Early Project Appraisal: Making the Initial Choices

303 Pages·2010·2.27 MB·English

by  Knut Samset

Early Project Appraisal
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10.1057/9780230289925 - Early Project Appraisal, Knut Samset
Early Project Appraisal
Making the Initial Choices
Knut Samset
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10.1057/9780230289925 - Early Project Appraisal, Knut Samset
99778800223300227733224455__0011__pprreexxvvii..iinndddd iiiiii 55//44//22001100 88::5511::4400 AAMM
© Knut Samset 2010
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No portion of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication 13
may be liable to criminal prosecution and civil claims for damages. 05-
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The author has asserted his right to be identifi ed as the author of this work 01
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in accordance with the Copyright, Designs and Patents Act 1988. ct -
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First published 2010 by n
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PALGRAVE MACMILLAN Co
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Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, gra
registered in England, company number 785998, of Houndmills, Basingstoke, al
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Hampshire RG21 6XS. h -
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Palgrave Macmillan in the US is a division of St Martin’s Press LLC, eri
175 Fifth Avenue, New York, NY 10010. Zu
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Palgrave Macmillan is the global academic imprint of the above companies ET
and has companies and representatives throughout the world. d to
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Palgrave® and Macmillan® are registered trademarks in the United States, ns
the United Kingdom, Europe and other countries. ce
ISBN 978–0–230–27324–5 hardback m - li
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This book is printed on paper suitable for recycling and made from fully ct.
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managed and sustained forest sources. Logging, pulping and manufacturing n
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processes are expected to conform to the environmental regulations of the co
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country of origin. av
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A catalogue record for this book is available from the British Library. al
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A catalog record for this book is available from the Library of Congress. w
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Printed and bound in Great Britain by eri
CPI Antony Rowe, Chippenham and Eastbourne mat
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10.1057/9780230289925 - Early Project Appraisal, Knut Samset
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Contents
List of Figures ix
List of Tables xiii
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Preface xiv 1
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Acknowledgements xv 11-
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Part I Front-End Assessment of Projects 1 ne
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1 Attributes of a Project 3 eC
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1.1 The project as a means to achieve an aim 3 gr
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1.2 What this book is about 5 h - P
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2 Successful Projects 10 eri
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2.1 Strategic and tactical performance 10 H Z
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2.2 Two project cases 12 o E
2.3 Analyses and decisions 18 d t
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3 Three Perspectives on a Project 20 ce
3.1 The project’s main stakeholders 20 m - li
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3.2 The stakeholders’ interests in the project 22 ct.c
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3.3 A broad planning perspective 24 n
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3.4 The project concept 26 ec
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3.5 Projects in a life-cycle perspective 29 gr
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4 Three Main Phases in a Project 32 w.
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4.1 Processes and project phases 32 m w
4.2 The possibilities to make amendments 35 al fro
4.3 The costs and benefits of front-end assessment 36 eri
at
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5 Uncertainty, Risk and Opportunities 38 ht
5.1 Uncertainty in decisions 38 yrig
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5.2 Uncertainty and information 43 o
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5.3 Uncertainty as a metric in projects 45
6 Possibilities of Foreseeing 51
6.1 The desire to foresee 51
6.2 Predictions in projects 52
6.3 Predicting simple events 54
6.4 Predicting complex events 55
6.5 Trends and discontinuities 56
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vi Contents
6.6 Predictable surprises 58
6.7 Predictability and information 60
6.8 Scenario planning 61
6.9 Costs and benefits of information 62
7 Strategic Guidance and Tactical Flexibility 66
7.1 Strategic guidance 66
7.2 Tactical flexibility 68
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7.3 Limits to strategic planning and management 71 5-1
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8 The Problem of Cost 76 01
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8.1 Benefit versus cost overrun 76 ct -
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8.2 Systematic underestimation of cost 78 nn
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9 The Problem of Utility 83 ve
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9.1 Overestimation of utility 84 algr
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9.2 Effects and impacts of projects 86 h -
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10 What is a Concept? 90 eri
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10.1 Concepts and strategic choice 90 H
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10.2 Identifying a concept 94 o
10.3 Requirements and choice of concept 97 ed t
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10.4 The choice of concept 100 ce
11 Project Alignment: Needs, Objectives and Effects 104 m - li
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11.1 Alignment of needs, objectives and effects 104 ct.
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11.2 Stakeholder analysis 106 nn
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12 Objectives and Their Formulation 113 av
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12.1 Using objectives in projects 113 al
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12.2 Linked and parallel objectives 116 ww.
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12.3 Identifying objectives: Four cases 119 m
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12.4 Causality and probability assessment 126 al fr
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13 Methods and Analyses in the Front-End Phase 130 at
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13.1 Simple methods, facts and judgemental data 130 ht
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13.2 Four types of analyses 131 yri
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13.3 The half-life of information 136 C
14 Quality of Information 138
14.1 Qualitative versus quantitative information 138
14.2 Information and validity 141
14.3 Judgemental, probabilistic assessment of utility 143
14.4 Precision – clarity and unambiguity 145
14.5 Rational choice, causality and probability 146
14.6 Constructing valid information hierarchies 147
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Contents vii
15 Front-End Assessment and the Decision
to Finance a Project 149
15.1 Reason and experience 149
15.2 Information processes up front 151
15.3 Quality assurance of the bases for decisions 154
16 Three Steps in Front-End Assessment: Definition,
Development and Appraisal of Concept 158
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16.1 Tools in front-end assessment 159 5-1
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16.2 Identifying the concept 162 1-
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16.3 Developing the concept 163 ct - 2
16.4 Appraisal of the concept 165 e
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Part II Tools and Techniques 167 ve
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17 Systems Analysis 169 al
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17.1 An open-ended systematic process 169 h -
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17.2 Example: Choice of energy system 173 eri
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18 SWOT Analysis 182 T
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18.1 A review of pros and cons 182 d to
18.2 E xample: Assessing sites for a housing se
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development 186 m - lic
19 Strategy Analysis – Logical Framework 188 o
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19.1 Evaluating project strategies 188 ect.
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19.2 Basis for the LogFrame 192 on
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19.3 Expert judgement 194 av
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19.4 Example: Building a tunnel for coastal ship traffic 195 al
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20 Rough Analysis of Uncertainty 200 ww
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20.1 Probability and effects 200 o
20.2 Example: Building a tunnel for coastal ship traffic 203 al fr
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21 Strategic Frames for Implementation 209 m
21.1 Strategic guidance and tactical flexibility 209 ght
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21.2 Contractual assignment of risk 210 p
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21.3 Strategic frames 211
21.4 Example: Building a university complex 213
22 Top-Down Probability-Based Cost Estimation 215
22.1 Resources and precision 215
22.2 Example: Building a shopping centre 218
23 Assessing Profitability 225
23.1 Expressions of costs and benefits 225
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viii Contents
24 Risk Analysis 230
24.1 Quantified expressions of expected value 230
24.2 Risk matrix 231
24.3 Identifying risk factors 232
24.4 Classifying risk 233
24.5 Risk policy 233
24.6 E xample: Developing and implementing
an IT system 235 13
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25 Probability-Based Progress Analysis 239 1-
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2255..12 IEmxapmropvleed: Lninetkwinogrk a a tnoawlyns itso the mainland 224329 ect - 2
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26 Evaluating Projects 248 C
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26.1 The moment of truth 248 gra
26.2 Types of evaluation 249 Pal
26.3 An evaluation model 251 ch -
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26.4 Ex ante evaluation 253 u
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27 Boondoggles and White Elephants 257 ET
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27.1 Some project cases 257 d t
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27.2 Analysis and decision to improve quality at entry 260 ns
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Notes 264 o
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Reference List 270 ne
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Bibliography 274 v
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Index 279 p
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List of Figures
1.1 The project – a means to achieve a goal by applying a
certain amount of resources 5
2.1 Measures of success – tactical and strategic performance 12 3
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2.2 The indicators of success applied in this textbook 16 1-0
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2.3 Measures of success as seen in relation to the ct - 2
management of the project, the project as such, ne
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and the business case, which defined the project 17 Co
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2.4 Indicators of success associated with the project’s various gra
al
outputs and outcome as time passes 18 P
h -
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3.1 Assessing projects in view of time and uncertainty 25 eri
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3.2 The project hierarchy as seen in the project’s context 28 H
T
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3.3 The project considered in a societal perspective 29 d to
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4.1 The project management view of a project during ns
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implementation 33 m - li
4.2 The effect of information on uncertainty up front 35 co
ct.
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4.3 Economic effects of improved planning up front 36 n
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5.1 Uncertainty, risks and opportunities 40 ve
a
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5.2 Outcome space for decisions to invest 41 al
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5.3 Outcome space constrained according to an w
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adopted risk policy 42 om
5.4 Potential to reduce uncertainty up from and during erial fr
implementation 43 mat
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5.5 Operational and contextual uncertainty through g
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the project phases 46 op
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5.6 Uncertainty and risk versus the size, complexity
and nature of a project 48
6.1 Continues trends as basis for prediction and
prescription 57
6.2 Discontinuous change or trend breaks 58
6.3 Predictable discontinuities 59
ix
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