Pre-Contract Risk in International PFI Projects
In life there are risks: in driving a car, crossing the road or playing various sports. So too in business although in many cases such risks are associated with financial consequences. Firms are subject to market volatility, and hence the ability to realistically provide expectations based upon a risk versus reward trade off. This chapter discusses the relationship between risk management and the use of Prime Contracting which is becoming one of the popular choices of procurement systems for large scale construction projects, as encouraged by two principle Government supported industry reviews reported in the publications ‘Constructing the Team’ (Latham 1994) and ‘Rethinking Construction’ (Egan 1998). These two review publications have supported an almost universal client requirement to achieve the benefits of increased value in infrastructure projects from the facilities management and ergonomic perspectives in both the private and public sectors. As a first step many UK clients have moved away from competitive tendering to favour the use of contracts with closer supply chain management through advances in both project and long-term strategic partnering arrangements between themselves and their facilities providers, constructors, designers and occasionally with some of their second-tier supply chain members. Although there are a number of examples showing an increased use in ‘partnering’, the actual extent of this commitment has been found from UK studies to vary in practice (Galliford 2000; Burtonshaw-Gunn 2001).
KeywordsSupply Chain National Audit British Standard Institute Project Risk Supply Chain Integration
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