RISK ALLOCATION MODEL FOR INDONESIA’S ROAD MAINTENANCE PROJECT UNDER PERFORMANCE BASED CONTRACT SCHEME

The implementation of Performance Based Contracts (PBC) in Indonesia still has many challenges. In terms of risk allocation, PBC allocate more risk to the contractor. Certain risks are inherent in all construction projects. Shifting the risk onto one of the parties to a construction contract agreement is unfair and expensive. Equitable allocation of risks among parties is very important. The allocation of risk between road manager and contractor parties in a PBC contract is a critical element of success that should be based on an assessment of the party best able to manage it. Determining the parties that are most able to bear the risk has been generated from various studies both through qualitative and quantitative approaches. Martin Barnes (1983) in his research has proposed a risk allocation algorithm to determine which parties are most able to accept the risks qualitatively. The purpose of this paper is to provide a qualitative risk allocation model for road maintenance projects with PBC schemes in Indonesia. The study took samples in several national roads in Pantura Lane Road. Risk allocation algorithm proposed by Martin Barnes (1983) is applied to determine the best able party to manage the risk by considering magnitude and cost of each risk factor. The results show that the risk of natural disasters and overloading vehicle risk should not bear by the contractors. Force Majeure risk should be allocated to the owner by creating an addendum contract for recovery works with unit price payment mechanism. If the contractor still bear overloading risk, then the owner must facilitate actual traffic volume data and actual total weight data for engineering designing process. This condition indicates that there is a trade-off from the contractor party in the bid price as the impact of handling risks.