Cost–benefit Analysis, Planning and Innovation
Transport Economics, Management and Policy series
Edited by Hugo Priemus, Bent Flyvbjerg and Bert van Wee
Chapter 8: Evolving Strategy: Risk Management and the Shaping of Mega-Projects
1 Roger Miller and Donald R. Lessard 8.1 INTRODUCTION AND OVERVIEW Project management is often equated with methods that decompose a project into discrete elements, determine their sequencing, and track their completion. Our review of large-scale engineering projects reveals a diﬀerent reality. In the early stages in particular, project management consists of a series of shaping episodes, ﬁrst to explore if there is a project, then to recruit participants and explore potential bases of collaboration among them, then to ﬂesh out a holistic proposal – a script for the project if you will – then to advocate and negotiate more precisely the shape of the project and the roles of the various parties, and ﬁnally to reach closure and a ﬁnal agreement. It is at this point that traditional ‘decomposing’ project management begins. Along the way, projects are often abandoned, or the process returns to an earlier stage because of obstacles encountered or new insight or interests that develop. Rather than a ‘Microsoft Project’, the more apt metaphor is a sequence of real options, each of which is shaped and then either exercised or abandoned. In fact, as is often the case with cutting-edge practice, managers have been successful at creating value through the development and exercise of sequential options without explicitly framing the process in options terms, and without explicitly valuing these options since the emphasis is on whether there is a positive value option that justiﬁed going forward rather than determining an exact price. The real-options framework is...
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