RISK BASED CONTRACT MANAGEMENT TO CONTROL MATERIAL PRICE INCREMENT IN A POWER PLANT PROJECT

Power plant projects are complex and expensive; therefore, the risks will be high especially for engineering, procurement and construction (EPC) fixed price contract projects. In these projects, the contracting company often experiences cost overrun caused by material price increment in several major items of work carried out by their suppliers or subcontractors. This study aims to control project costs by developing contract management and identifying risk factors. Descriptive and qualitative risk analysis was conducted to identify the dominant risks. Risk responses are then developed and integrated within the contract management processes. The results of this study show that there are 38 risk factors causing material price increment in power plant projects, among which 10 are dominant, and several aspects to be developed through 10 risk responses. The risk that affects material price increment the most occurs during the planning and strategy phase at the beginning of the contract formation