Part 3: Avoiding the red card - how risk allocation shapes behaviour on stadium projects
Every sports fan knows that discipline can decide a match. One reckless challenge can change the balance of a game. An unforeseen event can leave the rest of the team dealing with the consequences. Construction contracts operate in much the same way. The rules themselves matter, but what matters more is the behaviour they encourage. Risk allocation in construction is often discussed as though its primary purpose is to determine who pays when something goes wrong. On a stadium project with an immovable opening date, that framing misses something important. By the time a dispute about entitlement is being resolved, the fixture may already have been missed.
The more important question is what the contractual framework causes people to do whilst the project is still being delivered. Does it encourage problems to be identified early or quietly ignored until they become unavoidable? Does it keep both parties focused on protecting the programme or encourage them only to protect their contractual positions? When circumstances change, does it create a commercial incentive to solve the problem or simply to establish who owns it? In Part 1 of our Building the Beautiful Game series, we considered the defining challenge of stadium construction: the deadline that cannot move. In Part 2, we looked at selecting the delivery model and assembling the right team. The next question is what rules they should play by and, more importantly, what behaviour those rules encourage.
In this third instalment, we consider how intelligent risk allocation can do more than protect contractual positions. Done well, it can shape behaviours, align commercial interests and make the outcome that matters most, getting the stadium open on time, more likely.
Risk allocation: Who should really carry the risk?
JCT, NEC and FIDIC all provide sophisticated and well-tested foundations for major construction projects. The difficulty is not that standard forms are inadequate; it is that these types of projects are anything but standard. An immovable opening date changes the commercial significance of programme risk. Technological and governing body requirements can move faster than the construction programme. The stadium may need to interface with transport, public realm and infrastructure delivered under separate contracts and operational requirements may continue to develop during construction. Parts of a venue may even need to become operational while works continue elsewhere. No standard form can anticipate every one of those circumstances and the task is therefore not to amend a contract simply because amendments are customary, it is to identify what is genuinely different about the project and allocate those risks deliberately.
There is an important distinction between transferring risk and managing risk. Seeking to transfer every conceivable risk to the contractor may produce an impressive-looking building contract, but it does not make the underlying uncertainty disappear. A contractor that understands the exposure will price for it. A contractor that does not understand the exposure may discover it halfway through the programme, when the employer’s theoretically excellent contractual position suddenly becomes rather less comforting because poorly allocated risk can precisely encourage the wrong behaviours.
A contractor carrying a risk it cannot realistically control has every commercial incentive to protect its position when that risk materialises. The outcome is similar to a striker being told to defend the corner flag: technically within the rules, but entirely counterproductive. Notices proliferate. Records multiply. Commercial teams become defensive. Management attention moves from solving the problem to establishing who is to blame for it. None of those behaviours is irrational. The contract has made them rational. Good risk allocation is therefore not about transferring the greatest possible amount of risk. It is about placing each risk with the party best able to understand, manage and price it, while creating incentives for both parties to respond constructively when it materialises. Risk follows the same rule as possession: the question is not just who has it, but what they can do with it.
The starting question should not simply be “Who can we make responsible for this?” It should be “What do we want the project team to do if and when this happens?”.
Setting the playing field: Creating a clear baseline
For risk allocation to work, the parties first need to understand what they have agreed to deliver. In a design and build context, that makes the Employer’s Requirements particularly important. They define what the contractor is being asked to design and construct and establish the baseline against which change will later be measured. A poorly defined baseline is like kicking off without marking out the pitch. Everyone sets off in a different direction and argues about where the goalposts were when they get there.
For stadia, fixing that baseline can be unusually difficult. Technological and broadcast specifications may still be developing at the point of tender. Hospitality strategies can evolve as the commercial model for the venue develops. Operational, security and transport requirements may depend upon decisions being made by third parties. Governing body standards can also change during delivery. The drafting challenge is therefore not simply to produce the most comprehensive specification possible. It is to establish a baseline that is sufficiently clear to price while honestly recognising where uncertainty remains. Where uncertainty cannot sensibly be removed, it needs to be allocated deliberately. Connectivity and digital infrastructure requirements present a particular challenge in this regard. The expectation that modern stadia will deliver seamless, high-capacity connectivity across every part of the venue, for broadcasting, commercial operations and the matchday experience has moved from aspiration to baseline requirement, and the technical standards underpinning it continue to evolve rapidly. A specification that was current at the point of tender may be materially out of date by the time the venue opens.
Take a technical requirement that may change during construction. Transfer the entirety of that risk to the contractor and it may price conservatively to protect itself against the unknown. Leave it entirely with the employer and the contractor may have little commercial incentive to mitigate the consequences when change occurs. Neither approach is necessarily wrong, but each creates different incentives. The dangerous position is the one nobody consciously chose: drafting that appears clear when signed but leaves both parties believing the other accepted the same risk. That disagreement rarely reveals itself during contract negotiations. It tends to arrive halfway through construction, when the programme has no float and everybody suddenly remembers the negotiations rather differently.
The best time to resolve that argument is before it exists.
VAR: Notices, time bars and early warning
Few developments in modern sport demonstrate the tension between the letter and purpose of the rules better than VAR. Its objective is straightforward: identify mistakes and apply the rules correctly. Its most controversial moments come when the technically correct outcome feels strangely detached from what everyone thought they had just watched; construction notice and early warning provisions can occasionally produce a similar sensation.
Their purpose is entirely sensible. If an event may affect time or cost, the employer needs to know whilst there is still an opportunity to investigate it, mitigate its consequences and make informed decisions. On a stadium project, where programme recovery becomes progressively harder as opening day approaches, that information is particularly valuable. Strict notice provisions can reinforce that discipline. If entitlement depends upon timely notification, the contractor has a powerful commercial incentive to raise problems early. But incentives produce behaviour, and not always exactly the behaviour intended. A notice regime designed to encourage early warning can instead generate defensive notification of every conceivable issue. At the other extreme, an operational team focused entirely on keeping the project moving may allow contract administration to fall behind. Tomorrow becomes next week, next week becomes next month and suddenly substantial costs have been incurred without the notices needed to preserve entitlement.
The question is therefore not simply how strict the notice provisions should be, it is whether the regime encourages useful information to reach the people capable of acting on it whilst action can still make a difference. That requires more than drafting. Early warning meetings, live change and risk registers, clear delegated authority and disciplined tracking of notices should form part of the project’s operating rhythm. The best notice regime is not the one that produces the greatest number of notices. It is the one that produces the right information early enough to change the outcome. If its principal function has become deciding who wins an argument six months later, the opportunity has probably already been missed.
Liquidated damages: Winning the claim, losing the match
In 2025, Fulham's Josh King scored a crucial goal against Chelsea which was wrongly disallowed. The refereeing body subsequently admitted the mistake and apologised. Despite the vindication, Fulham still lost the match. Liquidated damages work in much the same way: receiving them after the event is something, but it does not change the result.
Liquidated damages remain the conventional contractual response to late completion. They provide an agreed financial consequence of delay and avoid the employer having to establish its actual loss every time completion slips. For stadium projects, however, their limitations are particularly stark. The consequences of missing the first home fixture can extend across matchday and hospitality revenue, broadcasting and sponsorship arrangements, temporary venue costs and operational disruption. Beyond those losses sits something considerably harder to quantify: the reputational impact of announcing to supporters, sponsors and the world’s media that the new stadium simply is not ready.
Following Cavendish Square Holding BV v Makdessi [2015] UKSC 67, English law does not require liquidated damages to represent a genuine pre-estimate of loss. The central question is whether the provision imposes a detriment out of all proportion to the innocent party’s legitimate interest in performance. On a stadium project, that legitimate interest may extend considerably beyond readily quantifiable financial loss.
But for project delivery, there is a more interesting question than how much the employer can recover.
A meaningful financial consequence for delay gives the contractor an obvious incentive to protect completion. But there is a limit to what downside risk alone can achieve. Once a programme is significantly behind, an increasingly large liability does not tell the contractor how to recover it. At worst, a commercial relationship dominated by accumulating damages can encourage both parties to concentrate on attribution precisely when their attention is most needed on recovery. As we observed in Part 1, a club takes little comfort from a cheque if the gates cannot open. Liquidated damages are an important protection, but on a project with a genuinely immovable deadline they are the safety net, not the game plan. The most sophisticated commercial structures therefore consider both sides of the equation. Milestone incentives, target cost arrangements, pain-share and gain-share mechanisms and other programme-based incentives can make success commercially valuable rather than merely making failure expensive. Properly structured, they give the contractor a direct commercial interest in the same outcome the employer wants. The drafting challenge is to ensure those incentives remain meaningful as the project evolves. A target that moves every time the project encounters difficulty ceases to be much of a target at all.
The strongest contractual regimes therefore combine credible consequences for failure with genuine commercial reasons to succeed.
Change control: Knowing when to make the substitution
A construction project is rarely completed exactly as first conceived. Technology develops. Hospitality strategies evolve. Planning conditions, utilities and unforeseen site conditions intervene. Operators learn more about how they intend to use the building. Design decisions that appeared settled at contract award can look very different eighteen months later.
Change is not a failure of stadium delivery. It is part of stadium delivery. Uncontrolled change is a different matter entirely. A good change mechanism should establish what is changing, why it is changing and, wherever practicable, what the consequences will be for cost and programme before the instruction is given. That allows the employer to answer the question that actually matters: is this change worth it? Again, however, the process needs to encourage the right behaviour.
Make change control too cumbersome and project teams will find ways around it. Allow instructions to proceed too freely and commercial discipline disappears. A contractor faced with an urgent change halfway through a compressed programme may genuinely need to mobilise before every consequence has been agreed. The temptation for both parties is to proceed on the basis that the paperwork will “follow” but if you make a run too early, you'll either be offside by the time you get the ball or tripping over the advertisement boards as it hits you on the back of the head.
Experienced project teams know the danger in that word. By the time it does "follow", the work may be complete, the cost incurred and the parties’ recollections of what was agreed surprisingly different. The answer is not more process. It is better process: simple enough to operate under programme pressure, flexible enough to accommodate genuinely urgent decisions and robust enough to create a reliable contemporaneous record. A change mechanism that everyone bypasses is not rigorous. It is simply badly designed. It is not bureaucracy to have a good change control process. It is programme management.
The final whistle: Designing for the right behaviour
There is a natural tendency when negotiating construction contracts to focus on what happens when things go wrong: liquidated damages, performance security packages, time bars, termination rights, indemnities and liability caps. Those provisions matter and deserve careful attention. But the most important question is not what the contract says when the relationship breaks down, it is what the contract causes people to do while it is still intact. The best contracts, like the best teams, are built for what happens during the match and not just for the inquest afterwards.
A construction contract is not a passive document waiting to allocate blame. It creates commercial incentives throughout delivery. Those incentives influence whether problems are on the surface or hidden, whether change is managed or simply instructed, whether the parties focus on programme recovery or entitlement and whether collaboration remains commercially rational when the project comes under pressure. That is why good risk allocation needs to go beyond identifying who carries each risk. The project baseline should be clear without pretending the project will never evolve. Notice provisions should identify problems whilst they can still be solved. Incentive structures should make programme success commercially valuable, not merely make failure expensive. Change mechanisms should work at the speed at which the project actually operates.
Above all, the contract should make the behaviour that is best for the project commercially rational for the people being asked to deliver it. Football managers cannot control every decision their players make once they cross the white line. What they can do is establish a system in which everyone understands their role, the consequences of losing discipline and what the team is trying to achieve. Stadium contracts should aspire to much the same thing. The objective is not simply a contract that tells us who was right after the final whistle. It is one that helped the right things happen during the match.
And, if the rules have done their job, nobody should need to see red.
