Hybrid fuzzy arithmetic-based model for determining contingency reserve

Abstract

Calculating an accurate contingency reserve amount is vital to managing construction project costs and risks. Current methods for determining contingency have limitations in incorporating risk response actions (RRAs), accounting for insufficient quantitative historical data, considering time-dependent variables, and capturing cause-and-effect interactions between risk events (REs) together and with RRAs. This paper presents a hybrid fuzzy arithmetic-based contingency reserve model (HFACRM) that addresses these limitations by 1) considering time-dependent probability and impact values of risk events and RRAs, 2) modeling causal relationships among variables affecting contingency, and 3) addressing subjective uncertainty of linguistic evaluations in risk management. HFACRM considers more realistic complexities and characteristics of projects compared to other models, resulting in a significant improvement in the accuracy and effectiveness of determining contingency reserve. A wind farm power generation project was used as a case study to demonstrate and validate HFACRM.