Al-Sobiei, O S; Arditi, D and Polat, G (2005) Managing owner's risk of contractor default. Journal of Construction Engineering and Management, 131(9), pp. 973-978. ISSN 0733-9364
Abstract
The objective of the study presented in this paper is to provide owners with a decision-making mechanism that will free them from automatically taking the typical "transfer the risk to a surety" option and will allow them to make intelligent and economical decisions that include retaining or avoiding the risk of contractor default. The methodology involves using artificial neural network (ANN) and a genetic algorithm (GA) training strategies to predict the risk of contractor default. Prediction rates of 75 and 88% were obtained with the ANN and GA training strategies, respectively. The model is of relevance to owners because once the likelihood of contractor default is predicted and the owner's risk behavior is established, the owner can make a decision to retain, transfer, or avoid the risk of contractor default. It is of relevance to surety companies too as it may speed up the process of bonding and of reaching more reliable and objective bond/not bond decisions. The comparative use of the ANN and GA training strategies is of particular relevance to researchers.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | contractors; owners; predictions; risk management |
| Index terms: | genetic algorithm, default, artificial neural network, surety, strategy, risk behaviour, decision-making, methodology, owner, risk management, option |
| Subjects: | decision analysis, sociology, management, research methods, decision-making and reasoning, algorithms, warranties, modelling and simulation, risk assessment, dispute resolution |
| Topics: | Research Practice, Business Strategy, Stakeholder Management, Risk Management, Digital Applications, Legal Issues, Contract Administration |
| Descriptive scope: | 3 PCT |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here