Equitable Contracting And Risk-Sharing

The human element in large measure dictates success in contracting relationships. Because of our professional backgrounds, we view contracts primarily as either engineers, contractors or owners. A beneficial contractual environment--one in which decisions, risks and benefits are shared--demands equal consideration of all three points of view. Most of the older cities in the United States, for example, suffer from bad contracts--generalized, patched-together documents that represent an accumulation of modifications originally written to compensate for specific situations that have occurred over the years. Because such documents lack coherence, they often present conflicting instructions which lead to defensive, ultimately destructive attitudes among the parties involved in the day-to-day administration of the project. Good contract development begins with a strong central philosophy to which the details of the contract can be related. First, the owner should establish a comprehensive philosophy in which risks between the parties are identified. Following this, a specific contract document can be written to satisfy this established philosophy. The contrast between two opposed contractual situations, NYC Water Tunnel Number Three and the Seabrook Nuclear Power Plant Cooling Water Tunnels, illustrates how comprehensive, well-written contracts--contracts which share both risks and benefits--provide the basis for achieving quality construction that will reward engineer, contractor and owner.