Risk Analysis and Decision Making in Construction Claims
Claims in construction projects are inevitable and can result in costly litigation. Construction contract ambiguity, overtly restrictive terms, and unfairly allocated risks to one party increase the likelihood for disputes. The goal of this study is to develop a model that helps construction parties in their decision making process for claims. This research outlines a comprehensive risk assessment to determine the probability of potential disputes by applying Bayesian Networks. The interaction between parties and their decisions are analyzed by application of Bayesian Games. In case of dispute, each party has private information regarding their liability and damages incurred. The introduced two-sided asymmetric information settlement model can calculate players’ best strategies. The calculations are optimized based on parties’ private information about the specifics of the claim and their beliefs about the other parties’ private information. The result of this study is a model that can be used by construction parties to analyze dispute cases to predict optimal settlement amounts.