Joukar, A (2016) Analysis and management of the price volatility in the construction industry. PhD thesis, Louisiana State University and Agricultural & Mechanical College, USA.
Abstract
The problem of price volatility as it pertains to material and labor is a major source of risk and financial distress for all the participants in the construction industry. The overarching goal of this dissertation is to address this problem from both viewpoints of risk analysis and risk management. This dissertation offers three independent papers addressing this goal.In the first paper using the Engineering News Record Construction Cost Index (ENR CCI), a predictive model is developed. The model uses General Autoregressive Conditional Heteroscedastic (GARCH) approach which facilitates both forecasting of the future values of the CCI, and capturing and quantifying its volatilities as a separate measure of risk through the passage of time. GARCH (1,1) was recognized as the best model. The maximum volatility was observed in October 2008 and results showed persistent volatility of the CCI in the case of external economic shocks.In the second paper using the same cost index (ENR CCI), the methodology of the first paper is integrated with Value at Risk concept to cautiously estimate the escalation factor in both short and long-term construction projects for avoiding cost overrun due to price volatilities and inflation. Proposed methodology was also applied to two construction projects in which the estimated escalation factors revealed satisfactory performances in terms of accuracy and reliability.Finally, the third paper addresses the price volatility from the view of risk management. It entails two objectives of identifying and ranking of potential management strategies. The former is achieved via in-depth literature review and questionnaire interviews with industry experts. The latter is done using Analytic Hierarchy Process (AHP). Quantitative risk management methods, alike those offered in foregoing papers are considered as one of the candidates in dealing with the price volatility risk. Cost, risk allocation and duration were perceived as the most significant criteria (project indicators) in construction projects. Also, Integrated Project Delivery (IPD) with respect to project duration; quantitative risk management methods with respect to the cost; and Price Adjustment Clauses (PAC) with respect to the risk allocation, were recognized as the top strategies to manage the risk of price volatilities.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Nahmens, I |
| Uncontrolled Keywords: | accuracy; cost overrun; duration; construction cost; forecasting; inflation; integrated project delivery; project delivery; risk management; cost index; risk analysis; analytic hierarchy process; construction project; interview |
| Index terms: | methodology, inflation, construction project, construction cost index, questionnaire, risk analysis, interview, literature review, integrated project delivery, strategy, accuracy, financial distress, risk allocation, risk management, duration, construction industry, estimate, dissertation, project delivery, management strategy, forecasting, construction cost, cost overrun, cost index |
| Subjects: | project controls, industry analysis, management, professional development, cost indicators, data analysis and analytics, prediction and forecasting, project delivery, financial and cost management, risk assessment, data collection methods, environmental hazards, research methods, production management, financial risk, contractual arrangements, economic analysis, research dissemination and communication |
| Topics: | Cost Management, Business Strategy, Research Practice, Information Management, Design Practice, Time Control, Project Management, Risk Management, Procurement, Sustainability |
| Descriptive scope: | 5 PCTEA |
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