Project Management Institute

Modeling the cost of political risk in international construction projects

This paper describes a neural network model that can provide assistance in predicting the additional increase in project cost, due to political risk source variables affecting a construction project. The risk factors that affect a construction project are classified as "political source variables" and "project consequence variables." These source variables are identified and represented in a neural network model. The paper explains how the developed political risk control model can be incorporated directly into a project cost estimation process. The paper concludes with a discussion of the capabilities and limitations of the proposed political risk estimation method, and how it will assist project managers in computing a realistic cost estimate for typical international construction projects under different political conditions.
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