International Construction Risk Mitigation: A Multi-Criteria Decision-Making (MCDM) Framework to Evaluate Information and Source Credibility

Suyash Padhye, Purdue University

Abstract

An increasing number of AEC firms are positioning themselves to expand operations in the international construction market. To undertake such decisions, it is critical for companies to analyze the risks, benefits, and future market potential of the host country. Further, companies typically select appropriate entry modes and develop business strategies to navigate the complex formal and informal institutions of the host country. The Board of directors and upper-management employees are typically involved in making such decisions. Previous researchers have identified various risks such as the political, financial, supply-chain using tools like the International Construction Risk Assessment Model (ICRAM) and the International Project Risk Assessment (IPRA). Such comprehensive models encompass various risk factors at the country, market, and project levels. At each level, data are to be collected from various sources that could be susceptible to political agenda, bias, and inaccessibility. Research findings suggest that the results provided by such models heavily rely on the credibility of the information and the information source.First, this research provides comprehensive definitions for Information and Source Credibility with respect to the international construction decision-making domain. Second, the research proposes a framework to assist decision-makers in evaluating Information and Source credibility to rank and prioritize their sources. This research has identified (a) 5 Criteria and 20 Metrics for Information Credibility and (b) 3 Criteria and 18 Metrics for Source Credibility. Third, a survey of construction industry professionals was carried out to determine the relevancy and relative importance of the identified criteria and metrics with respect to international construction decisions. The collected survey responses have a Cronbach’s Alpha value of 0.89 which indicates that the responses are reliable for further analysis. A one-way ANOVA test was conducted to investigate the influence of the prior credibility evaluation experience of the respondents on the relative weights for the framework. The results indicate that prior evaluation experience does not significantly affect the perception of the users towards selecting and weighing the criteria and metrics.Finally, a multi-criteria decision-making (MCDM) model is proposed to incorporate the proposed credibility evaluation framework with the relative weights of the criteria and metrics. An Excel-based macro-enabled tool (with a user-friendly interface) is developed to accept user inputs associated with their information and sources. A well-defined scale of measurement is developed to reduce the subjectivity and biases involved in making such abstract assessments. Final scores, Cr_Information and Cr_Source, are calculated for every piece of information and source selected by the user. The MCDM results are expected to assist users in determining the undertaking of robust decisions by incorporating one additional layer of determining the credibility of their information and prioritizing their information sources. The suggested point of application for this research is before Financial Investment Decision (pre-FID) stage to ensure sufficient time for all the stakeholders to reevaluate their FIDs.

Degree

M.Eng.

Advisors

Hastak, Purdue University.

Subject Area

Engineering

COinS