Allocation Of Risks

In traditional construction contracting practice, the owner allocated almost all risks to the contractor, saying in effect, "you deal with all construction problems and all third parties, and don't bother me." In this same tradition, the architect or engineer designed a structure in its finished condition, and if he thought about the construction problems that might be involved in building it, he was careful not to express any opinions on these matters in the contract documents. This feudal attitude fostered two results: 1. Contractors added high contingencies to their bids to cover the costs of risks. 2. Litigation of construction contract claims blossomed. Broadly, the owners lost--the courts reallocated many risks the owners thought they had laid on the contractor. Thoughtful owners and engineers recognized that owners were paying for risks twice --once in bid contingencies and a second time in court. Meanwhile, contractors were not getting rich; they were losing money on delays and disputes, and just about getting even (if they were lucky) in court. And construction law was becoming an increasingly lucrative field--for lawyers. Furthermore, with the growing influx of lawyers onto the construction scene, the owner-contractor-engineer relationship became increasingly an adversary one. The emphasis came to be on culpability rather than capability--who could be held responsible for breaching some contract clause, not who might find a solution to some common problem. This game was played with equal vigor by owners and contractors.