Even though risk management is a vital aspect of project management, the way that risk-based decisions are taken in projects is not well documented. Economic theory employs the concept of utility and assumes that decision makers are rational. Behavioural economics and prospect theory challenge this idea, making a number of specific claims about how decision-making behaviour deviates from rationality in practice. Based on a focus group discussion with project managers, this research highlights the importance of risk management in underpinning decision making and investigates the extent of rationality and applicability of prospect theory in an engineering project context. Prospect theory’s claims of reference dependence and loss aversion are found to be important, but the claims of diminishing sensitivity and probability weighting appear to be less relevant
