Analysis of the interactions between risks affecting construction project cost

Abstract

Previous studies regarding construction project risk management mainly hypothesized that risk factors are independent and they do not interact with each other. The applicability of those studies, however, is limited because they cannot effectively reflect the risks happening in real construction projects. Based on the principles of system dynamics approach, this paper thus proposes to analyze the interrelations between major risks influencing construction project cost. To this end, this paper establishes a risk assessment model to analyze the interactions between risk factors involved. The model developed is validated and simulated based on data collected from the Xinzheng airport rehabilitation and expansion project. The findings demonstrate that the existence of interactions between risk factors can significantly influence the entire project cost. That the results of sensitivity analysis tell that the most sensitive factors in affecting project cost include "contractors' poor management capacity", "engineering change", and "rise in material and equipment price". This study contributes to the body of knowledge of construction project risk management by furthering the understanding of risks affecting project cost. © Springer-Verlag Berlin Heidelberg 2014.