Project Uncertainty Management: A New Approach – The ‘Lost Opportunities’ Practical uncertainty management seen from a project joint perspective

Abstract: The thesis examines uncertainty management in a single-project environment. In addition to the main chapters, Appendix I contains the published papers that this thesis is built upon, Appendix II contains the bibliography from the project ‘Practical Uncertainty Management in a Norwegian Project Owner’s Perspective’ (‘The PUS project’), and Appendix III lists the references. In the early 2000s, uncertainty analysis became more or less mandatory for large projects in Norway. However, there was no clear evidence that the companies and projects subsequently used the results of the analyses when managing uncertainty. A lot of projects experienced that although they had done an uncertainty analysis they could not use the results in their uncertainty management process. Some of the relevant questions worth addressing are: Who should be involved in the uncertainty management process? What type of uncertainty or risks should be addressed in the process? Who should be responsible for following up the uncertainty on more strategic and tactical levels? Who ‘owns’ the process and who should be responsible for managing it? What types of practical tools are needed and how should the uncertainty management process be organized? Projects have traditionally strived towards predictability and to keep all critical factors under control. However, for large and complex projects, such predictability does not exist in reality. In the past, a project was about delivering a unique task, whereas today many projects are regarded as ‘change agents’ and they therefore have purpose: they should deliver the objectives and give maximum benefit for the project owners. This view creates new demands regarding how projects should be planned and executed. In classical project management theories, project managers were supposed to ‘stick to the plan’, and deliver their projects according to specifications and within the cost and time frame established at the beginning of the project. However, in a shifting and changing environment with a lot of foreseen and unforeseen uncertainties, sticking to the plan is no longer an option for many projects. Instead, they need to manage uncertainty. Most important findings and contributions to research presented in this thesis The empirical data in this thesis demonstrate that many projects still do not deal with threats and opportunities in a balanced way. The data from studies show more or less the same pattern – there are many more threats than opportunities in uncertainty registers. Also, opportunities that were identified in the execution phase were few and often not exploited at all. The case studies show that the private sector and public sector projects had more or less the same focus on threats. In addition, private projects were not better at exploiting opportunities than public projects. All of the studied projects seemed to be quite conservative about new ideas and change, and were not seeking new opportunities in their execution phase. Some opportunities were identified late in the project during uncertainty analysis workshops, yet the identification of new opportunities does not mean that projects will utilize such opportunities after the workshops are finished. The empirical data show that managing risk is hard and exploiting opportunities is even more difficult, and is a different task than dealing with threats. The empirical data also show that exploiting opportunities often requires the project owner and the project management team to accept changes and have both the will and the power to change the solutions or deliverables described in the plans and in project management documentation. It is often a difficult task to motivate people to change; an opportunity must be deemed significantly better than the planned solutions if it is to be considered worth taking, since implementing an opportunity means that the project must use money and time to change plans or, in the worst case, the whole concept. In addition, the data show that many projects do not want to consider new opportunities. They may consider the list of opportunities that comes up in an uncertainty analysis as a gamble, because it means that they will need to change the process or concept, and it may be a gamble that the project management team will not be paid for or will not derive any benefit from. It is not possible to get an opportunity into a project without the project management team’s willingness to change the existing plans. This means getting an opportunity into the project demands willingness and authority from the project sponsor and project management, since both must disregard something that they earlier in the process had agreed upon as the best solutions. This suggests that an opportunity has to be extremely interesting to be considered, because - The project must be willing to change contracts, concepts, and plans to exploit a possible opportunity - The project must abandon something it had earlier accepted as the best solution - The project must use time and money on exploiting something that is uncertain – it cannot be certain that the effect will be positive or give benefits. The six most important contributions in this thesis can be summarized as follows 1. The project uncertainty management maturity has increased as a result of the focused improvement efforts in Norway 2. The context matters and the focus of the analyses will differ if the project owners participate in the process 3. A new and improved uncertainty management process has been developed 4. A new tool for uncertainty management has been developed 5. Five characteristics of uncertainty and four characteristics of opportunities have been developed 6. Four characteristics of opportunities in projects have been developed Research on organizations and projects has shifted from developing tools and techniques to focusing more on understanding human behaviour. This means that project management scholars acknowledge that both the context and the humans involved matter, and that there is a need to understand the organizational culture and the process in use in order to develop and change organizations. If a company wants to develop skills in uncertainty management, it needs to understand its employees’ behaviour, the culture in the company, the project owners’ role, and how stakeholders interact with the uncertainty management process. If projects are to be efficient in dealing with uncertainty, they need to understand, interpret, and handle uncertainty both within and outside the project. Project manager must understand their circumstances and the impact of the efforts that they have initiated. If there is no focus on learning and knowledge creation as projects progress, then the process of managing uncertainty will not be efficient. This implies that the mother-organization, which is responsible for training and developing new methods, needs a strong focus on learning and knowledge sharing so that the new methods, tools, and techniques will be applied in ‘all’ projects. Since 2005, a joint Norwegian effort on uncertainty management comprising the PUS project and several projects in the Concept research programme has clearly improved the level of maturity regarding uncertainty management in many companies in Norway. However, this is still no guarantee of success in all projects. Fewer cost overruns come at a price – there is a tendency to spend more money on each project, which means Norway gets fewer roads, railways, schools, and oil plants for the same money today as in the mid-2000s. A high level of maturity regarding uncertainty management does not necessarily mean that all projects are efficient in their planning and execution. It is not known whether projects in Norway have become better at estimating uncertainty in time and cost, whether the estimates are more realistic now than in year 2000, whether the project managers and owners simply have been better at adding contingencies to their budgets, whether the contingencies or time buffers have been raised, or whether project managers and owners has been better at managing the uncertainty that exists in our changing world