Early Project Appraisal: Making the Initial Choices

300 Pages·2010·2.68 MB·English

by  Knut Samset (auth.)

Early Project Appraisal
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Early Project Appraisal
Making the Initial Choices
Knut Samset
© Knut Samset 2010
Softcover reprint of the hardcover 1st edition 2010 978-0-230-27324-5
All rights reserved. No reproduction, copy or transmission of this
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The author has asserted his right to be identifi ed as the author of this work
in accordance with the Copyright, Designs and Patents Act 1988.
First published 2010 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
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Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-32375-3 ISBN 978-0-230-28992-5 (eBook)
DOI 10.1057/9780230289925
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10 9 8 7 6 5 4 3 2 1
19 18 17 16 15 14 13 12 11 10
Contents
List of Figures ix
List of Tables xiii
Preface xiv
Acknowledgements xv
Part I Front-End Assessment of Projects 1
1 Attributes of a Project 3
1.1 The project as a means to achieve an aim 3
1.2 What this book is about 5
2 Successful Projects 10
2.1 Strategic and tactical performance 10
2.2 Two project cases 12
2.3 Analyses and decisions 18
3 Three Perspectives on a Project 20
3.1 The project’s main stakeholders 20
3.2 The stakeholders’ interests in the project 22
3.3 A broad planning perspective 24
3.4 The project concept 26
3.5 Projects in a life-cycle perspective 29
4 Three Main Phases in a Project 32
4.1 Processes and project phases 32
4.2 The possibilities to make amendments 35
4.3 The costs and benefits of front-end assessment 36
5 Uncertainty, Risk and Opportunities 38
5.1 Uncertainty in decisions 38
5.2 Uncertainty and information 43
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
v
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
7.3 Limits to strategic planning and management 71
8 The Problem of Cost 76
8.1 Benefit versus cost overrun 76
8.2 Systematic underestimation of cost 78
9 The Problem of Utility 83
9.1 Overestimation of utility 84
9.2 Effects and impacts of projects 86
10 What is a Concept? 90
10.1 Concepts and strategic choice 90
10.2 Identifying a concept 94
10.3 Requirements and choice of concept 97
10.4 The choice of concept 100
11 Project Alignment: Needs, Objectives and Effects 104
11.1 Alignment of needs, objectives and effects 104
11.2 Stakeholder analysis 106
12 Objectives and Their Formulation 113
12.1 Using objectives in projects 113
12.2 Linked and parallel objectives 116
12.3 Identifying objectives: Four cases 119
12.4 Causality and probability assessment 126
13 Methods and Analyses in the Front-End Phase 130
13.1 Simple methods, facts and judgemental data 130
13.2 Four types of analyses 131
13.3 The half-life of information 136
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
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
16.1 Tools in front-end assessment 159
16.2 Identifying the concept 162
16.3 Developing the concept 163
16.4 Appraisal of the concept 165
Part II Tools and Techniques 167
17 Systems Analysis 169
17.1 An open-ended systematic process 169
17.2 Example: Choice of energy system 173
18 SWOT Analysis 182
18.1 A review of pros and cons 182
18.2 Example: Assessing sites for a housing
development 186
19 Strategy Analysis – Logical Framework 188
19.1 Evaluating project strategies 188
19.2 Basis for the LogFrame 192
19.3 Expert judgement 194
19.4 Example: Building a tunnel for coastal ship traffic 195
20 Rough Analysis of Uncertainty 200
20.1 Probability and effects 200
20.2 Example: Building a tunnel for coastal ship traffic 203
21 Strategic Frames for Implementation 209
21.1 Strategic guidance and tactical flexibility 209
21.2 Contractual assignment of risk 210
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
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 Example: Developing and implementing
an IT system 235
25 Probability-Based Progress Analysis 239
25.1 Improved network analysis 239
25.2 Example: Linking a town to the mainland 242
26 Evaluating Projects 248
26.1 The moment of truth 248
26.2 Types of evaluation 249
26.3 An evaluation model 251
26.4 Ex ante evaluation 253
27 Boondoggles and White Elephants 257
27.1 Some project cases 257
27.2 Analysis and decision to improve quality at entry 260
Notes 264
Reference List 270
Bibliography 274
Index 279
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
2.2 The indicators of success applied in this textbook 16
2.3 Measures of success as seen in relation to the
management of the project, the project as such,
and the business case, which defined the project 17
2.4 Indicators of success associated with the project’s various
outputs and outcome as time passes 18
3.1 Assessing projects in view of time and uncertainty 25
3.2 The project hierarchy as seen in the project’s context 28
3.3 The project considered in a societal perspective 29
4.1 The project management view of a project during
implementation 33
4.2 The effect of information on uncertainty up front 35
4.3 Economic effects of improved planning up front 36
5.1 Uncertainty, risks and opportunities 40
5.2 Outcome space for decisions to invest 41
5.3 Outcome space constrained according to an
adopted risk policy 42
5.4 Potential to reduce uncertainty up from and during
implementation 43
5.5 Operational and contextual uncertainty through
the project phases 46
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