IDEAS home Printed from https://ideas.repec.org/a/mgt/youmng/v10y2015i2p163-176.html
   My bibliography  Save this article

Risk Consideration and Cost Estimation in Construction Projects Using Monte Carlo Simulation

Author

Listed:
  • Claudius A. Peleskei

    (Universitatea Tehnica din Cluj-Napoca, Romania)

  • Vasile Dorca

    (Universitatea Tehnica din Cluj-Napoca, Romania)

  • Radu A. Munteanu

    (Universitatea Tehnica din Cluj-Napoca, Romania)

  • Radu Munteanu

    (Universitatea Tehnica din Cluj-Napoca, Romania)

Abstract

Construction projects usually involve high investments. It is, therefore, a risky adventure for companies as actual costs of construction projects nearly always exceed the planed scenario. This is due to the various risks and the large uncertainty existing within this industry. Determination and quantification of risks and their impact on project costs within the construction industry is described to be one of the most difficult areas. This paper analyses how the cost of construction projects can be estimated using Monte Carlo Simulation. It investigates if the different cost elements in a construction project follow a specific probability distribution. The research examines the effect of correlation between different project costs on the result of the Monte Carlo Simulation. The paper finds out that Monte Carlo Simulation can be a helpful tool for risk managers and can be used for cost estimation of construction projects. The research has shown that cost distributions are positively skewed and cost elements seem to have some interdependent relationships.

Suggested Citation

  • Claudius A. Peleskei & Vasile Dorca & Radu A. Munteanu & Radu Munteanu, 2015. "Risk Consideration and Cost Estimation in Construction Projects Using Monte Carlo Simulation," Management, University of Primorska, Faculty of Management Koper, vol. 10(2), pages 163-176.
    • Handle: RePEc:mgt:youmng:v:10:y:2015:i:2:p:163-176
    as

    Download full text from publisher

    File URL: http://www.fm-kp.si/zalozba/ISSN/1854-4231/10_163-176.pdf
    File Function: full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pavlos Loizou & Nick French, 2012. "Risk and uncertainty in development," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(2), pages 198-210, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohammed A. Al-Ghamdi & Khalid S. Al-Gahtani, 2022. "Integrated Value Engineering and Life Cycle Cost Modeling for HVAC System Selection," Sustainability, MDPI, vol. 14(4), pages 1-30, February.
    2. Janne Harkonen & Arto Tolonen & Harri Haapasalo, 2018. "Modelling of Construction Products and Services for Effective Productisation," Management, University of Primorska, Faculty of Management Koper, vol. 13(4), pages 335-353.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Yang & Zhang, Xiaoling & Chau, K.W. & Yang, Linchuan, 2022. "How the institutional change in urban redevelopment affects the duration of land redevelopment approval in China?," Land Use Policy, Elsevier, vol. 119(C).
    2. Obinna Collins Nnamani, 2018. "Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review," ERES eres2018_8, European Real Estate Society (ERES).
    3. Anastasios Tsamis & Konstantinos Liapis, 2014. "Property Assets Fair Value Accounting Under Uncertainty," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 35-54.
    4. Christina Whidya Utami & Mochammad Ferdiansah, 2017. "Development of Knowledge Management Model in Establishing Innovation and Company Performance in UMKM/ SME1 in Indonesia," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 655-665.
    5. Christos L. Galanos, 2017. "Stress Testing the Effect of Income Tax Scale on a Full Time Agricultural Income in Greece After the New Tax Legislation," European Research Studies Journal, European Research Studies Journal, vol. 0(4A), pages 684-695.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mgt:youmng:v:10:y:2015:i:2:p:163-176. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alen Jezovnik (email available below). General contact details of provider: https://edirc.repec.org/data/fmkupsi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.