Search results

The learning ability on critical bargaining information contributes to accelerating construction claim negotiations in the win-win situation. The purpose of this paper is to study how to apply Zeuthen strategy and Bayesian learning to simulate the dynamic bargaining process of claim negotiations with the consideration of discount factor and risk attitude.

The authors first adopted certainty equivalent method and curve fitting to build a party’s own curve utility function. Taking the opponent’s bottom line as the learning goal, the authors introduced Bayesian learning to refine former predicted linear utility function of the opponent according to every new counteroffer. Both parties’ utility functions were revised by taking discount factors into consideration. Accordingly, the authors developed a bilateral learning model in construction claim negotiations based on Zeuthen strategy.

The consistency of Zeuthen strategy and the Nash bargaining solution model guarantees the effectiveness of the bilateral learning model. Moreover, the illustrative example verifies the feasibility of this model.

As the authors developed the bilateral learning model by mathematical deduction, scholars are expected to collect empirical cases and compare actual solutions and model solutions in order to modify the model in future studies.

Negotiators could refer to this model to make offers dynamically, which is favorable for the parties to reach an agreement quickly and to avoid the escalation of claims into disputes.

The proposed model provides a supplement to the existing studies on dynamic construction claim negotiations.

Target cost contracts are commonly used to share the monetary outcome of work or a project. However, discussion is ongoing, as to what constitutes optimal sharing. The purpose of this paper is to examine optimal sharing and derives a result for defined risk assumptions on the owner (risk neutral) and contractor (risk-averse ranging to risk neutral).

The derivation is based on solving a constrained maximization problem using ideas from principal-agent theory. Practitioners were engaged in a designed exercise in order to validate the approach and propositions. The influence of the contractor's level of risk aversion, the cost uncertainty and the contractor's effort effectiveness are examined.

The paper shows that, at the optimum, the sharing ratio between contractor and owner needs to reduce and the fixed fee needs to increase when the contractor becomes more risk-averse, the level of the cost uncertainty increases, or the effectiveness of the contractor effort decreases.

The paper's findings provide practitioners with a useful benchmark for outcome sharing in target contracts.

Existing work on outcome sharing in target contracts is limited to being qualitative and anecdotal in nature. This paper extends existing knowledge by providing a quantitative treatment of optimal sharing.

The main parties in construction projects are the engineers, clients, architects, contractors, material suppliers, and consultants such as the project managers. They play the most important roles in implementing construction projects, and their activities have a significant impact on their risk attitudes during the execution of projects. Because each participant has their particular interests, by proprietary information, each participant is driven to achieve maximum benefit, which can result in improper behaviour concerning each other. The risk in this situation is that there would be a moral hazard and adverse selection based on information asymmetry among principal construction participants especially contractors; this outcome is called risk attitudes. Behaviour is affected by various risk factors and the successful implementation of construction projects depends on effective management of the key risk factors part of which is a personal factor. The purpose of this paper is to identify the critical factors affecting contractors’ risk attitudes among Malaysian construction companies with the moderating role of government policy. Organizational control theory and expected utility theory were used to develop the theoretical framework. The study investigated G7 contractors in the Malaysian construction industry. Data were collected through the use of a questionnaire.

The research analysis was based on structural equation modelling (SEM), and the research model was ascertained through the Smart PLS 3.0 software (Ringle et al., 2012). Partial least square-SEM is an appropriate analysis that was used to assess the results in the current research because its algorithm permits the unrestricted computation of cause-effect relationship models that use both reflective and formative measurement models. This study uses the quantitative method to identify the individual factors influencing contractors’ risk attitude and the moderating role of government policy among construction companies in Malaysia. This study also focussed on the G7 contractors operating in the Malaysia construction industry that specializes in building, bridge and road construction projects. The duration of the data collection was between two and three weeks. The questionnaire was prepared both in Malay and English languages to allow the respondents to respond most conveniently. Before the copies of the questionnaire were distributed, the selected contractors’ committees were duly informed about the details of the survey procedures. The adopted Likert scale was originally a five-point scale that ranges from “very low” to “very high” with “low or high” in between.

The result of this study moderately supports the hypothesized relationships proposed in the theoretical model. In particular, the results recommended that personal factors that affect risk attitudes (working experience, emotional intelligence, professional competence and physical health) have a significant relation with contractors’ risk attitudes in the construction companies in Malaysia. Also, it has been found that government policy (rules and regulations) are important determinants of risk attitudes.

The study focussed on individual factors affecting contractors’ risk attitudes in the construction company’s in Malaysia. Therefore, the dimensions of factors affecting risk attitudes can be used in another aspect of construction projects such as management factors, economic factors and technical factors. Therefore, further research might investigate other grades of Malaysian construction companies apart from Grade 7 contractors to know if there is a similarity in the results; other grades of the contractors might have potential positive contributions to the construction industry as well.

With consider to the practical, the current research findings have several contributions for the contractors and project managers. The research results demonstrate that government policy plays an important role in the construction industry and organizational support will also help contractors to control their attitudes in working place. Individual factor has a direct relationship with contractor risk attitudes (CRA), project managers must ensure that the government policy has an impact in all their workers and offered is competitive, fair and by their employees’ contribution. Apart from that managers should also focus on organizational goals especially in managing professional and skilled contractors in the companies. Employees who perceived their employers as uncaring or not supporting their needs and well-being may not be happy working with the organization and the tendency for them to change their attitudes towards risk will be high.

This study also contributes knowledge by lending empirical support to the organizational control theory and expected utility theory system’s effect on CRA and confirming that changing one individual attitude will change the whole equilibrium. This is useful to aid in further synthesis of organizational control theory and expected utility theory in construction companies.

This study is the first attempt at evaluating the direct and moderating effect relationships among individual factor affecting risk attitudes, government policy and CRA in Malaysian construction companies. These findings also prop up the applicability of the organizational control theory and expected utility theory within the context of construction companies in Malaysia. Also, this study contributed to the literature on psychology by subjective (psychological) measures of individuals’ behaviour and decisions. In the CRA literature, there has been much discussion on personal characteristics to understand behaviours such as attitudes of a contractor towards risk and morals.

Modelling of the multiproject cash flow decisions in a contracting firm facilitates optimal resource utilization, financial planning, profit forecasting and enables the inclusion of cash‐flow liquidity in forecasting. However, a great challenge for contracting firm to manage his multiproject cash flow when large and multiple construction projects are involved (manipulate large amount of resources, e.g. labour, plant, material, cost, etc.). In such cases, the complexity of the problem, hence the constraints involved, renders most existing regular optimization techniques computationally intractable within reasonable time frames. This limit inhibits the ability of contracting firms to complete construction projects at maximum efficiency through efficient utilization of resources among projects. Recently, artificial neural networks have demonstrated its strength in solving many optimization problems efficiently. In this regard a novel recurrent‐neural‐network model that integrates multi‐objective linear programming and neural network (MOLPNN) techniques has been developed. The model was applied to a relatively large contracting company running 10 projects concurrently in Hong Kong. The case study verified the feasibility and applicability of the MOLPNN to the defined problem. A comparison undertaken of two optimal schedules (i.e. risk‐avoiding scheme A and risk‐seeking scheme B) of cash flow based on the decision maker's preference is described in this paper.

The objective of this research is to develop a decision method that can generate appropriate risk response strategies for international construction project managers (PMs) and allow these strategies to reflect their different risk preferences.

The optimal model approach is adopted. A credibility-based fuzzy chance constrained programming (CFCCP) model is developed, which simultaneously minimizes the expected losses of risk events and total costs of risk response. To solve this multi-objective model, a fuzzy interactive solution method is used. Moreover, the model performance is demonstrated by a real international industrial plant project. In addition, a sensitivity analysis of the model is conducted.

The result of the sensitivity analysis indicates that PMs with a greater risk aversion can lead to a higher mitigation ratio of expected losses of risk events and a higher total cost of risk response.

This research provides contractors with an effective decision-making model to develop a project risk response plan, and it will assist contractors to minimize risk losses and enhance the project performance in the international construction market.

Previous studies overlook the risk preference, which is an important behavioral factor influencing decisions in risk response strategy selection. This research proposed a novel risk response strategy selection decision method that considers different attitudes toward risk among decision makers.

Capital project delivery, such as the delivery of transportation networks and industrial facilities, often suffers losses due to overly aggressive planning. Planners often are overly optimistic about the chance of success while underestimating risks. The purpose of this paper is to examine the hypothesis that these biases are from the difficulties most decision makers face when interpreting probabilistic information.

Three behavioral experiments were conducted to test the theoretical fitness of the paradigms proposed by the description–experience gap literature, namely, the sampling errors effect, the recency effect and statistical information format. College students were recruited to participate in a series of estimating tasks. And their estimating results were compared given different levels of information completeness.

It was found that the existing paradigms could predict risk decision making in the risk-averse estimating scenarios where test subjects were required to give a relatively conservative estimate, but they seemed to be less effective in predicting decisions in the risk-seeking estimating scenario, where test subjects were asked to give a relatively aggressive estimate.

Based on these findings, an integrative model is proposed to explain the observations pertaining to aggressive planning in capital projects. Two dimensions are deemed to be relevant: including risk-taking intentions, and an information uncertainty continuum that ranges from an implicit experience-based information representation to an explicit description-based information representation.

Making the right bid/no-bid decision is critical to the success and development of construction contracting enterprises. Decision makers’ personal characteristics, such as risk perception and propensity, have great impact on bid/no-bid decisions, which is the major concern of this research. The purpose of this paper is to explore the relationship among decision makers’ risk perception, risk propensity, and their bid/no-bid decision making of construction projects, as well as the factors influencing the risk perception and propensity.

In total, four hypotheses were proposed based on an extensive literature review. Experimental questionnaires were distributed to employees working in Chinese construction contracting enterprises with knowledge of construction bidding, and 134 valid questionnaires were obtained. Multivariate statistical analysis through SPSS 19.0 was used to analyze the acquired data.

Data analysis shows that in the context of international construction contracting: risk perception has a negative influence on bid/no-bid decision making; while risk propensity produces a positive influence and the probability and magnitude of potential gain or loss both have significant impacts on risk perception, and the probability plays a more important role.

This research studied the bid/no-bid decision making of construction projects from the new perspectives of risk perception and risk propensity of the decision makers.

The purpose of this paper is to investigate the major challenges faced by Chinese international contractors (CICs) in the Malaysian construction industry.

An exploratory sequential mixed-methods research approach was adopted where following a detailed literature review and semi-structured interviews with local professionals, 20 prevalent challenges experienced by CICs are identified. Subsequently, a questionnaire survey was used to elicit the views of 100 construction practitioners. Descriptive statistics were used to prioritise the challenges, while exploratory factor analysis was conducted to uncover the underlying factors.

The five most crucial challenges identified relate to: changes of regulation, cost control, contract clauses, language barrier and quality control. Exploratory factor analysis revealed four major underlying dimensions of these challenges, in connection to financial and government policy management, organisational performance management, supplier relationship management and cross-cultural management.

The challenges are considered primarily involving CICs in the context of Malaysia; further work can be extended to Western or other East Asian, such as Japanese and Korean, international contractors undertaking construction projects in Malaysia or selected developing countries around the region.

This study will benefit professionals involved with China-backed construction projects in countries sharing demographics and socio-economic characteristics akin to Malaysia. The outcome of the study is expected to facilitate project managers to devise proactive risk-mitigation measures to reduce the impact of these challenges and to improve project delivery.

The paper examined the challenges faced by CICs in the Malaysian context. This is a timely study, as China’s Belt and Road Initiative will provide considerable opportunities for Chinese companies in Malaysia.

This paper explores the impact of both government subsidies and decision makers' loss-averse behavior on the determination of transportation build-operate-transfer (BOT) concession periods based on cumulative prospect theory (CPT). The prospect value of a transportation project under traffic risk can be formulated according to the value function for gains and losses and the decision weight for gains and losses. As an extra income for investors, government subsidy is designed for highly risky aspects of BOT transportation projects: uncertain initial traffic volumes and fluctuating growth rates.

A decision-making model determining the concession period of a transportation BOT project is proposed by using the Monte-Carlo simulation method based on CPT, and the effects of risky behaviors of private investors on concession period decision making are analyzed. A subsidy method related to the internal rate-of-return (IRR) corresponding to a specific initial traffic volume and growth rate is proposed. The case of an actual BOT highway project is examined to illustrate how the method proposed can be used to determine the concession period of a transportation BOT project considering decision makers' loss-averse behavior and government subsidy. Contingency analysis is discussed to cope with possible misestimating of key factors such as initial traffic volume and cost coefficients. Sensitivity analysis is employed to investigate the impact of CPT parameters on the concession period decisions. An actual BOT case which failed to attract private capital is introduced to show the practical application. The results are then interpreted to conclude this paper.

Based on comparisons drawn between a concession period decision-making model considering the psychological behaviors of decision makers and a model not considering them, the authors conclude that the concession period based on CPT is distinctly different from that of the loss-neutral model. The concession period based on CPT is longer than the loss-neutral concession period. That is, loss-averse private investors tend to ask for long concession periods to make up for losses they will face in the future. Government subsidies serve as extra income for investors, allowing appointed profits to be secured sooner. For the benefit side of contingency variables, the normal state of initial traffic volume, average annual traffic growth rate and bias degree and the government subsidy need to be paid close attention during the project life span. For the cost side of contingency variables, the annual operating cost variable has a significant impact on the length of predicted concession period, while the large-scale cost variable has minor impact.

With an actual BOT highway project, the determination of transportation BOT concession periods based on the psychological behaviors of decision makers is analyzed in this paper. As the psychological behaviors of decision makers heavily impact the decision-making process, the authors analyze their impacts on concession period decision making. Government subsidy is specifically designed for various states of initial traffic volume and fluctuating growth rates to cope with corresponding high risks and mitigate private investors' loss-averse behaviors. Contingency analysis and sensitivity analysis are discussed as the estimated values of parameters may not be authentic in actual situations.

The failure rate of international construction joint venture (ICJV) projects has been noted to be high in developing countries due to the complexity and risky nature of construction projects in the international market. The purpose of this study is to identify and evaluate the risks facing ICJV projects in Ghana.

A risk register was developed through a comprehensive literature review. The identified risks were then used in a questionnaire survey involving local and foreign partners in ICJV projects in Ghana.

From a total of 74 risks identified, categorized into country-level risks, market-level risks and project-level risks, the “top ten” risks found to be the most critical risks facing ICJV projects in Ghana include unstable currency exchange rates, inflation, design changes, high-interest rate, budget overrun, cash flow problems of the client, economy fluctuation, difficulty in obtaining approval of projects from host government authorities/bureaucracy, potential financial distress of JV partner and bribery and corruption.

This study provides a comprehensive list of risks ICJV partners are likely to encounter on their projects in developing countries. Furthermore, this study improves on one of the major limitations of previous ICJV studies by collecting data from both partners of the ICJV, appropriate for cross-cultural examination and comparison.