Developing a fuzzy risk assessment model for guaranteed maximum price and target cost contracts in South Australia

Wai Ming Chan, Joseph H.L. Chan, Tony Ma

Research output: Journal article publicationJournal articleAcademic researchpeer-review

13 Citations (Scopus)


Purpose – This paper aims to develop a fuzzy risk assessment model for construction projects procured with target cost contracts and guaranteed maximum price contracts (TCC/GMP) using the fuzzy synthetic evaluation method, based on an empirical questionnaire survey with relevant industrial practitioners in South Australia.Design/methodology/approach – Atotal of 34 major risk factors inherent with TCC/GMP contracts were identified through an extensive literature review and a series of structured interviews. A questionnaire survey was then launched to solicit the opinions of industrial practitioners on risk assessment of such risk factors.Findings – The most important 14 key risk factors after the computation of normalised values were selected for undertaking fuzzy evaluation analysis. Five key risk groups (KRGs) were then generated in descending order of importance as: physical risks, lack of experience of contracting parties throughout TCC/GMP procurement process, design risks, contractual risks and delayed payment on contracts. These survey findings also revealed that physical risks may be the major hurdle to the success of  TCC/GMP projects in South Australia.Practical implications – Although the fuzzy risk assessment model was developed for those new-build construction projects procured by TCC/GMP contracts in this paper, the same research methodology may be applied to other contracts within the wide spectrum of facilities management or The research team wishes to extend their heartfelt gratitude to those industrial practitioners in Australia who have kindly participated in the empirical questionnaire survey for contributing their valuable opinions and feedback to this research study. The authors would also like to thank the Faculty of Construction and Environment, as well as the Department of Building and Real Estate, of The Hong Kong Polytechnic University, for providing financial support to this research endeavour (General Research Grants Allocation 2008/09 with Project Account Code: A-SA42). This paper forms part of a funded research project entitled “Development of an Overall Performance Index (PI) for Target Cost Contracts in Construction” with several research objectives sharing common background of study and research methodology. building maintenance services under the target cost-based model. Therefore, the contribution from this paper could be extended to the discipline of facilities management as well.Originality/value – An overall risk index associated with TCC/GMP construction projects and the risk indices of individual KRGs can be generated from the model for reference. An objective and a holistic assessment can be achieved. The model has provided a solid platform to measure, evaluate and reduce the risk levels of TCC/GMP projects based on objective evidence instead of subjective judgements. The research methodology could be replicated in other countries or regions to produce similar models for international comparisons, and the assessment of risk levels for different types of TCC/GMP projects (including new-build or maintenance) worldwide.
Original languageEnglish
Pages (from-to)624-646
Number of pages23
Publication statusPublished - 1 Jan 2014


  • Fuzzy synthetic evaluation
  • Guaranteed maximum price contracts
  • Risk assessment
  • South Australia
  • Target cost contracts

ASJC Scopus subject areas

  • Human Factors and Ergonomics
  • Architecture
  • Building and Construction


Dive into the research topics of 'Developing a fuzzy risk assessment model for guaranteed maximum price and target cost contracts in South Australia'. Together they form a unique fingerprint.

Cite this