Building Options at Project Front-End Strategizing: The Power of Capital Design for Evolvability
Buy this book at PMI.org
Biesek and Gil found limitations in the current practices and theory for management of capital projects, and turned to real options reasoning and design literature. Project teams often resort to real options reasoning, because investment in design flexibility is similar to buying options. If future changes are minimal or favorable the options can be exercised to adapt the design economically. In the event the future is not favorable to the project, a limited investment has been lost.
During their extensive research, the authors determined that current practices are not adequate for decision making during the design phase. In Building Options, the authors present a formal framework to assist project teams with sound, effective decision making. Based on project risk management concepts, real options theory, and experimental results, the proposed framework improves the quality of outcomes and increases the project team’s accountability during the design phase.
Biesek and Gil demonstrate how a formal framework for design flexibility on the front end encourages greater communication among project team members, helps avoid risks and reduce costs, and improves efficiency. While the uncertainties of the future will always be present, capital project teams can manage potential change more effectively by adopting these principals and designing for evolvability.