Characteristics of traditional methods for assessing efficiency in construction investment practice

Abstract

The issue of assessing the efficiency of construction investments remains central to the system of strategic project management. The modern construction economy is based on a combination of classical financial indicators and modified methodologies that take into account risks, time lags, and inflationary changes. Traditional approaches – net present value (NPV), internal rate of return (IRR), payback period (PBP), and profitability index (PI) – provide a foundation for analytical evaluation but require adaptation to the complex environment of development processes. In the construction sector, where each project has a long life cycle and high uncertainty, it is critically important to consider not only financial but also operational, organizational, and social factors of efficiency.

The evolution of investment analysis methodology in construction demonstrates a transition from linear financial models to complex systems of multicriteria evaluation. These systems encompass aspects such as risk integration, probability of implementing the projected scenario, delays in project phases, changes in material costs, and real estate market dynamics. Modified NPV and PBP indicators that account for inflationary and stochastic parameters provide a more accurate picture of efficiency. Alongside these, the PI and discounted PBP methods are used as auxiliary tools for preliminary project screening and selection of the most viable options.

Modern construction investment practice shows that efficiency should be evaluated not only through the lens of profitability but also through resilience to external influences, the ability to adapt financial strategies, and optimize management decisions. The application of scenario analysis, Monte Carlo modeling, and digital platforms such as ERP and Business Intelligence transforms efficiency assessment into a dynamic process of forecasting.

The characteristics of traditional methods for assessing efficiency in construction reveal the relationship between classical financial criteria and modern stochastic models that reflect market realities. Their combination creates the conditions for decision-making that is simultaneously financially feasible, strategically justified, and socially responsible.