Evaluation of Risk Factors of Cost Plus Contract for Implementing in Indian Construction Projects

The construction industry has experienced an adversarial relationship amongst contracting parties as most of the project participants focuses primarily on the success of their own business rather than the overall project itself. The most appropriate and effective contracting method is required for successful delivery and completion of any construction project. Over traditional procurement strategies Cost-plus contracts with/without guaranteed maximum price (GMP) or target cost contract (TCC) mechanism can be regarded as an alternative integrated procurement strategy to minimize risks, claims and develops an interest for cost incentive mechanism for construction projects. This paper aims to study the suitability of cost-plus contracts and to identify key risks, potential difficulties to implement cost-plus contracts in Indian construction projects and mitigate them to increase the use of cost-plus contracts. Based on a comprehensive review of published literature various risk factors are identified. A questionnaire is prepared for clients, contractors and consultants to compare implementation of this type of contract with traditional contracts and to analyze the severity of different risk factors for different project groups accordingly. The survey data has analyzed by using SPSS software to find out majority of risk involved factors that should be overcome and taken care before starting of project. The research finding assists contractors and owners to better understand the cost-plus contract and its risk management so that use of cost-plus contract will be beneficial and effective for both parties as well as overall project