Date of Award

2007

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Civil Engineering

Abstract

Exculpatory clauses are often used in construction contracts to shift potential risks of construction from one party to another. Hartman (1998) suggests that Canadian contractors use a risk premium between 9% and 19% as part of their contingency plan to alleviate the risks associated with accepting exculpatory clauses. This study was conducted to identify and quantify risk premiums U.S. contractors use to mitigate the risk associated with accepting five exculpatory clauses. These clauses allocate risk for: design errors, differing site conditions, construction errors, risks of payments, no damage for delays. The study also examined the correlation among the contractor's years of experience, company size and percent of self completed work and the contractor's risk premium for each identified risk. Seven research questions were developed for this study. The study compared the bid prices obtained from two groups of contractors/estimators (group A and group B), with different bid packages for the same project. While results of this study indicated that there was no statistically significant difference between bid prices obtained from group A and group B contractors. The results did indicate that there was a reduction in the bid amount of 23% between group A contractors' lump sum prices and group B contractors' lump sum prices. Based on the reported results, an alternative approach was recommended with the goal of reducing project costs. Also, recommendations were made to owners to better control for the identified risks.

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