Using Options to Manage Dynamic Uncertainty in Acquisition Projects

Abstract : Uncertainty in acquisition projects and environments can degrade performance. Traditional project planning, management tools, and methods can effectively deal with uncertainties in relatively stable environments. But in more uncertain environments conditions can evolve beyond the assumptions used in preproject planning and require major deviations from initial plans. Important uncertainties often cannot be identified and described adequately during preproject planning to design optimal strategies. Therefore, rigid project strategies prepared solely on the most likely outcomes as perceived during preproject planning can result in sub-optimal performance. In these cases, acquisition planners must explicitly incorporate flexibility into project plans to keep effective strategies available until uncertainty resolves adequately to reveal the best choice. Options can provide an effective framework for designing, evaluating, and implementing flexible acquisition project strategies and therefore can improve project performance. A large complex defense project illustrates the potential and challenges of options and research needs to expand and improve their use to manage uncertainty.