Page of 2 - ZOOM + 1 MSET 5230 Review Problems 1. What is risk management in construction? 2. What is a design build project? Will the design build approach reduce risk exposure? 3. A construction project is expected to complete in 12 months. The monthly cost is listed in Table 1. There are two position risks: (1) delay due to heavy rains in May to August (2) labor shortage for entire year. Month Cost 1 1 2 2 Table 1: construction cost flow (unit SM) 3 | 4 5 6 7 8 3 4 5 5 5 5 9 4 10 4 11 2 12 1 Assume the probability distribution of additional cost per month (in terms of percentage of the base costs listed in Table 1) is same for the four months May, June, July, and August, shown in Figure 1. The probability distribution of additional cost of base cost) due to lalor shortage per month is same for all 12 months, shown in Figure 2. (1) Draw sensitivity curves for the two risks with regard to the total construction cost (NPV with 5% discount rate). (2) Draw 25% and 75% portability contour on the sensitivity curves. 0.04 0 5 50 Additional cost per month due to weather delay(%) Figure 1 Page of 2 - zoom + MSET 5230 Review Problems Additional cost per month due to labor shortage (9) Figure 2 4. A general contractor is bidding on a S100M commercial building project. The GC is self performing on this project. Based on its estimate the total material cost is $60M, total labor cost is SIOM, total management cost is $15M, the GC's target profit rate is 8% of overall project bid price. Two major risks are considered by the GC. Material cost increase, and labor cost increase. The risk prediction for material is listed in Tables 1. The additional cost due to laboris of a uniform probability distribution between 5-0.5M and S2M. In order to be competitive, what is the optimal bid price on this project? The total bid price shall be the sum of labor cost, material cost, management cost, and the profit. Assume the total management cost is fixed. Use Monte Carlo simulation to solve this problem. Table 1 Additional Project Cost due to Material Cost Increase Additional -SIM project cost S4M Probability 0.05 0.3 0.5 0.15 Page of 2 - ZOOM + 1 MSET 5230 Review Problems 1. What is risk management in construction? 2. What is a design build project? Will the design build approach reduce risk exposure? 3. A construction project is expected to complete in 12 months. The monthly cost is listed in Table 1. There are two position risks: (1) delay due to heavy rains in May to August (2) labor shortage for entire year. Month Cost 1 1 2 2 Table 1: construction cost flow (unit SM) 3 | 4 5 6 7 8 3 4 5 5 5 5 9 4 10 4 11 2 12 1 Assume the probability distribution of additional cost per month (in terms of percentage of the base costs listed in Table 1) is same for the four months May, June, July, and August, shown in Figure 1. The probability distribution of additional cost of base cost) due to lalor shortage per month is same for all 12 months, shown in Figure 2. (1) Draw sensitivity curves for the two risks with regard to the total construction cost (NPV with 5% discount rate). (2) Draw 25% and 75% portability contour on the sensitivity curves. 0.04 0 5 50 Additional cost per month due to weather delay(%) Figure 1 Page of 2 - zoom + MSET 5230 Review Problems Additional cost per month due to labor shortage (9) Figure 2 4. A general contractor is bidding on a S100M commercial building project. The GC is self performing on this project. Based on its estimate the total material cost is $60M, total labor cost is SIOM, total management cost is $15M, the GC's target profit rate is 8% of overall project bid price. Two major risks are considered by the GC. Material cost increase, and labor cost increase. The risk prediction for material is listed in Tables 1. The additional cost due to laboris of a uniform probability distribution between 5-0.5M and S2M. In order to be competitive, what is the optimal bid price on this project? The total bid price shall be the sum of labor cost, material cost, management cost, and the profit. Assume the total management cost is fixed. Use Monte Carlo simulation to solve this problem. Table 1 Additional Project Cost due to Material Cost Increase Additional -SIM project cost S4M Probability 0.05 0.3 0.5 0.15