Automation in Construction 16 (2007) 607 – 619

www.elsevier.com/locate/autcon

On-line multi-criterion risk assessment model for

construction joint ventures in China
Sung-Lin Hsueh a,⁎, Yeng-Horng Perng b,1 , Min-Ren Yan c,2 , Jen-Rong Lee d,3
a
Department of Interior Design, Tung Fang Institute of Technology, No.110, Tung Fang Rd. Hu-Nei Shang Kaohsiung Hsien, Taiwan
b
43, Section 4, Keelung Road, Taipei 106, Department of Architecture, National Taiwan University of Science and Technology (NTUST), Taiwan
c
1 University Road, Yuanchau, Kaohsiung 824, Institute of Engineering Science and Technology,
National Kaohsiung First University of Science and Technology (NKFUST), Taiwan
d
Department of Construction Engineering, 1 University Road, Yuanchau, Kaohsiung 824, Institute of Engineering Science and Technology,
National Kaohsiung First University of Science and Technology (NKFUST), Taiwan
Accepted 11 October 2006

Abstract

Constructors are facing, constantly, complicated problems occasioned by culture, frequent policy changes, and other related factors when
conducting Joint Ventures (JVs) in Mainland China. Hoping to decrease the risk of JVs in China for international constructors, this study applies
Analytical Hierarchy Process (AHP) and Utility Theory to develop a multi-criterion risk assessment model for construction pre-JVs stage and to
integrate World Wide Web (WWW) and company Databases. This model demonstrates the advantage of inspiring the evaluators to make more
objective and systematic assessment; and more important, its on-line assessment function can demolish regional, spatial and time barriers, which
will help the decision-making team use computers to participate in long-distance evaluations of users’ ends at any time and any place. Moreover,
each member of the team can fully participate in the process which lifts efficiency and improves decision-making assessments.
© 2007 Elsevier B.V. All rights reserved.

Keywords: Joint ventures; Analytical hierarchy process; Utility theory; Decision-making; World Wide Web

1. Introduction
The Chinese construction market is viewed as the most
appealing one among the global construction markets for the
coming 5 years [1]. It has been both a potential and incentive target
for internationalized constructors and therefore contractors have
rushed into this market. In China, foreign construction companies
tendering for projects must have at least one suitable local partner
and are required to obtain alliances on a project-by-project basis
⁎ Corresponding author. Tel.: +886 7 6939607; fax: +886 7 6936946.
E-mail addresses: hsueh.sl@msa.hinet.net (S.-L. Hsueh),
Perng@mail.ntust.edu.tw (Y.-H. Perng), u9015908@ccms.nkfust.edu.tw
(M.-R. Yan), jrlee@ccms.nkfust.edu.tw (J.-R. Lee).
1
Tel.: +886 2 27373908; fax: +886 2 27376721.
2
Tel.: +886 7 6011000 2128; fax: +886 7 6011237.
3
Tel.: +886 7 6011000 2122; fax: +886 7 6011237.
0926-5805/$ - see front matter © 2007 Elsevier B.V. All rights reserved.
doi:10.1016/j.autcon.2007.01.001
[2]. JVs, for most countries, have become one important means for
attracting foreign investment [3]; but if foreign investors have to
face on unfamiliar construction environment, there may be high
risk involved when conducting JVs [4].
Former studies of the risks of Chinese JVs include
cooperative strategies, the formation of IJVs, the dynamics of
partner relationships, the role of information in JVs, and the
evaluation of JV performance [5]. They mainly focus on
discovering the important risk factors during the JV process
and emphasize risk management at the construction stage;
however, they lack any assessment model for the pre-JV stage.
Therefore, in view of the great impact of risk evaluation
beforehand to the later risk management, this study applies the
traditional AHP and Utility Theory to develop a set of multi-
criterion risk assessment models to manage both the visible and
invisible unquantifiable multiple criteria affecting JVs, and also
integrate organization Database and World Wide Web (WWW)
608 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619
functions, which supports the company decision-makers in
conducting long-distance evaluations at various sites, which
can upgrade the effect and efficiency of the decision-making
process for internationalized constructors.
Utility Theory is able to handle multiple criteria, but the
calculation of Expected Utility Value (EUV) becomes complex
when the evaluation model is applied for various projects;
therefore, this study uses IT together with WWW to improve the
facilities of the traditional assessment model, and further to
integrate promptly opinions from decision-makers at different
locations, which can benefit the constructors in gaining pre-
dominance in the market and minimize the risk of construction
JVs.
2. Model overview
The Model development and Model application as shown in
Fig. 1 are categorized into 7 steps:
Step 1: Sort the influential Chinese JVs crucial risk factors out
of the previous related literature.
Step 2: Sum up the suitable criteria and establish a systematic
hierarchy as the source of questionnaire survey
(questionnaire as Appendix B).
Step 3: Use AHP to get the weighting (wi) of each criterion as
the parameter for developing assessment model.
Step 4: Define the content and quantifiable risk range of each
criterion and apply Utility Theory for building the uti-
lity function, then use Utility function to convert the
quantified risk function into numerical relative ratings
(uri).
Step 5: Apply AHP to get the rating (wi) and use utility to gain
the relative ratings (uri) so as to compute the Expected
Utility Value (EUV) of each scenario; therefore
EUV = S(wi) ⁎ (uri).
Fig. 1. The process development of proposed model.
Step 6: Employ EUV to deduce how cost impacts on the
function of risk and take it as the source of quantitative
comparisons among all scenarios
Step 7: Combine the functions of traditional evaluation model
with company's database and World Wide Web (WWW).
This proposed model integrates the techniques of database
and internet to set up an on-line decision-making assessment
model, which helps decision-making members be able to
participate in the evaluation process in spite of the limitations of
domain, time and space.
3. Initial evaluation dimensions
The related literature regarding Chinese construction JVs
and especially risk factors are as follows:
1. According to Bing [6], the risk factors are grouped into three
main groups: (1) internal, (2) Project-specific, (3) External;
and then final conclusion goes for 25 international JVs
project risk factors.
2. Shen et al. [7], in his study of Chinese construction JVs risk
factors, there are six dimensions of approved JVs risk factors
including: technical risks, management risks, market risks,
financial risks, and political risks; and to sum up there are 58
risk factors.
3. Gale, Luo [8] divided JVs life circle into three stage:
(1) formation stage, (2) operation stage, and (3) termination
or continuity.
The main purpose of the proposed assessment model is
to offer an evaluation set for Chinese construction JVs for
foreigner constructors at JV formation stage; as a result, con-
sideration should cover all aspects including: Internal, project-
specific and External. Therefore, the risk factors are grouped
 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619 609

Table 1 as shown in Appendix B to select the appropriate criteria from

Risk criteria of construction pre-JVs the mentioned 70 criteria for this study.
Internal Project-specific External The research team conducted surveys and information
Relationship with partner Project characteristic Government side gathering in China during December, 2002 to August of
factors 2003, in two ways: face to fact direct calls and questionnaire
1. Agreement 1. Engineering contract 1. Policy change investigation. The questionnaires, with the help of five
2. Renegotiation 2. Duration a 2. Interests rate
Taiwanese JV project mangers engaging in Chinese JVs, were
fluctuation
3. Good relationship 3. Project type 3. Fairness distributed to 150 professionals, who are experienced project
Background of partner 4. Complexity 4. Public facilities managers, architects and Chinese construction department
1. Past work a 5. Cash-flow requirement a Market condition government officials; they all have considerable working
2. Current work a Support force 1. Demands experience in various joint ventures in major cities: Beijing,
3. Historic profit a 1. Subcontractors 2. Competition
Shanghai, Chungshan, Chuhai and Donggoan. There are 45
4. Comprehensive 2. Technical skills 3. Material
position to fluctuation effective replies. Their feedback demonstrate that there are 25
regulations and laws suitable criteria for evaluating construction JVs at the pre-JVs
5. Bank credibility 3. Machines and tools stage as shown in Table 1 and five of which are the new added
available criteria.
4. Project allocation
5. Employment
a
4. Hierarchy structure of risk criteria
: New added criteria: 1. Past work 2. Current work 3. Historic profit
4. Duration 5. Cash-flow requirement.
Table 1 shows 25 criteria are needed when foreign
constructors are performing evaluations at the Pre-JV stage for
into three main groups: (1) Internal, (2) Project-specific, (3) construction jobs and the AHP evaluation hierarchy framework
External [6]. There are 70 influential JV risk factors integrated established by those 25 criteria is shown in Fig. 2.
from the above mentioned literatures as shown in Appendix B.
However, although those 70 criteria have been proven to 5. Weighting value of each criterion
impact, to various extents, on Chinese construction JVs,
whether they are suitable JV criteria for pre-JV evaluation has The AHP framework organizes feelings and intuitive judg-
not been verified. Therefore, we employ a questionnaire survey ments as well as logic, so that researchers can map out complex

Fig. 2. Assessment hierarchy structure of each criterion.

610 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619

Table 2
AHP-comparison matrix of each criterion
Subclassification preferences of overall assessment factors
Attributes Internal Project-specific External
Internal 1 1 2
Project-specific 1 1 2
External 1/2 1/2 1
Eigenvector 0.40 0.40 0.20

Subclassification preferences of internal factors

Attributes Relationship with partner Background of partner
Relationship with partner 1 2
Background of partner 1/2 1
Eigenvector 0.67 0.33

Subclassification preferences of project-specific factors

Attributes Project characteristic Support force
Project characteristic 1 3
Support force 1/3 1
Eigenvector 0.75 0.25

Subclassification preferences of external factors

Attributes Government side factors Market condition
Government side factors 1 2
Market condition 1/2 1
Eigenvector 0.67 0.33

Criteria preferences of subclass relationship with partner factors

Attributes Agreement Renegotiation Good relationship
Agreement 1 1 2
Renegotiation 1 1 1
Good relationship 1/2 1 1
Eigenvector 0.41 0.33 0.26

Criteria preferences of subclass background of partner factors

Attributes Past work Current work Historic profit Comprehension of regulations Bank credibility
and laws
Past Work 1 1/3 5 1/2 5
Current work 3 1 5 1 3
Historic profit 1/5 1/5 1 1/5 1/3
Comprehension of regulations and laws 2 1 5 1 3
Bank credibility 1/5 1/3 3 1/3 1
Eigenvector 0.22 0.33 0.05 0.30 0.1

Criteria Preferences of Subclass Project Characteristic Factors

Attributes Engineering Duration Cash flow requirement Complexity Project type
contract
Engineering contract 1 1/2 3 5 5
Duration 2 1 3 5 5
Cash flow requirement 1/3 1/3 1 3 5
Complexity 1/5 1/5 1/3 1 3
Project type 1/5 1/5 1/5 1/3 1
Eigenvector 0.30 0.40 0.17 0.08 0.05

Criteria preferences of subclass support force factors

Attributes Subcontractors Technical Machines and Project allocation Employment
skills tools available
Subcontractors 1 2 2 2 4
Technical skills 1/2 1 1 2 3
Machines and tools 1/2 1 1 2 4
 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619 611

Table 2 (continued )
Criteria preferences of subclass support factors
Attributes Subcontractors Technical Machines and Project allocation Employment
skills tools available
Project allocation 1/2 1/2 1/2 1 3
Employment 1/4 1/3 1/4 1/3 1
Eigenvector 0.35 0.21 0.23 0.15 0.06

Criteria preferences of subclass government side factors

Attributes Policy change Interest rate fluctuation Fairness Public facilities
Policy change 1 3 3 3
Interest rate fluctuation 1/3 1 1/3 1
Fairness 1/3 3 1 3
Public facilities 1/3 1 1/3 1
Eigenvector 0.47 0.12 0.28 0.12

Criteria preferences of subclass market condition factors

Attributes Demand Competition Material fluctuation
Demand 1 4 1
Competition 1/4 1 1/3
Material fluctuation 1 3 1
Eigenvector 0.46 0.13 0.42

situations as we perceive them. It reflects the simple intuitive On the basis of professional knowledge from the experts,
way we actually deal with problems, but it improves and pair comparison and matrix comparison of criterion items at
streamlines the process by providing a structured approach to each level in the hierarchy framework are carried out. Also,
decision making [9]. Check for consistency of the eigenvector derived from the

Table 3
Weighting value of each criterion
Class block ID Subclass block ID Criteria block ID Wi Wi%
1 (0.4) 1.1 (0.67) 1.1.1 Agreement (0.41) 0.1096 10.96
1.1.2 Renegotiation (0.33) 0.0874 8.74
1.1.3 Good relationship (0.26) 0.0696 6.96
1.2 (0.33) 1.2.1 Past works (0.22) 0.0295 2.95
1.2.2 Current work (0.33) 0.0441 4.41
1.2.3 Historic profit (0.05) 0.0666 0.67
1.2.4 Regulation and law (0.30) 0.0399 3.99
1.2.5 Bank credibility (0.10) 0.0132 1.32
2 (0.4) 2.1 (0.75) 2.1.1 Engineering contract (0.30) 0.0901 9.01
2.1.2 Duration (0.40) 0.1196 11.96
2.1.3 Cash flow requirement (0.17) 0.0506 5.06
2.1.4 Complexity (0.08) 0.0249 2.49
2.1.5 Project type (0.05) 0.0147 1.47
2.2 (0.25) 2.2.1 Subcontractors (0.35) 0.0348 3.48
2.2.2 Technical skills (0.21) 0.0214 2.14
2.2.3 Machines and tools available (0.23) 0.0228 2.28
2.2.4 Project allocation (0.15) 0.0145 1.45
2.2.5 Employment (0.06) 0.0065 0.65
013 (0.2) 3.1 (0.67) 3.1.1 Policy change (0.47) 0.0631 6.31
3.1.2 Interest and exchange rate fluctuation(0.12) 0.0163 1.63
3.1.3 Fairness (0.28) 0.0377 3.77
3.1.4 Public facilities (0.12) 0.0163 1.63
3.2 (0.33) 3.2.1 Market demand (0.46) 0.0305 3.05
3.2.2 Competition (0.13) 0.0084 0.84
3.2.3 Material fluctuation (0.42) 0.0277 2.77
Total 1.00 100
Wi = Wi ⁎ 100%
612 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619

Table 4 Table 4 (continued )

Definition and scale of criteria
Hierarchy Criterion Definition Scale
Hierarchy Criterion Definition Scale ID name
ID name
3.2.2 Competition The numbers of the similar JVs High = 0
1.1.1 Agreement The degree of fairness upon the High = 100 project in the domain Medium = 50
contract signed with the partner Medium = 50 Low = 100
Low = 0 3.2.3 Material Percentage of profit loss due to Percent (%)
1.1.2 Renegotiation How is the situation when Easy = 100 fluctuation the fluctuation of material
conduct conciliation, renegotiation, Difficult = 50
and opinion exchanging upon the Impossible=0
cooperation details?
1.1.3 Good Is good connection built with Yes = 100 comparison matrix and identify the weighting of each criterion
relationship partner before cooperation? No = 0
item. Since the priority of each element is developed sys-
1.2.1 Past work Partner's good past work records Number
(#/year) tematically and objectively, therefore they are reliable to
1.2.2 Current work Partner's current project status, Yes = 100 provide problem solutions for multi-factors decision-making
can partner manage new project? No = 0 situations.
1.2.3 Historic profit Amount of profit obtained on Percent An effective way to obtain group judgments for evaluating a
past project of similar nature (%/year)
complex problem is using a questionnaire to collect different
1.2.4 Regulation Partner's comprehension of and Good = 100
and law obedience to regulations and law Fair = 50 viewpoints from a number of individuals. The statistics of the
Poor = 0 group response from the questionnaire may reflect the consensus
1.2.5 Bank Partner's credibility and support Good = 100 of opinion and may be used as the basis of evaluation [10]. The
credibility from the banks Fair = 50 questionnaires were returned answered and the result of pair
Poor = 0
comparison matrices and eigenvectors for setting the priorities
2.1.1 Engineering The frequency of disputes High = 100
contract between partners and Medium = 50 among the evaluation criteria in the hierarchy is shown in
former proprietors Low = 0 following Table 2.
2.1.2 Duration Partner's past records for Good = 100 100 sets of AHP questionnaire surveys were dispatched
controlling the duration of Fair = 50 and 32 effective replies came back; the main assistants and
projects Poor = 0
correspondents of the questionnaire are the same as the mem-
2.1.3 Cash flow Can company's cash flow cover Yes = 100
requirement the monthly expenditure without No = 0 bers of Table 1.
bank loan? According to the developed result of AHP, the weighting
2.1.4 Complexity Can company deal with the Yes = 100 value of each criterion is equal to the weighting of the main
complexity of JVs? No = 0
2.1.5 Project type Is the type within the scope of Yes = 100
the firm? No = 0
2.2.1 Subcontractors Are local subcontractors Easy = 100 Table 5
available or difficult to obtain? Difficult = 50 Range, threshold, most preferred point, constants and utility function for criteria
Impossible=0
Block yu yL yT ym A B Utility function
2.2.2 Technical Partner's overall technical Good = 100
skills skills Fair = 50 1.1.1 100 0 80 100 0.05 − 4.00 ui(yi) = 0.05yi− 4
Poor = 0 1.1.2 100 0 75 100 0.04 − 3.00 ui(yi) = 0.04yi− 3
2.2.3 Machines and Can Partner's machines and tools Good = 100 1.1.3 100 0 75 100 0.04 − 3.00 ui(yi) = 0.05yi− 3
tools available be available to support project? Fair = 50 1.2.1 5 0 1 5 0.25 − 0.25 ui(yi) = 0.25yi− 0.25
Poor = 0 1.2.2 100 0 75 100 0.04 − 3.00 ui(yi) = 0.4yi− 3.00
2.2.4 Project Partner's reliability in providing Good = 100 1.2.3 10 −5 1 10 0.11 − 0.11 ui(yi) = 0.11yi− 0.11
allocation project manpower Fair = 50 1.2.4 100 0 75 100 0.04 − 3.00 ui(yi) = 0.04yi− 3
Poor = 0 1.2.5 100 0 60 100 0.025 − 1.50 ui(yi) = 0.025yi− 1.5
2.2.5 Employment Is local labor with good Good = 100 2.1.1 100 0 80 100 0.05 − 4.00 ui(yi) = 0.5yi− 4
reliability and availability? Fair = 50 2.1.2 100 0 90 100 0.1 − 0.001 ui(yi) = 0.1yi− 0.001
Poor = 0 2.1.3 100 0 80 100 0.05 − 4.00 ui(yi) = 0.05yi− 4
3.1.1 Policy change The impact influences the cost High = 0 2.1.4 100 0 60 100 0.025 − 1.50 ui(yi) = 0.025yi− 1.5
due to policy changes Medium = 50 2.1.5 100 0 60 100 0.025 − 1.50 ui(yi) = 0.025yi− 1.5
Low = 100 2.2.1 100 0 75 100 0.04 − 3.00 ui(yi) = 0.04yi− 3
3.1.2 Interest and Profit loss due to the fluctuation High = 0 2.2.2 100 0 40 100 0.0167 − 0.67 ui(yi) = 0.0167yi− 0.67
exchange rate of interest and exchange rate Medium = 50 2.2.3 100 0 40 100 0.0167 − 0.67 ui(yi) = 0.0167yi− 0.67
fluctuation Low = 100 2.2.4 100 0 40 100 0.0167 − 0.67 ui(yi) = 0.0167yi− 0.67
3.1.3 Fairness The fairness of host government Yes = 100 2.2.5 100 0 60 100 0.025 − 1.50 ui(yi) = 0.025yi− 1.5
handling disputes No = 0 3.1.1 100 0 50 0 − 0.02 1.00 ui(yi) = − 0.02yi + 1
3.1.4 Public The transportation and water/ Good = 100 3.1.2 100 0 50 0 − 0.02 1.00 ui(yi) = − 0.02yi + 1
facilities electricity supply nearby the Fair = 50 3.1.3 100 0 80 100 0.05 − 4.00 ui(yi) = 0.05yi− 4
project Poor = 0 3.1.4 100 0 60 100 0.025 − 1.50 ui(yi) = 0.025yi− 1.5
3.2.1 Market The market demand and the High = 100 3.2.1 100 0 80 100 0.05 − 4.00 ui(yi) = 0.05yi− 4
demand profit of investment for the Medium = 50 3.2.2 100 0 50 0 − 0.02 1.00 ui(yi) = − 0.02yi + 1
project product Low = 0 3.2.3 5 0 3 0 − 0.333 1.00 ui(yi) = − 0.0333yi + 1.00
 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619 613

Table 6
Expected utility value for most-preferred/worst-case selections
Criterion Criterions name Most-preferred Worst-case
ID Wi(%) Sele. option yi uri uri × Wi Sele. option yi uri uri × Wi
1.1.1 10.96 Agreement High 100 1 10.96 Low 0 −4 − 43.84
1.1.2 8.74 Renegotiation Easy 100 1 8.74 Impossible 0 −3 − 26.22
1.1.3 6.96 Good relationship Yes 100 1 6.96 No 0 −3 − 20.88
1.2.1 2.95 Past work 5 5 1 2.95 0 0 − 0.25 − 0.74
1.2.2 4.41 Current work Yes 100 1 4.41 No 0 −3 − 13.23
1.2.3 0.67 Historic profit 10 10 1 0.67 −5 −5 − 0.66 − 0.44
1.2.4 3.99 Regulation and law Good 100 1 3.99 Poor 0 −3 − 11.97
1.2.5 1.32 Bank credibility Good 100 1 1.32 Poor 0 − 1.5 − 1.98
2.1.1 9.01 Engineering contract High 100 1 9.01 Low 0 −4 − 36.04
2.1.2 11.96 Duration Yes 100 1 11.96 No 0 − 0.001 − 0.01
2.1.3 5.06 Cash flow requirement Yes 100 1 5.06 No 0 −4 − 20.24
2.1.4 2.49 Complexity Yes 100 1 2.49 No 0 − 1.5 − 3.74
2.1.5 1.47 Project type Yes 100 1 1.47 No 0 − 1.5 − 2.21
2.2.1 3.48 Subcontractors Easy 100 1 3.48 Impossible 0 −3 − 10.44
2.2.2 2.14 Technical skills Good 100 1 2.14 Poor 0 − 0.67 − 1.43
2.2.3 2.28 Machines and tools available Good 100 1 2.28 Poor 0 − 0.67 − 1.52
2.2.4 1.45 Project allocation Good 100 1 1.45 Poor 0 − 0.67 − 0.97
2.2.5 0.65 Employment Good 100 1 0.65 Poor 0 − 1.5 − 0.98
3.1.1 6.31 Policy change High 0 1 6.31 Low 100 −1 − 6.31
3.1.2 1.63 Interest and exchange rate fluctuation High 0 1 1.63 Low 100 −1 − 1.63
3.1.3 3.77 Fairness Yes 100 1 3.77 No 0 −4 − 15.08
3.1.4 1.63 Public facilities Good 100 1 1.63 Poor 0 − 1.5 − 2.45
3.2.1 3.05 Market demand High 100 1 3.05 Low 0 −4 − 12.20
3.2.2 0.84 Competition High 0 1 0.84 Low 100 −1 − 0.84
3.2.3 2.77 Material fluctuation 0% 0 1 2.77 5% 5 − 0.666 − 1.85
Expected Utility Value 99.99 − 237.24

classification multiplied by weighting of sub-classification. For Because uri(yT) = 0; uri(ym) = 1, we can get the following
the sake of quick computation, we define: Wi = wi × 100; its equations:
results are listed as Table 3. uri ð yT Þ ¼ A  yT þ B ¼ 0 ; B ¼ −AyT
uri ð ym Þ ¼ A  ym þ B ¼ 1 ; A ¼ 1=ðym −yT Þ
6. Utility function of each criterion/expected utility value
Finally:
Utility is a term used in economics, originated by Jeremy uri ðyi Þ ¼ ½ð1Þ  ð ym −yT Þ  yi −yT  ð ym −yT Þ
Bentham, an English scholar, and it can measure the preferences
of consumers and serve as a unit of personal welfare. The utility We obtained the above equation according to the definition in
function can represent the preference and relative risk attitude of Table 4 and the relationship between uri( ym) = 1 and uri( yT) = 0;
consumers [11]. We use utility function here so that decision- Furthermore, from the identified range, threshold, and the most
makers can consider individual preference and attitude towards preferred point of each criterion in Table 5, we can obtain the
risk to select the appropriate fuzzy scale within the risk ranges constants A and B for a utility function for each criterion. In the
and then use utility function to convert the fuzzy scale of each meantime, we can also identify a utility function for each cri-
criterion into comparable relative ratings. terion, as in Table 5.
This study follows Dozzi, AbouRizk and Schroeder's re-
search [12] and applies utility function techniques of straight-line
relationship to build a utility function for each criterion. The
process starts by taking decision-makers’ experience as a basis to
enumerate the definition and fuzzy scale of each criterion, as
shown in Table 4. Besides, the definition for range, threshold, and
the most preferred point are shown as Table 5. The fuzzy scale is
between (yu, yL), and within the range between yu and yL; ym is the
most preferred point, uri(ym) = 1; yT is threshold point, uri(yL) = 0;
moreover, utility function of straight-line relationship is uri(yi) =Ayi
+B. Thus, we get A and B constants in uri(yi) =Ayi +B and the
computation is as follows:
Compute A and B value in uri(yi) = Ayi + B. Fig. 3. Profit effect curve.
614 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619
The expected utility value equals to the sum of relative
ratings (uri) multiplied by the weighting value (Wi) of each
criterion, and can be indicated by the following equation:
X
n Rð Eui Þ ¼ CEui þ D
Expected Utility ValueðEUVÞ ¼ ðuri  Wi Þ
i¼1
When using this multi-criterion model for evaluation, decision-
makers will adjust individual experience to select the fuzzy
scale of each criterion. Thus, use the utility function of each
criterion to get the relative ratings (uri); therefore, we can get the
Expected Utility Value (EUV) of each evaluated project from
the above equation. Decision-makers can make judgments on
each JV project according to the weighting of EUV as the higher
the EUV is, the lower the overall risk is.
7. A cost effect function of risk and profits effect value
Decision-makers can decide fit or unfit for each project sce-
nario through the computed expected utility value, yet the
weightings of EUV cannot demonstrate clearly its possible
impact on profit. Since when judging the feasibility of a project
at the pre-JV stage, the decision makers mostly depend on the
potential expected profit value; therefore, this developed cost
effect function of risk can convert the gained EUV of each
project scenario into potential Profit Effect Value (PEV)so that
the decision makers feel better informed, with more compre-
hensible information.
Based on the questionnaires surveying 20 international
constructors conducting JVs in the Chinese market, we found
out that there are three different results from surveyed project
targets by comparing the JV EUVS with the real profit records.
The descriptions are as follows:
1. Among successful JV projects, the real profit is approx. 1–
2% less than the expectations.
2. Among the ineffective JVs projects, the real profit is approx.
8% less than the expectations.
3. Regarding failed JV projects, the real profit is about 20% less
than the expected profit.
The aforementioned survey results are important parame-
ters for establishing cost effect function of risk, and besides,
Fig. 4. Evaluator's authority for on-line assessment.
based on Dozzi, AbouRizk and Schroeder [12] research, the
linear equation for converting expected utility value is as
follows:
We sum-up the above information to discover the needed
cost effect function of risk suitable for this model as the
following:
(1) When EuT ≤ Euri ≤ Eum,
RðEum Þ ¼ C ðEum Þ þ D ¼ −1k
RðEuT Þ ¼ C ⁎0 þ D ¼ −8k; D ¼ −8k; C ¼ ð7kÞ
ðEum Þ
RðEui Þ ¼ ½ð7kÞ  ðEum Þ  ðEui Þ−8k
(2) when Euw ≤ Euri ≤ EuT,
RðEuw Þ ¼ E ðEuw Þ þ F ¼ −20k
RðEuT Þ ¼ E⁎0 þ F ¼ −8k; F ¼ −8k; E ¼ ð−12kÞ
ðEuw Þ
RðEui Þ ¼ ½ð−12kÞ  ðEuw Þ  ðEui Þ−8k
There are two important equations for cost effect function of
risk derived from the aforementioned computation, and they are
used in different scenarios: when the obtained EUV is between
the highest EUV and EUV = 0 (EuT = 0), we use R (Eui) =
[(7%) ÷ (Eum)] × (Eui) − 8% equation; on the other hand, when
the EUV is between EUV = 0 and the lowest EUV, then
equation: R (Eui) = [(− 12%) ÷ (Euw)] × (Eui) − 8% is used. Please
note that unless the principle is followed, the EUV cannot be
converted accurately into Profit Effect Value.
8. A profit effect curve
In addition to threshold point, the expected utility value in
the best and worst scenarios must be obtained. The meaning of
the best scenario indicates each criterion conforms to the
maximum utility. Thus the expected utility value obtained also
is the highest value; but the meaning of the worst scenario
indicates each criterion conforms to the minimum utility. Thus
the expected utility value obtained also is the lowest value. The
expected utility values computed for these two scenarios
are 99.99 and − 237.24 respectively. The details are shown in
Table 6.
 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619 615

Fig. 5. Interface of project selections.

Fig. 3 is so called the profit effect curve, which displays the
relationship between The Expected Utility Value and Profit
Effect Value within the range of the fuzzy scale. As long as we
have EUV, we can get the relative Profit Effect Value from this
curve.
9. On-line risk assessment and decision mechanism
Information Technology (IT) is now routinely used in the
construction industry as a tool to improve coordination and
collaboration between firms participating in a construction
project, leading to better communication practices [13]. Among
all IT applications, the Internet is the technology that best
facilitates a collaborative working environment in a construc-
tion project. Walker and Betts [14] postulated that the Internet,
World Wide Web (WWW), will be the key to a change in global
construction business in the near future. It is used as a com-
munication medium to help information transfer occur faster
and more effectively. Independent project participants using
different hardware platforms can share the same system over the
Web [15].
Since foreign constructors who conduct Chinese JVs are
considered as cross-nation projects, important decision-makers
often are not at the same location, thus on-line evaluation is
supposed to be more appropriate for global constructors. This
research integrates Internet technique to develop On-Line Risk
Assessment and Decision Mechanism, which applies Enterprise
Knowledge Portal (EKP) and multi-platform Internet interface
to carry on the on-line evaluation process upon the evaluation
sheets stored in company databases.
The descriptions of On-Line Risk Assessment and Decision
Mechanism are as follows:
(1). The limit of authority:
Any participant in the decision-making team can use any
computer as the decision-making platform anytime any-
where. This study suggests that the best decision-making
team should contain the executive decision-maker and
four other professionals of finance, purchase/procurement,
construction and management, and service. Moreover, the
Administrator is responsible for controlling the system
and assigning user's authority; each member has his

Fig. 6. Assessment sheet.

616 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619

Fig. 7. Assessment display window.

account no. and password, no entry to the decision-making (2). Project assessment:
discussion zone is possible without the identification. Each enterprise probably has several ongoing projects
(Please refer to Fig. 4) therefore, the first step for members to register in an

Fig. 8. Decision-making process.

 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619 617

on-line assessment system is to select the project for Table 7

evaluation (as Fig. 5). As soon as one enters into the User-selected options and corresponding multi-criterion utility model for
construction JVs
specific project, the system will display, automatically,
the project evaluation sheet, which demonstrates the ID Criterions name Selected yi uri Wi uri×Wi
option
name, definition, and scale…etc. and decision-makers can
key in the appropriate rating for each criterion according 1.1.1 Agreement 80 80 0 10.96 0.00
1.1.2 Renegotiation 80 80 0.2 8.74 1.75
to his experience and judgment. (as Fig. 6). The result of
1.1.3 Good relationship 80 80 0.2 6.96 1.39
each evaluation will be recorded in the enterprise's 1.2.1 Past work 5 5 1 2.95 2.95
Database for follow-up and reanalysis afterwards. 1.2.2 Current work 60 60 −0.6 4.41 − 3.81
(3). Integration of assessment 1.2.3 Historic profit 8 8 0.77 0.67 0.52
As soon as the evaluator grades the suitable rating for 1.2.4 Regulation and law 60 60 −0.6 3.99 − 2.4
1.2.5 Bank credibility 75 75 0.375 1.32 0.50
each criterion (as Fig. 7), the window will show out its
2.1.1 Engineering contract 85 85 0.25 9.01 2.25
results of EUV and EPU immediately; and the results 2.1.2 Duration 40 40 3.999 11.96 47.83
from other team member will also be displayed simul- 2.1.3 Cash flow requirement 100 100 1 5.06 5.06
taneously, in case of “NA”, it indicates that the evaluator 2.1.4 Complexity 100 100 1 2.49 2.49
is still on the evaluation process. Therefore, Fig. 7 is an 2.1.5 Project type 100 100 1 1.47 1.47
2.2.1 Subcontractors 80 80 0.2 3.48 0.70
important tool for integrating the team members’ opinions
2.2.2 Technical skills 75 75 0.583 2.14 1.25
because each member can figure out the discrepancy of 2.2.3 Machines and tools 40 40 0.000 2.28 0.00
evaluation from other members via the widow, so that available
every evaluator can take this chance to double check the 2.2.4 Project allocation 40 40 0.000 1.45 0.00
properness of his evaluation if any amendment is needed. 2.2.5 Employment 50 50 −0.25 0.65 − 0.16
3.1.1 Policy change 50 50 0 6.31 0
As Fig. 8 shows, each member can choose “confirm” to
3.1.2 Interest and exchange 100 100 −1 1.63 − 1.63
accept the evaluation or “revise” to reevaluate. Moreover, rate Fluctuation
each member can use “past results” selection to check the 3.1.3 Fairness 20 20 −3 3.77 − 11.31
past records of project scenarios for reference, which 3.1.4 Public facilities 50 50 −0.25 1.63 − 0.41
allows each member to have more objective information. 3.2.1 Market demand 90 90 0.5 3.05 1.53
3.2.2 Competition 50 50 0 0.84 0
If there is no agreement reached on the evaluation, it
3.2.3 Material fluctuation 5 5 −0.66667 2.77 − 1.85
implies that there is great discrepancy of comments on Expected Utility Value (EUV) 48.53
certain criteria among the team members; as a result, Profit Effect Value (PEV) − 4.603
further discussion will be required and the CEO has to | uri = u(yi) = Ayi + B,yi = selected option.
make a final choice on the project evaluation. |Compute PEV:
EuT ≤ Eui ≤ Eum, R (Eui) = [(7%) ÷ (Eum)] × (Eui) − 8% ; Euw ≤ Eui ≤ EuT, R (Eui) =
10. Conclusion [(− 12%) ÷ (Euw)] × (Eui) − 8%.

Using the utility function to set up an assessment model

shows the advantages that it can not only overcome the
difficulties of building a multi-criteria model but also support
decision-makers to adjust properly according to their preference
and risk attitude so as to reduce inconsistent decisions
influenced by various factors such as: emotion, environment
and information…etc. In addition, considering most of the
decision-makers of international construction companies are not
necessarily at the same location; this study combines WWW
with Database system to build an on-line assessment mecha-
nism, which can help each evaluator to conduct the evaluation
process through WWW at any time, anywhere free from the
limits of region and space–time. Consequently, the decision-
makers can improve the quality and efficiency of their decisions
because of full participation in the evaluation process and
opinion integration.
Besides, an objective assessment model combines with the
computer system storage function, which can accumulate,
constantly, decision-making knowledge which will definitely
assist the effectiveness of decision-making. Since this proposed
assessment model is integrated with a computer system, it is easy
to be operated and it's also much easier to trace back past
records and maintenance. This study resulted in an On-line Multi-
criterion Risk Assessment Model installed at http://jv-risk.org.
Readers can log into the website via accounts: perng, hsueh, yan,
or lee, password: 123456 for individual experimentation with the
system.
Appendix A contains an example of evaluating a Chinese
construction JVs in a pre-JVs stage.
Appendix A. Example of model application
The assessment example is located in Chung-Shan city of
Guangdong Province. The basic background information of the
JVs includes that the decision-making constructor can govern
the project and the decision-maker has ample Chinese expe-
rience and besides, the local partner also has good background.
However, the project is facing strong competition from other
rivals in the neighborhood and unsteadiness of the existing
policy. The selected option of each criterion is shown in
Table 7.
The selected option of each criterion can get Relative Ratings
uri through Table 5; and from Table 3. We obtain the weighting
value Wi; subsequently
P we identify that the Expected Profit
Value is Eui ¼ ni¼1 ðuri  wi Þ = 48.53. As for the Profit Effect
618 S.-L. Hsueh et al. / Automation in Construction 16 (2007) 607–619

Value, we can either apply information from Fig. 3 or the profit Appendix ) (continued )
(continuedB
effect curve to obtain this value or to compute it through the cost Risk factors Category Selection
effect function of risk. This computation is as follows: 23rd Loss due to insufficient law for joint ventures
24th Lack of enforcement of legal judgment
Rð Eui Þ ¼ CEui þ D 25th Increase in project management overheads
26th Loss due to fluctuation of inflation rate
Since EuT ≤Euri ≤ Eum, we use the following equation to 27th Problems due to partners’ different practice
compute Profit Effect Value: 28th Inadequate project organization structure
29th Difficult convertibility of RMB
30th Fall short of expected income from project use
RðEui Þ ¼ ½ð7kÞ  ðEum Þ  ðEui Þ−8k Fourth ten risks
¼ ½ð7kÞ  ð100Þ  ð48:53Þ−8k 31st Increase in site overheads
32nd Bankruptcy of project partner
¼ −4:603k 33rd Errors in design drawings
34th Loss incurred due to political changes
The constructor's original predicted profit for this construc- 35th Loss due to fluctuation of RMB exchange rate
tion JVs project was 10%, however the real profit is approx. 36th Poor quality of procured materials
4.8%. We practice the established model to verify the 37th Shortage in supply of water, gas and electricity
constructor's real profit and it shows that it should be about 38th Unknown site physical conditions
39th Breach of contracts by project partner
4.603% less than the predicted profit. Therefore, as construc-
40th Poor quality of procured accessory facilities
tor's original expected profit was 10% and we use the Fifth ten risks
assessment model to verify the real profit, which should be: 41st Breach of contracts by other participants
10% − 4.603% = 5.379%, it shows the discrepancy of 0.579% 42nd Poor relation and disputes with partner
with the real profit rate 4.8% and it proves that the proposed 43rd Problems associated with culture difference
44th Increase of materials price
model can provide some degree of accuracy in predicting the
45th Unfairness in tendering
result. The Profit Effect Value derived from the assessment 46th Change of organization within local partner
model can offer the decision-makers the good and bad of each 47th Hazards of environmental regulations
JV scenario as a basis of judgment so as to reduce the wrong 48th Shortage in skillful workers
decision-making before initiating a JV collaboration and further Fifth ten risks
49th Increase of accessory facilities price
to improve the effectiveness and efficiency of the decision-
50th Shortage in accessory facilities
making. Other risks
51st Obsoleteness of building equipment
Appendix B. Questionnaire on risk factors related to 52nd Accidents on site
53rd Unusual weather and force majeure
project's pre-JV stage 54th Equipment failure
55th Industrial disputes
56th Materials shortage
Risk factors Category Selection 57th Increase of labor costs
58th Incompetence of transportation facilities
Top ten risks
1st Cost increase due to changes of policies 59th The political and legal system
2nd Improper project feasibility study 60th Economic and industrial condition
3rd Project delay 61st Society
62nd The physical environment
4th Inadequate forecast about market demand
5th Improper selection of project location 63rd Partner selection
6th Improper selection of project type 64th Agreement
7th Increase of resettlement costs 65th Subcontracting
66th Engineering contract
8th Inadequate choice of project partner
9th Loss due to bureaucracy for late approvals 67th Employment
10th Design changes 68th Good relationship
69th Control
Second ten risks
11th Local protectionism 70th Renegotiation
12th Incomplete contract terms with partner Profit loss value caused by JVs cooperation risk
13th Local firm's incompetence and low credibility 1. Successful cases ______________%
2. Ineffective cases ______________%
14th Competition from other similar projects
15th Loss incurred due to corruption and bribery 3. Failed cases __________________%
16th Improper project planning and budgeting New added factors. (Please add the necessary new factors which are not listed).
17th Low credibility of shareholders and lenders
18th Uncertainty and injustice of court justice
19th Incompetence of project management team References
20th Poor relationship with host government authority
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22nd Loss due to fluctuation of interest rate
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Sung-Lin Hsueh earned his Ph.D degree in Department of Architecture,
National Taiwan University of Science and Technology in 2006. He is currently
an Assistant Professor of Project Management in the Dept. Interior Design, Tung
Fang Institute of Technology. Concurrently, he is also the Managing Director of
SIN-YA International Engineering Consultants Inc. (Taiwan) engaging in
developing real estate in the Chinese market.
Yeng-Horng Perng earned his Ph.D degree in construction engineering and
project management from the University of Texas at Austin in 1988. He is
currently a professor of the Dept. of Architecture, National Taiwan University of
Science and Technology (NTUST).
Min-Ren Yan is currently a Ph.D Candidate of Institute of Engineering Science
and Technology, National Kaohsiung First University of Science and
Technology (NKFUST) in Taiwan. He was awarded an MSc in construction
management from the same university in 2001. Moreover, he is a lecturer in
Tung-Fang Institute of Technology, Taiwan.
Jen-Rong Lee earned his Ph.D degree in civil engineering from The Ohio State
University in 1997. He is currently an Assistant Professor of Construction
Project Management in the Dept. of Construction Engineering, National
Kaohsiung First University of Science and Technology (NKFUST).