Empirical study on cost risk in international construction project

Abstract

Since the multidimensional uncertainties, the international construction market is a more risker market rather than domestic construction market. Sustainable business in the international market requires accurate project diagnosis and proactive response strategies through the risk assessment process and it is necessary to provide empirical risk evaluation data to support more accurate risk assessment in aspects of practice. This study, therefore, aims to analyze and provide risk evaluation data which contains key risk factors, risk impact and probability in aspects of cost performance. The 124 international construction projects conducted from Korean contractors were used in this study. The key risk factors were derived by comparing low-performance project and high-performance project in aspects of cost performance and the results are suggested by product types which are civil structure, building and plant. The study found that ‘Insufficient period for construction completion’, ‘Weather and climate uncertainty’ and ‘IT based project management difficulties’ are the high ranked risk factors regardless of product types. It also found that contract risk had the greatest impact on business in international market since lots of high ranked risk factors are belong to contract risk. The results of this study can be used as a reference data for practitioners to evaluate the risks of international construction projects and will support them successfully carry out the project through more accurate risk assessment based on past case data.