A game theory approach for determining optimum strategy of claim resolution in construction projects

Abstract

Claim is a big challenge for the contractors and the owners in construction projects. Claims are considered to be one of the most disruptive events of a project. A suitable claim resolution strategy can prevent the damages to the project and the involved parties. In this research, a mathematical model using game theory is presented to find the optimum strategy for resolving cost-related claims in Design-Bid-Build (DBB) projects. The model investigates the strategies of the contractor and the owner in a consecutive four-step process including: negotiation, mediation, arbitration and litigation. It helps the involved parties to have deeper comprehension of the problem, have a better evaluation of their situation and analyze possible strategies in facing with such circumstances. Considering different scenarios, the points which both parties can agree rationally are proposed with an analytical solution. Finally, two cases of real-world problems are presented and analyzed using the proposed approach and the optimum strategy is determined for each case. Based on the results, some strategies for the owners and contractors are presented in order to be more successful in the claim resolution process.