Farman Afzal, Shao Yunfei, Muhammad Sajid and Fahim Afzal
Cost overrun is inherent to project chaos, which is one of the key drivers of project failure. The purpose of this paper is to explore the critical elements of complexity-risk…
Abstract
Purpose
Cost overrun is inherent to project chaos, which is one of the key drivers of project failure. The purpose of this paper is to explore the critical elements of complexity-risk interdependency for cost-chaos in the construction management domain by utilizing a multi-criteria decision model.
Design/methodology/approach
A total of 12 complexity and 60 risk attributes are initially identified from the literature and using expert’s judgements. For the development of a structured hierarchy of key complexity and risk drivers, a real-time Delphi process is adopted for recording and evaluating the responses from experts. Afterwards, a pair-wise comparison using analytical network processing is performed to measure complexity-risk interdependencies against cost alternatives.
Findings
The findings of the integrated priority decision index (IPDI) suggest that uncertainties related to contingency and escalation costs are the main sources of cost overrun in project drift, along with the key elements such as “the use of innovative technology,” “multiple contracts,” “low advance payment,” “change in design,” “unclear specifications” and “the lack of experience” appear to be more significant to chaos in complexity-risk interdependency network.
Research limitations/implications
This study did not address the uncertainty and vulnerability exit in the judgment process, therefore, this framework can be extended using fuzzy logic to better evaluate the significance of cost-chaos drivers.
Practical implications
These results may assist the management of cost overrun to avoid chaos in a project. The proposed model can be applied within project risk management practices to make better-informed technical decisions in the early phases of the project life cycle where uncertainty is high.
Originality/value
This research addresses the importance of cost overruns as a source of project chaos in dynamic systems where projects reach the edge of chaos and progress stops. A new IPDI index contributes toward evaluating the severity of complexity and risk and their interdependencies which create cost-chaos in infrastructure transport projects.
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Farman Afzal, Ayesha Shehzad, Hafiz Muhammad Rehman, Fahim Afzal and Mohammad Mushfiqul Haque Mushfiqul Haque Mukit
Cost estimation is a major concern while planning projects on public–private partnership (PPP) terms in developing countries. To bridge the gap of the right approximation of cost…
Abstract
Purpose
Cost estimation is a major concern while planning projects on public–private partnership (PPP) terms in developing countries. To bridge the gap of the right approximation of cost of capital, this study aims to sermon a significant role of investor’s risk perception as unsystematic risk in PPP-based energy projects.
Design/methodology/approach
To investigate the effective mechanism of determining cost of capital and valuing the capital budgeting, a pure-play method has been acquired to measure systematic risk. In addition, dynamic conditional correlation (DCC) and generalized autoregressive conditional heteroscedasticity (GARCH) models have been applied to calculate weighted average cost of capital.
Findings
Initially, a joint cost of capital of energy-related projects has been calculated using DCC-GARCH and pure-play method. Investors risk perception has been discussed through market point of view using country risk premium modeling. Latter yearly betas have been calculated using DCC signifying the final outcomes that applying a dynamic model can provide a better cost estimation in emerging economies.
Practical implications
The findings are implicating that due to the involvement of international investors, domestic risk is linked with country risk. In such situations, market-related information is a key factor to find out the market performance, helping in the estimation of cost of capital through capital asset pricing model (CAPM). High dynamic nature of emerging economies causes an impediment in the estimation of cost of capital. Consequently, to calculate risk in dynamic markets, this study has acquired DCC model that can predict the value of beta factor.
Originality/value
Study contributes to the body of knowledge by addressing an important issue of investor’s risk perception and effective implication of CAPM using pure-play and DCC-GARCH when data is not promptly available in dynamic situations.
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Farman Afzal, Shao Yunfei, Danish Junaid and Muhammad Shehzad Hanif
Risk analysis plays a vital role in controlling and managing cost overruns in complex construction projects, particularly where uncertainty is high. This study attempts to address…
Abstract
Purpose
Risk analysis plays a vital role in controlling and managing cost overruns in complex construction projects, particularly where uncertainty is high. This study attempts to address an important issue of cost overrun that encountered by metropolitan rapid transit projects in relation to the significance of risk involved under high uncertainty.
Design/methodology/approach
In order to solve cost overrun problems in metropolitan transit projects and facilitate the decision-makers for effective future budgeting, a cost-risk contingency framework has been designed using fuzzy logic, analytical hierarchy process and Monte Carlo simulation.
Findings
Initially, a hierarchical breakdown structure of important complexity-driven risk factors has been conceptualized herein using relative importance index. Later, a proposed cost-risk contingency framework has investigated the expected total construction cost in order to consider the additional budgeted cost required to mitigate the risk consequences for particular project activity. The results of cost-risk analysis imply that poor design issues, an increase in material prices and delays in relocating facilities show higher dependency and increase the risk of cost overrun in metropolitan transit projects.
Practical implications
The findings and implication for project managers could possibly be achieved by assuming the proposed cost-risk contingency framework under high uncertainty of cost found in this research. Furthermore, this procedure may be used by experts from other engineering domains by replacing and considering the complex relationship between complexity-risk factors.
Originality/value
This study contributes to the body of knowledge by providing a practical contingency model to identify and evaluate the additional risk cost required to compute total construction cost for getting stability in future budgeting.
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Farman Afzal, Shao Yunfei, Mubasher Nazir and Saad Mahmood Bhatti
In the past decades, artificial intelligence (AI)-based hybrid methods have been increasingly applied in construction risk management practices. The purpose of this paper is to…
Abstract
Purpose
In the past decades, artificial intelligence (AI)-based hybrid methods have been increasingly applied in construction risk management practices. The purpose of this paper is to review and compile the current AI methods used for cost-risk assessment in the construction management domain in order to capture complexity and risk interdependencies under high uncertainty.
Design/methodology/approach
This paper makes a content analysis, based on a comprehensive literature review of articles published in high-quality journals from the years 2008 to 2018. Fuzzy hybrid methods, such as fuzzy-analytical network processing, fuzzy-artificial neural network and fuzzy-simulation, have been widely used and dominated in the literature due to their ability to measure the complexity and uncertainty of the system.
Findings
The findings of this review article suggest that due to the limitation of subjective risk data and complex computation, the applications of these AI methods are limited in order to address cost overrun issues under high uncertainty. It is suggested that a hybrid approach of fuzzy logic and extended form of Bayesian belief network (BBN) can be applied in cost-risk assessment to better capture complexity-risk interdependencies under uncertainty.
Research limitations/implications
This study only focuses on the subjective risk assessment methods applied in construction management to overcome cost overrun problem. Therefore, future research can be extended to interpret the input data required to deal with uncertainties, rather than relying solely on subjective judgments in risk assessment analysis.
Practical implications
These results may assist in the management of cost overrun while addressing complexity and uncertainty to avoid chaos in a project. In addition, project managers, experts and practitioners should address the interrelationship between key complexity and risk factors in order to plan risk impact on project cost. The proposed hybrid method of fuzzy logic and BBN can better support the management implications in recent construction risk management practice.
Originality/value
This study addresses the applications of AI-based methods in complex construction projects. A proposed hybrid approach could better address the complexity-risk interdependencies which increase cost uncertainty in project.