Risks like contract disputes, unforeseen site conditions, and financial challenges are unavoidable in construction. The key to success? How well you identify, allocate, and manage these risks.

Managing Risk with FIDIC, NEC, and JCT Contracts

Effective risk management starts with a clear allocation of responsibilities. Contracts like FIDIC, NEC, and JCT provide frameworks that define how risks are shared between the employer and contractor.

• FIDIC: Widely used internationally, FIDIC allocates risks like unforeseen conditions to the employer. Contractors must submit notices and claims promptly to protect their entitlements.
• NEC: NEC promotes collaboration through early warnings and a Risk Register, ensuring risks are addressed early and disputes are minimized.
• JCT: JCT follows a more traditional approach, where risks like design errors are the employer’s responsibility. Insurance provisions also transfer certain risks.

What is a Risk Register?

A Risk Register is a live document that helps teams manage risks throughout a project. It:

• Identifies risks: From delays to environmental issues.
• Assesses likelihood and impact: Prioritising based on severity.
• Assigns responsibility: Ensuring clarity on who manages each risk.
• Tracks mitigation actions: Outlining steps to reduce the risk.

Regular updates keep the Risk Register relevant, promoting proactive management. In NEC contracts, the Risk Register plays a key role in ensuring collaboration and addressing risks before they escalate.

Key Lessons from Recent Case Studies

• Interbuild (UK) Ltd v Beazer Homes UK Ltd [2017]: Highlights the importance of financial protections.
• Liverpool City Council v M.G.L. Development (Liverpool) Ltd [2012]: Shows how poor risk identification leads to costly delays.
• Smith & Sons Construction Ltd v Greenfield Homes Ltd [2020]: Demonstrates the value of force majeure clauses in managing global risks like COVID-19.

Managing risk isn’t about avoiding it. It’s about being prepared for it.