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Risk Appraisal in Engineering Infrastructure Projects: Examination of Project Risks Using Probabilistic Analysis

  • Jane Lai
  • Lihai Zhang
  • Colin Duffield
  • Lu Aye
Conference paper

Abstract

Understanding the significant implication of uncertainty is an important step in infrastructure project appraisals. A detailed discussion and application of a risk-based, cost-benefit analytical framework with focus on the analysis of likelihood of risks is presented in this chapter. Three risk analysis tools (i.e. Monte Carlo simulation, Latin Hypercube sampling, and engineering reliability analysis) are presented and compared based on their efficiency and accuracy. Likelihood of risk was represented by a project’s probability of investment loss. The framework was applied to a residential property in Melbourne, Australia, with house price as an uncertain variable. It was shown that engineering reliability analysis was the most accurate and efficient in calculating a probability of loss in a 3-year investment duration. In addition, Latin Hypercube sampling, requiring 50 to 100 iterations for convergence, was superior to Monte Carlo simulation which needed 500 to 1000 iterations. Finally, an integrated model is presented to estimate the project risk in term of expected loss.

Keywords

Engineering reliability analysis Expected loss Latin hypercube sampling Monte Carlo simulation Probability of loss Risk analysis 

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Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.Department of Infrastructure EngineeringThe University of MelbourneParkvilleAustralia

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