Developing a subsidy plan for promoting prefabricated construction

To promote the adoption of sustainable prefabrication construction, many governments worldwide have committed to designing subsidy policies to increase the number of prefabricated components (PCs) used in real-life construction projects. This paper investigates the interactions between governments and contractors and uses mathematical optimization to design an optimal bi-level subsidy planning framework. Three bi-level programming models, each representing a subsidy strategy, are proposed and compared to identify the optimal subsidy allocation model. At the upper level, the government makes dominant decisions (e.g., on the unit subsidy price) to maximize the use of PCs. At the lower level, contractors make purchasing-related decisions (e.g., whether to use PCs and, if so, the number of PCs to purchase from local and non-local suppliers) to minimize their costs. A particle swarm optimization-based algorithm is developed to solve the bi-level models. Data are collected from Hong Kong to validate the proposed subsidy strategies. Numerical experiments show that providing contractors with various PC subsidy prices within and beyond a determined adoption rate can benefit more contractors than other subsidy strategies. Sensitivity analyses of subsidy budgets, preferences for objectives, and offshore PC prices are performed, enabling policy-making suggestions for governments and useful decision-making insights for contractors. The findings of this paper are expected to contribute to the sustainable development of the construction industry.