Osipova and Eriksson

additional insurance. The project actors argued that
amendments make the contracts less clear for the
contractor and may result in conflicts and disputes.
Influence of form of payment on risk management
The respondents mentioned the form of payment as a
very important factor influencing actors behaviour. In
fixed price contracts, there is a lot of financial pressure
on the contractor and disputes are common. Project 5
is one of the projects where the actors were very dissatisfied by their work together because of the many
financial discussions associated with the fixed price
payment form. Fixed price contracts require very
detailed and specific technical documentation from
the contractor in the tender. In cost-reimbursement
contracts, there is less focus on financial aspects and
many problems can be solved during project implementation. Communication of risks in the procurement phase depends heavily on the form of payment.
The interviewees mentioned that the clients do not
communicate risks to a high degree when they procure
fixed price contracts.
Fair distribution of opportunities through incentive
arrangements (contracts) was recognized as an efficient instrument for RM. Incentive arrangements
stimulate better collaboration in finding the best possible solutions, and, therefore, lead to cost reductions.
The cost-reimbursement form of payment with incentives in Projects 9 and 10 increased the motivation of
the main contractor to decrease the project cost by
finding the best suitable solutions and cooperating
with other project actors. Moreover, incentive-based
forms contributed to the RM process when all actors
were interested in minimizing risk instead of shifting
it to one another.
Influence of partnering or collaboration arrangement on
risk management
In traditional GC and DB projects with fixed price
payment the actors often think about different risks
and do not see the project as a whole. The contractor,
for example, is more interested in identifying risks that
can influence cost, while the client is more interested
in risks that affect quality of the final product. Great
expectations in partnering were found among the project actors, including those who had no experience of
partnering. It was argued that partnering allows the
actors to see the project as a whole and influence RM
throughout the construction process. A possible
advantage of partnering is that RM can be carried out
jointly from the earliest phases of the project. When
the contractor is involved in the early planning phase
it makes RM more effective in terms of joint risk identification and assessment. The consultant, in turn, has

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Risk management
an opportunity to assess technical solutions together
with the client and the contractor, which results in
better solutions and fewer risks in the production
phase. Factors that characterize partnering projects,
such as open dialogue, trust, and cooperation, help to
achieve effective communication and information
exchange: all risks are placed on the table.
In Project 10, the client and the contractor together
developed a collaboration agreement in order to
improve relationships among the actors. In the agreement, they formulated the main principles of their
work together. The collaborative approach was then
used throughout the project in order to meet tough
deadlines and to jointly manage risks.

Discussion
From a risk management perspective, a number of factors influence the clients choice of procurement
option. Clients who want to minimize their own risks
choose DB contracts with fixed price payment because
there is a single point of responsibility for both design
and construction and because of the possibility for
transferring risks of cost overruns to the contractor. DB
creates opportunities for RM discussions between consultants and contractors, but may hamper the clients
involvement and influence on RM and project performance. Accordingly, this study illustrates the importance of personal commitment on behalf of the client in
order to achieve sufficient RM in DB projects.
Competent clients may favour general contracts
partly because the cost may be lower and partly
because they want to have a higher degree of influence on the project. However, general contracts often
result in a sequential construction process where
many actors are involved in some project phases and
focus on their own part of the work rather than on
the whole project. In particular, a general contract
without any collaboration arrangement gives no space
for discussion about technical solutions between the
clients design team and the contractor. Moreover,
non-participation of the architect in the production
phase brings additional design risks that the contractor must deal with. When a general contract with
fixed price form of payment is used, a strong focus on
financial aspects prevents actors from seeking
collaboration. In the case where neither partnering or
collaboration arrangements nor incentive schemes
exist, the actors concentrate on formal risk allocation
through the contract and shift risks to each other in
an attempt to optimize their own profits. In order to
strengthen contractors contributions to technical
solutions and RM in early project phases in GC, key
contractors can become involved at that early stage.

This study also supports previous research that

highlights the benefits of coupling early involvement
with partnering arrangements and incentive-based
payments (Bayliss et al., 2004; Alderman and Ivory,
2007) in order to further enhance a project environment based on trust and joint commitment on which
a throrough RM can rely.
The production phase was where most interest and
activity related to RM were found. These results confirm the findings of two surveys (Uher and Toakley,
1999; Lyons and Skitmore, 2004), which show a
higher degree of RM in the production phase than in
the early phase. Unfortunately, this can easily prove
to be too late to manage some risks, including those
design risks that might have been avoided in an earlier
phase. The majority of respondents feel that RM
should be more important in the early phases for several reasons. First, early risk identification makes the
client aware of project risks and facilitates the choice
of the optimal procurement option. Moreover, significant savings are possible in the early phases, since
changes at the beginning of the project cost less
money than in the production phase. Procurement
options that allow early involvement of the actors can
therefore contribute to more thorough RM.
Most of the respondents see risk as a negative event
that can affect the project and cause problems. Only a
few people mentioned opportunity as the converse of
risk. This confirms the results of a study by Akintoye
and MacLeod (1997), which show negative perception
of risk among practitioners. Furthermore, when
describing their work on project risks, the actors often
say contractors risk management and clients risk
management. Joint risk management where all actors
participate and perform identification, assessment and
response together is a weakness in the current practice.
This is probably a result of traditional procurement
options that distinctly separate responsibilities and
risks in time and space. When working jointly with
RM based on early involvement, incentives and partnering arrangements it will probably become more
natural to search for positive opportunities and not to
focus on avoiding negative consequences.

Conclusions
The aim of this study was to explore how
procurement options influence risk management in
construction projects. This discussion is important
from both theoretical and practical perspectives as it
provides clarity on how to improve RM by adopting
appropriate procurement options in terms of project
delivery method, form of payment and use of collaboration or partnering arrangements. Despite the use of
general conditions of contract that formalize risk allo-

1156
cation between the project actors, conflicts existed in
a majority of the studied projects and led to cost
increase for one or several actors. Thus, a formal risk
allocation through the general conditions of contract
is not sufficient for achieving the desired performance.
Informal aspects affected by the use of collaboration
agreements and incentives are also critical.
Implementation of additional collaboration or partnering agreements and incentive-based payment forms
changes the attitudes of the actors and creates opportunities for their involvement in RM throughout the
construction project. As a collaborative approach is
intended to improve communication and joint problem solving, it enhances a joint approach to thorough
RM. Two projects in this study that used collaborative
activities and joint objectives can serve as examples of
effective project organizations from a RM perspective.
Collaboration between the actors during all project
phases resulted in successful problem solving and cost
savings for both the client and the contractor.
A client is a party that owns the project, and
should therefore be an active part of the risk management process and demand active participation
from the other actors. In current practice, very limited interest and activity are found in the early
phase. This aspect must be addressed by the project
actors as the early phases are commonly recognized
to be very important for systematic RM. Thorough
attention to the project risks must be paid in the
early phases in order to safeguard project objectives.
The architects and design managers should be
involved more in RM because design is a very significant risk source in a construction project. Currently,
RM is not a part of consultants assignment in
traditional contracts. Incentive contracts, where the
consultant is involved in profit sharing, create opportunities for consultants engagement in RM. Moreover, incentives make it crucial for consultants to
participate in RM in the production phase in case
design risks crop up during construction.
The main limitation of this study is that it includes
only three procurement options: general contracts
with fixed price, design-bid with fixed price, and partnering with a cost-reimbursement form of payment.
Future surveys should aim to target a wider range of
procurement options in a larger sample of construction projects.

Acknowledgements
The authors gratefully acknowledge the financial
support of the Swedish Research Council Formas and
the Development Fund of the Swedish Construction
Industry SBUF.

Osipova and Eriksson

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New construction of roadin

the north of Sweden

Reconstruction of
infrastructure facilities in
Stockholm
New construction of a
house for meetings at the
university campus in the
north of Sweden
New construction of
infrastructure in the north
of Sweden
Construction of a residential
building in Stockholm

Public/
regular
purchaser
Private/
regular
purchaser
Private/
regular
purchaser
Public/
regular
purchaser
Public/
regular
purchaser
Public/
regular
purchaser

13
months
200607
17
months
200506
12
months
200405
6 months
2005

2 years
200809

2 years
200709

15
months
200304

Public/
regular
purchaser
Public/
regular
purchaser
Public/
regular
purchaser
Public/
regular
purchaser

Public/
regular
purchaser

10
months
200405
14
months
200506
10
months
200506
3 years
200407

Type of
client

Project
duration

Fixed price and costreimbursement with

incentives/bonus

GC

Fairly
bad

Fairly bad

Very good

Very
good
Yes
Collaboration
agreement

Very
good
Very
good

No

Yes Partnering

Fairly good

Fairly
good

Very bad for the client/

very good for the
contractor
Very good for the client/
fairly bad for the
contractor

Very
good

Very
good

Very
good

Very
good

Very
good

Fairly
good

Fairly
good

Fairly
good

Fairly
good

Very
good

quality

Fairly good

Fairly good

Very good for the client/

fairly bad for the
contractor

budget

Very good for the client/

fairly bad for the
contractor
Very good for the client/
fairly good for the
contractor
Very good

Fairly
good

Very
good

Very
bad

Fairly
good

Very
good

Very
good

time

Project performance in terms of

Fairly
good

No

No

No

No

No

No

No

Partnering
Collaboration
agreement

Fixed price with incentives/ Yes Partnering

bonus

Cost reimbursable

GC

GC

Fixed price

DB

Fixed price

DB

Fixed price

Fixed price

DB

DB

Fixed price

Fixed price

GC

GC

Fixed price

Fixed price

GC

GC

Form of payment

Project
delivery
method

Project

Note: The characteristics of a projects implementation are based on the assessments of the project participants. Four alternatives were available for assessment of project implementation: very
bad, fairly bad, fairly good, very good.

Reconstruction of a
residential building in
Stockholm
9
Reconstruction of a
residential building, located
in Stockholm
10 Construction of laboratory
facilities consisting of two
buildings located in
Stockholm
11 Reconstruction of
infrastructure facilities in
the north of Sweden

Rebuilding and additional

construction of university
premises, located in the
north of Sweden
New construction of a road
in the north of Sweden

Short description

Appendix 1

1158
Osipova and Eriksson

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