Naive Bayesian Classifier for Selecting Good/Bad Projects during the Early Stage of International Construction Bidding Decisions

Woosik Jang, Jung Ki Lee, Jaebum Lee, Seung Heon Han

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Since the 1970s, revenues generated by Korean contractors in international construction have increased rapidly, exceeding USD 70 billion per year in recent years. However, Korean contractors face significant risks from market uncertainty and sensitivity to economic volatility and technical difficulties. As the volatility of these risks threatens project profitability, approximately 15% of bad projects were found to account for 74% of losses from the same international construction sector. Anticipating bad projects via preemptive risk management can better prevent losses so that contractors can enhance the efficiency of bidding decisions during the early stages of a project cycle. In line with these objectives, this paper examines the effect of such factors on the degree of project profitability. The Naive Bayesian classifier is applied to identify a good project screening tool, which increases practical applicability using binomial variables with limited information that is obtainable in the early stages. The proposed model produced superior classification results that adequately reflect contractor views of risk. It is anticipated that when users apply the proposed model based on their own knowledge and expertise, overall firm profit rates will increase as a result of early abandonment of bad projects as well as the prioritization of good projects before final bidding decisions are made.

Original languageEnglish
Article number830781
JournalMathematical Problems in Engineering
Volume2015
DOIs
Publication statusPublished - 2015 Jan 1

Fingerprint

Bayesian Classifier
Bidding
Contractors
Classifiers
Profitability
Volatility
Prioritization
Risk Management
Expertise
Screening
Profit
Sector
Risk management
Economics
Model-based
Uncertainty
Cycle
Line
Model

All Science Journal Classification (ASJC) codes

  • Mathematics(all)
  • Engineering(all)

Cite this

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abstract = "Since the 1970s, revenues generated by Korean contractors in international construction have increased rapidly, exceeding USD 70 billion per year in recent years. However, Korean contractors face significant risks from market uncertainty and sensitivity to economic volatility and technical difficulties. As the volatility of these risks threatens project profitability, approximately 15{\%} of bad projects were found to account for 74{\%} of losses from the same international construction sector. Anticipating bad projects via preemptive risk management can better prevent losses so that contractors can enhance the efficiency of bidding decisions during the early stages of a project cycle. In line with these objectives, this paper examines the effect of such factors on the degree of project profitability. The Naive Bayesian classifier is applied to identify a good project screening tool, which increases practical applicability using binomial variables with limited information that is obtainable in the early stages. The proposed model produced superior classification results that adequately reflect contractor views of risk. It is anticipated that when users apply the proposed model based on their own knowledge and expertise, overall firm profit rates will increase as a result of early abandonment of bad projects as well as the prioritization of good projects before final bidding decisions are made.",
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Naive Bayesian Classifier for Selecting Good/Bad Projects during the Early Stage of International Construction Bidding Decisions. / Jang, Woosik; Lee, Jung Ki; Lee, Jaebum; Han, Seung Heon.

In: Mathematical Problems in Engineering, Vol. 2015, 830781, 01.01.2015.

Research output: Contribution to journalArticle

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