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Abstract
Cost estimation is a vital and sensitive part of every construction project. In the context of international projects, cost estimation becomes more challenging due to elevated levels of risk. An ever increasing amount of construction companies expanding into the global market create a demand for these risks to be analyzed and evaluated to enhance our understanding of project predictability and outcomes. This research identified critical risk considerations unique to international projects and juxtaposes them with their domestic project counterparts. Data from an industry survey were analyzed to identify risk considerations with the greatest impact on domestic and international construction projects. The researchers identified risk considerations most impactful to cost on international projects. Understanding the increased impact these risk considerations may have on project cost can help industry professionals compile more accurate cost estimates for international projects. More careful attention to the details of the most critical considerations can lead to a reduction in unanticipated project costs.
Keywords: international construction, cost estimation, construction management, risk, probabilistic, deterministic
Introduction
Identifying and managing risk is a difficult and complex part of every construction project. This complexity is amplified greatly by the expansion of construction industry into the global market. When approaching an international project, contractors must address risk factors associated with politics, geography, economy, environment, regulations, security, and culture. These factors must be taken into consideration when determining feasibility of projects, cost, and schedule parameters (CII 2003). Although domestic projects may face similar difficulties, when considering these issues abroad, contractors often have a larger degree of uncertainty and therefore a greater amount of risk.
Risk management is a critical part of successful project delivery. The risk management process includes risk identification, evaluation, and mitigation. The exclusion of any part of the process can lead to adverse project outcomes such as cost overruns and schedule delays. Due to the dynamic nature of construction projects and the possibility for risk to appear at any time in a projects' life cycle, the risk management process must not be limited to a single analysis. Many iterations of the process should be performed throughout the duration of a project to limit the possibility of adverse outcomes and identify risks as early as possible (CII 2004).
According to a research summary released...