Wang, H; Yi, W; Zhen, L; Song, Y and Wu, P (2025) Designing optimal government-contractor subsidy policy for promoting modular construction: Bilevel stochastic program. Journal of Construction Engineering and Management, 151(10): 04025136, ISSN 0733-9364
Abstract
Modular construction (MC) is an advanced construction method that offers great economic, social, and environmental advantages over the cast-in-situ method, but the adoption rate of MC is low in practice. Government promotional policies are recognized as effective strategies to incentivize the use of MC modules (MCMs) by contractors. However, current studies devoted to the government subsidy problem are designed based on deterministic parameters. In real-life scenarios, the selling price of MCMs, the cost of cast-in-situ construction, the maximum quantity of MCMs supplied, and the construction work of future projects have many uncertainties. Neglecting these factors can result in suboptimal subsidy plans for governments and further influence the supply chain related decisions made by contractors. This study contributes to the literature by designing an optimal government subsidy allocation strategy to promote the adoption of MC technique. An innovative bilevel stochastic program was formulated that incorporates price and quantity uncertainty, and an exact solution method was developed for problem-solving. The proposed optimal subsidy allocation policy was validated using a Hong Kong case study. The results show that our plan is expected to increase the adoption rate of MC in Hong Kong to 52.3%, thereby justifying the practical contributions of our well-designed subsidy policy. Furthermore, results show that the consideration of real-life uncertainties can result in a noteworthy 38% improvement in the adoption of MC compared with the traditional deterministic method, thereby justifying the methodological contributions of this study. Through sensitivity analysis, useful managerial insights related to subsidy budget are provided for policymakers.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bilevel stochastic programming; managerial insights; modular construction; supply chain management |
| Index terms: | construction method, strategy, sensitivity analysis, programming, modular construction, program, case study, Hong Kong, subsidy, module, construction work, in-situ |
| Subjects: | data collection methods, management, software systems, programming, operations management, economic analysis, architectural elements, Geography, building construction, environmental hazards |
| Topics: | Business Strategy, Research Practice, Construction Technology, Design Practice, Digital Applications, Site Management, Project Management, Geographical Context, Engineering Principles, Sustainability |
| Descriptive scope: | 3 PCE |
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