MEGHA ARORA and ABHISHEK ROHATGI discuss approaches to risk allocation in construction agreements. 

Construction projects in the energy and infrastructure sectors are inherently complex in nature owing to several factors. Being land-intensive, such projects are dependent upon availability and suitability of land and are also susceptible to vagaries of nature. Large construction projects are typically labour-intensive and reliant on availability of raw materials and a logistic framework for the supply of construction material and equipment.  Multiplicity of stakeholders, a dynamic legal and regulatory environment and social and political factors involved in construction projects also have an impact on time, cost and successful implementation.  

 

Given the intricacies of construction projects, it becomes imperative to clearly identify and allocate risks between the various stakeholders. However, allocation of risks is hardly ever a straightforward issue and often becomes a key negotiating point...