Project Governance
Also by Terry M. Williams MAKING ESSENTIAL CHOICES WITH SCANT INFORMATION MANAGING AND MODELLING COMPLEX PROJECTS MODELLING COMPLEX PROJECTS MANAGEMENT SCIENCE IN PRACTICE Also by Knut Samset EARLY PROJECT APPRAISAL: Making the Initial Choices PROJECT EVALUATION, MAKING PROJECTS SUCCEED MAKING ESSENTIAL CHOICES WITH SCANT INFORMATION
Project Governance Getting Investments Right Edited by Terry M. Williams Hull University Business School, UK and Knut Samset Norwegian University of Science and Technology, Norway
Selection and editorial content Terry M. Williams and Knut Samset 2012 Individual chapters the contributors 2012 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 may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2012 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. 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 978-1-349-34897-8 ISBN 978-1-137-27461-8 (ebook) DOI 10.1057/9781137274618 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 21 20 19 18 17 16 15 14 13 12
Contents List of Tables and Figures Acknowledgements Notes on Contributors vi viii ix Introduction 1 Terry Williams and Knut Samset 1 The Influence of Strategic Context on Project Management Systems: A Senior Management Perspective 3 V. K. Narayanan and Robert DeFillippi 2 The Proposal 46 Knut Samset and Gro Holst Volden 3 Assessing the Proposal 81 Chris Chapman 4 Designing the Project 135 Andrew Edkins and Alan Smith 5 Decision-Making in Organisations 175 Tim O Leary 6 Fading Glory? Decision-Making around the Project How and Why Glory Projects Fail 221 Svetlana Cicmil and Derek Braddon 7 Decision-Making in the Political Environment 256 Tom Christensen Concluding Note 277 Terry Williams Index 282 v
List of Tables and Figures Tables 1.1 A comparative summary of the stages of project management systems 23 1.2 Competencies and maturity of PM system 38 2.1 Five widely applied success measures 48 3.1 A traditional four-stage view of the asset lifecycle and dominant management aspects 83 3.2 V ( ) as a function of n for the insulation example 119 3.3 V ( millions) as a function of r = the real discount rate (% per annum) 120 5.1 A stage gate approval process 178 5.2 Comparing the social trajectory and systems control models 197 5.3 Approaches to managing complex and uncertain projects 202 5.4 The structure of conversations for action (based on Winograd and Flores, 1987) 209 Figures 1.1 A framework for analysis 18 1.2 Choice of project management system 37 2.1 Successful projects 49 2.2 An investment case is implemented as a project after prior assessment of alternative concepts 59 2.3 Trade-off between the amount/quality of information and the acquisition cost 65 2.4 Early underestimation relative to what is the finally approved budget is often far greater than the cost overrun 67 2.5 Strategic overestimation of benefits 69 2.6 Costs and benefits over the project s life cycle 70 2.7 Deterring effects of user fees 72 2.8 Inelastic demand 73 2.9 Pricing of congestion 73 vi
List of Tables and Figures vii 3.1 Simple interval estimate example 86 3.2 An illustration of the approximation involved 86 3.3 Sensitivity diagram: Highways Agency (HA) example 89 3.4 The role of the performance lens and the knowledge lens to visualise uncertainty 93 3.5 Decision diagram: One risk efficient choice example 95 3.6 Decision diagram: Two risk efficient choices example 97 3.7 Decision diagram: Comparison of approaches A, B and C 100 3.8 Efficient options in an efficient frontier portrayal 104 3.9 The basic project definition process the seven Ws 105 4.1 A two dimensional view of novelty within projects with illustrative examples 146 5.1 The project trajectory and the alignment-seeking process 198 5.2 The operation of the alignment-seeking process 199
Acknowledgements This book is a result of research funded by the Concept Research Programme on front-end management of public investment projects. More information on the programme is given on www.concept.ntnu.no. The editors and author would like to thank John Wiley and Sons for permission to use selected parts of How to Manage Project Opportunity and Risk (Chapman and Ward, 2011) as a basis for drafting the text of Chapter 3, as well as for permission to reuse figures and tables. viii
Notes on Contributors Derek Braddon is Emeritus Professor of Economics at the Bristol Business School, University of the West of England, Bristol. His principal research interests include the economics of defence, peace and conflict and also the economics of international business, the new industrial economics and the governance of large-scale international projects. Professor Braddon has published seven books and many papers in these areas and has made over 200 TV, radio and news media contributions on related themes. He has been Director of the University s Defence Economics Research Group since 1984 and is also Visiting Professor at the United Nations University s European Centre for Peace and Development in Belgrade, Serbia. Chris Chapman is Emeritus Professor of Management Science, University of Southampton, UK, and a senior associate of The Nichols Group, London, UK. He is a former director of the School of Management, University of Southampton. He is a past president of the Operational Research Society, and he was Founding Chair of the APM Project Risk Management Specific Interest Group. Consultancy and research grounded on consultancy experience addressing risk, opportunity and uncertainty in project, operations and corporate contexts has been a central concern of his since the 1970s, with an international client set and a range of publications. Tom Christensen is Professor of Public Administration and Public Policy at the Department of Political Science, University of Oslo. He is also Adjunct Professor at University of Bergen and City University of Hong Kong. His main research interest is in the field of comparative public reform and his theory basis is organisation theory. He has published internationally about 80 articles and books. He belongs to several international research networks and projects. Svetlana Cicmil is Director of Postgraduate Research and Associate Professor in Global Operations, Faculty of Business and Law, University of the West of England, UK. A civil engineer by training, she worked in the construction industry before starting an academic career as a researcher and executive management educator internationally. Svetlana s research focuses on the critical study of project-based work and management as economic, social and political phenomena and on the pursuit of advanced understandings of complexity in organisations, risk, crisis and sustainability. She has published widely in academic and professional journals and co-edited an influential book Making Projects Critical (Palgrave Macmillan, 2005). Her research has been supported by national and intentional grants. ix
x Notes on Contributors Andrew Edkins is the director of the Bartlett School of Construction & Project Management at UCL, UK. His career has alternated between being a practitioner and an academic, starting off in complex fast-track construction for a leading UK company. He then went to UCL to study for his doctorate and then worked as a member of faculty. He left UCL to join a highly successful company specialising in the provision of PFI custodial facilities and services. He re-joined UCL in 2004 and has worked since then in the area of executive development for professionals working on managing complex projects and in complex project procurement. Robert DeFillippi is Professor and Chair of Strategy and International Business and the founder and Director of the Center for Innovation and Change Leadership at the Sawyer Business School, Suffolk University. He publishes in leading US and European journals on project-based learning and project-based organisations in the creative sector. He is founder and editor of the book series Business Innovation and Disruption in the Creative Sector (Mediaxxi publisher). His current research is focused on the design and implementation of co-creation projects and the digital disruption and transformation of project work in media-based industries. V. K. Narayanan is Associate Dean for Research, Director of the PhD program and the Center for Research Excellence, and the Stubbs Professor of Strategy and Entrepreneurship in Drexel University, Philadelphia. Previously, the Fulbright-FLAD Chair in Management of Technology at the University of Aveiro, he was (founding) Chair of the Strategy Process Interest Group at the Strategic Management Society; currently, he serves on the Academic Advisory Board of Project Management Institute (PMI). Narayanan has published five books and his articles have appeared in leading professional journals. His consulting assignments have been with large pharmaceutical and high technology companies primarily in strategy implementation and corporate innovation. Tim O Leary has 30 years experience in the management of large IT and business change programmes. Working with major organisations in both the public and private sector, he has played leadership roles in numerous complex, multi-organisational change programmes, including banking start-ups, business reengineering projects, and the launch of online government services. In parallel with his consultancy work, he undertakes research into the social practice of project and programme management, having completed his PhD in 2010 at the University of Southampton based on an 18-month ethnographic study. He is currently Visiting Lecturer at the University of Southampton. Knut Samset is Professor of Project Management at the Norwegian University of Science and Technology in Trondheim (Norway). He is founder and partner of the consultancy company Scanteam, and director of the
Notes on Contributors xi Concept Research Program on Front-end Management of Major Investment Projects. His current research is on project governance, appraisal and quality assurance of major investments. He has published a large number of research reports and papers and is the author of books on technology assessment, project design, evaluation and front-end management of projects. Alan Smith is Director of University College London s Mullard Space Science Laboratory and the Centre for Systems Engineering. He has more than 35 years experience in the space sector including as a project manager within the European Space Agency, and is particularly interested in the development of complex systems, both their engineering and their management. He has developed and delivered postgraduate and training courses in project management and systems engineering in the UK, US, Canada and Australia, and is a Fellow of the Association of Project Management. He has published more than 65 papers in refereed journals across a broad range of subjects. Gro Holst Volden is Research Director of the Concept Research Program at the Norwegian University of Science and Technology in Trondheim (Norway). She in an economist and her main fields of expertise are investment decisions, benefit-cost analysis and financial management. She has previous experience as senior advisor at the Norwegian Government Agency for Financial Management, educating and advising government officials within areas such as appraisal, evaluation and performance measurement in the public sector. Terry Williams is Dean of the Hull University Business School, UK. He previously worked in project risk management at Engineering Consultants YARD, then at Strathclyde University and later as Director of the School of Management at Southampton University UK. He researches and consults on the behaviour of major projects, modelling both post-project review and pre-project risk, including work in major claims in Europe and North America. He has written numerous journal articles and books, is a PMP and a member of a number of research networks worldwide.