Applying System dynamics to analyze the impact of incentive factors’ allocation on construction cost and risk

The proper application of incentive mechanism in construction project can decrease project cost. However, current incentive methods donpsilat consider the change of human needs in construction and are inadequate to analyze the impacts of incentive factors allocation on project risk and cost due to the complexity and dynamics of the project in a real world. And therefore, there is a need for a model to solve this problem. In this paper, a system dynamic model is built to simulate the impacts of incentive factors allocation on project risk and cost. Firstly, behavioral factors which encourage staff efforts to decrease risk and cost are obtained by questionnaire. Causal loop diagram containing these factors is then built and the system dynamic model is established by visualization system dynamic model software iThink, which shows how the allocation of incentive factors affects project risk and cost. And then a sensitive analysis is used to testify the validity of the model, from the outputs, an incentive cost input can be obtained at the lowest level of risk and cost. Finally, this paper carries on policy simulation tests. In this simulation, different ratios of every incentive factors in different periods correspond to different lowest risk and cost, which are the results of the simulation. Thus, optimal allocation of incentive cost among incentive factors and incentive factors among departments is solved. The model developed in this paper offers a useful tool for evaluating the impact of incentive factors allocation on project risk and cost.