CONTRACTUAL ALLOCATION OF RISKS IN PUBLIC ROAD CONSTRUCTION PROJECTS IN ONDO STATE,NIGERIA

Abstract

Construction contracts are rather different from other commercial agreements – the object of the contract (the construction) has a high degree of uncertainty as it is not there at the time of contract execution and at the same time is an expensive product, with a high level of technical and technological complexity. The absence of a proper contract to provide clear terms and procedures regarding all relevant aspects and a balanced distribution of risk between the parties may leave client or contractor exposed to the risks associated with construction projects and a potentially severe compromise regarding desired outcomes.This study examined risk allocation in the standard form contract between the employer and contractor in the public road construction industry with a view to determining efficiency of the clauses. The study examined selected risk elements in the contract provisions and in actual practice, the degree of fairness/reasonableness of the risk allocation clauses, and the effects of risk allocation clauses in the General Conditions of Contract on project performance.The study was carried out in Ondo state, Nigeria. Questionnaire was administered in a survey conducted among the construction industry participants and stakeholders involved in public contracts formation in the study area. The study combined primary survey based data with secondary information from contractual records. The idea behind this is to obtain cross-referencing data and some independent confirmation of data.A random sampling technique was employed for this study. Using Yamane (1973) sample size formula, a sample size of one hundred and eighty-eight (188) was calculated from three hundred and fifty-two (352) identified as the population of the study. Paired samples T-test, mean ranking, ANOVA, and simple linear regression were used in analyzing the data. Findings from the study shows that the difference between the contract provisions and actual practice of the selected risk elements in construction contracts were found to be significant (Sig. value = 0.000). Also, the degree of fairness and reasonableness of all the selected risk elements was calculated to be 3.02 and rated “moderately reasonable”. The study concluded that most construction contracts in Ondo state, if not properly designed, would lead to disputes among construction stakeholders in the state. The study recommended that risk allocation clauses should be properly enforced and construction participants should be properly orientated on contractual clause