What are the ways of risk allocation and diminishing during the solicitation assessment?
Quantitative risk analysis may be required to allocate risks and diminish these risks during the solicitation assessment. This is a best way to identify risks and analyze their impact on the overall objectives of the contract between a supplier and a buyer. The nature of the allocation of risks is related to the consequences of the risk factors. During a solicitation, the responsibilities of each party can be identified and who will be responsible for which risk can be decided. According to Engelbeck (2002), “Under a fixed price contracts the contractor is exposed to cost growth from non-performance and delays, whereas under cost-reimbursement contracts, the government accepts these risks”. This refers to the risk of a rising costs due to any reason. So if a fixed cost contract is reached, the rising costs would be the responsibility of the contract while if the contract is cost-reimbursement, the buyer or the seller would be responsible to pay any increase in the costs of the project.
During solicitation, the buyers and the seller form contract clauses that clearly define the terms and conditions for any risks that may be possible. Risks may or may not be anticipated. If there is no proper definition of responsibilities if a risk hinders the project life cycle, this could result in a blame game and conflicts may arise between the suppliers and the buyers. These conflicts may require legal intervention to be settled down. Therefore, during a solicitation assessment, there should be a focus on risk allocation and describing ways to tackle these risks for the smooth progress of the project work.