Construction Project Selection and Bernoulli Utility

by V. K. Handa, Prof. of Civ. Engrg.; Dept. of Civ. Engrg., Construction Group, Univ. of Waterloo, Waterloo, Canada,
I. F. Georgiades, Asst. to General Manager; Fort George Relocation Co., Montreal, Quebec,

Serial Information: Journal of the Construction Division, 1980, Vol. 106, Issue 3, Pg. 355-370

Document Type: Journal Paper


A method to estimate the value of construction projects is illustrated that in an uncertain environment will result in the maximization of long-run profits to the construction firm. The risk of a project is valued relative to the size of the firm and to the relations between current and proposed projects. The information used is obtained from a subjective or statistical evaluation of the estimates for construction projects and from the balance sheet of the firm. The ways in which the risk of a project changes with diversification and with the progress of current projects are illustrated. An example shows how a firm can apply these methods to select portfolios of construction projects. The computational aspects are stressed.

Subject Headings: Construction methods | Construction companies | Construction management | Risk management | Value engineering | Profits | Statistics | Computing in civil engineering

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