Research on Cost Risks for EPC Project Using Entropy-Weight Evaluation Method

Abstract

Fixed-price contract is usually adopted for EPC-type project, the abbreviation of Engineering-Procurement-Construction. It is commonly appreciated that fixed-price contract will present more risks to general contractor, in particular when EPC project is implemented, which engages a long process of construction. It is crucial to evaluate properly these cost risks in order to identify proper measures to control them. Considering the characteristics of EPC project, an integrated research method is adopted to evaluate cost risks. Checklist method and expert investigation method are used to identify cost risks in EPC project. The expert scoring method and entropy-weight calculation method are used to evaluate the cost risk factors by presenting relative individual risk factors. ABC classification method is taken to rank the risks according to their importance. The analysis results by using these methods help identify effective corresponding strategies to reduce cost risks in the process of implementing EPC project. The evaluation results on the key cost risks can help general contractors better plan risk management measures in their practice.