Determining and Managing Contingency  Reserve throughout the Lifecycle of  Construction Projects
Creators: Fateminia, Seyed Hamed
Publisher: name: University of Alberta Library
Year: 2023

<p>Managing risk events and uncertainties plays a key role in the successful delivery of construction projects. To cover the implementation cost of risk response actions as well as the effects of risks on project goals, contingency reserve must be calculated and considered in the project budget. Previous research on determining contingency reserve focused on the first steps in the risk management process, which are risk identification and assessment. However, incorporating risk response planning into risk identification and assessment can improve the accuracy of determining contingency reserve. The application of complex quantitative models such as optimization methods to select and rank risk response actions for large-scale construction projects can be a complex and costly process because of the effort and amount of data required. Moreover, these models account for only a limited number of criteria, which can lead to the selection of risk responses that are cost effective but unfeasible in terms of technology, environment, and achievability.<br>
Previous research has also limitations on determining contingency reserve not only in the absence of sufficient quantitative historical data in construction projects but also in considering positive risks (opportunities). Fuzzy logic and fuzzy arithmetic can be employed to capture the subjective uncertainty and take linguistic evaluations into consideration when numerical project data fall short of the amount or quality requirements for successful modelling. However, previous research (i.e., both expert-driven and data-driven methods) has difficulty to determine the fuzzy membership function of linguistic terms used to assess the probability and impact of risk events. Previous research on risk assessment and contingency determination methods assume that the probability and impact of risk events and risk response actions are independent and static. However, in practice, these values change over the course of project and depend on the occurrence and impact of other risk events.<br>
To address the limitations of previous research on determining contingency reserve in construction projects, a hybrid fuzzy arithmetic-based contingency reserve method (HFACRM) was proposed which is the combination of four fuzzy models: (1) a fuzzy model consisting of fuzzy rule-based system (FRBS) along with fuzzy ranking methods to evaluate the effectiveness of risk response actions and rank them, (2) a hybrid fuzzy model to determine the MBFs of linguistic terms used to describe the probability and impact of risk events, the causality degree among project components, and the effectiveness of risk response actions, (3) an adaptive hybrid fuzzy model to determine the degree of causality and formulate soft causal relationships between risk events together and with risk response actions, (4) a hybrid fuzzy model to formulate hard relationships, stocks and flows of quantitative fuzzy system dynamics model.<br>
The main contribution of this thesis is to propose a novel hybrid fuzzy method to determine the value of contingency reserve at different stages of construction projects in work package and project level. It identifies the most critical criteria to evaluate the effectiveness of risk response actions; it improves the accuracy and effectiveness of determining contingency reserve by modeling time dependent elements and cause-and-effect relationships between them; it addresses the problem of high reliance on quantitative data by using fuzzy arithmetic and capturing subjective uncertainty associated with linguistic evaluations; and it improves the process of determining memberships functions by considering the level of risk expertise of multiple experts and aggregating multiple experts’ assessments.</p>