Front-end management, flexibility, and project success




Nils O. E. Olsson

Knut Samset

Well-designed projects stand a better chance to succeed than inadequately designed ones. Investing more resources in the initial stages therefore seems to pay off. These are not controversial statements; they express common understanding and are supported by a great number of studies (e.g., Anderson & Merna, 2003; Berg et al., 1999; Morris & Hough, 1991). A study of 1,125 projects by the World Bank (1996) on the importance of quality-at-entry concluded that projects with adequate or better identification, preparation, and appraisal had an 80% satisfactory rate versus 35% for projects that were deficient in all these aspects. The study shows that the formal definition of the main characteristics of a project seems to matter, but also the project design in qualitative terms. In other words, a project design based on a thorough pre-study and appraisal is more likely to succeed than a project based on less systematic analysis of reality.

The distinction between design and planning is important. What really matters is to identify the key determinants that would be decisive in the final selection and design of the project. Many of these key determinants are predictable. Systematic scrutiny of these determinants and a probabilistic assessment of the risks and the opportunities they represent are likely to help produce a realistic design and increase chances of success.

Current practice is something else. Despite the fact that decisions made in the concept definition phase tend to have the largest impact on the final effect of the project, too little is done to ensure that these decisions are firmly based on analysis. Too many projects are initiated based a preconceived idea of the technical solution to the problem at hand. Genus (1997) showed that early and inflexible technology choices was one of the core problems in the Channel Tunnel project between Britain and France. In too many projects, the initial idea remains largely unchallenged and turns out to become the selected project concept. The predominant tradition is to apply “downstream” analyses of the consequences of an already given alternative, rather than “upstream” assessment of alternative concepts as seen in relation to needs and priorities.

The front-end phase of a project commences when the project idea is conceived—and it ends when the final decision to finance the project is made. The main aim of front-end management is to get the strategic perspective right. The potential to reduce possible additional and amendment costs during implementation and also to increase the projects long-term utility is higher in the front-end phase than during implementation. This is illustrated in Figure 1. It is therefore a paradox that textbooks in project management, as well as curricula in project management lectured in universities tend to restrict their focus on the more detailed planning and implementation phase where the potential for major improvements are more marginal in relative terms. The authoritative Project Management Body of Knowledge (PMBOK® Guide) (Project Management Institute [PMI], 2004) is no exception with its relative marginal coverage of front-end management. Morris (2000) also points out that the PMBOK® Guide fails to recognize issues such as aligning project objective to business objectives of the project sponsor.

Söderlund (2004) discussed two main theoretical traditions in project management research. The first tradition has its intellectual roots in engineering science. Planning techniques and methods of project management, including the recent emphasis on uncertainty quantification and risk management, have been the major focus. This is in accordance with Packendorff (1995), who maintains that a number of authors trace the intellectual roots of project management research and knowledge to various types of planning techniques, such as PERT and CPM. The other tradition has its intellectual roots in social sciences and is especially interested in the organizational and behavioral aspects of projects. Söderlund (2004) terms these “the engineering tradition” and “the social science tradition,” respectively. Another dimension on project management is noted by Engwall (2003), who claims that research on project management has been dominated by what he calls “the lonely project” perspective, with little emphasis on projects context.

The discussion on project management traditions can also be related to how “project management” is defined. PMI (2004) defines project management as “the application of knowledge, skills, tools, and techniques to project activities to meet project requirements” (PMI, 2004, p. 368). In this terminology, project management is aimed at meeting project requirements, and not necessarily related to meeting overall objectives of projects. Provided that the requirements fully support overall objectives, such an approach is not problematic. In this way, project management does not include validating that project requirements are actually reflecting overall purposes of the project. What we have called front-end phase includes the initiating process group in PMI (2004) terminology. However, it is not clear if PMI (2004) considers selecting the right project as a part of project management. It is stated that “initiating processes are often done external to the project’s scope of control by the organization or by program or portfolio processes, which may blur the projects boundaries for the initial project inputs” (PMI, 2004, p. 43).

Schematic cash flow for a project over its life cycle. The project management approach (1) is to spend additional resources on planning in order to avoid cost overrun and delays in producing project outputs. More significant in terms of improving long-term utility (2) would probably be to spend additional resources front-end in selecting the most feasible project concept

Figure 1: Schematic cash flow for a project over its life cycle. The project management approach (1) is to spend additional resources on planning in order to avoid cost overrun and delays in producing project outputs. More significant in terms of improving long-term utility (2) would probably be to spend additional resources front-end in selecting the most feasible project concept.

Efficiency versus Effectiveness

A project’s ability to produce its immediate outcome can be measured in terms of efficiency. It is a question of doing things right and producing project outputs in terms of the agreed scope, quality, cost, and time. It is a measure internal to the project and restricted to the project or contractor’s perspective. The longer-term effects of the project can be measured in terms of effectiveness—or in other words doing the right things. It is an external measure. Eikeland (2001) relates effectiveness to how the results of a project contribute to value added for owners and users. In Organisation for Economic Co-operation and Development (OECD) terms, effectiveness measures the realization of the project’s purpose, or its first-order effects (Organisation for Economic Co-operation and Development, 2000). This is the perspective of the project owner or financing party, who in many types of projects might have a perspective similar to the users.

Clearly, initial decisions regarding the choice of concept need to be based on thorough evaluation of ways and means to achieve the perceived project’s overall purpose and goal, and not only its outputs. The project’s purpose is directly related to user satisfaction and is best evaluated from a user perspective—which is commonly addressed within the so-called engineering tradition of project management. The project’s long-term goal is related to the socioeconomic benefits of the project, and will have to be considered in a broader socioeconomic perspective. This would require the skills and insight represented by the social science tradition.

Strategy versus Tactics

The traditional approach in front-end management of projects is to strive for increased predictability and robustness, by managing details and attempting to bring all variables under control. However, the merit of detailed strategic planning at an early stage is subject to much debate as discussed by for instance by Slevin and Pinto (1989), Christensen and Kreiner (1991), Kreiner (1995), and Mintzberg (1994). Not surprisingly, experience shows that the chance of realizing a plan without major amendments decreases with increasing time horizon. This was supported by Flyvbjerg, Holm, & Buhl (2004), who pointed out that cost escalation of major transportation investments is highly dependent on the length of the project implementation phase. Longer implementation causes higher cost escalation.

Because we neither have full predictability nor control over all variables, attempts at detail management may easily result in the opposite; reduced manageability. Flexibility to be able to handle situations that might occur along the way, might be equally, if not more important. Morris and Hough (1991) have studied large engineering projects and highlighted the need for clarity of project definition but also the drawbacks of premature over-commitment. Based on experiences form the Channel Tunnel project, Genus (1997) advocates flexible and incremental decision-making in large engineering. According to Genus (1997), inflexible technologies are characterized by long lead time, high capital intensity, large unit size, and dependence upon specialized infrastructure. Genus (1997) argues that technologies that do not have these characteristics should be favored.

An interpretation of this is that thorough preparations in the front-end phase are useful for determining the direction and the strategic framework for a project. It is also important for predicting the difficulties that might occur in order to keep ahead, in identifying options and possible tactical moves when necessary. Sufficient tactical leeway is needed to achieve the expected benefits of a project. However, if the basic project concept is wrong, appropriate tactical implementation cannot compensate for faulty strategic choice.

Terms like adaptability and robustness are often used when discussing issues related to what is termed flexibility. Note that flexibility is not seen as an alternative to strategic management, but as a means to help realizing a strategy; in the way that Samset (2001) argues that successful projects are characterized by a distinct strategy in combination with sufficient tactical flexibility. Olsson (2004) showed that flexibility often is a means of improving effectiveness rather than efficiency in projects. Well-performed front-end assessments involve a consistent focus on the original decisions made in the concept definition phase of the project. This will provide the project’s stakeholders with a common framework when the project subsequently is planned and implemented. Iterations are not necessarily negative, depending of timing, type, and size. It is assumed that iterations are less resource consuming in the early phases than later, and that planned or prepared iterations require less management resources than those that are not prepared for.

Norwegian Major Public Projects—Case Studies

This paper is based on multi-case research over a number of years. Three data sets have been used. The first data set includes 18 projects. The prime source is reports written as a preparation of the quality-at entry regime. In addition, personal experience and public evaluation reports of governmental projects have been used.

The second source of information consists of 48 quality-at-entry reports carried out between 2000 and 2004. As a part of the Norwegian quality-at-entry regime, a forum was established consisting of the involved consultants and ministries. A key issue of this forum was to ensure a uniform structure and terminology of the quality-at-entry reports. As a consequence, the research data used in this study has a uniform and quality-assured structure. Both these data sets have been codified and entered into a research database. The purpose of the database was to provide proper storage of all relevant data regarding the projects.

Finally, a multiple case study of four projects was done using both quantitative and qualitative data. Traffic impact of four Norwegian railway investment projects was analyzed, which focused on the development of punctuality, frequency, travel time, number of travelers, and construction cost. The main purpose was to follow-up benefit realization in the studied projects.

Measures to Improve Cost Control

The cost of major public investment projects in Norway amounts to the equivalent of about U.S. $3 billion per year totally. Funds are mainly channeled through the Ministries of Labor and Public Administration, Finance, Defense, and Transport and Communications (Ministry of Finance, 2001). In 1998, the Norwegian Ministry of Finance made an analysis of a number of such projects (Berg et al., 1999). Effective from 2000, the ministry introduced mandatory quality assurance and uncertainty analysis of all major public projects exceeding NOK $500 million (U.S. $60 million), the so-called quality-at-entry regime.

The regime was introduced in response to a situation with large overruns. The responsible ministries are now required to commission consultants to undertake assessments prior to the Parliament’s appropriation of funds. Aims of such assessments are to review cost estimates and major risks that might affect the projects when implemented. Such analyses are termed “quality assurance 2” (QA2). The aim of the regime is to establish realistic cost and time frames for large governmental projects. A limited number of consulting groups are commissioned to undertake the assessments. The responsible ministry in these cases is seen as the project owner. Neither the project users nor the contractors are involved in the quality-at-entry analyses. The QA2 reports provide the ministries with a third-party opinion of the projects before they are submitted to Parliament.

Olsson, Austeng, Samset, & Laedre (2004) and Langlo and Olsson (2004) point out that the quality-at-entry Regime has had a prime focus on budget. To achieve maximum benefit from such an analysis, the project organizations themselves need to address the uncertainties identified in the analyses and continuously monitor these and other uncertainties that might affect the project. From a learning point of view, the research revealed a need for ensuring ownership of the results from the quality-at-entry analyses, while at the same time obtaining the benefits from an independent review. The responsible ministries report that they have got a better understanding of the projects and a better decision base.

To make sure that governmental projects do not require additional funding, project reserves are allocated. The QA2 reports include a budget recommendation for the project. Reserves are not intended for expanding the scope of the projects, but solely to cover unexpected expenses. Specific rules for the management of reserves have been established. During the period from the first QA2 in 2000 to mid 2002, QA2 was under development to find a suitable form, accepted definitions, and more uniform cost estimation process between the consultants. Compared to the agencies’ cost estimates, the consultants’ estimates were on average 9.5% higher. Subsequently, a more uniform cost estimation practice has emerged. Since mid 2002 the average difference between the cost estimates of consultants and agencies is reduced to 1.6%. From 2000 to 2005, cost overruns for Norwegian road projects has dropped from an average of 17% in 2001, to 4% in 2005 (Jordanger, 2005), indicating that a structured approach to cost estimation and control can result in reductions of cost overruns.

Need for Effectiveness Improvement

Even though a structured approach to cost management in the late front-end of projects can contribute to cost control, this does not ensure project success or optimal use of available resources. Our experience indicates that successful projects are characterized by a distinct strategy in combination with sufficient tactical flexibility and that both these key features are to be established in the front-end phase. It is therefore surprising that neither strategy nor flexibility is defined as focus areas in project management, but left to other disciplines.

Although effectiveness is important for project success in a strategic perspective, it is challenging to obtain, predict, and manage. Experience from the Norwegian quality-at-entry regime indicates that a structured approach to cost management in the late front-end of projects can contribute to cost control, illustrated by the effect of the QA2 exercises. Project management as an academic and management field possesses tools and techniques for this type of cost control and efficiency support. This does not ensure that existing tools and techniques are properly used and taken into account, depending on management tradition and other characteristics of organizations, but the enablers do exist and the project management community is constantly improving in taking them into use. In contrast, our studies indicate an improvement potential for tools, techniques, and experiences to secure effectiveness of projects. To a certain extent, this means utilizing practices from other disciplines than projects management.

To illustrate the challenges regarding project effectiveness, and particularly the benefit side of investment projects, Flyvbjerg, Bruzelius, & Rothengatter (2003) documented that estimated number of travelers on new transport infrastructure rarely matches the estimated numbers. Olsson (in press-a) made an in depth-analysis of the effect of four Norwegian railway investment projects. The results showed than it was a major challenge to obtain a combination of cost control and achieving expected benefits. Projects that were carried out as large-scale “mega projects” suffered cost overruns. However, they did achieve considerable benefit improvements, such as travel time reductions and an increase in the number of travelers. Projects that were decided upon section by section had better cost control, but benefit improvements were limited.

Measures to Improve Effectiveness

In the following, we discuss some approaches to achieve a combination of a distinct strategy in combination with sufficient tactical flexibility for projects. In addition, results from analyses of some of the proposed approaches are presented.

Quality-at-Entry Analyses at an Early Stage

The experiences from the first 54 quality assurance studies were that QA2 only addresses part of the major problems the projects are confronted with. Three years of trailing research served as input to the revision of the quality-at-entry regime. Olsson et al. (2004) as well as Magnussen and Samset (2005) have presented the results from this research. Figure 2 shows a summary of observations from the first four years of the quality-at-entry regime. There is a need to focus on the basic rationale of projects as to satisfy needs. The quality-at-entry regime was therefore revised in 2005, and extended to include an external assessment of the initial selection of the project concept. This new part of the regime is called quality assurance 1 (QA1), and was introduced with the view that it might have considerably more impact on the projects’ long-term utility.

Issues and problems related to QA2

Figure 2: Issues and problems related to QA2.

The QA1 exercise includes an analysis of the prerequisites for a proposed project, a need analysis, analyses of the documented strategy and requirements, and finally, a comparison of alternative concepts. The Government is required to present at least three alternative project concepts, including the “zero” alternative—proceeding without the project. The QA1 exercise has a wide perspective and focuses on the project’s response to future users and society as a whole. The purpose is to identify the right project.

Decoupling Robustness and Adjustment

Thomke (1997) discusses how techniques developed in a total quality management tradition are transferable to a project management context. He particularly points to the Taguchi model (Taguchi, 1987) where flexibility is achieved through a two-step model by decoupling robustness optimization and performance adjustment. In this connection, robustness is defined as the insensitivity of the product toward variation in uncontrollable (to the project) external variables. During the first step, functional robustness of the product is maximized independent of the final requirements. During the next step, the performance of the product is adjusted to meet customer and user requirements. Referring to the Norwegian quality-at-entry regime, the objective of QA1 is to achieve a robust project concept, for instance by making the essential choice between different alternatives to improve transport between the mainland and an island (bridge, tunnel, ferry, etc.). QA2 makes a review of the final adjustments of the selected project, including its specification, cost and management structure, cost estimate, and risk exposure. Thomke (1997) pointed out that decoupling of robustness and adjustment has significant implications on design flexibility. Early design of project concept can focus on robustness alone. Changes to meet evolving need can then be made quickly using a low-cost adjustment factor.


Design modularity is a common approach to achieve flexibility (Hellström & Wiktröm, 2005; Thomke, 1997). Hellström and Wikström (2005, p. 394) defined modularization as “decomposition of a part of a product into building blocks (modules) with specified interfaces, driven by company-specific reasons.” Modularization in product development projects is primarily a tool to improve project efficiency (Thomke, 1997).

We have studied a strategic kind of modularization in an investment project context, where commitment to large projects is done step-by-step, not all in one. An approach of minimal commitment at each decision stage is a part of the “anti-disaster methodology” proposed by Hall (1980, p. 267). According to Hall (1980, p. 272) “this would generally mean an incremental or adaptive approach to development of any kind, rather than a new major departure; it would suggest enlargement and adaptation of existing airports rather than building new ones.” Another approach to incremental decision-making is found in real options, an approach with roots in financial options theory (Amram & Kulatlaka, 1999; Brennan & Trigeogris, 2000). In a real options perspective, uncertainty can increase the value of a project, as long as flexibility is preserved and resources are not irreversibly committed. A real options approach to transport infrastructure investment means that the value of future flexibility and new information is included in the project decision process, as illustrated by Mehndiratta, Brand, & Parody (2000) and Brand, Mehndiratta, & Parody (2000). Decision-makers can wait to observe the outcome of initial investments before they commit to next steps of a major investment. However, studies of railway investment projects indicate that such an approach also has a cost, because it may result in reduced benefit of the project (Olsson, in press-a). Benefits materialize only when certain new levels of improvements are achieved.

Flexibility in Decision Process and Product

Project flexibility refers to how projects are executed and to how adaptable the final product will be, once it has been produced. According to Olsson (2004), flexibility in the decision process is based on an approach where decisions and commitments in the projects are made sequentially over episodes. Flexibility in the product means that the design of the final product (what the project shall produce) has taken into consideration possible future changes in use or requirements. If requirements are altered, no changes are needed because the design can accommodate the revised requirements. Gill, Tommelein, Stout & Garrett (2005) also discussed flexibility in the process and product in a similar way.

Flexibility in the product and the decision process (Olsson, 2006)

Figure 3: Flexibility in the product and the decision process (Olsson, 2006).

Different strategies for project flexibility management are depicted in Figure 3, each characterized by high or low flexibility in the process and product, respectively. With high flexibility in the product and low in the process, the decision process related to the project may be fairly straightforward because the result of the project is prepared for alternative use. High flexibility in the decision process in the study includes changes, extensions, and iterations in the project preparations.

Flexibility in the product and the decision process was analyzed in 18 projects. Figure 4 displays the number of projects found in each category reacted to flexibility in decision process and product. In addition, average cost overrun for the projects is shown in parentheses. The results indicate that flexibility in one dimension only to a limited extent could compensate for lack of flexibility in the other dimension. Projects with high flexibility in the product also had high flexibility in the decision process, even though it was not necessarily prepared for. Regardless of the flexibility in the product, a high flexibility in the decision process resulted in more than 100% cost overrun, compared to the initial budget. Few projects had prepared for flexibility in the decision process. The number of projects in this study is too restricted to allow firm conclusions. However, the findings might illustrate challenges related to flexibility that could be explored further. Most projects were subject to changes, extensions, and iterations (summarized as “flexibility in the decision process”), few had prepared for flexibility. Finally, when flexibility is not properly managed, it is expensive.

Flexibility in the product and decision process (number of projects and mean cost overrun in percent)

Figure 4: Flexibility in the product and decision process
(number of projects and mean cost overrun in percent).

Room for Maneuvering

Many textbooks on project management present models that illustrate how project attributes change during different project phases, often similar to Figure 5. These have in common that the uncertainty, significance of decisions, and the degree of freedom to maneuver are typically high in the beginning of the project, and low in the end. At the same time, variables such as the accumulated cost and available information begin at low levels and end up at a high level at the end of the project.

Uncertainty, significance of decisions and the degree of freedom to maneuver are typically high in the beginning of the project, and low in the end. Accumulated cost and available information have a reverse development through the project, beginning at a low level and ending at a high level. Based on Christensen & Kreiner, 1991, p. 40; Mikkelsen & Riis, 2003:, p. 7; Midler, 1995, p. 369; Samset, 2000, p. 32)

Figure 5: Uncertainty, significance of decisions and the degree of freedom to maneuver are typically high in the beginning of the project, and low in the end. Accumulated cost and available information have a reverse development through the project, beginning at a low level and ending at a high level. Based on Christensen & Kreiner, 1991, p. 40; Mikkelsen & Riis, 2003:, p. 7; Midler, 1995, p. 369; Samset, 2000, p. 32).

Midler (1995) linked the decreasing degree of freedom to maneuver with a rising degree of irreversibility in project decisions. Mahmoud-Jouini, Midler, & Garel (2004, p. 361) describes the descending curve as “possibilities of action in the project.”

Figure 6 provides a similar model to illustrate a project’s flexibility. A decision is within the room for maneuvering if it does not violate the consequences of previous decisions. The need of room for maneuvering is within the actual room for maneuvering in the early phase of projects (area A), but not during later parts of projects (area B). A major challenge in project management is that the need of room for maneuvering is typically at its highest when the actual freedom for maneuvering already has decreased significantly. Area B represents situations when some stakeholders (for example, users or project owner) have a desired room for maneuvering that is larger than the actual room. To satisfy the need for adjustments, changes have to be made, because the adjustments violate previous decisions. This generally reduces efficiency in the project. With reference to Figure 6, adequate front-end management means utilizing area A and minimizing area B. The project is not closed prematurely (utilize area A), an approach similar to the late locking advocated by Miller and Lessard (2000). Stakeholder alignment reduces the “desired room for maneuvering” after the project is finally decided upon (minimizing area B).

Consequences of different values on the uncertainty, significance of decisions and the degree of freedom to maneuver compared to the desired room for maneuvering in different project phases. (Based on Eikeland, 2001, p. 40)

Figure 6: Consequences of different values on the uncertainty, significance of decisions and the degree of freedom to maneuver compared to the desired room for maneuvering in different project phases. (Based on Eikeland, 2001, p. 40).

Midler (1995) and Verganti (1999) identified strategies to increase the area A and reduce the area B in Figure 6. The purpose is to avoid changes but to keep options open to satisfy as much as possible the anticipated need for maneuvering. Midler (1995) described a management strategy where early commitment is prevented while as much information as possible is gathered on the project. This increases the area A. In the second phase, the project is locked as precisely as possible. Finally, at the end of the project, progress is given maximum priority in order to solve the remaining technical obstacles.

Targeted Room for Maneuvering

Another approach implies that front-end analyses identify areas where there is substantial uncertainty related to one or a limited number of issues that might affect the scope of the project. In such a case, the bulk of the project could be locked in the front-end phase, while some issues remain unsettled until later stages, as illustrated in Figure 7. This approach is routinely used in hospital construction, where the final decision of medical equipment typically is made later than decisions regarding the physical construction.

Based on data from QA2 analyses, Olsson and Magnussen (2005) estimated that at the time when projects were finally approved, it was considered appropriate that an average of 6% of the projects’ total budget consisted of deliveries that where not finally specified or decided upon. Also, the analyses recommend that 9% of the project’s budget were allocated as reserve, to cover unexpected expenses. An approximation of the relative size of projects that can be left open is therefore estimated to be in the range between 10 and 15% of total budgets.

Locking the major part of a project, but keeping selected items in the specification open

Figure 7: Locking the major part of a project, but keeping selected items in the specification open.

Concluding Discussion

The paper emphasizes that successful projects are characterized by a clear and well-founded strategy in combination with sufficient tactical flexibility. Establishing a strategy that provides a distinct direction but leaves room for maneuvering is arguable the most essential part in front-end management. In ensuring flexibility, the study suggests some measures that may be of use in front-end preparations of projects:

  • Late locking of projects can be applied either for the whole or part of a project. Late locking of parts means that selected parts of the specification can still be open when the project is finally decided upon. Findings presented in this paper indicate that project content equivalent to some 10–15% of the total project budget can be finally specified even after the decision to go ahead with the projects as a whole.
  • Splitting or modularizing major projects offer flexibility for decision-makers. There are indications that such an approach contributes to better cost control but reduced benefit realization, compared to major projects with an irreversible final commitment.

Project management as an academic and management discipline is essentially applying tools and techniques for efficiency support by focusing on cost control, progress, and quality of the output. In an engineering tradition, the objective of front-end management is to provide a well-defined framework for efficient project implementation. The purpose is to a large extent to minimize the need for flexibility. This does not mean that flexibility is undesirable; it is usually considered useful for adjustments within the strategic framework, and especially regarding how requirements shall be met. This perspective is often held by project managers and contractors. It was also the dominating perspective in the early phase of the Norwegian quality-at-entry regime.

Based on what is termed a social science tradition, an objective of the front-end phase is to align the content of the project to objectives of stakeholders. This is also the essential part of the current, revised Norwegian quality-at-entry regime. Objectives may be drifting; implying certain needs for flexibility. However, a strategic focus is needed and this is supported by a robust project concept. A final conclusion is that neither front-end management nor flexibility is properly emphasized in the curriculum of project management. As a consequence, these issues are largely left to other disciplines.

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