Integrated Risk of Progress-Based Costs and Schedule Delays in Construction Projects

Abstract

This article aims to explore the impact of the integration of risk factors into delayed milestones for construction projects. A simulation model was developed to determine the impact of schedule variability on cost estimation. To generate random scenarios a Monte Carlo Simulation (MCS) technique was applied. The developed model computes the cost impact of delayed milestone in the expected budget. Using a risk integration approach revealed the critical time frame that may lead to a budget deficit for a project. As a result, a number of cost-sensitive risk factors and schedule delays were identified for the critical time period where the risk of budget deficit increases. The method of integration proposed in this article highlights the priority of risk factors and schedule delays for construction contracts involving Payments at Event Occurrences (PEO). Consequently, the developed method can be useful for practitioners in anticipation of potential increase of costs, hence, prevention of failure due to budget deficit.

Keywords:

• Schedule Risk
• Delay
• Cost Estimate
• Integrated Risk
• Risk Prioritization

EMJ Focus Areas:

• Program and Project Management; Decision Making and Risk Management

Acknowledgements

The authors would like to thank the three anonymous reviewers and the editors of the Engineering Management Journal (EMJ) for their constructive feedback and suggestions. These suggestions have been extremely useful in improving the paper to its current version.

Additional information

Notes on contributors

Salahi Pehlivan

Salahi Pehlivan is a lecturer in the Industrial Engineering Department at Girne American University, Cyprus, where he teaches modeling and optimization, and project management courses. He gained his PhD in Construction Management from Girne American University. He worked as an Investment Analyst/Project Manager for an international company for training programs (Investment Appraisal and Risk analysis, and Project Management) conducted for professionals in Africa, Asia, and Canada. His areas of interest are risk analysis, simulation, and cost estimation.

Ali Erhan Öztemir

Ali Erhan Öztemir is a lecturer in the Construction Management/Civil Engineering Department at the Cyprus International University, Cyprus, where he teaches courses on Construction Management, Construction Engineering, and Civil Engineering Theory. He holds a PhD. in Civil Engineering from Arizona State University. Ali Erhan has conducted research in U.S. on construction optimization. His main areas of interest include Construction Risk analysis. Ali Erhan’s professional experience includes work at various construction sites in Turkey and Cyprus.