EPC project owner and contractor design decision analysis based on game theory

ZHAO Yue; QIANG Maoshan; WANG Hao

doi:10.16511/j.cnki.qhdxxb.2021.22.027

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Journal of Tsinghua University(Science and Technology) ›› 2021, Vol. 61 ›› Issue (10) : 1195-1201. DOI: 10.16511/j.cnki.qhdxxb.2021.22.027

CONSTRUCTION MANAGEMENT

EPC project owner and contractor design decision analysis based on game theory

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Abstract

The engineering-procurement-construction (EPC) method is frequently used in construction projects because this method integrates all aspects of design and construction into one process. This method differs from the design-bid-build(DBB)method in which the design and construction steps are sequential. An important factor for smooth and effective implementation of an EPC project is how involved is the owner early in the design process. This study used game theory to analyze the effects of the owner's level of involvement and the contractor's design optimization decisions in an EPC project with a numerical analysis of the more applicable two-sided optimization strategy for engineering practice. The results show that increasing the profit and cost ratio in the optimization process reduces the importance of the owner's level of involvement in the design process. For profit and cost ratios less than 1.2, the owner being heavily involved in the design has an optimal compatibility with a specific proportion of the risk assumed by the owner while for ratios greater than 1.2, the importance of the owner's level of involvement in the design process increases with increasing proportion of the risk assumed by the owner. Overall, the owner having limited involvement in the design with an design optimization by the contractor is the most advantageous strategy. Practical suggestions are given to help the industry better understand and more effectively use EPC.

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engineering-procurement-construction (EPC) / game theory / design depth / optimal design

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ZHAO Yue, QIANG Maoshan, WANG Hao. EPC project owner and contractor design decision analysis based on game theory[J]. Journal of Tsinghua University(Science and Technology). 2021, 61(10): 1195-1201 https://doi.org/10.16511/j.cnki.qhdxxb.2021.22.027

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