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《Journal of Industrial Engineering and Engineering Management》 2012-04
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Contractor-Oriented Risk Analysis of EPC Hydropower Project Cost

LIU Dong-hai1,2,SONG Hong-lan1(1.School of Civil Engineering,Tianjin University,Tianjin 300072,China; 2.State Key Laboratory of Hydraulic Engineering Simulation and Safety,Tianjin University,Tianjin 300072,China)  
Fixed price contract is usually employed in the engineering-procurement-construction(EPC) hydropower project.However,project cost is difficult to manage because many uncertainty factors exist.There is a risk for the general contractor to accomplish an EPC project with a fixed price contract.Therefore,it is important for a general contractor to make quantitative analysis of uncertainty factors related to project cost in order to give a competitive bidding with reasonable contract price and then implement effective cost control during the whole construction period. First,this paper identifies main cost risks of an EPC hydropower project and proposes a contractor's cost model by considering price uncertainty,interest rate,natural condition,engineering technology and owner's credit.The cost contains not only the budgetary estimate of design(A),but also the additional expected costs including materials price inflation cost(a),and the interest of contractor's advanced cash because of owner's overdue payment(G),and the increased cost of modification design that are susceptible to natural condition and engineering technology risks(L). Second,we discuss the methods used to calculate materials price inflation cost,the interest of contractor's advanced payment and the increased cost.We estimate the price inflation cost a and predict the price fluctuation by using the average growth of main materials price index of hydropower project.Considering unfavorable natural conditions of engineering geology,hydrology and climate,and project technique risks,PERT(Program Evaluation and Review Technique) and Three Point Evaluation methods are employed to measure the increased cost of modification design L.Additionally,the maximum delayed months and monthly repayment probability are determined by experts according to owner's credit and financial capability.The interest of contractor's advanced payment during the whole construction period G can be calculated to estimate the monthly budgetary of design and the repayment probability. Finally,the complex contractor's cost model with some random variables is solved by the Monte-Carlo method.The cost distribution and monthly expected cost cash-flow,as well as the cost control risk of general contractor can be simulated quantitatively.Furthermore,the general contractor cost of an EPC hydropower project in Yunnan province China is analyzed using the proposed methods.The finding provides strong support for the general contractor to make reasonably decision on bidding price,risk compensation,and cost control in the construction process.
【Fund】: 国家自然科学基金资助项目(51079096);国家自然科学基金创新研究群体科学基金资助项目(51021004);; 教育部新世纪优秀人才计划资助项目(NCET-08-0391)
【CateGory Index】: F285;TV512
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