From both the client and the contractor's perspective, the risk has a price, usually defined by insurance premiums and insurance excesses. A project quote will/should include the insurance premium plus the cost of a number of excesses expected to be outlaid.
Questions for the client include:
Is it more cost effective to take out one overall policy for the project and therefore avoid paying the premiums that would otherwise be included each contractor/subcontractor contract? This is becoming more popular but has issues in managing claims and excesses.
Will contractors adequately consider and proactively manage risk if they are not paying for it.
Caps on liability reduce contractor risk exposure and therefore should result in reduced costs, but how can this be assessed?
If the risk exposure is too high will this deter competent contractors from submitting a bid leaving the client with either no bids or only bids from less competent contractors desperate for work (and do you want this type of organisation running your project)?
There is not 'right answer' to these questions and no way of knowing if the decisions made were optimum, even after the project is complete.
The question a competent contractor should ask is 'is the potential reward from this project worth the risk?'.
What has become apparent in the last couple of decades is the proactive management of risk by the client really delivers dividends; there is no such thing as a 'risk free project', and it is impossible to transfer all risk to other parties by way of contract: https://mosaicprojects.com.au/PMKI-SCH-045.php
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24 years 9 monthsThis is a question regarding
This is a question regarding the cost of risk.
From both the client and the contractor's perspective, the risk has a price, usually defined by insurance premiums and insurance excesses. A project quote will/should include the insurance premium plus the cost of a number of excesses expected to be outlaid.
Questions for the client include:
There is not 'right answer' to these questions and no way of knowing if the decisions made were optimum, even after the project is complete.
The question a competent contractor should ask is 'is the potential reward from this project worth the risk?'.
What has become apparent in the last couple of decades is the proactive management of risk by the client really delivers dividends; there is no such thing as a 'risk free project', and it is impossible to transfer all risk to other parties by way of contract: https://mosaicprojects.com.au/PMKI-SCH-045.php