Project management quality and the value of flexible strategies

Purpose – Construction strategies for competitive bidding and operations are used to avoid the consequences of poor schedule performance such as delay penalties. Flexible strategies in the form of options can increase project value if uncertain conditions cannot be adequately forecast before operations begin. However, project management purposefully manipulates the project performance that drives the use of options and thereby the value added by options. Therefore project management quality may influence option values. Seeks to address this question.Design/methodology/approach – This research investigates the interaction of project management and option value by operationalizing a common use of real options in construction and valuing the option with different levels of project management quality. A simple but realistic dynamic simulation model of a project is described and exercised to reveal some impacts of project management on option value.Findings – The results support a hypothesis that increased pro...

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