Determining project contingency reserve using a fuzzy arithmetic-based risk analysis method

Abstract

Traditional techniques for estimating contingency reserve fail to capture subjective uncertainties and expert knowledge, and they rely on historical data. This paper proposes a fuzzy risk analysis model (FRAM) that uses fuzzy arithmetic to analyze risk and opportunity events and determine construction project contingency reserve. The FRAM allows experts to use natural language to assess the probability and impact of risk and opportunity events by employing linguistic scales represented by fuzzy numbers, thus addressing the data reliance problem of probabilistic methods. It enables experts to customize linguistic scales and fuzzy numbers for different project types and stages. The FRAM also deals with the challenges associated with deterministic approaches by addressing measurement imprecision and the subjective uncertainty of experts' opinions. Moreover, the FRAM allows analysts to estimate contingency at different levels of confidence. This paper also illustrates Fuzzy Risk Analyzer© (FRA©), software that implements the fuzzy arithmetic procedure of the FRAM.