Cost prediction using decision/risk analysis methodologies

The ability to make good cost predictions is a very important aspect of the construction process. The methods used have historically relied on subjective judgements based on data which have proved satisfactory. The formal methodologies of decision/risk analysis have been little used in construction. This paper looks at how the use of decision trees, utility theory and the Monte Carlo simulation technique might improve human judgement in cost prediction. The successful application of decision/risk analysis to a housing refurbishment contract is described in a case study.