Modelling completion risk using stochastic critical path-envelope method: a BOT highway project application
In integrated project delivery methods such as build-operate-transfer (BOT), a thorough financial risk analysis model should incorporate completion risk analysis into operation risk analysis as the timing of financial events such as refinancing and debt servicing depend on the construction completion date. During construction, project managers always have opportunities to react to negative events and to take corrective actions whenever possible to recover late-running schedules. These opportunities to react are 'real options' embedded in the construction process. However, current models of completion risk analysis ignore this feature of project managers. A reliable construction completion risk model for project feasibility studies should capture a manager's option to react to unforeseen, negative events. A novel approach for modelling construction completion risk analysis is developed by combining stochastic critical path method with the envelope method (SCP-EM). The SCP-EM approach can model the option-like feature of management feedback reactions in a straightforward fashion. The proposed approach, if applied correctly during the project feasibility study stage, enhances the project finance risk model by helping analysts properly evaluate financial risk arising from completion delay.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 28 (2010)
Issue (Month): 12 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RCME20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RCME20|
When requesting a correction, please mention this item's handle: RePEc:taf:conmgt:v:28:y:2010:i:12:p:1239-1254. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.