Modelling the relationship between risks and disputes in subcontractor contracts

Risk is a crucial concept that permeates in all industries, including the construction sector. Risk in construction has greater stakes. The construction projects bind together actors that possess differing priorities, interests and skills. Therefore, it is not possible to foresee all risks and take precautionary measures. Uncalculated factors, changes in procedure, inadequate performance of the subcontractor, technical issues, economic factors, unrealistic expectations or differences in the way the terms of the contract are perceived may cause conflicts between Project participants. It is inevitable to see the negative effects of conflicts on projects when conflicts are overlooked or when they are not resolved. Disputes have negative effects in terms of project time and cost; and the relations between parties may end or become damaged. Disputes may result in even greater costs by causing the project to be unsuccessful. One of the causes that lead to disputes are related to inaccurate projection of the risks and inadequate structuring of risk management. In this context, it is very important that contractual risks in t and factors that result in disputes are to be adequately addressed. The purpose of the study is to compute a regression model by investigating the relationship between risk in subcontractor contracts and disputes in contracts. To that end, a linear regression analysis is used. The initial chapter of the thesis encompasses an abstract and provides information about the aims, contents and methodology of the study. The second chapter is concerned with the phenomenon of risk. Construction risks are delineated. The chapter has a focus on contractual risks. Subcontractor risk hierarchy has been formulated based on performance appraisal surveys and the contractual risk table, which is based on the findings elicited as a result of the review of literature. The studies that involve the calculation of risk in construction have been examined to compute the scores for risk factors of the subcontractor contracts. The third chapter of the thesis accounts for the disputes in construction contracts and it is concerned with the determination of the causes of the disputes in subcontractor contracts. Specifically, the concept of dispute is discussed and the causes of disputes in construction as well as the causes of disputes in subcontractor contracts are delineated. The studies that are concerned with the identification of the potential disputes in construction are explicated to digitize the data, which pertain to subcontractor contracts. The fourth chapter focuses on the analysis of the relationship between risks and disputes in subcontractor contracts, which are delineated in the third chapter. To that end, 60 national and international subcontractor contracts have been examined and in upper and middle level managers have been interviewed in person. A total risk factor score has been calculated by using the subcontractor risk factors, which were identified in the thesis. A total dispute factor score has been calculated using the subcontractor dispute factors, which were identified in the thesis. A regression model of the relationship between risk in subcontractor contracts and disputes has been calculated by using the scores. The conclusion involves the results regarding the regression model and regression model performance and recommendations have been provided. The aim of the study is modelling the relationshıp between risks and disputes in subcontractor contracts using regression analysis. By examining 60 subcontractor contracts and inteviewing contract and project managers who worked in these projects, the risks in subcontractor contracts are measured and weighted scores for disputes are provided. The initial chapter of the thesis provides information about the aims, contents and methodology of the study. The second chapter is concerned with the phenomenon of risk and construction risks are delineated. The chapter focuses on sub contractor risks, which have been formulated based on the findings of the review of literature as well as the subcontractor performance appraisal surveys of a contractor company. Risk calculation mathodologies in the construction industry are presented. The third chapter of the thesis focuses on the disputes in construction contracts and it is concerned with the determination of the causes of the disputes in subcontractor contracts. Specifically, the concept of dispute is discussed and the causes of disputes in construction as well as the causes of disputes in subcontractor contracts are delineated. The studies that are concerned with the identification of the potential disputes in construction are explicated to digitize the data which pertain to subcontractor contracts. The fourth chapter focuses on the analysis of the relationship between risks and disputes in subcontractor contracts. The chapter provides information about the projects that have been examined. Risks and disputes are measured for each project. Reliability analysis, correlation analysis and regression analysis have been performed. The last chapter includes the conclusion and the recommendations for further research. A face to face survey has been designed as part of the thesis. The interviewees of the study include contract engineers, contract manager and contract directors that work in the same company. The findings of the study are shared and discussed with the representatives of the construction sector. In addition to the computation of the regression model of the relationship between risk and disputes in subcontractor contracts, comparison analyses have been completed by using the data elicited from fieldwork. Comparative analyses include the investigation of the influence of various project features on risk and dispute values. The study shows that project contract types, duration, contract issue, advance payment and performance security bond percentage, employer issued in the contract, the source of the finance, subcontractor experience, whether the subcontract firms have obtained ISO14001/OHSAS18001/CE certification do not pose a statistically significant influence at = 0.05 level (α=%5) when average value of risk (impact x probablity) and average value of dispute (impact x frequency) are considered. The findings of the study show that sample that is used for the computation of the regression model is homogenous when total risk and total dispute values are considered. The regression model is valid for the subcontractor contracts that belong to different categories. The second phase of the comparison analyses involves the comparison of the frequency distribution of the disputes in infrastructure project and superstructure project. The results show that there is a positive correlation between the frequency of disputes in infrastructure projects and frequency of disputes in superstructure projects (ρ = 0.09473). The results indicate that there is not a statistically significant relationship between frequency of disputes in infrastructure contracts and frequency of disputes in superstructure contracts at the = 0.05 level (p = 0.690). The study shows that frequency distribution of the disputes in infrastructure differ from the frequency distribution of superstructure contracts.Thus, the study determines the frequent disputes in infrastructure and superstructure projects and the differences amongst the disputes in infrastructure projects and disputes in superstructure projects. The third phase of the comparison analyses investigates the relationship between the disputes and group of risks. Spearman correlation analysis shows a statistically significant relationship between group of risks and dispute types at the = 0.05 level. The study has important implications for the determination of the potential disputes after the completion of the risk analysis of the subcontractor contracts. The results of the study will contribute to the understanding of the risk factors that cause disputes in subcontractor contracts. Apart from that, the findings of the study will facilitate the endeavors that are directed at raising the awareness of the contractual risks which may be foreseen even before the beginning of the project. The model will help in estimating the dispute potential by examining risks in subcontractor contracts.