Identification of the main risks for international rail construction projects based on the effects of cost-estimating risks

Abstract

The purpose of this study was to explore the effects of cost-estimating risks on the investment costs of international rail projects. A Monte Carlo simulation was used to conduct research based on the data gathered from official reports over the past 10 years and semistructured interviews. The study found that the main influences on cost performance are the maximum number of working days per week, the minimum wage for a full-time worker, dealing with construction permits, an inefficient government bureaucracy, and the business costs of crime and violence. The outcomes illustrate that the effects of risk on cost estimations obey different probability distributions. 22 of the effects of risk on cost estimations followed a normal distribution, and 2 of the effects of risk followed a uniform distribution. The research determined that in international rail projects, different risks have different effects on cost estimations. The effect of the maximum number of working days per week on investment costs was substantial (11.6%–13.3%). The effect of the minimum wage for a full-time worker on investment costs was approximately 11.4%–13.1%. The effect of dealing with construction permits on investment costs was relatively lower (11.4%–12.8%). The results further suggest that the effect of all cost-estimating risks on the total investment costs of international rail projects is approximately 5.7%–12.9%. The study concluded that to achieve sustainable cost control, decision-makers should pay more attention to the effects of cost-estimating risks, such as the number of working days, workers’ wages and construction permits. The limitation of the research is that less effort has been made to assess the risk attitudes of international construction sectors.