Semantic Risk Assessment for Ad Hoc and Amended Standard Forms of Construction Contracts

2022

Teknik Dergi

Issues related to readability risks in contracts could exacerbate conflict, claim and dispute occurrences in construction projects. Determination of root causes of readability risks by defining casual relationships in construction contracts is essential to improve contract documentation and enable successful risk management. This paper aims to differentiate net causes from net effect factors of readability risks in construction contracts. Most significant readability risks in construction contracts were analyzed using fuzzy decision-making trial and evaluation laboratory (DEMATEL) method, which is known for its wide implementation in similar problems. Root cause degree (RCD) diagram was drawn to illustrate the differentiation of these factors by adopting maximum mean de-entropy (MMDE) algorithm. Analysis results indicated that poor grammar use, legal terminology, visual representation, and negative language were the major underlying cause factors; while lengthy document, use of abbreviations, scope complexity, controversial uses, repetitions, and ambiguous words were the net effect factors. The results are expected to improve readability of contract documents, which would contribute to more effective risk management and better allocation of project resources.

Section: Related Workmentioning

confidence: 99%

Causal Relationships of Readability Risks in Construction Contracts

2022

Teknik Dergi

“…It was found that impatience of client, unwillingness to invest in good quality documents, ignorance, and incompetence were the main reasons for the poor quality of tender documents along with problems related to misinterpretation. The most prevailing study on contract interpretation was conducted by Youssef et al (2018). They developed a model for evaluating risk allocation of ad hoc and amended standard forms of contracts relied on semantic principles.…”

Section: Ambiguity and Interpretation Of Construction Contractsmentioning

confidence: 99%

“…Several studies have been performed to examine readability issues in construction contracts, however, there is a gap in the literature analysing semantic problems as a result of ambiguous contract provisions (Youssef et al , 2018). Thus, the cornerstone of this research is the assessment of ambiguity factors in construction contracts that may lead divergent interpretations entailing conflicts.…”

Section: Introductionmentioning

confidence: 99%

Ambiguity factors in construction contracts entailing conflicts

2021

ECAM

PurposeConflicts, claims and disputes are inherent in most construction projects. Acceptable degree of commonality in the interpretation of contract provisions is critical in effective contract administration. This study aims to assess the effects of contract ambiguity factors on construction conflicts, highlighting the causes of divergent interpretations using fuzzy technique for order of preference by the similarity-to-ideal-solution (TOPSIS) method.Design/methodology/approachFuzzy TOPSIS framework with 27 ambiguity factors is constructed by conducting a comprehensive literature review, accompanied by a pilot study. Questionnaire survey is formed, and one-to-one interviews are arranged with 35 contract administration experts.FindingsThe findings indicate that (1) ambiguity due to excessive changes in the bill of quantity (BOQ) (including ambiguous provisions related to BOQ changes), (2) incomplete clauses that do not describe the scope of the intended work purely, (3) ambiguity due to excessive amendments in the scope of works (including ambiguous provisions related to scope changes), (4) ambiguous enforceability including excessive demands and (5) ambiguous goal and performance requirements are the top five ambiguity factors affecting construction conflicts.Research limitations/implicationsPresented framework is performed referring to ambiguity factors in all type of construction contracts in the general sense. However, the identified factors may vary depending on the project type, contract type, procurement method or use of standard contract forms (such as NEC, FIDIC).Originality/valueThe literature lacks the investigation of ambiguity factors in construction contracts, yet the assessment of the effects of contract ambiguity is essential to minimize conflicts.

“…Effective contract administration could ease successful achievement of project objectives, as risk allocation, obligations, rights and details of the required works are formulated in contracts (Acharya et al , 2006; Charkhakan and Heravi, 2019; Nguyen et al , 2018; Zhang et al , 2016). Clear, balanced and trustful definition of contract provisions is essential by considering the complex nature of construction projects (Youssef et al , 2018). A construction contract, which provides a legal bond to both parties, should be explicitly drafted to meet the expectations of the involved parties (Chong and Oon, 2016; Hassan and Le, 2020; Lee et al , 2020).…”

Section: Introductionmentioning

confidence: 99%

Administrative risks challenging the adoption of smart contracts in construction projects

2021

ECAM

PurposeAs a remedy to usually voluminous, complicated and not easily readable construction contracts, smart contracts can be considered as an effective and alternative solution. However, the construction industry is merely known as a frontrunner for fast adoption of recent technological advancements. Numerous administrative risks challenge construction companies to implement smart contracts. To highlight this issue, this study aims to assess the administrative risks of smart contract adoption in construction projects.Design/methodology/approachA literature survey is conducted to specify administrative risks of smart contracts followed by a pilot study to ensure that the framework is suitable to the research question. The criteria weights are calculated through the fuzzy analytical hierarchy process method, followed by a sensitivity analysis based on degree of fuzziness, which supports the robustness of the developed hierarchy and stability of the results. Then, a focus group discussion (FGD) is performed to discuss the mitigation strategies for the top-level risks in each risk category.FindingsThe final framework consists of 27 sub-criteria, which are categorized under five main criteria, namely, contractual, cultural, managerial, planning and relational. The findings show that (1) regulation change, (2) lack of a driving force, (3) works not accounted in planning, (4) shortcomings of current legal arrangements and (5) lack of dispute resolution mechanism are the top five risks challenging the adoption of smart contracts in construction projects. Risk mitigation strategies based on FGD show that improvements for the semi-automated smart contract drafting are considered more practicable compared to full automation.Originality/valueThe literature is limited in terms of the adoption of smart contracts, while the topic is receiving more attention recently. To support easy prevalence of smart contracts, this study attempts the most challenging aspects of smart contract adoption.