LDA-Based Model for Measuring Impact of Change Orders in Apartment Projects and Its Application for Prerisk Assessment and Postevaluation

AbstractThis study analyzed the impact of change orders on construction projects by using the loss distribution approach (LDA), which is used in finance to analyze operational risks, and proposed a framework for applying the LDA to construction. It examined 9,028 change orders for 237 apartment housing projects in South Korea. Prior to the analysis, the change-order factors were classified into five categories and the work types into eight categories in order to form a risk matrix. The severity and frequency distributions of each cell were calculated based on the risk matrix. Because the amount of loss can vary depending on the construction cost, severity was defined as the amount of loss relative to the construction cost. Using this, the authors calculated the loss distribution of each cell and combined them to derive the total loss distribution. The analysis results confirmed that field conditions had the largest overall impact on change orders. This was ascribed to the limitations of estimating and ref...

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