Models of projects portfolio formation in construction business

Abstract

The paper presents models and methods of projects portfolio formation in the construction business. The company’s strategy success depends on the projects which an organization includes in its portfolio to achieve strategic goals. Nowadays companies often use methods of individual project estimation and selection to include in their portfolio of projects. However, such approach does not consider the effect from an individual project on the whole portfolio financial result and the total risk as well as the specificities of the construction industry portfolio formation. There is usually a set of projects for evaluation and selection and, as a consequence, there are several potential portfolio combinations for a company to choose. Construction business is project-oriented and a correct choice of a certain project and a portfolio with the best combination of projects is a strategically important management element. Models and methods of portfolio formation and management will help to make a choice. The paper presents specific features of portfolio in the construction area which should be considered in the portfolio methodology formation. The comparative analysis of mathematical models for project evaluation and portfolio selection in the construction business was provided. The profiles of companies to implement different models were determined. The results of the research will be useful for scientists and practitioners to choose a model for application or adaption to a company’s needs.