Agrument of Price Adjustment and Risk Allocation in Contract of Public Construction-Based on the Mode of Price Adjustment
Date Issued
2016
Date
2016
Author(s)
Chen, Ying-Han
Abstract
Due to tremendous money scale and long-period, public constructions are always surrounded by various risks. Among these risks, the dispute of price adjustment has been an unsolved problem in construction practices for a long time. Public Construction Commission in Taiwan has provided a mechanism of price adjustment, and made this mechanism more flexible, and tried to allocate risks of price fluctuation between owners and contractors more reasonably. Nevertheless, disputes on price adjustment are still primary and troublesome issues in court practice, especially the issue whether price fluctuation has constituted the principle of change of circumstance. These diverse views in court make mechanism of adjustment more risky. For public benefits, success of public construction is decisive, whether costs or qualities of public constructions. Accordingly, it’s necessary to establish a new type of mechanism of price adjustment, reducing the risk of price fluctuation between owners and contractors. This study starts from a review of past mechanism of price adjustment, organizing types of price adjustment dispute, analyzing demerits of mechanism of price adjustment nowadays. Moreover, the author analyzes the formula in FIDIC in a different view, proposing distinguishing concepts between “Mode of Threshold” and “Mode of Risk Proportion” and a process of designing a “optimized threshold ” in every construction project. Despite introducing the method from Jine-Lih Shen, who created a process of optimum readjustment threshold, this study provides an alternative method called threshold of “profit-based .” By testing the threshold under any possible circumstance, an optimized threshold which ensures the contractor’s profit to a certain extent. Furthermore, these methods can be also applied in court practice, helping judges allocate risk of price fluctuation and reducing transaction cost between owners and contractors.
Subjects
Price Adjustment
Risk Allocation
Construction Contract
Mode of Threshold
Mode of Risk Proportion
Type
thesis
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ntu-105-R00a21005-1.pdf
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