Understanding relationship between risks and claims for assessing risks with project data
Engineering, Construction and Architectural Management
Article publication date: 3 August 2020
Issue publication date: 28 April 2021
In construction management, risks and claims are treated separately, but several studies tacitly acknowledge a strong link between the two. In this context, this research intends to investigate whether risks and claims have a causal relationship? Based on this causal relationship, a claim-based risk assessment model (C-RAM) is developed to quantify occurrences and cost implications of risks using project data.
First, the causal relationship between risks and claims is established through a conceptual framework for content analysis of the literature on risk management (RM) and claim management (CM). Then, a C-RAM is developed based on the content analysis of 234 claims from 24 settled arbitration awards.
Risks and claims are found to be two stages in the same chain of uncertain events that affect projects, subsequently revealing a causal relationship between risks and claims. Due to this causal relationship, claim documents become a potential source of risk information from past projects. Proposed C-RAM quantifies occurrences of risks with three parameters: number of projects in which a risk occurs, number of ways in which a risk occurs, and number of claims a risk causes if it occurs. Also, cost implications of risks are quantified as percentage of contract sums for interpretation as tangible values.
Though C-RAM is applicable to all types of claims, the results in this paper are based on impacts of risks in past projects that caused claims and reached to arbitration stage.
The causal relationship between risks and claims will encourage integration of knowledge on RM and CM which is currently treated separately. Practitioners can now visualize claims as cost implications of risks that occurred in projects. Further, C-RAM makes risk assessment (RA) more objective by quantifying the cost implications of risks as percentage of contract sums which can be readily used for contingency estimation.
The relationship between risks and claims, and the potential of claim documents as a source of project risk information, can initiate a new paradigm in RM research based on project data.
Parts of this research was done under the sponsored research project RP02737 at Indian Institute of Technology (IIT) Delhi (India) funded by M/s NBCC (India) Ltd. The authors also thank Dr. Smita K. Patil (IIT Delhi) for providing the arbitration cases.Data availability statement: Two sets of data were collected in this research. The first set is included in the supplemental file. The second set includes content analysis of arbitration awards which can be made available on request from the first author.
Kumar, R., Iyer, K.C. and Singh, S.P. (2021), "Understanding relationship between risks and claims for assessing risks with project data", Engineering, Construction and Architectural Management, Vol. 28 No. 4, pp. 1014-1037. https://doi.org/10.1108/ECAM-11-2019-0664
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