Projects trapped in their freedom

analyzing flexibility aspects of projects based on results from front-end quality assurance

a The Norwegian University of Science and Technology,
Department of Civil and Transport Engineering, Høgskoleringen 7A
N-7491 Trondheim, Norway, Telephone +47 73594640, Fax +47 73597021

b SINTEF Technology and Society, 7465 Trondheim, Norway, Telephone +47 97713628, Fax +47
73597021

* Corresponding author. nils.olsson@ntnu.no

1. Introduction

The purpose of this paper is to use experiences from the Norwegian Quality-at-Entry Regime for major governmental investments to illustrate aspects on project flexibility. The paper is also an attempt to contribute with empirical results on some project management issues related to project flexibility.

To begin with, theoretical traditions in project management are discussed. Some models for illustration of project flexibility are also presented. Secondly, the nature of the Norwegian quality-at-entry regime for major governmental investments is analyzed in general. Project flexibility is chosen as a perspective to illustrate some aspects of the regime in more depth.

1.1 Project management

Söderlund (2004) discusses 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 claims that a number of writers trace the intellectual roots of project management research and knowledge to various types of planning techniques, such as Program (or Project) Evaluation and Review Technique (PERT) and Critical Path Method (CPM. The other tradition has its intellectual roots in the 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. In a similar distinction between project management traditions, Crawford and Pollack (2004) uses the terms “hard” and “soft”. Crawford and Pollack (2004) relate “hard” project management approaches to objectivist, scientific approaches and has parallels to Söderlund's (2004) engineering tradition. The “soft” project management approaches of Crawford and Pollack (2004) stem from an interpretivist and constructivist schools of thought, and share similarities with Söderlund's (2004) social science tradition.

According to Engwall (2003), research on project management has been dominated by what he calls “the lonely project” perspective, with little emphasis on project context and organizational history. Engwall (2003) and Jugdev (2004) point out that current project management knowledge is a practitioner-driven theory focusing on supporting advices to the project manager, apparently referring to the engineering tradition.

1.2 Flexibility and project management

Flexibility is used in a rather wide meaning in this paper, based on the definition of Husby, Kilde, Klakegg, Torp, Berntsen, and Samset. (1999): flexibility is “the capability to adjust the project to prospective consequences of uncertain circumstances within the context of the project.” Flexibility is one approach to prepare projects for the effects of uncertainty. Flexibility could be conceived in numerous ways. We treat flexibility as a project characteristic or property. Terms like adaptability and robustness are often used when discussing characteristics that this paper calls flexibility. Flexibility can also be seen as availability of options that make irreversible decision more reversible or postponing irreversible decisions until more information is available (Brennan & Trigeoris, 2000).

The definition above clearly defines uncertainty as an important element of flexibility, which calls for a discussion of the concept of uncertainty. The uncertainty of a decision in a project can be described by the gap between the information needed to make a decision that is entirely consistent with the actual outcome, and the information available at the moment of decision making (Galbraith, 2001). Mikkelsen and Riis (2003) identify a fundamental dilemma in project planning: that the importance of decisions is at the highest at the same time as the available information is at its lowest. A common way of reducing this dilemma is to increase the available knowledge about the project. One key idea in project flexibility is to postpone irreversible decisions in the front-end phase of projects, in addition to (or instead of) gathering more information.

The engineering tradition of project management, referred to by Söderlund (2004) and Crawford and Pollack (2004) is focused on stability for the project, particularly in the later phases of a project. The social science tradition has a greater understanding of the needs for flexibility and adaptability. Kreiner (1995) points out that the traditional focus on stability becomes challenged under uncertainty, which creates what he calls “drifting environments.” The drifting environments (or “context,” as termed by Engwall, 2003) of a project are not necessarily caused by actual changes in the project context, but may also be the result when the project owners and users stakeholders get a better understanding of, and ability to express, their actual needs. According to Samset (2003), contextual uncertainty is associated with the surroundings or context of a project and usually considered beyond the scope and authority of the project. The project has limited opportunity to influence the contextual uncertainty. Olsson (2004) indicates that flexibility is generally not desirable when the unit of analysis is limited to the project itself, but it can be rational when a wider context is included in the analysis.

Projects are traditionally seen as temporary organizations designed for unique tasks (Cleland, 2004), often in contrast to the mass producing core activities of organizations. At present, projects are initiated to solve tasks of almost any type (Engwall, 2003) to the extent that the Western society seems to be heading towards a “projectified society” (Gareis, 2004; Lundin & Söderholm, 1995). A major benefit of organizing a task as a project is the freedom to create an organization more or less from scratch. While uniqueness is the competitive advantage of projects as a way of organizing, changes and lack of predictability are commonly seen as the major pitfalls of projects. Successful projects are characterized by control and governance (Hall, 1980; Morris & Hough, 1991; Miller & Lessard, 2000).

The work of permanent organizations, on the other hand, is traditionally seen as repetitive tasks, suitable for permanent organizations (Taylor, 1912). Focus in manufacturing and supply chains has moved from mass production, via lean to agile production, (Asbjørnslett, 2003). As a part of this development, the emphasis on flexibility has increased, to the extent that “changeability” is listed on equal terms as effectiveness and efficiency when establishing performance measurement systems (Andersen, Fagerhaug, & Rolstadås, 1998).

2. The quality-at-entry regime

The largest public investment projects in Norway amount to about US$3 billion per year totally, mainly channeled through the Ministries of Labor and Government Administration, Finance, Defense, and Transport and Communications (Proposition to Parliament no. 1 (2001-2002)). In 1998, the Norwegian ministry of finance initiated an analysis of a number of major governmental investments. Effective from 2000, the Norwegian Ministry of Finance initiated mandatory up-front quality assurance and uncertainty analysis of all governmental investments in Norway exceeding NOK 500 millions (US$60 million), the so-called Quality-at-Entry Regime. The regime was introduced in response to a situation with large overruns (Berg et al., 1999).

As a consequence, the responsible ministries are required to undertake assessments prior to the parliament's appropriation of the projects, with a particular aim to review cost estimates and major risks that might affect the projects when implemented. Such analyses are given the short name Quality Assurance 2 (QA2). The aim is to establish realistic cost and time frames for the projects. . Four consulting groups, experts in project management, were commissioned to undertake the assessments. Seen from a project life cycle perspective, the quality-at-entry analyses are made in the end of the front-end phase.

Important elements in the QA2 Quality-at-Entry assessments are (Proposition to Parliament no. 1 (1999-2000):

  • Verify the cost estimates in order to achieve commitment for realistic project budgets
  • Establish a list that specifies how the cost can be reduced if the set budget cannot be met– the reduction list
  • Advise on budget reserves that can cover unforeseen cost. The reserves should serve as a realistic tool to ensure that the projects could be carried out based on the allocated funds and, if need be, by also using the reduction list
  • Advise on how the budget reserves should be managed, specifically who would have the authorization to use the funds.

The quality-at-entry assessments shall also address issues such as important prerequisites, contract management and project organization.

The purpose of the QA2 assessments was to give the ministry of finance and other involved ministries an independent analysis of the project before approval in parliament. In the consultant's mandates, it is clear that the controlling aspect is the main focus. Based on the chosen content of the Quality-at-Entry Regime, the assessments appear to have their roots in the engineering tradition of project management. Main attention is paid on securing that he projects can be carried out as planned, with a particular emphasis on the budget. An important part of the QA2 assessments has been stochastic calculations of the expected cost. Dedicated software tools are used for such calculations. Even though organizational aspects of the projects are included in the quality-at-entry assessments, this is done from a controlling perspective: how do we secure that the projects can be carried out as planned? The reasons for such a perspective, documented in the preparations for the regime, were cost overruns and varying treatment of uncertainty in project estimates were identified as major challenges.

Experiences from the Quality-at-Entry QA2 regime have indicated a need to focus on the basic rationale of projects as to satisfy needs. The Quality-at-Entry Regime has been revised and extended to include an external assessment of different project concepts. This new part of the regime is called Quality Assurance 1 (QA1).

4.6 QA1 - societal and stakeholder perspectives

After presenting empirical results related to the preparations and execution of the Quality-at-Entry Regime, we now continue to a brief analysis of a new aspect of the regime. After the first round of four years, the Quality-at-Entry Regime has been revised and new consultant contracts were awarded in June 2005. In the revision of the regime, a new part has been added that includes an external assessment of different project concepts, termed Quality Assurance 1 (QA1). Five years of trailing research served as input to the revision of the Quality-at-Entry Regime. According to Magnussen and Samset (2005), QA1 is established based on a belief that in order to achieve substantial improvements of project performance, the basic concepts of projects shall be analyzed, not only the final proposal, as is done in QA2.

QA1 includes an analysis of the prerequisites for a proposed project, a needs analysis, analyses of the documented strategy and requirements, and finally, a comparison of alternative concepts. An important element of QA1 is that at least three alternatives shall be analyzed, including a reference alternative which only includes maintenance and other actions needed to continue to use existing resources. QA1 has a wide perspective and focuses on end users and society as a whole. The purpose is to identify the most adequate project based on relevant needs and priorities. The societal effects and the interest of different stakeholders are key criteria in the comparison of project alternatives to be carried out in QA1.

3. Method and material

Two data sets have been used. Table 1 gives an overview of some characteristics of the two data sets. The first data set describes the background for the Quality-at-Entry Regime. This material includes 14 projects initiated between 1986 and 1998. The prime source is reports written as a preparation for the Quality-at-Entry Regime. These analyses are well documented and submitted to public inquiry before a summary of the results were included in a parliamentary bill. In addition, public evaluation reports of governmental projects that have been submitted to the parliament have been used. Both types of reports are comprehensive and quality-assured analyses of the projects.

The second source of information consists of reports from quality assurance assignments 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 if 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.

Table 1. An overview of the two used datasets.

Data set Background for the Quality-at-Entry regime Projects under the Quality-at-Entry regime (QA2)
Number of projects (N) 14 48
Time if project initiation 1986-1998 2000 -
Data source Evaluation reports Consultant reports
 
Project type Number Per cent Number Per cent
Hospitals 2 14 % 1 2 %
Transportation infrastructure 6 43 % 25 52 %
Defense 3 21 % 16 33 %
Public buildings 3 21 % 6 13 %
 
Project size (final or last known)
<US$15 million (NOK 100 million) 2 14 % 0 0 %
US$15 - 60 million (NOK 100-500 million) 4 29 % 5 10 %
US$60 - 250 million (NOK 500-2000 million) 4 29 % 34 71 %
>US$250 million (NOK 2000 million) 4 29 % 9 19 %

As Table 1 shows, the material related to the preparations for the Quality-at-Entry Regime is of a retrospective type. The data related to projects that were subject to analysis under the Quality-at-Entry Regime is of a prospective type. A research program, CONCEPT, was established to do research on the effects of the new regime and to follow the projects that were subject to analysis. The projects to be studied were therefore defined before the data collection took place. The variables to be studied were also defined prior to the data collection based on the format of the Quality-at-Entry analyses.

In addition to the written material, structured interviews were carried out with key stakeholders in many of the projects, including the ministries, government agencies and project organizations. The ministries and project organizations in eight of the first 20 projects were interviewed. Further interviews of agencies and project managers in the Defense Ministry, the Public Roads Administration and the Directorate of Public Construction and Property were carried out.

4. Results

In the following, the empirical data are presented. To begin with, we present results from a re-analysis of the material that served as a decision basis when the Quality-at-Entry Regime was established. Secondly, there are results based on performed Quality-at-Entry analyses. Finally, there is a brief presentation of the next steps in the development of the regime.

4.1 Background for the quality assurance regime re-analyzed

Based on the available reports from the analysis that was done as a preparation for the Quality-at-Entry Regime, we have reanalyzed the projects in a flexibility perspective. The type of projects in this part of the study is shown in Table 1. The analyzed projects were been initiated between 1986 and 1998.

The types of flexibility that was observed in the projects have been analyzed, and is summarized in Table 2. A distinction is made between scope changes, iteration and no observed use of flexibility. Iterations indicate strategic re-configurations of the projects, while scope changes indicate adjustments with less strategic implication. Scope changes were common, particularly during the planning phase. Only one project could be executed as planned. This means that in the sample of projects related to the period before the Quality-at-Entry Regime, projects were subject to adjustments of both the basic project concepts (manifested by iterations), as well as changes within the defined concepts (generating scope changes).

The original analysis (Berg et al., 1999) claimed that unsatisfactory project results, mostly cost overruns, often came as a consequence of poor preparations of the projects before they were presented to the parliament for final approval. In a flexibility perspective, this reanalysis indicates that the analyzed projects were subject to project flexibility, particularly in the planning and execution phases. The background for the Quality-at-Entry Regime, therefore, indirectly points to project flexibility as a major problem in governmental investments.

Table 2. Type of flexibility observed in different project phases in the first set of studied projects (N=14)

Front-end Planning Execution No phase
Scope changes 0 7 2 N/A
Iterations 2 2 0 N/A
No flexibility 0 0 0 1

4.2 Results from quality-at-entry reports seen in a flexibility perspective

Mandatory quality-at-entry analyses of governmental investments were carried out by external consultants on behalf of the responsible ministry. The consultants present a report that compiles the results from the quality assurance. By the time of cutoff for data going into this paper, 54 projects had been subject to quality-at-entry analysis. General information was obtainable for 48 of these projects. Table 1 shows a summary of the type and size of the projects.

Flexibility is, with some exceptions, not directly addressed as a term by its own in the QA2 analyses. However, several issues discussed previously in this paper as different aspects of flexibility are to be found. The QA2 reports include an overview of critical success factors and pitfalls. Table 3 shows a summary of how frequent three aspects of flexibility were mentioned in the summaries of the quality-at-entry reports. The aspects were change management, structured approach to flexibility and finally predictable funding. Issues related to scope change management are summarized in the columns for change management in Table 3. Iterative decision processes and flexibility in the technical solutions are summarized in the columns labeled structured approach to flexibility. This was the only area where the term “flexibility” was explicitly used in the quality-at-entry reports. Finally, management of uncertain funding is covered in the columns labeled predictable funding. Table 3 shows a summary of how frequently these aspects of flexibility were mentioned as one of the top issues in the project analyses. The overview only covers occurrences in the summaries of the reports, meaning that a prioritization among the aspects has been made.

Table 3. Key project aspects related to project flexibility as mentioned in the summaries of the quality-at-entry reports (QA2). N=48

Change management Structured approach to flexibility Predictable funding
Percent No. Percent No. Percent No.
Pitfall 33 % 16 4 % 2 4 % 2
Key success factor 25 % 13 6 % 3 2 % 1
Pitfall or key success factor 50 % 24 10 % 5 6 % 3

Management of changes was the most frequent issue in the quality-at-entry reports related to flexibility. It was mentioned as a top issue in 24 (50 %) of the projects. In most cases, the purpose of change management was to establish a structured management of scope changes in order to minimize the amount and the size of the changes. In five projects, change management was mentioned as both success factor and pitfall, usually addressing the same issue, in essence an emphasis of the importance of change management. The apparent “double counting” in five projects means that the total number of projects addressing change management are not equal to the sum of each issue individually in Table 3. Flexibility in the product or decision process was mentioned in 10% of the projects. The availability of predictable funding was frequently mentioned in the text of the reports. However, it was only listed among the top pitfalls or key success factors in three projects.

Table 2 indicated that flexibility was a frequent problem in the studied projects from the time before the Quality-at-Entry Regime. For later projects, after the Quality-at-Entry Regime, the results in table 3 indicate that flexibility management, typically flexibility minimization, was a common success factor in the quality-at-entry reports (or that the lack of flexibility management was mentioned as a pit fall).

5. Discussion

The analysis indicates that flexibility was seen as one of the major problems in governmental projects prior to the introduction of the Quality-at-Entry Regime. As discussed in the introduction section, the engineering tradition in project management theory then proposes a stronger emphasis on the front-end phase in order to adequately prepare the projects. In this perspective, one of the objectives of the Quality-at-Entry Regime was to reduce the flexibility of the projects. The purpose was to make sure that the project is well defined, both in terms of project scope and organization.

The strong emphasis on scope change management in the QA2 reports indicates that changes and flexibility primarily are treated as something to be minimized, or at least to have a strict regime for. Use of reduction lists can be seen as a structured approach to flexibility. However, the sole purpose of the reduction lists is to keep the project within budget. This might be described as a “negative” aspect of project flexibility. There is no intention to use the freedom to maneuver to increase the effectiveness, or the benefit side of the projects. In contrast, a “positive” or external freedom to maneuver would include options for increased user satisfaction with the projects. This can be explained by the background to the Quality-at-Entry Regime, where the observed flexibility of the projects often was aimed at increasing the benefit from the projects for the involved stakeholders. This frequently resulted in cost increases. A key purpose of the Quality-at-Entry Regime was to stop this development.

We noted that the possibility to establish a more or less customized organization for a unique task is one of the main reasons that projects are set up. As a contrast, control is a key issue in the Quality-at-Entry Regime. Once established to have freedom and adaptability, project management, or at least the engineering tradition of project management, is focused on reducing or controlling this freedom of the projects. Projects thus appear to be trapped in their freedom. The potential freedom of projects is so large that major management emphasis is directed towards reducing and controlling flexibility. Permanent organizations have a different perspective. Repetitive tasks are traditionally organized in ways that utilize economies of scale and to utilize the learning curve. This has usually meant rigid processes and high investment. Coming from a tradition of repetitive tasks, successful permanent organizations are characterized by adaptability (Mintzberg, 1994).

Table 4. Flexibility is a success criterion of permanent organizations and a strength of projects.

Permanent organization Project
Strength Repeatability Flexibility
Success criteria Flexibility Focus

Table 4 illustrates, with the lack of nuances that comes with such matrixes, that flexibility is not the inherent strength, but a success criteria of permanent organizations. As a contrast, flexibility is the inherent strength of projects or temporary organizations, and controlling this flexibility by focus is a key success criterion of this type of organizations. The lack of nuances in Table 4 includes the fact pointed to by Engwall (2003) that many organizations are neither purely projects nor permanent. Reality is therefore more like a continuum of gray scales, where the degree of “permanent” or “project” character of organizations varies. The discussion above then relates to organizations with a high degree of repetitive tasks or “permanent,” and similar for “projects.”

It is claimed that QA2 aims to reduce flexibility, at least in the planning and execution phases of projects. Seen in isolation, this means a reduction of flexibility. However, the introduction of QA1 means a stronger emphasis on analyzing alternatives in the front-end phase than has previously been required in this manner. By seeing QA2 and QA1 in combination, the Quality-at-Entry Regime is an opportunity to reduce flexibility options in the planning and execution phases, and to increase and structure these options in the front-end phase.

Some authors on project management, including Söderlund (2004), argue that the engineering and social science tradition are incompatible from a theoretical standpoint. The discussion about QA1 and QA2 indicate that the two perspectives might be practically compatible when analyzing one particular project, but with a displacement in time. The Norwegian Quality-at-Entry Regime strives to utilize the best of the two perspectives, drawing on the social science perspective in the early phase (represented by QA1), and then switching focus to the engineering perspective in the execution phase (represented by QA2). The fact that these traditions co-exist in the minds of different actors involved in a project does not contradict Söderlund's (2004) notion about the mutual incompatibility from a theoretical standpoint.

In accordance with the engineering tradition in project management, the Quality-at-Entry Regime strives to provide the project owner and project management control over the environments related to the project, or a type of “framing” of the projects. To achieve a high efficiency in the projects, the stakeholders appear to strive for control of the prerequisites for their tasks. It is in accordance with the engineering tradition, with its roots in project planning, that project management shall strive for control of the environments related to the project. In the QA2 reports, this is represented by the high priority given to change management, as shown in table 3. As shown by the use of project reserves and reduction lists, stakeholders also strive for freedom to maneuver within the defined prerequisites. The QA2 aims at defining the projects as precisely as possible, but still provide project management with the freedom to decide how the specifications shall be met, work carried out and budgets to be held. In a similar way, Turner (2004) claims that one of four necessary conditions for project success is that the project manager is empowered. The project owner should give guidance on how the project can be best achieved, but allow the project manager flexibility to handle unforeseen circumstances as they chose.

6. Conclusion

The purpose of this paper was to use experiences from the Norwegian Quality-at-Entry regime for major governmental investments to illustrate aspects on project flexibility. From a flexibility perspective, project management as a discipline was compared to other managerial disciplines. Projects are described as trapped in their freedom. The potential freedom of projects as temporary organizations is so large that major emphasis in project management must be directed towards reducing and controlling the freedom, or flexibility, of projects.

Theoretical traditions in project management were discussed. The analysis of the Norwegian Quality-at-Entry Regime for major governmental investments indicated that the regime has its theoretical roots in the engineering tradition of project management. However, the extension to include an early analysis on project alternatives appears to have more in common with the social science tradition than the engineering one. This means that the quality assurance regime, including both QA1 and QA2, is an attempt to use the best of the two worlds divided by the time scale; use social science “glasses” when analyzing the alternatives, then switch to engineering “glasses” to execute the project.

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