Risks in the PAM 2006 standard form of contracts

Abstract

Construction industry is among one of the dynamic, challenging, satisfying and also risky industries. It involves around many uncertainties and probabilities which is indirectly exposed to risk. Generally risk is known as an uncertain event or condition in which its occurrence could affect the project objective and most likely to leave a negative impact. These risks in construction are said to be present from the earlier stage of project such as feasibility stage till the completion stage. The standard form of contract which is used to bind a legal relationship that is enforceable by law between the contracting parties also has some risk. The objective of this study is to identify the risk found in PAM Contract 2006 and to identify the risks probability of occurrence and level of impact. This study had been carried out by using the stages in risk management process. Firstly the risks in terms and condition of contract are identified using the documentation review technique. Later, those risks were ranked according to the probability of occurrence and the level of impact of each risk by conducting a questionnaire survey. The result indicates that there were 46 risks from 23 different clauses identified in terms and condition of PAM Contract 2006. For the probability ranking, there are 10 risks which are almost certainly to occur followed by 31 risks certainly to occur and 5 risks that are likely to occur. Meanwhile for the impact assessment, 27 risks would be leaving very high impact to the objective followed by 19 high impact risks. Overall it can be concluded that risk do exist in terms and condition and one should really understand those terms before entering into contract to avoid any risky events that could affect the project.