Optimum risk allocation model for construction contracts: fuzzy TOPSIS approach

Risk allocation, a responsibility-sharing scheme for each party in a risk management process, is an important decision-making process for project success. Although previous studies have discussed risk allocation extensively, no comprehensive quantitative modeling approach for risk allocation exists. Such a model, specific for contract negotiation, would conduct authorities through the risk allocation process to determine the best risk-bearing participant. The purpose of this paper is to provide a quantitative model for the risk allocation process. This model should support decision making in risk management in a way that addresses the concerns of inappropriate risk allocation. Because linguistic principles and qualitative expert knowledge are the essential ingredients of any risk allocation process, the modeling scheme utilizes fuzzy set theory, which incorporates the quantification and reasoning of natural language.