Human beings and the organizations of human beings do not act rationally when dealing with risk. The optimum actions indicated by probability theory when an organization is placed in risk are often not the actions chosen by the individuals directing the organization.; Deviations from the actions predicted as optimal by probability theory can be measured and modeled by Utility theory. Utility theory, with utility functions, describe the risk behaviour(s) of organizations and individuals and can be used to predict reactions to risky situations.; Using the risk behaviours (utility functions) of the parties to the construction undertaking the owner can identify an efficient allocation of risk between the parties. A study of contracting strategies will allow the owner to select the contract that will allocate the construction risks according to the risk allocation model thereby improving the productivity through lower contingencies and improved claims negotiation.; An in-depth review of a construction sector provides realistic data to test the model. Conclusions and recommendations discuss the findings and the direction of potential future research.
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