Using fuzzy risk assessment to rate cost overrun risk in international construction projects

Determination of an appropriate mark-up while bidding for international construction projects is a critical decision. Level of mark-up is a function of risks associated with a project. Construction companies may benefit from a tool that helps them to assess the level of risk so that they can determine an appropriate mark-up. The aim of this paper is to propose a fuzzy risk assessment methodology for international construction projects and develop a tool to implement the proposed methodology. The proposed methodology uses the influence diagramming method for construction of a risk model and a fuzzy risk assessment approach for estimating a cost overrun risk rating. A computerized system has been developed for an international construction company and applicability of this system during risk assessment at the bidding stage has been tested by using real company and project information. Although the developed tool is company-specific, similar tools may be developed for other companies using the same methodology and expert judgments that reflect different company objectives and risk policies.