JPMA-01356; No of Pages 12

Available online at www.sciencedirect.com

International Journal of Project Management xx (2011) xxx – xxx

www.elsevier.com/locate/ijproman

Fuzzy adaptive decision making model for selection balanced risk allocation
Garshasb Khazaeni a , Mostafa Khanzadi a,⁎, Abas Afshar a, b

a
School of Civil Engineering, Iran University of Science and Technology (IUST), P. O. Box: 16765-163, Narmak, Tehran, Iran
b
Center of Excellence on Enviro-Hydro Informatics, Iran

Received 19 April 2011; received in revised form 6 October 2011; accepted 20 October 2011

Abstract

The unbalanced allocation of risks among the contracting parties is an important decision leading to increase of the total cost of a specific pro-
ject and affects the overall relationship between the contracting parties. Due to common risk allocation decision-making process is based on ex-
periential knowledge, is subjective and implicit. This paper presents a fuzzy adaptive decision making model for selection of balanced risk
allocation which transforms the linguistic principles and experiential expert knowledge into a more usable and systematic quantitative-based anal-
ysis by using the fuzzy logic. The objectives of balanced risk allocation are developed based on the concept of Competence-Tendency trade-off.
The proposed model integrates fuzzy logic qualitative approach and analytic hierarchy process (AHP) adaptive capabilities to evaluate allocation of
project risks and determine best party to bear each one. Results from this model show its high capability in addressing most proper risk allocation
with least contingency applied to the owner.
© 2011 Elsevier Ltd. APM and IPMA. All rights reserved.

Keywords: Contract risk management; Risk allocation; Fuzzy logic; AHP

1. Introduction in success of project management that insures the balance of liabil-

Modern and complex construction projects are supposed to
have inherent risks due to the contribution of many contracting
agents such as owners, designers, contractors, subcontractors, sup-
pliers, etc. The construction risks can hardly ever be eliminated;
they may be transferred or shared from one party to another
through contract clauses (Andi, 2006). Although many owners
put as much financial risk as possible on the contractor; a balan-
cing of the risk should be sought between the owner and his con-
tractor or designer in order to utilize the incentive value of bearing
risk while minimizing a contingency charged for accepting the risk
(Gordon, 1994). Therefore, proper allocation should be definite by
balance of parties' interests. Balanced risk allocation identifies
and distributes liability associated with risk events in order to pro-
portionally distribute the possible prospect loss or gain of project.
Thus the balance of risk allocation becomes an important matter
⁎ Corresponding author.
E-mail addresses: Gkhazayeni@iust.ac.ir (G. Khazaeni),
khanzadi@iust.ac.ir (M. Khanzadi), A_Afshar@iust.ac.ir (A. Afshar).
0263-7863/$ - see front matter © 2011 Elsevier Ltd. APM and IPMA. All rights reserved.
doi:10.1016/j.ijproman.2011.10.003
ities and gains among project parties. It is claimed that a significant
portion of the considerable cost wastage identified within the last
20 years by the Construction Industry Institute may be attributed
to unbalanced risk allocation in contracts. This has been cited in
various examples of risk allocation analysis in the construction in-
dustry and the underlying causes of disputes conducted in Canada
and the United States (Zaghloul and Hartman, 2003).
Generally specified, all risks originally reside with the
owner and transfer to another party should entail fair compen-
sation (Kartam and Kartam, 2001). Unbalanced allocation of
risks forces owners paying more than necessary, as a result of
bid contingencies, delays to project utilization and unanticipat-
ed involvement in dispute resolution by owner's staffs, as well
as consultants and attorneys (Smith, 1992). Balanced allocation
of risks requires all parties understand risk responsibilities, risk
event consequences and risk management capabilities.
However contracting parties usually have different risk un-
derstandings, which cause disagreements over risk allocation
accountability (Hartman and Snelgrove, 1996). Decision
makers regularly have contrasting concerns that are recognized

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
2 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx
as the objectives of risk allocation and are unable to find a party
that complies all these objectives (Medda, 2007). Therefore,
there is an urgent need for a decision support system to guide
decision maker through conflicting objectives. As far as au-
thors' literature review is concerned, none of the previous stud-
ies have considered the balance between concern and objectives
of parties within risk allocation process and don't provide a
quantitative model to identify balanced allocation of risks with-
in multi-parties' projects.
The main objective of this paper is to quantitatively address
the balanced allocation of risks to the appropriate contracting
party in the construction industry. Based on a Fuzzy AHP
method, this paper intends to introduce a numerical model to
identify the most appropriate party to bear a risk within least
contingency. A hierarchical structure is introduced and a
fuzzy adaptive model was used that selects the most proper al-
location of risk among contracting parties. It aims to support the
decision making in risk allocation such that risks can be trans-
ferred to those project parties who can best manage them with
a fair compensation. As linguistic criteria and qualitative expert
knowledge are the essential component of the risk allocation
process (Lam et al., 2007), the fuzzy set theory which relates
to quantification and reasoning of natural language is utilized
in the model structure.
2. Literature review
Risk allocation practices in construction projects have been
found highly variable, intuitive, subjective and unsophisticated
(Ng and Loosemore, 2007). Given its critical effect on project
success, several studies have been conducted to explore how
to select proper risk allocation (Jin and Zhang, 2010). Most of
these studies have developed a framework for appropriate risk
allocation on the basis of questionnaire survey, such as Ameri-
can Society of Civil Engineers (ASCE) conducting a question-
naire survey to identify the proper allocation of risks (Kangari
(1995)), Kartam and Kartam (2001) proposing appropriate
risk allocation on the perspective of the largest Kuwait contrac-
tors, and Bing et al. (2005) conducting a questionnaire survey
to explore preferences in risk allocation in PPP/PFI projects in
the UK. El-Sayegh (2008) addresses the proper allocation of
risks to the appropriate contracting party in the UAE construc-
tion industry. The appropriate distribution of risks needs the
array of risks and the resources and capabilities of the parties
to a contract to be thoroughly analyzed and understood (Ng
and Loosemore, 2007). Although most of these static frame-
works agree on the general allocation of risks, it is very impor-
tant to realize the limitation of such frameworks that they
hardly can be adapted to different project context and cover in-
terest of different parties.
In the model based on questioner surveys, however, there is
also a divergence of perception due to attitude of the parties
(Barnes, 1983) and bias in personal judgment (Lam et al.,
2007). In order to guide decision maker into selecting proper al-
location, some studies have suggested that principles or criteria
should be adopted as the basis for allocating risks, such as
Abrahamson (1973), Loyd (2001), Thomas et al. (2003),
Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
Abednego and Ogunlana (2006), Lam et al. (2007) Gao and
Jiang (2008), Jin and Doloi (2008), Loosemore and McCarthy
(2008), and Xu et al. (2010). Since all these risk allocating prin-
ciples commonly use natural language in the application and
heavily rely on the qualitative judgment of experts, the problem
of this kind of decision making process is its implicitness (Lam
et al., 2007). As Hartman and Snelgrove (1996) had shown di-
vergence of perception among different parties in construction
contracts may impose significant variation on the risk alloca-
tion decision.
However, few, if any, research studies focus on exploring a
quantitative model for risk allocation (Xu et al., 2010), such as
Lam et al. (2007) providing a quantitative model for risk alloca-
tion by utilizing linguistic principles and qualitative expert
knowledge through Fuzzy set theory, Medda (2007) modeling
risk allocation process with a final offer arbitration game ap-
proach, Jin and Zhang (2010) modeling risk allocation in PPP
projects by using artificial neural network, and Xu et al.
(2010) developing a fuzzy synthetic evaluation model for deter-
mining an equitable risk allocation. However, these studies just
focus on the main contract and capability to handle risk alloca-
tion between two parties (e.g. owner and contractor). These
studies either deem the risk allocation process as one that is
only affected by management capabilities and lacks theoretical
foundations or empirical evidence to support their submissions
(Jin and Zhang, 2010). It would seem that all too often the allo-
cation of risks is affected by agents' risk attitudes (Thomas
et al., 2003) as well as by its management capabilities (Jin
and Zhang, 2010). In reality the owner is merely gaining the il-
lusion of risk transfer, since it is likely that the risk will be
transferred back to them in the form of higher risks, risk pre-
miums and project problems (Ng and Loosemore, 2007). The
process of risk allocation should be analyzed as a bargaining
process between project parties when confronted with opposing
objectives in the allocation of risks (Medda, 2007). The best al-
location of risk will depend on how the parties price the risk,
whether this is reasonable for the owner and how it compares
to the potential risk (in cost and probability terms) if retained
by the owner (Ng and Loosemore, 2007). The introduced risk
allocation model aims to support the decision making in risk al-
location such that the concerns of unbalancing among interest
of parties can be addressed.
The proposed model provides a quantitative model through
fuzzy AHP approach by utilizing fuzzy set theory to quantifica-
tion and reasoning of linguistic principles and qualitative expert
knowledge. In several prior publications, fuzzy AHP method
was applied to establish decision support models, such as
Ravanshadnia et al. (2010a) presenting a construction project-
selection model by applying a multistage fuzzy multi-attribute
decision making (MADM) method to determine whether one
should offer or not offer a tender, Zhang and Zou (2007) devel-
oping a fuzzy analytical hierarchy process (AHP) model for the
appraisal of the risk environment pertaining to the JV imple-
mentation in procuring construction projects, Ravanshadnia
et al. (2010b) proposing a fuzzy AHP model for engineering
partner selection, Nieto-Morote and Ruz-Vila (2010) presenting
a risk assessment methodology based on the fuzzy AHP, and
 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx
Zayed et al. (2008) designing an assessment model for the ef-
fect of the sources of risk on highway construction projects
using analytic hierarchy process (AHP). However, quantitative
risk allocation model via fuzzy Analytic Hierarchy Process
(AHP) is rarely reported in the literature.
3. Proposed decision making model
This study focuses on the risk allocation, as a main phase of
risk management process in any contract. By understanding
risks through the identification phase, then, parties should com-
promise on the most proper party to undertake the responsibil-
ity of each risk in the allocation process. The owner of the risk,
to whom a risk is allocated, is assumed as responsible for man-
agement and financial consequences of the risk (Uff, 1995).
Identifying n risks in a project, decision maker should select
best parties among m parties to bear each risk by decision ma-
trix [X]:
p1 pj pm
2 3
r1 x11 x1m
½X ¼ 6 7
ri 4 xij 5
rn n
x1 xmn
where xji represents the allocation of risk i to party j that varies
by 0 or 1. n is the number of risk and m is the number of party
to whom the risk is allocated.
For balanced risk allocation purposes, the fuzzy AHP meth-
od effectively has been used to select the most proper allocation
of risks with respect to party's ability to control the risk and
proposed contingency cost. This paper intends to propose and
test a decision support system for risk allocation under these
two main objectives.
This decision support system mainly consists of the following
steps: (1) identification and classification criteria to measure the
conflicting objectives of risk allocation; (2) fuzzification by con-
verting linguistic terms into membership functions; (3) evaluating
the allocation criteria by fuzzy AHP method; (4) calculating pri-
ority weights of criteria by extent analysis; (5) participants are fi-
nally evaluated to calculate the total allocation fuzzy value. The
finalized model will be applied to a mega infrastructure project
and then the capability of model evaluated by introducing the bal-
ance allocation index (BAI) and compared with some allocation
pattern initiated in previous works. Fig. 1 illustrates a flowchart
for the proposed risk allocation procedure. More detailed descrip-
tion of the allocation step will be followed.
3.1. Identify risk allocation hierarchical criteria
This section presents scheme to identify allocation criteria to
be used in subsequent section, selecting best party to bear a
risk. It is generally accepted that the risks in a project should
be apportioned to those parties who can best manage them
(Macdonald, 2001), however this principle is too unilateral to
determine proper risk allocation. The main concern or objective
of owner in allocation process, regardless of the ability of the
party to manage the risk, is the cost of this risk transfer. The
principal objectives of the owner to balance risk allocation
Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
3
developing objectives of risk
allocation
Constructing hierarchical criteria
structure to measure objectives
Conducting fuzzification-
converting linguistic terms into
membership functions
calculating priority weights by
extent analysis Fuzzy AHP
including expert knowledge
through Delphi method
participant Evaluation in applied
project
ð1Þ
caculating fuzzy Value appropriatness
and introducing Proper Risk
Allocation Pattern
Evaluation of the model by
Balanced Allocation Index (BAI)
Fig. 1. Flowchart of Fuzzy AHP risk allocation procedure.
would be (1) whether the receiving party has the competence
to assess the risk fairly and the expertise necessary to control
or minimize it; and (2) whether the shift of the risk from the
owner to another party will result in savings to the owner and
the public (Fisk, 1997). However these objectives regularly
have contrasting result and you may be unable to find a party
that complies all named criteria. In other words, the risk-
allocated agent from which the risk originates and thus who is
best able to control it, may not be able to control the risk in
the most efficient way and at the lowest cost (Medda, 2007).
Allocation criteria have been structured realizing two con-
flicting objectives: Competence of participants to manage a
risk properly and its tendency to bear it in minimum cost. An
expert Delphi team is organized in support of the model formu-
lation. The team involves some project managers from owners,
consultants and contractors with over 15-year experience in the
construction industry in managerial levels. Reviewing the pre-
vious works (Abednego and Ogunlana, 2006; Abrahamson,
1973; Lam et al., 2007; Loosemore and McCarthy, 2008;
Loyd, 2001; Thomas et al., 2003; Xu et al., 2010) and through
discussion with Delphi team, risk allocation criteria are identi-
fied in three levels considering the Competence-Tendency
trade-off as main concept of balanced allocation. Hierarchical
framework of risk allocation criteria is illustrated in Fig. 2. By
this framework, two conflicting objectives of owner can be
4 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx
Risk management
Competency
Assess Control Manage
Tools Ability to Sustain
Identifiction
Accessability
Forseen Expertise
Evalution Athority
Fig. 2. Hierarchical structure of risk allocation riteria.
measured through the third level quantifiable and detailed cri-
teria in order to select the most proper party for managing a
risk.
According to Fig. 2, a party has more competence to manage
a risk when he can assess the risk accurately (Loosemore and
McCarthy, 2008); control the risk to prevent its occurrence
(Loyd, 2001); and nonetheless he can manage its consequence
if it happens (Lam et al., 2007). In order to assess a risk, the
owner of a risk needs to identify the risk (Loosemore and
McCarthy, 2008), foresee its likelihood (Thomas et al., 2003)
and evaluate its effect on the project goal (Lam et al., 2007).
Also to control a risk needs accessibility to tools for magnitude
of a risk (Loosemore and McCarthy, 2008); expertise
(Abednego and Ogunlana, 2006) and authority (Loyd, 2001)
to utilize these tools. If the risk event occurred, he should sus-
tain the sequence and have resources to indemnify the probabil-
ity loss of others (Abednego and Ogunlana, 2006). In all
management stages, the owner of the risk should communicate
with other party.
In this criteria framework is also assumed that the attitude
and benefits (Xu et al., 2010) of the owner of the risk identify
the contingency within the shift of the risk (Loosemore and
McCarthy, 2008). If a participant seeks more profit or insures
with some security bonds, it will be more capable to bear a cer-
tain risk (Abrahamson, 1973). A party has also more tendencies
to bear a risk when he gains more benefit from managing it by
himself (Xu et al., 2010). He can benefit from bearing a risk by
achieving direct advantage (Xu et al., 2010), and raise his rep-
utation in or escaping from a probability loss (Lam et al., 2007).
Eventually shifting any risk to another party imposes some con-
tingency to the owner (Thomas et al., 2003). This contingency
can be in the form of extensive premium in bid (Abednego and
Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
Balanced
Allocation
Tendency to Cost
Saving
Attitude Benefit Contigency
Advantage
Profit seeking Perimum Charge
the Sequence Achivement
Resource for Adventure
loss Escape Claim
Contigency Attitude
Stackholder
Security Bond Reputation Quality Effect
Cominucation
Ogunlana, 2006), and claims rise through the project or double
payment because of poor quality of work (Fisk, 1997).
Utilizing Delphi method, the selected criteria have been ver-
ified by some construction experts. They have been asked to
verify the importance of each criterion in evaluating whether
a party is able to bear the risk properly. The less important cri-
teria are omitted, and the remaining criteria are arranged in the
criteria hierarchical framework.
3.2. Fuzzification of risk allocation criterion
The decision maker should identify few measurable indica-
tors in each criterion. In order to evaluate the criterions, expert
knowledge is applied through linguistic indicators. In applica-
tions it is often convenient to work with triangular fuzzy num-
bers (TFNs) because of their computational simplicity, and they
are useful in promoting representation and information proces-
sing in a fuzzy environment. Triangular fuzzy numbers can be
defined as a triplet (l, m, u). The parameters l, m, and u respec-
tively, indicate the smallest possible value, the most promising
value, and the largest possible value that describe a fuzzy event
(Ertugrul and Karakaşoglu, 2008).
A triangular fuzzy number x is a fuzzy number denoted as
x = (l, m, u) where a, b and c are real numbers and l b m b u.
The linguistic appropriateness allocation set for measure indica-
tors for the pair-wise comparisons is {Equal or not important,
Weak important, Moderate important, Strong important, Ex-
treme important}. Fig. 3 shows the membership function of lin-
guistic variables, and Table 1 explains the numerical values of
the membership functions.
If we define, two positive triangular fuzzy numbers (l1, m1,
u1) and (l2, m2, u2) then; by the extension principle mentioned
 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx 5

Table 2
Fuzzy pair-wise comparison for first criteria (risk assessment).
C1 (risk assessment) C1
m1 m2 m3
m1(risk identification) E M W− 1
m2 (risk foreseen) M− 1 E M
m3 (risk evaluation) W M− 1 E
E, Equal or Not important; W, Weak important; M, Moderate important; S,
Strong important; X, Extreme important.
Fig. 3. Membership functions for importance of the measure indicators.

criteria set. Therefore, 18 extent analysis values for one party

can be obtained, with the following signs:
by Zadeh (1965), the important fuzzy arithmetic operations of
any two triangular fuzzy numbers, used in this study, follow M11 ; …; M jk ; …; M m
18 ; k ¼ 1; 2; …; 18: ð5Þ
these operational laws:
where M jk ðj ¼ 1; 2; …; mÞ all are TFNs. The steps of Extent
ðl1 ; m1 ; u1 Þ þ ðl2 ; m2 ; u2 Þ ¼ ðl1 þ l2 ; m1 þ m2 ; u1 þ u2 Þ ð2Þ
Analysis are given in Appendix 1.
From Table 2, according to extent analysis synthesis values
ðl1 ; m1 ; u1 Þ⋅ðl2 ; m2 ; u2 Þ ¼ ðl1 ⋅l2 ; m1 ⋅m2 ; u1 ⋅u2 Þ ð3Þ with respect to project manager technical competency are cal-
culated like in Eq. (11):
ðl1 ; m1 ; u1 Þ−1 ≈ð1=u1 ; 1=m1 ; 1=l1 Þ: ð4Þ
Sm1 ¼ ð5:0; 6:3; 8:2Þ⊗ð1=22:5; 1=16:7; 1=11:7Þ ¼ ð0:222; 0:378; 0:703Þ
A comprehensive pair-wise comparison matrix is built by
Sm2 ¼ ð4:3; 6:2; 8:1Þ⊗ð1=22:5; 1=16:7; 1=11:7Þ ¼ ð0:193; 0:371; 0:698Þ
Delphi team for allocation criteria. The members of the group
have been carefully selected. The selected experts had a high Sm3 ¼ ð2:3; 4:2; 6:1Þ⊗ð1=22:5; 1=16:7; 1=11:7Þ ¼ ð0:104; 0:251; 0:527Þ:
degree of knowledge and previous experience in construction
projects and were familiar with risk management procedure. From Table 2, these fuzzy values are compared by using
The team consists of experts from project managers, owner rep- Eq. (15), and these values are obtained:
resentatives, supervisors, construction managers and risk man-
V ðSm1 ≥Sm2 Þ ¼ 1:0; V ðSm1 ≥Sm3 Þ ¼ 1:0;
agement groups. The members of the risk allocation group are
encouraged to identify the importance of each criterion. Pair- V ðSm2 ≥Sm1 Þ ¼ 1:0; V ðSm2 ≥Sm3 Þ ¼ 1:0;
wise comparison values are formed as linguistic TFNs. For ex-
ample pair-wise comparison between technical competencies is V ðSm3 ≥Sm1 Þ ¼ 0:7; V ðSm3 ≥Sm1 Þ ¼ 0:7:
shown in Table 2. In a similar way, other fuzzy values of technical competen-
cies respectively in Table 2 are compared to continue this
3.3. Priority weights of criteria step. As shown in Table 3, priority weights are calculated by
using Eq. (16) from Table 2.
The Extent Fuzzy AHP method is utilized to handle priority From Table 3, the normalized priority weight vectors are
weights from fuzzy comparison matrices, which was originally calculated by using Eq. (18):
introduced by Chang (1996). Let M = {m1, …, mk, …, m18} be
allocation criteria set and 18 is the number of allocation criteria. W 1 ¼ ð0:372; 0:366; 0:262ÞT
For selecting best party for a certain risk r i, m options should be
distinguished by comparing all m parties regarding 18 criteria The absolute weight of measurements is calculated by mul-
of third level. Then, each party is taken and extent analysis tiplying relative weight of measurements into upper level cri-
for each criterion is performed, respectively. Let yj = { y1j, y2j, teria; and presented in Table 4.
y3j, …, y18j} be an option set of evaluating party j by all 18 cri-
teria, and W = {w1, w2, w3, …, w18} be an importance weight of 3.4. Participant evaluation

The proposed model would be run individually for each risk

Table 1 to select best participant to bear the certain risk. For any certain
Numerical values for importance of the measure indicators.
Table 3
Degree of importance Linguistic variable Positive TFN
Priority weights of technical competencies.
~
1 Equal or not important (1,1,1) definite value
~
3 Weak important (1,3,5)
Degree of possibility m1 m2 m3
~
5 Moderate important (3,5,7) d′(m1) 1 1.0 1.0
~
7 Strong important (5,7,9) d′(m2) 1.0 1 1.0
~
9 Extreme important (7,9,9) d′(m3) 0.70 0.70 1.0

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
6 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx

Table 4
The weight of third level allocation criteria.
Objectives Relative weight Criteria Relative weight Measurements Relative weight Absolute weight
Risk management competency 0.5 Risk assessment 0.22 m1 Identification 0.37 0.04
(O1) (C1) m2 Foreseen 0.37 0.04
m3 Evaluation 0.26 0.03
Risk control 0.43 m4 Tools Accessibility 0.45 0.10
(C2) m5 Expertise 0.21 0.05
m6 Authority 0.35 0.07
Risk management 0.34 m7 Ability to sustain the sequence 0.34 0.06
(C3) m8 Resource for contingency 0.45 0.08
m9 Stakeholder communication 0.21 0.04
Tendency to cost saving 0.5 Attitude 0.29 m10 Profit seeking 0.60 0.09
(O2) (C4) m11 Adventure attitude 0.09 0.01
m12 Security bond 0.30 0.04
Benefit 0.30 m13 Advantage achievement 0.30 0.05
(C5) m14 Loss escape 0.60 0.09
m15 Reputation 0.09 0.01
Contingency 0.41 m16 Premium charge 0.45 0.09
(C6) m17 Claiming 0.35 0.07
m18 Quality effect 0.21 0.04

risk of project, the decision maker should establish a linguistic 2010b). The final decision for allocation of risk i (x i) is the par-
pair-wise comparison by evaluating the appropriateness of each ticipant who gains maximum value of ultimate appropriateness
participant with regard to eighteen criteria (m1–m18). The ag- (Wang et al., 2008):
gregation of these appropriateness values through AHP method
P
18
i
demonstrates how a certain participant complies with the com- f kj
i k¼1
mon set of objectives of risk allocation. Therefore the partici- Fj¼ k ¼ 1; …; 18 ð8Þ
P
18
pant with biggest value would be selected as the most proper wk
k¼1
party (Wang et al., 2008).
Regarding allocation criteria, decision maker is asked to
compare all participants (p1, …,pj, …,pm) in linguistic language. 8  
< xi ¼ 1 F i j ¼ max F k 1 ; …; F k j ; …; F k m
j
Again extent analysis is utilized (according to Appendix 1) to  : ð9Þ
: xi ¼ 0 F i j ≠ max F k 1 ; …; F k j ; …; F k m
handle priority of options (ykj) from fuzzy comparison matrices. j

A set of appropriateness vectors is introduced by following this

method, as follows:
n o
Y i ¼ yi kj ; j ¼ 1; 2; …; m and k ¼ 1; 2; …; 18
where j is the number of participants and k is the number of
third level criteria in hierarchical structure, as introduced in
Section 3.1. For risk i, ykji demonstrates how much the partici-
pant j complied with the criteria k.
In the present methodology, the linguistic evaluations of ykj
are appointed by the owner as decision maker of allocation pro-
cess. For participant pj, the evaluation of the weighted allocation
criteria ( fkji) is a fuzzy relation equation which is calculated using
multiplication operator.
i
f kj ¼ yikj d wk
where ykji is the appropriateness value of participant j with re-
gard to measurement k in the case of risk i, and wk is the abso-
lute weight of criteria k.
For the sake of convenience to obtain the relative impor-
tance of each layer, the normalized appropriateness vector
(Fji) is determined by weights of criteria (Ravanshadnia et al.,
4. Application of the method
ð6Þ
An infrastructure project has been proceeding with the de-
sign, construction and operation of a Complex Port in Iran by
243.6 billion dollar budget. The questionnaire was utilized for
gathering expert's knowledge conducted by ASCE during a
conference on construction risk and liability sharing held in
Scottsdale, in 1979 as reported by Kangari (1995). The risk
events which Delphi expert team identified as more important,
in this project, are extracted from the ASCE study and applied
in the proposed model.
Assuming a certain risk, the participant's appropriateness is
evaluated regarding each criterion by Delphi team. Pursuing the
fuzzy AHP method introduced in Appendix 1, the application
ð7Þ of proposed model for a certain risk (e.g. permit and ordinance)
is presented as follows.
At first expert team is asked to compare participants regard-
ing any criteria (m1–m18) by linguistic variables. In Table 5, it
can be seen that in the case of identification criteria (m1), expert
team assessed that the owner is extreme appropriate (X) than
contractor for the risk of permit and ordinance. It means that
the owner can identify extremely better, the risk of permit

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx 7

Table 5 The priority of options (y) is obtained according to

Linguistic values of “permit and ordinances” risk. Eqs. (16–18):
R1 (permits and ordinances) Owner Shared Contractor
′ ′ ′
m1 (identification) Owner E S X y1′ ¼ ðd ðA1 Þ; d ðA2 Þ; d ðA3 ÞÞT ¼ ð1:0; 0:2; 0:0ÞT
Shared S− 1 E S y1 ¼ ðdðA1 Þ; dðA2 Þ; dðA3 ÞÞT ¼ ð0:863; 0:137; 0:00ÞT :
Contractor X− 1 S− 1 E
m2 (foreseen) Owner E S S As previously identified in Table 4, the importance weight
Shared S− 1 E M− 1 of the criteria m1 has been calculated to be 0.041. The aggrega-
Contractor S− 1 M E tion of criteria's weight (w1) and vector of participant's priority
(y1) are expressed as:
1
and ordinance than the contractor. While they assess that f 1 ¼ y1 d w1 ¼ ð0:863; 0:137; 0:00Þ:ð0:041Þ ¼ ð0:036; 0:006; 0:00Þ
the owner is more capable to identify this risk than the shared
status, so the owner gets the strong appropriate (S) by compar- By following this procedure (Eqs. (11–18)) for all 18 criteria;
ing to shared status in Table 5. This process is continued until the final appropriate value of each party would be identified as:
all participants are pair-wisely compared by eighteen criteria. X
18
1
In Table 6, then, the linguistic variables are replaced by TFN fk
.
values (according to Table 1). F 11 ¼ k¼1
¼ ð0:036þ0:034þ0:029þ ::::þ0:071þ0:043Þ ¼ 0:91
X18 1
The extent analysis synthesis values for criteria m1 are calcu- wk
lated regarding Eqs. (11) and (12): k¼1
X
18
1
0 1 fk
X
3 X3 X
3 X
3 .
M11; j ¼ @ l1; j ; m1; j ; u1; j A F 11 ¼ k¼1
¼ ð0:006þ0:00þ ::::þ0:00þ0:00Þ ¼ 0:08
j¼1 j¼1 j¼1 j¼1
X18 1
wk
¼ ðð1 þ 5 þ 7Þ; ð1 þ 7 þ 9Þ; ð1 þ 9 þ 9ÞÞ ¼ ð13; 17; 19Þ k¼1
0 1
X
3 X3 X
3 X
3 X
18
1
M12; j ¼ @ l2; j ; m2; j ; u2; j A fk
.
¼ ð0:00þ0:007þ ::::þ0:00þ0:00Þ ¼ 0:01:
j¼1 j¼1 j¼1 j¼1 k¼1
F 11 ¼
¼ ðð0:2 þ 1 þ 5Þ; ð0:14 þ 1 þ 7Þ; ð0:11 þ 1 þ 9ÞÞ ¼ ð6:2; 8:1; 10:1Þ X
18 1
0 1 wk
X
3 X3 X
3 X
3
M13; j ¼ @ l3; j ; m3; j ; u3; j A k¼1
j¼1 j¼1 j¼1 j¼1

¼ ðð0:14 þ 0:2 þ 1Þ; ð0:11 þ :14 þ 1Þ; ð0:11 þ 0:11 þ 1ÞÞ ¼ ð1:3; 1:3; 1:2Þ Since the owner (p1) gains maximum appropriate value, the
2 3−1 risk of R1 is allocated to it. Final decision for allocation of the
X
m X3 X
3
S1 ¼ M1; j ⊗4
1
Mj; j 5
1 risk R1 is determined by the following vector:
j¼1 j¼1 j¼1
 
¼ ð13; 17; 19Þ⊗ð1=30:3; 1=26:4; 1=20:5Þ ¼ ð0:4; 0:6; 0:9Þ X 1 ¼ x11 ; x12 ; x13 ¼ ð1; 0; 0Þ:
2 3−1
Xm X3 X
3
S2 ¼ 1
M2; j ⊗ 4 1 5
Mj; j The vector (X1) expresses that owner who has the biggest ap-
j¼1 j¼1 j¼1 propriateness value would bear the risk of permit and ordinance
¼ ð6:2; 8:1; 10:1Þ⊗ð1=30:3; 1=26:4; 1=20:5Þ ¼ ð0:2; 0:3:0:5Þ (R1). It means the owner may be capable to efficiently manage the
2 3−1
Xm X 3 X
3 risk of “Permits and ordinances” with a minimum cost.
S3 ¼ 1
M3; j ⊗ 4 1 5
Mj; j Proposed model is applied for all remaining risks and appro-
j¼1 j¼1 j¼1
priateness values for owner, contractor and share allocation are
¼ ð1:3; 1:3; 1:2Þ⊗ð1=30:3; 1=26:4; 1=20:5Þ ¼ ð0:0; 0:0; 0:1Þ:
calculated. Decision matrix (Eq. (1)) presents the final result of
allocation process as follows:
These fuzzy values are compared by using Eq. (15):
2 3T
V ðS1 ≥S2 Þ ¼ 1:0; V ðS1 ≥S3 Þ ¼ 1:0; 1; 1; 0; 0; 1; 1; 0; 0; 0; 1; 0; 1; 0; 1
V ðS2 ≥S1 Þ ¼ 2:0; V ðS2 ≥S3 Þ ¼ 1:0; ½X  ¼ 0; 0; 0; 0; 0; 0; 1; 1; 0; 0; 1; 0; 0; 0 5 :
4T

V ðS3 ≥S1 Þ ¼ 0:0; V ðS3 ≥S1 Þ ¼ 0:0: 0; 0; 1; 1; 0; 0; 0; 0; 1; 0; 0; 0; 1; 0

Table 6
TFN values of “permit and ordinances” risk.
R1 (Permits and ordinances) Owner Shared Contractor
m1 (Identification) Owner (1,1,1) (5,7,9) (7,9,9)
Shared (1/5,1/7,1/9) (1,1,1) (5,7,9)
Contractor (1/7,1/9,1/9) (1/5,1/7,1/9) (1,1,1)
m2 (Foreseen) Owner (1,1,1) (5,7,9) (5,7,9)
Shared (1/5,1/7,1/9) (1,1,1) (1/3,1/5,1/7)
Contractor (1/5,1/7,1/9) (3,5,7) (1,1,1)

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
8 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx

Table 7
Results of the proposed model application for the case study.
Risk description Numerical results of the proposed model Allocation Actual in
decision port complex
Owner Contractor Shared
R1 Permits and ordinances 91 2 7 Owner Owner
R2 Delayed site access or land causation 63 19 18 Owner Undecided
R3 Availability of equipment, material and labor 7 82 11 Contractor Contractor
R4 Productivity of equipment 0 90 10 Contractor Contractor
R5 Defective design 83 3 14 Owner Contractor
R6 Change in work 66 20 14 Owner Contractor
R7 Subsurface conditions 20 25 54 Shared Contractor
R8 Acts of God 37 10 52 Shared Contractor
R9 Accidents/safety 4 84 12 Contractor Contractor
R10 Inflation 71 2 27 Owner Shared
R11 Delayed dispute resolution 32 11 57 Shared Undecided
R12 Delayed payment on contractor and extra 71 2 27 Owner Undecided
R13 Mistake/defective work 0 78 22 Contractor Contractor
R14 Actual quantities of work 72 16 12 Owner Owner

The numerical and detailed results of the application of the
proposed model for all risks are presented in Table 7 and com-
pared by actual decision that applied in the port complex.
Table 8 displays the findings from some survey that address the
proper allocation risks in construction industry (El-Sayegh, 2008;
Kangari, 1995; Kartam and Kartam, 2001; Lam et al., 2007).
Comparing the finding of Table 8, demonstrates that there
are some rare risks that allocated in same party in all 5 studies.
Table 9 displays the numerical findings from these surveys and
makes available a benchmark to investigate the accuracy and
completeness of hierarchical criteria structure presented in this
study. For each option of allocation to owner, contractor or
share, Table 6 addresses the percent appropriateness measure
of participants to bear a risk (El-Sayegh, 2008; Kangari,
1995; Kartam and Kartam, 2001).
Within Fig. 4, it can be seen that the findings of ASCE survey
(Kangari, 1995) tend to preserve more risk by owner, while re-
sults of El-Sayegh (2008) study are likely to shift more risk to
other party. Results of the methodology presented in this study
are more consistent to finding of Kartam and Kartam (2001),
however it shows difference in “Actual quantity of work” (R14)
and “Inflation” (R10) risks where the presented methodology
allocated these two risks to the owner, but Kartam's survey allo-
cated them to contractor. In the proposed method by referring to
description of criteria within Section 3.1, it can be found that
although profit seeking attitude of contractor makes it better to
bear “Actual quantity of work” (R14) and “Inflation” (R10) risks,
but the owner is more correspondent to assess these risks and
has more resource to manage them.
Comparing the result of this model by ASCE finding shows
some important differences, too. Although ASCE survey allo-
cates the risks of “Subsurface condition”, “Act of God” and
“Delayed dispute resolution” to the owner, but the result of ap-
plying the proposed method shifts them to shared status. In the
case of the risk of subsurface condition, reviewing detailed cri-
teria evaluated by Delphi expert team shows that although the
owner has enough resource for managing and gains more ad-
vantage from control of the risk, but the contractor has more ex-
pertise and authority to control it and has strong willingness
to bear the risk because of contractor's profit seeking attitude.
So the Fuzzy AHP method has decided to allocate the risk of
subsurface condition to shared position. The proposed model
also allocated the risks of “Act of God” and “Delayed dispute
resolution” to shared status.

Table 8
Comparison of the proposed model results regard to previous works.
Risk description Proposed ASCE Lam et al. Kartam and Kartam El-Sayegh Actual in port
model (79) (2007) (2001) (2008) complex
R1 Permits and ordinances Owner Owner Contractor Owner Undecided Owner
R2 Delayed site access or land causation Owner Owner Owner Owner Undecided Undecided
R3 Availability of equipment, material and labor Contractor Contractor Contractor Contractor Contractor Contractor
R4 Productivity of equipment Contractor Contractor – Contractor Contractor Contractor
R5 Defective design Owner Owner Contractor Owner Shared Contractor
R6 Change in work Owner Owner – Owner – Contractor
R7 Subsurface conditions Shared Owner Owner – – Contractor
R8 Acts of God Shared Owner – Shared – Contractor
R9 Accidents/safety Contractor Contractor Contractor Contractor Contractor Contractor
R10 Inflation Owner Shared Shared Contractor Shared Shared
R11 Delayed dispute resolution Shared Owner – Shared Shared Undecided
R12 Delayed payment on contractor and extra Owner Owner – Owner Undecided Undecided
R13 Mistake/defective work Contractor Contractor Contractor Contractor Contractor Contractor
R14 Actual quantities of work Owner Owner Owner Contractor – Owner

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx 9

Table 9
Numerical results of application proposed model in comparison with previous works.
Risk description Proposed Model ASCE Katam El-Sayegh
Owner Contractor Shared Owner Contractor Shared Owner Contractor Shared Owner Contractor Shared
1 R1 Permits and ordinances 91 2 7 74 26 – 74 12 14 31 31 38
2 R5 Defective design 83 3 14 100 0 – 52 16 32 26 18 55
3 R14 Actual quantities of work 72 16 12 72 28 – 18 72 10 31 18 51
4 R10 Inflation 71 2 27 48 – 52 7 70 23 6.2 38 55
5 R12 Delayed payment on contractor 71 2 27 87 13 – 77 9 14 32 37 31
and extra
6 R6 Change in work 66 20 14 74 26 – 72 10 18 51 11 38
7 R2 Delayed site access or land 63 19 18 100 – – 52 22 26 25 34 42
causation
8 R7 Subsurface conditions 39 45 16 61 39 – – – – – – –
9 R8 Acts of God 37 10 52 78 22 – 15 10 75 – – –
10 R11 Delayed dispute resolution 32 11 57 48 – 52 29 16 55 6.2 25 69
11 R3 Availability of equipment, 7 82 11 21 79 – 0 97 3 0 75 25
material and labor
12 R9 Accidents/safety 4 84 12 13 87 – 0 90 10 3.1 88 9.2
13 R4 Productivity of equipment 0 90 10 0 100 – 0 94 6 0 83 17
14 R13 Mistake/defective work 0 78 22 13 87 – 0 85 15 4.6 65 31

5. Verification of balanced allocation
In order to verify the balance concept within results of the
proposed model, the bidder of the project was asked to propose
their bid prices in three risk allocation frameworks, according
to the frameworks recommended by ASCE, Katam and this
study. Some lenders were also asked to determine the amount
of interest for investment in the project where each framework
is applied. All risks are assumed to allocate to the owner unless
shifted by tender document (Fisk, 1997), so “disclaimers” were
used for addressing different alternatives of risk allocation. Dis-
claimers are provisions that are placed in written contract doc-
uments in order to limit or exclude an owner liability and
often are in the form of costs or expenses incurred by a contrac-
tor as a result of unforeseen variety of factors including in pro-
ject (Zaghloul and Hartman, 2003). For example to address
unforeseen or different subsurface condition risks (R7), the
below wording is used to shift the risk to contractor:
“The bidder is not entitled to rely on any data or information
included in the bid documents as to the job site or subsurface
condition or test results indicating the suitability or quantity
or otherwise of the job site or subsurface material for backfill-
ing or other uses in carrying out the construction of the work.”
The result of the tender price by bidders (extensive contin-
gency in bid) and interest of loan has been shown in Figs. 5
and 6 respectively. Value axis in these figures demonstrated
the extra price that bidders or lenders proposed in their proposal
for accepting certain risk according to each of three allocation
frameworks.
Since balance of risk allocation is a critical project success
factor (Gordon, 1994), any risk allocation framework should
be evaluated to verify how balanced they are. In this paper, Bal-
ance Allocation Index (BAI) introduced, Eq. (10) as follows, to
compare how much the balance allocation concept is applied to
a risk allocation framework. It provides a rational scale for eval-
uating how any risk allocation model is balanced by complying
conflicting interests of contracting parties. BAI ratio can be
measured by the requested loan interest of a lender or investor
to the bid price proposed by contractor to handling the project
risks in a certain project. This ratio may vary from a big

100
Owner Khazaeni
80
ASCE
60
Katam
40 El-Sayegh
20
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
-20
-40 Risk No.

-60
-80
Contractor or Shared
-100

Fig. 4. Trends of results of application proposed model in comparison with previous works.

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
10 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx

5.50
5.00 This Study
4.50 ASCE
4.00 Katam
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00

Fig. 5. Price of bidder's proposal for different allocation pattern.

positive amount to a big negative amount. A bigger positive 6. Conclusion

number for BAI expresses that the framework of risk allocation
is more suitable for the owner, while a bigger negative number
causes the risk allocation framework to be more preferred by
contractor. How this index goes to zero, therefore, can meet
more the interest of contracting party and present more bal-
anced risk allocation framework.
 
Lender interest
BAI ¼ 1−
Bidder price
BAI ratio was measured for each three framework and pre-
sented in Table 10 in order to verify whether balanced concept
applied within risk allocation models. According to Table 10, it
can be concluded that the allocation framework introduced by
this methodology is more balanced and may provide more stable
framework for owner and contractor than the other frameworks.
More balanced framework concluded to a win–win contract
and durable transaction toward the success of project. Negative
amount of BAI ratio in the ASCE risk allocation framework
means that the lenders have less appetite than the contractors to
invest in the project. Therefore the owner is expected to have
some difficulty to find a source of finance for the project.
In today's multiparty infrastructure construction projects that
new and specific risks emerged, need to custom-made risk allocat-
ing strategy among the contracting participants based on the bal-
anced allocation principles. In this study, a quantitative-based
decision model for selection and assignment of balanced risk allo-
cation has been delineated and implemented with an application.
The presented method can be a convenient alternative to the tradi-
ð10Þ tional method of selecting how to allocate the risks and provides a
useful tool for decision makers of construction owner that lack ad-
equate experience in selecting the best proper risk allocation posi-
tions, from a number of possible choices. By introducing a new
measurement as Balance Allocation Index (BAI) and using some
financial data, the proposed model was analyzed and compared
by previous study. It was found that the proposed model has pro-
vided more balanced results and given an accepted and reliable
risk management framework to provide a stable contracting.
The fuzzy adaptive model has been presented in this paper;
and has developed a hierarchical allocation criteria and mea-
surement from imprecise linguistic principles and experiential
expert knowledge. The model assesses allocation principles
and criteria based on the risk management process and percep-
tion of parties. By using the extensive analysis, a fuzzy AHP

5.00
4.50 This Study
4.00 ASCE
3.50 Katam
3.00
2.50
2.00
1.50
1.00
0.50
0.00

Fig. 6. Price of lender's proposal for different allocation pattern.

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx 11

Table 10 the judgment matrix and use fuzzy mathematics and fuzzy op-
BAI measurement in three risk allocation pattern. erators in aggregation of weight coefficients and fuzzy evalua-
Allocation pattern This study ASCE Katam tion matrices (Nieto-Morote and Ruz-Vila, 2010). Enhancing
Participant Bidder Lender Bidder Lender Bidder Lender the degree of judgment of decision maker, in Fuzzy AHP a se-
Cost risk transfer 20.22 18.51 18.03 20.71 21.44 17.78 ries of weight vectors in the form of Triangular fuzzy numbers
Balance Allocation Index 8.43% − 14.86% 17.05% will be used to choose final attribute.
(BAI)
A number of methods have been developed to handle fuzzy
comparison matrices. The extent analysis method proposed by
Chang (1996), which derives crisp weights for fuzzy compari-
method was employed to quantitatively analyze the appropri- son matrices, among all the approaches has been employed in
ateness of each contracting party. This method has several ad- quite a number of applications due to its computational simplic-
vantages. Compared to traditional allocation approach in risk ity (Wang et al., 2008). Participants' assessment in AHP meth-
allocation practice which is based on individual's professional odologies comprise some judgments done by means of pair-
judgment; it provides a systematic approach based on balanced wise comparisons that generally present inconsistency prob-
risk allocation principles. In addition to competency for manag- lems in preference information of alternatives (Nieto-Morote
ing the risk in order to assess appropriateness of allocation, the and Ruz-Vila, 2010). This proposed fuzzy risk allocation
hierarchical criteria structure involves tendency of the party to model and utilized Extent Analysis in order to identify proper
bear a risk by attitude, benefit and contingency criteria. risk allocation, and thus it could take into account the inconsis-
By indicating numerically the appropriateness of each party tency of the judgments. In the following, the outlines of extend
to bear a risk in the output, the model can provide a decision analysis method on fuzzy AHP are introduced as given by
support system for the owners in reaching a final decision. It Ertugrul and Karakaşoglu (2008).
does not only reduce time and costs during selection phase, Let Y = {y1, …, yj, …, ym} be an appropriateness set of partic-
but also diminishes the conflict and hidden costs in the imple- ipant set P = {p1, …, pj, …,pm}, and W = {w1, …, wk, …, w18} be
mentation stage. The proposed model can be applied into com- an importance weight of criteria set. Then, each alternative is
plex and multi party contract strategy rather than to risk taken and extent analysis for each criterion is performed, re-
allocation between the owner and the contractor in a traditional spectively. Therefore, 18 extent analysis values for each party
contract arrangement. It can be customized to suit a specific can be obtained, with the following signs:
context or project strategy by adjusting or expanding the risk al-
location criteria, the membership functions of the variables and M1j; j ; …; Mkj; j ; …; M18
j; j ; j ¼ 1; 2; …; m:
the participant's characteristics.
where Mj,k j(k = 1, 2, …, 18) all are TFNs.
Appendix 1. Fuzzy AHP Method The value of fuzzy synthetic extent with respect to the kth
criteria is defined as
Analytic Hierarchy Process (AHP) has been widely used as 2 3−1
a useful Multiple Criteria Decision Making (MCDM) tool or X
m Xm X
m
Sj ¼ Mkj;j ⊗4 Mkj;j 5 : ð11Þ
a weight estimation technique in many areas such as selection, j¼1 j¼1 j¼1
evaluation, planning and development, decision making, fore-
casting, and so on (Vaidya and Kumar, 2006). The traditional P
m
To obtain M kj; j , the fuzzy addition operation of m extent
AHP requires crisp judgments. However, due to the complexity j¼1
and uncertainty involved in real world decision problems, a de- analysis values for a particular matrix is performed such as:
cision maker (DM) may sometimes feel more confident to pro- 0 1
vide fuzzy judgments than crisp comparisons (Wang et al., X
m Xm X
m X
m
Mkj; j ¼ @ lj; j ; mj; j ; uj; j A: ð12Þ
2008). j¼1 j¼1 j¼1 j¼1
The Fuzzy Set Theory introduced by Zadeh (1965) is suitable
for dealing with imprecision and uncertainty associated with data As M1 = (l1, m1, u1) and M2 = (l2, m2, u2) are two triangular fuzzy
in risk assessment problems. In a universal set of discourse X, a numbers, the degree of possibility of M1 = (l1, m1, u1) ≤ M2 = (l2,
fuzzy subset A of X is defined by a membership function LA (x), m2, u2) is defined as:
which maps each element x in X to a real number in the interval h  i
V ðM2 ≥M 1 Þ ¼ sup min μ M1 ðxÞ; μ M2 ðyÞ ð13Þ
[0, 1]. The function value of LA (x) signifies the grade of member- y≥x
ship of x in A. When LA (x) is large, its grade of membership of x
in A is strong (Nieto-Morote and Ruz-Vila, 2010). and can be expressed as follows:
Fuzzy AHP is a systematic method to the option selection V ðM2 ≥M 1 Þ ¼ hgt ðM 1 ∩M2 Þ ¼ μ M2 ðdÞ ð14Þ
and justification problem by means of the fuzzy set theory con-
cept and hierarchical structure analysis. The decision maker can 8
>
> 1; if m2 ≥m1
identify preferences in the form of natural language on the sub- <
0; if l1 ≥u2
¼ l1 −u2 : ð15Þ
ject of the importance of each attribute. In the fuzzy AHP ap- >
>
: ; otherwise
proach, use fuzzy numbers as the pair-wise comparisons in ðm2 −u2 Þ−ðm1 −l1 Þ

Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003
12 G. Khazaeni et al. / International Journal of Project Management xx (2011) xxx–xxx

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Please cite this article as: Khazaeni, G., et al., Fuzzy adaptive decision making model for selection balanced risk allocation, International Journal of Project
Management (2011), doi:10.1016/j.ijproman.2011.10.003