A Monte Carlo simulation of cost risks in modular integrated construction projects in Hong Kong

Purpose – The modular integrated construction (MiC) method is promoted in Hong Kong to address the engineering limitations of prefabrication for high-rise buildings. However, MiC projects have encountered unprecedented challenges and risks, especially cost intensity. Studies have presented single-point risk assessment frameworks, which cannot capture and retain the distributions and profiles of various risks influencing the costs of MiC projects. Previous studies have also overlooked the significance of tail risks and failed to develop resource allocation schemes to manage cost risks in MiC projects. As such, this study aims to simulate and develop a probabilistic resource allocation scheme for cost risk management in MiC projects. Design/methodology/approach – A questionnaire survey of 117 industry practitioners was conducted to assess the probability of occurrence and severity of impact of cost risks associated with MiC projects in Hong Kong. The data were analyzed using a Monte Carlo simulation and novel metrics. Findings – The simulation revealed 26 significant cost risks in MiC projects in Hong Kong. It further revealed nine significant cost risks at 95% and 97.5% risk tolerance (RT) levels within the high-risk exposure zone and 82.5% and 85% RT levels within the medium-risk exposure zones of the risk matrix. Originality/value – This study developed a probabilistic cost risk assessment and prioritization scheme that captures uncertainties associated with MiC project while considering the significance of tail risks to inform optimal resource allocation.