Development of a Risk-based Decision Method for Construction Project Evaluation Using Value Theory

Construction projects are plagued by numerous risks, most notably cost and schedule overruns besides quality and environmental risks. Various management techniques are usually applied to manage these risks. However, the lack of risk-based decision methods often produces unsatisfactory results. In this paper, a risk-based decision method is proposed to develop risk scale for construction projects using risk management and decision-making approaches. For this purpose, risks involved in construction projects and the corresponding risk factors are identified through an objective-oriented risk identification approach. Then, qualitative and quantitative risk levels are established for the identified risk factors depending on their nature. These levels correspond to no risk, minimum, average and maximum allowable risks in the case of standards availability for the quantitative risk measures where equal levels of risk are defined subjectively for the qualitative risk measures. Afterward, preferences and strengths of preference are determined between each risk level to obtain normalized values for each risk criteria using MACBETH, a multi-criteria decision-making technique. After assigning weights through pairwise comparison employing expert judgment, the weighted normalized values are aggregated by means of an additive model to form risk scores. Each score represents a level of aggregated risk used as a yardstick to determine how critical the actual risk is compared to the established aggregated risk levels. A risk bar graph is then developed to visualize the ranges of risk to facilitate decision making.