Project Evaluation and Selection: A Risk-Return Perspective

Abstract

Traditional project appraisal focuses on the "iron triangle" of time, cost, and scope while systematically failing to deliver intended long-term benefits, a disconnect that wastes billions in organisational resources annually. This thesis advances project decision-making by developing the ROL framework: a lifecycle-integrated, mathematically grounded approach that systematically incorporates the risk preference of the project funder, opportunities alongside threats, and long-term benefit realisation risks into risk-return trade-off analysis. Guided by critical realist philosophy, the research employs a mixed-methods approach combining quantitative mathematical modelling with qualitative stakeholder insights across three sequential studies. Each study follows a structured multi-phase methodology encompassing model development, numerical illustration, sensitivity analysis, and where applicable, real-world case study validation with empirical data collection through structured surveys. The methodology adapts expected utility theory and modern portfolio theory to project contexts through scenario-based analysis operationalised in MATLAB and LINGO. The research produces transformational empirical findings. Study 1's project appraisal framework demonstrates improved appraisal accuracy by developing a utility-based project evaluation map which incorporates scenario-based estimation and semi-deviation risk measures. Study 2's portfolio selection model eliminates systematic selection errors through comprehensive interdependency modelling, showing that omitting interdependencies produces non-optimal portfolios even when individual project metrics appear acceptable. Study 3's risk response selection enhances the risk-return trade-off by prioritising mitigation and enhancement actions that maximise project attractiveness within budget constraints. The thesis delivers three breakthrough theoretical contributions: (1) lifecycle-integrated project evaluation maps that visualise utility-based attractiveness consistently across appraisal, monitoring, and performance judgement stages, (2) dual-conception risk modelling treating opportunities as positive uncertainties to be enhanced rather than mere threat mitigation, and (3) extension of financial asset and portfolio theories to capture project-specific characteristics through forward-looking scenarios and semi-deviation measures suitable for contexts with limited historical data. Immediate practical implications emerge through implementable decision-support tools using existing organisational data such as, risk registers, benefit projections, and cost estimates, thus enabling transparent, resource-optimised, stakeholder-aligned decisions across appraisal, selection, and risk response planning under uncertainty. The integrated framework spans the complete project lifecycle from initiation through benefit realisation, providing consistent decision logic that transforms project failure patterns by ensuring systematic alignment between operational delivery and strategic value creation. Show more