Managing Enhanced Risk in the Mega Project Era (2022)

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80 NCHRP LRD 86 the best value for the public and reduces or avoids claims and disputes between the owner and its contractor. Under each risk section, a summary recommendation subsection was included to highlight the eective strategies to manage, as well as allocate that risk in the contract document. In addition to considering the detailed information provided in this digest regarding how best to address specic risks, it is important for the owner to implement a well-thought-out risk management process by identifying, assessing, managing, and controlling risks on a holistic basis through the entire project duration and project phases. Up-front planning is critical to manage risks including identication of the required govern- mental approvals, permits, funding, etc. Risk assessment is also a key step to enable the agency to understand how specic risks may aect the project, while also considering objectives such as quantifying anticipated durations of obtaining approvals. Strat- egizing regarding risk management and mitigation, including accounting for information gathered during the risk assessment process and considering lessons learned from other projects, is perhaps the most critical step in developing eective contract terms and conditions. During this step, the owner determines how the risk will be managed, who will be responsible for which aspects of managing the risk, and how to ensure that all parties have appropriate incentives to mitigate risks. Finally, the con- trolling step is to continue to follow through and implement the contract as planned, while maintaining exibility to address unforeseen circumstances and changes that will inevitably aect the project. developer’s O&M obligation including the conformance to the handback requirements. A long-term concession period (e.g., 30-year agreement) enables the owner to shi responsibility for almost any D&C errors to the contractor. Under traditional project delivery methods, these errors would not normally be discovered until aer the contractor completed its work. e concession model— especially when availability payments are used—also ensures that the contractor will design and construct the project con- sidering the cost of construction quality and life-cycle costs so as to eciently balance the up-front construction costs against the maintenance running cost throughout the O&M period. It is key for owner personnel to be aware of how their actions might reduce or even nullify the contractor’s liabilities by using pre- scriptive specications, dictating particular design solutions, or otherwise attempting to control the contractor’s performance. us, personnel administering such contracts need to be well- trained to implement the contract as written, so as not to in- advertently shi the design performance responsibility to the owner. a. Summary Recommendations Operations and maintenance are traditionally the province of the transportation owner. With mega projects and alternative delivery methods, owners may shi signicant responsibility for O&M to the contractor. When the contractor has responsibility for the project over a long term, it has signicant incentives to consider life-cycle costs in D&C of the project. is approach also serves to ensure that maintenance of critical projects will be performed properly and will not be adversely aected by owner budget constraints. Nevertheless, many owners are reluctant to transfer the public responsibility for O&M to the private sec- tor, particularly in light of the long-term commitment of public funds. III. CONCLUSION In light of the ever-expanding need to reconstruct deterio- rating highways and develop major new projects, and the re- sulting increase in mega projects and need for owners to con- sider alternative delivery methods, this digest addresses legal issues that must be considered in determining how to allocate responsibilities between the contracting parties; and describes the types of contract provisions that are likely to be most eec- tive in meeting the agency’s goals and objectives. Each section of this digest provides a summary of relevant risk allocation and risk management provisions from mega project contracts and describe risk management practices relating to risk assessment and allocation based on ndings from the literature review and the national representative sample of the case study projects. e case study projects were selected to represent a variety of sizes, project delivery methods, and locations to enable trans- portation agencies to determine whether a particular provision is pertinent to its needs in draing their mega project contract provisions, taking into account their project and statutory con- straints, with the goal of obtaining an end product that provides