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Risk under performance-based contracting in the UK construction sector


  • Stephen Gruneberg
  • Will Hughes
  • Debbie Ancell


As a method of procuring the services of the built environment, performance-based contracting (PBC) seeks to link the building supplier to longer term commitments than has traditionally been the case in the construction sector. By rewarding the building producer according to the way that building or structure delivers the users' requirements, rather than according to a list of assembled parts, a number of additional risks are taken by contractors, including fitness for purpose, costs and briefing. The extent to which contractors recognize these risks and their methods of dealing with them vary considerably and are influenced by their attitudes towards risk. As the risks associated with PBC are seen as large, uninsurable, and vulnerable to changing client requirements, the majority of respondents would reject the use of PBC as a method of contracting. Nevertheless, PBC may be used under particular conditions, where rewards are deemed sufficient to compensate for the additional risk to the contractor of undertaking work on the basis of a stream of payments paid over the life of a structure depending on the satisfactory performance of the building or as part of a private finance initiative.

Suggested Citation

  • Stephen Gruneberg & Will Hughes & Debbie Ancell, 2007. "Risk under performance-based contracting in the UK construction sector," Construction Management and Economics, Taylor & Francis Journals, vol. 25(7), pages 691-699.
  • Handle: RePEc:taf:conmgt:v:25:y:2007:i:7:p:691-699 DOI: 10.1080/01446190601164097

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    References listed on IDEAS

    1. Xing Wu & Zhihui Zhang, 2005. "Input-output analysis of the Chinese construction sector," Construction Management and Economics, Taylor & Francis Journals, vol. 23(9), pages 905-912.
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    3. Wolff, Edward N, 1991. "Capital Formation and Productivity Convergence over the Long Term," American Economic Review, American Economic Association, vol. 81(3), pages 565-579, June.
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    5. Alex R. Hoen, 2002. "Identifying Linkages with a Cluster-based Methodology," Economic Systems Research, Taylor & Francis Journals, vol. 14(2), pages 131-146, June.
    6. Wolff, Edward N., 1994. "Productivity measurement within an input-output framework," Regional Science and Urban Economics, Elsevier, vol. 24(1), pages 75-92, February.
    7. Junning Cai & Pingsun Leung, 2004. "Linkage Measures: a Revisit and a Suggested Alternative," Economic Systems Research, Taylor & Francis Journals, vol. 16(1), pages 63-83.
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    Cited by:

    1. Arshad Ali Javed & Patrick T.I. Lam & Albert P.C. Chan, 2014. "Change negotiation in public-private partnership projects through output specifications: an experimental approach based on game theory," Construction Management and Economics, Taylor & Francis Journals, vol. 32(4), pages 323-348, April.


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