PAYING THE PRICE FOR CONSTRUCTION RISK

The amount that a contractor charges an owner is the expected cost of performing the work plus a price for accepting the risk plus a markup. The prices that different contractors should charge to accept risk depend upon their financial situations. The relative values of different sums of money to contractors and owners are modeled by utility curves, and the prices that contractors with different finances should charge are computed from these curves. The effects of these varying financial conditions upon the competitive bidding process are analyzed. The owner may be charged more by a contractor to carry risk than it is worth. A contractor in such financial difficulty that he is willing to gamble on a risky job to recover has a bidding advantage over a more financially stable contractor. /Author/

• Corporate Authors:

  American Society of Civil Engineers

  345 East 47th Street
  New York, NY  United States  10017-2398
• Authors:
  • Carr, R I
• Publication Date: 1977-3

Media Info

• Features: Appendices; Figures; References; Tables;
• Pagination: p. 153-161
• Serial:
  • Journal of the Construction Division
  • Volume: 103
  • Issue Number: CO1

Subject/Index Terms

• TRT Terms: Contracts; Costs; Economics; Expenditures; Finance; Hazards; Risk assessment
• Old TRIS Terms: Financial expenditures
• Subject Areas: Administration and Management; Construction; Economics; Finance; Highways; Safety and Human Factors;

Filing Info

• Accession Number: 00163660
• Record Type: Publication
• Report/Paper Numbers: ASCE 12827
• Files: TRIS
• Created Date: Jan 13 1978 12:00AM