Major quantitative techniques for risk analysis in the construction industry : a comparative analysis

Risk analysis is one of the critical functions of the risk management process. It relies on a detailed understanding of risks and their possible implications. Construction projects, because of their large and complex nature, are plagued by a variety of risks which must be considered and responded to in order to ensure project success. This study conducts an extensive comparative analysis of major quantitative risk analysis techniques in the construction industry. The techniques discussed and comparatively analyzed in this report include: Programme Evaluation and Review Technique (PERT), Judgmental Risk Analysis Process (JRAP), Estimating Using Risk Analysis (ERA), Monte Carlo Simulation technique, Computer Aided Simulation for Project Appraisal and Review (CASPAR), Failure Modes and Effects Analysis technique (FMEA) and Advanced Programmatic Risk Analysis and Management model (APRAM). The findings highlight the fact that each risk analysis technique addresses risks in any or all of the following areas – schedule risks, budget risks or technical risks. Through comparative analysis, it has been revealed that a majority of risk analysis techniques focus on schedule or budget risks. Very little has been documented in terms of technical risk analysis techniques. In an era where clients are demanding and expecting higher quality projects and finishes, project managers must endeavor to invest time and resources to ensure that the few existing technical risk analysis techniques are developed and further refined, and that new technical risk analysis techniques are developed to suit the current construction industries requirements.