Risk-Sharing Returns to Contracts and Rearranges Market Priorities
What a difference six months makes. Powerplant contractors are being choosier about what terms they will work under and on many projects are sharing the risks of cost overruns with owners through target prices. A half-year ago such risk-sharing was rare and in most cases unimaginable.
To be sure, the "totally wrapped" projectwhere all risks are assigned to an engineer-procure-construct companyremains the most common contractual form and isn't likely to disappear. That type of contract is generally replete with performance guarantees and hefty liquidated damages that lenders and bond investors love.