AI and Text-Mining Applications for Analyzing Contractor's Risk in Invitation to Bid (ITB) and Contracts for Engineering Procurement and Construction (EPC) Projects

Contractors responsible for the whole execution of engineering, procurement, and construction (EPC) projects are exposed to multiple risks due to various unbalanced contracting methods such as lump-sum turn-key and low-bid selection. Although systematic risk management approaches are required to prevent unexpected damage to the EPC contractors in practice, there were no comprehensive digital toolboxes for identifying and managing risk provisions for ITB and contract documents. This study describes two core modules, Critical Risk Check (CRC) and Term Frequency Analysis (TFA), developed as a digital EPC contract risk analysis tool for contractors, using artificial intelligence and text-mining techniques. The CRC module automatically extracts risk-involved clauses in the EPC ITB and contracts by the phrase-matcher technique. A machine learning model was built in the TFA module for contractual risk extraction by using the named-entity recognition (NER) method. The risk-involved clauses collected for model development were converted into a database in JavaScript Object Notation (JSON) format, and the final results were saved in pickle format through the digital modules. In addition, optimization and reliability validation of these modules were performed through Proof of Concept (PoC) as a case study, and the modules were further developed to a cloud-service platform for application. The pilot test results showed that risk clause extraction accuracy rates with the CRC module and the TFA module were about 92% and 88%, respectively, whereas the risk clause extraction accuracy rates manually by the engineers were about 70% and 86%, respectively. The time required for ITB analysis was significantly shorter with the digital modules than by the engineers.

Automated summary

This study developed two core modules for a digital EPC contract risk analysis tool to help contractors identify and manage risk provisions. By automatically extracting risk-involved clauses and building a machine learning model, the accuracy rates of risk clause extraction were improved.