System Dynamics Approach to Optimum Response Selection in Construction Project Risks

Due to presence of risks and uncertainties, inherent in different stages of projects, many construction projects are failed to achieve the determined project objectives in terms of time, cost and quality. Incorporating the risk management concepts into construction practice can enhance the performance of project by taking appropriate responses in facing with different risks. Construction project risks have two major systemic natures for which, all of traditional risk management techniques have proved ineffective at providing quick and reliable information. These systemic natures of risks including 1) existence of numerous inter relationships between different risks and 2) existence of different feedback loops for risks. System Dynamics provides an alternative view in which these major influences are considered and quantified explicitly. This approach dispenses with much of the detail required by the traditional tools, but enables modeling of the systemic effects which traditional tools cannot model. In this paper, first the construction processes of a project are modeled by System Dynamics. The proposed methodology is employed to evaluate the consequences of different alternative response scenarios to the identified risks. Consequences are quantified in terms of reduction in cost over run, poor quality and project delays. The optimum response to different project risks may be selected by the use of the proposed methodology and a multi criteria decision making. To be more informative, a practical example is presented.

Keywords:

System Dynamics , Construction Industry , Decision Making , Response Scenarios , Risk Analysis