Modeling Profitability-Influencing Risk Factors for Construction Projects: A System Dynamics Approach

Abstract

This study addressed the complexity involved in integrating the causative risk factors influencing construction profitability. Most of the existing studies cover the individual effects of profitability influencing factors. Very few focus on the systematic impact without incorporating the complexity and associated dynamics, presenting a gap targeted by the current study. The current study aimed to assess causative interrelations and interdependencies between profitability influencing risk factors (PIRF), through systems thinking (ST) and system dynamics (SD) modeling. The SD approach was used to evaluate the integrated impacts on profitability-influencing risk categories (PIRC) in construction projects. The causative influencing factors affecting construction profitability were identified through a comprehensive literature review. These were ranked using content analysis, and categorized into significant issues. Through 250 structured surveys and 15 expert opinion meetings, the path for quantitative and qualitative evaluations was prepared. Following these investigations, a causal loop diagram (CLD) was established using the ST technique, and the integrated effect was quantified using SD modeling. The study finds the rising cost of material, supply chain process, payment issues, planning and scheduling problems, financial difficulties, and effective control of manpower and equipment resources as the most critical PIRFs. The integrated effects of PIRFs on PIRC were quantified using SD modeling. This study helps field professionals with profitability-influencing factors, diagnosing issues, and integrating impacts regarding decision-making and policy formulation. For researchers, it presents a list of factors that can be investigated in detail, and the holistic interrelationships established.