International Construction Law Review
DIFFERING SYSTEMS OF CONTRACTING AROUND THE WORLD—ADVANTAGES AND DISADVANTAGES FROM A CONTRACTOR’S POINT OF VIEW
DOMINGO VEGAS1
Director de Construction International
INTRODUCTION
The balance of risk allocation in international construction contracting has been moving, in general terms, in favour of the employers and against the contractors during the last 20 years.
The results of this evolution are various:
- Employers feel that they are now more protected and have a better security on the final cost and quality of their investments.
- Contracts have become increasingly antagonistic and litigious. An important part of the industry resources diverts to contractual and legal battles.
- The onerous notice provisions, more and more frequent in actual contracts, have forced both contractors and engineers to provide for additional staff resources—totally ineffective for producing a more efficient project, but which increases the overall final cost.
- Due to higher competition around the world, contractors do not value properly the risks assumed by them (although the estimation of some of these risks is more a gambling exercise than a technical issue).
- To succeed in international contracting today, contractual and claim strategies are as important, if not more, than technical efficiency.
- Many of the contractors lose money and more and more of them consider international contracting a bad business and are abandoning it. Of course newcomers, more aggressive, although with less experience, keep coming. It is a matter of time that they will reach similar conclusions.
In these conditions, is this a good business to be in?
There have been recent efforts to develop new ways: partnering is probably the best known and promising of them.
Apart from contract conditions, the global trend to award construction
Pt. 2]
Differing Systems of Contracting Around the World
403