Guidelines for Risk Analysis

AUTC project number: 107059


Robert A. Perkins (UAF)

  • US Department of Transportation (RITA)
  • Permafrost Technology Foundation
  • Start Date: Aug 3, 2007
  • End Date: Jun 30, 2009

Project Summary

Work changes are common in construction contracts, especially for large projects. When contract changes must be made, how the owner (the organization paying for the work) and the contractor (the firm performing the work) agree on a fair and reasonable cost can be as complex as a good poker game. It is usually in the owner’s best interest to negotiate a lump sum price for changes before the new work starts (forward-pricing). Forward-pricing passes considerable risk (such as work delays, changing weather, getting new materials to remote sites, and re-scheduling other projects) to the contractor, who deserves some compensation for assuming it. The owner wants the best deal possible, and the contractor is the best judge of his (or her) own costs. The stakes can be higher in Alaska, where a short building season and remote locations can push a project into an additional year, with extra staging costs, staffing, and scheduling nightmares. This project, lead by UAF engineering science management specialist Robert Perkins will produce a guide for AKDOT&PF managers and engineers that will better prepare them for judging project risk and estimating costs.