System Dynamics Approach for Quantitative Risk Allocation

Allocation of construction risks between clients and their contractors has a significant impact on the total construction costs. this paper presents a system dynamics (sd)-based approach for quantitative risk allocation. using the proposed sd based approach, all the factors affecting the risk allocation process are modeled. the contractor’s defensive strategies against the one-sided risk allocation are simulated using governing feedback loops. the full-impact of different risk allocation strategies may efficiently be modeled, simulated and quantified in terms of time and cost by the proposed object-oriented simulation methodology. the project cost is simulated at different percentages of risk allocation and the optimum percentage of risk allocation is determined as a point in which the project cost is minimized. to evaluate the performance of the proposed method, it has been implemented in a pipe-line project. the optimal risk allocation strategy is determined for the inflation risk as one of the most important identified risks.