Construction Consultancy Services: Risks And Practice Of Professional Indemnity Insurance In Addis Ababa, Ethiopia

Abstract

Construction consultants are one of the significant stakeholders in the construction industry and are involved in the construction of a project, starting from conducting feasibility studies to contract closeout. They are representatives of the client and independent contract administrators and are bound contractually and legally for their services. Hence, they are prone to risk for their roles and responsibilities. To alleviate this problem is to come across alternative practices to be used in more quantity. This research was conducted to assess risk management and professional indemnity insurance practices of construction consultants in Ethiopia. It identified significant risks in construction consultancy services in the pre construction, construction, and post-construction stages. This research is both qualitative and quantitative in nature. Literature review of text books, research papers, journals, magazine, internet, and other sources were conducted to collect secondary data. The data obtained was used to prepare questionnaire which was distributed to and collected from consulting firms in Addis Ababa. SPSS and Microsoft Excel software were used to analyze the results of questionnaire using descriptive statistics. In this research, 53.8% of the consultants stated they had a formal risk management plan and used either an in house risk manager or insurance broker to manage risks. However, most consultants showed poor performance in actual application of the different techniques in the processes of risk management, relying mostly on expert judgments, interpersonal skills, and meetings. 81% of the consultants had professional indemnity insurance coverage that protects them from errors and omission and negligence liabilities. The consultants still do not consider risk management as a priority and their main reason to acquire professional indemnity insurance was only when a clause was specified under specific contractual obligations. Hence, the application of risk management techniques and awareness of professional indemnity insurance is lacking among construction consultants.