Project Flexibility in Large Engineering Projects
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Traditionally, projects tend to strive for increased predictability by managing details and attempting to bring all variables under control. However, experience shows that the chance of realising a plan without major amendments decreases with an increasing time horizon, which points to a need for flexible projects. A number of scholars argue that flexibility is necessary to face changes and uncertainty in the business environment. On the other hand, flexible projects are generally not described as desirable in project management literature. These conflicting approaches to flexibility have justified an analysis of the dynamics related to project flexibility, both from a theoretical and an empirical perspective. Such an analysis is presented in this thesis,based on analyses of large engineering projects in Norway. Most of the projects are governmental investments. This thesis aims at structuring knowledge on project flexibility. Two types of results have emerged; the first related to how to analyse project flexibility, and the second related to how to manage flexible projects. Based on studies of different parts of the life cycle of projects, the research provides indications as to how flexibility can be addressed in the front-end phase of large public investments. A framework for analysing project flexibility is also proposed. Chapter 1 discusses flexibility in a project management perspective, and raises key research questions. The research presented in this thesis addresses the dynamics between utilising benefits from flexible approaches and avoiding drawbacks. Being flexible is characterised by a capability to adapt to new, different or changing requirements. Flexibility is used in a rather wide sense in the thesis, but is always related to the managing effects of uncertainty. Project flexibility includes adjustments and preparations in response to both internal and contextual uncertainty, such as for example, scope change management, iterative decision process and adjustments related to uncertain funding. Chapter 1 ends with two key research questions related to how to analyse and manage project flexibility. Chapter 2 presents the research design. The thesis is based on nine papers. These papers are summarised in part one of the thesis. Three main data sources have been used, along with complementary information. First, project evaluations and summaries of 18 Norwegian investment projects have been analysed. Second, this research has benefited from access to an established database for major governmental investments, including results from 48 front-end assessments of large governmental projects. Third, a wider range of data has been collected in a multi-case study of four Norwegian railway projects. The research is based on an inductive-deductive approach, using a combination of qualitative and quantitative information. Validity and reliability associated with the data used in this thesis are not sufficient to provide solid answers, taken in isolation. As is common in project management research, the small samples in the studies generally do not support statistical analysis of the data, particularly when subgroups of the material are subject to analysis. However, the research has taken previous studies of related issues into account.The results presented in the thesis support many of the findings from other studies, but also indicate some nuances to common understanding of project flexibility. Further research is needed to clarify to what extent these indications are of a general nature or project-specific. Chapter 3 discusses project flexibility in different project phases. A distinction is made between three project phases: front-end, planning and execution. Both this thesis and previous research point to a flexible front-end phase as the least controversial aspect of project flexibility. Low flexibility after the front-end phase increases the likelihood of projects being completed on time, within budget and according to specifications. Some models and measures of project flexibility in a time perspective are also presented in this chapter. Chapter 4 analyses project flexibility from a stakeholder perspective. Project stakeholders are actively involved in a project, or their interests may be positively or negatively affected by the project. Project flexibility is perceived differently by different stakeholders. Flexibility for one project stakeholder can be another stakeholder’s risk. An analysis of flexibility in stakeholder perspective called for a distinction between internal and external project flexibility. Project internal flexibility relates to flexibility within defined scope – how requirements are to be met. External flexibility refers to adjustments of project scope – what requirements are to be met. Project internal flexibility appears to be particularly desirable to project managers and contractors. Project external flexibility is more likely to be looked upon favourably by users and project owners. Incentives open to stakeholders affect their approaches to project flexibility. In general, flexible projects have a value for stakeholders which benefit from adjustments and come at a cost for those who have to adapt. Chapter 5 highlights the relevance of efficiency and effectiveness when discussing flexible projects. In general, efficiency is related to producing direct project outputs, often measured in terms of cost, time and quality. Effectiveness is related to added value for owners and users. The case in favour of flexibility emphasises the possibility to increase a project’s effectiveness. The case against project flexibility highlights the negative effects on efficiency due to changes and the possibilities for frustration due to lack of decisions and commitments. Analyses presented in this thesis indicate challenges in materialising the expected benefits of flexible projects. On the other hand, the expected decrease in efficiency in flexible projects has been frequently observed throughout the analysis. Chapter 5 also addresses redundancy as an enabler for project flexibility. Redundancy is created when more resources than strictly necessary are available. The logic behind redundancy is that a project with redundant resources will be efficient because it can be executed as planned, compared to a project with no redundancy that turns out to be error-prone in reality. Chapter 6 discusses flexibility related to modularity, flexible decision processes and flexible final products. Flexibility in the decision process means that decisions and commitments in projects are made sequentially over phases. Flexibility in the product is achieved when the final product that a project is to produce is prepared for alternative use. There are indications that flexible projects utilise both flexible products and flexible decision processes, rather than emphasising one of these dimensions at the expense of the other. When analysing flexibility in decision processes, there was a need to make a distinction between planned and actual approaches to flexibility. Actual approaches turn out to be different from planned ones. Modularity can be an enabler for flexible project management. On a macro level, modularity means that projects are divided into independent sub-units. Decision makers can then make incremental commitments to each sub-unit at a time. In the studied projects, macro modularisation was associated with cost control but also with lower benefit realisation than planned. On a micro level, modularisation means a decomposition of a product into modules with specified interfaces. Such modularisation can reduce the ‘knock-on’ effects of design changes. Chapter 7 summarises a framework for analysing project flexibility and indicates guidelines for managing flexible projects. The framework for analysis consists of project flexibility categorisations, perspectives of analysis, and flexibility drivers and enablers. Approaches for the management of project flexibility are also suggested in Chapter 7. Successful strategies for project flexibility either aim at avoiding flexibility or at enabling projects to be flexible. Projects can avoid adjustments or live with them. One key to successful flexibility management in projects lies in the transition from an initial open-minded environment to the subsequent focused phases. Based on the results in the thesis, an attempt is made to list approaches to project flexibility management. Even though the results are based on studies of only a few projects, there are indications that the drawbacks of flexible projects are largest when projects do not prepare for future adjustments. This notion is consistent with previous works on flexibility, which highlight that flexible decisions require a structural framework of strategies and guidelines. The suggested approaches and categorisations related to project flexibility are intended as an input to such a structural framework.
Består avOlsson, Nils. Management of flexibility in projects. International Journal of Project Management. 24(1): 66-74, 2006.
Magnussen, Ole M; Olsson, Nils. Comparative analysis of cost estimates of major public investment projects. International Journal of Project Management. 24(4): 281-288, 2006.
Olsson, Nils. Flexibility in Engineering Projects: Blessing or Curse?. .
Olsson, Nils. Impact analysis of railway projects in a flexibility perspective. Transport Reviews. 26(5): 557-569, 2006.
Henriksen, Bjørnar; Olsson, Nils; Seim, Andreas. Adjustments, effectiveness and efficiency in Norwegian hospital construction projects. Proceedings CIB W70 Trondheim International Symposium. Changing User Demands on Buildings, 12–14 June 2006, Trondheim, Norway, 2006.
Olsson, Nils; Samset, Knut. Front-End Management, Flexibility and Project Success. .
Olsson, Nils. Flexibility and Front-End Management; Key to Project Success and failure. .