Assessing the Value of Flexibility in Large Projects

Abstract

Large projects are complex undertakings that often involve lengthy execution, sizable budget, and substantial uncertainty. A large project is typically managed as a single, holistic program. This study compares the execution of a large project as a one-shot project (LT) with its execution via a series of smaller, possibly shorter-term, projects (SQ). We develop analytical models to evaluate the LT and SQ approaches pointing to the fundamental role of flexibility in project management, under varying conditions of project complexity, environmental dynamics, resource constraints, and uncertainty. Our findings indicate that LT is favored when the environment is stable, and SQ is preferred when the project budget is very high, project integration costs are low, and the rate of reduction over time in the suitability of the project outcome to its intended requirement is high. In addition, we show how technological uncertainty and uncertainty about the importance of the project’s outcome at the time of project completion affect the choice between LT and SQ. The analysis of several real-world case studies highlights the importance of flexible execution in large projects within dynamic environments. Funding: This work was supported by the Archimedes Center, The Henry Crown Institute of Business Research in Israel, and Blavatnik Interdisciplinary Cyber Research Center (ICRC) at Tel Aviv University.