Development of conceptual model of project value dynamics analysis in conditions of uncertainty
DOI:
https://doi.org/10.15587/1729-4061.2021.239195Keywords:
cost-benefit ratio, risk assessment, value engineering, resource consumption, innovation managementAbstract
A conceptual model for analyzing the dynamics of the value of the project, achieved as a result of engineering, under conditions of uncertainty has been developed. In the methodological context, the proposed approach is based on an array of isovalues, each of which corresponds to its own level of optimism in forecasting the cash flow for the project. With the increase in the efficiency of the project due to engineering, the entire array of iso-value lines’ changes its geometrical position, moving further from the origin (in the four-dimensional space "time-benefit-cost-risk"). The proposed model includes three stages. At the first stage, input information is collected and the corresponding analysis is initiated. The result of the second stage is a multivariate cash flow forecast and calculation of the benefit-cost ratio (BCR) and its changes for each scenario. The third stage provides the calculation of the expected BCR and its change, an assessment of the risk of making an erroneous decision and changing this risk as a result of the engineering session. The model makes it possible to calculate the achieved proportion of the static and dynamic vectors of change in the value of the project, which is one of the key manifestations of the scientific novelty of the work. In the example considered, the share of the dynamic vector of growth in the value of the project was found to be 35.47 %. The model has an environmental property - the assessment of the success of value engineering under conditions of uncertainty is carried out on the basis of the annual total benefits and the annual total costs throughout the project cycle. Thus, the analysis takes into account the impact of the project on the environment, which is reflected in the risk assessment. The given case testifies to the feasibility of applying the model in the practice of engineering the value of construction projects.
References
- Friedman, K., Lou, Y., Ma, J. (2015). Shè Jì: The Journal of Design, Economics, and Innovation. She Ji: The Journal of Design, Economics, and Innovation, 1 (1), 1–4. doi: https://doi.org/10.1016/j.sheji.2015.09.002
- Schwab, K., Malleret, T. (2020). COVID-19: The Great Reset. ISBN Agentur Schweiz, 280.
- Poggenpohl, S. H. (2017). Blindspots in Economics and Design: A Review of John Heskett’s Design and the Creation of Value. She Ji: The Journal of Design, Economics, and Innovation, 3 (4), 251–261. doi: https://doi.org/10.1016/j.sheji.2018.02.002
- Integrated Project Delivery: A Guide. AIA. Available at: https://www.aia.org/resources/64146-integrated-project-delivery-a-guide
- Roos, G. (2016). Design-Based Innovation for Manufacturing Firm Success in High-Cost Operating Environments. She Ji: The Journal of Design, Economics, and Innovation, 2 (1), 5–28. doi: https://doi.org/10.1016/j.sheji.2016.03.001
- Bugrov, O., Bugrova, O. (2020). Control process development on the ground of project value dynamics laws. Technology Audit and Production Reserves, 2 (4 (52)), 11–19. doi: https://doi.org/10.15587/2706-5448.2020.200995
- Lee, S. M., Trimi, S. (2018). Innovation for creating a smart future. Journal of Innovation & Knowledge, 3 (1), 1–8. doi: https://doi.org/10.1016/j.jik.2016.11.001
- Bos-de Vos, M., Volker, L., Wamelink, H. (2019). Enhancing value capture by managing risks of value slippage in and across projects. International Journal of Project Management, 37 (5), 767–783. doi: https://doi.org/10.1016/j.ijproman.2018.12.007
- Iliescu, M., Ciocan, R. (2017). Modern Technologies Innovation in Use for Quality Control on Construction Site. Procedia Engineering, 181, 999–1004. doi: https://doi.org/10.1016/j.proeng.2017.02.499
- Buchanan, R. (2015). Worlds in the Making: Design, Management, and the Reform of Organizational Culture. She Ji: The Journal of Design, Economics, and Innovation, 1 (1), 5–21. doi: https://doi.org/10.1016/j.sheji.2015.09.003
- Martinsuo, M., Klakegg, O. J., van Marrewijk, A. (2019). Editorial: Delivering value in projects and project-based business. International Journal of Project Management, 37 (5), 631–635. doi: https://doi.org/10.1016/j.ijproman.2019.01.011
- Vesic-Vasovic, J., Radojicic, M., Nesic, Z., Mihailovic, D. (2014). Possibility of choosing development investment programs of a production company by applying discounted investment appraisal technique. Journal of Engineering Management and Competitiveness, 4 (1), 41–46. doi: https://doi.org/10.5937/jemc1401041v
- Volden, G. H. (2019). Assessing public projects' value for money: An empirical study of the usefulness of cost–benefit analyses in decision-making. International Journal of Project Management, 37 (4), 549–564. doi: https://doi.org/10.1016/j.ijproman.2019.02.007
- Wu, D., Ma, X., Zhang, S., Ma, J. (2019). Are more economic efficient solutions ignored by current policy: Cost-benefit and NPV analysis of coal-fired power plant technology schemes in China. Ecological Indicators, 103, 105–113. doi: https://doi.org/10.1016/j.ecolind.2019.02.039
- Gaspars-Wieloch, H. (2017). Project Net Present Value estimation under uncertainty. Central European Journal of Operations Research, 27 (1), 179–197. doi: https://doi.org/10.1007/s10100-017-0500-0
- Bilqist, R. A., Dachyar, M., Farizal, F. (2018). Project Valuation in the Geothermal Power Plant Project: A Comparison of Expected Net Present Value and Static Net Present Value Approaches. SSRN Electronic Journal. doi: https://doi.org/10.2139/ssrn.3248120
- Casady, C. B., Gómez-Ibáñez, J. A., Schwimmer, E. (2020). Toll-managed lanes: A simplified benefit-cost analysis of seven US projects. Transport Policy, 89, 38–53. doi: https://doi.org/10.1016/j.tranpol.2020.02.001
- Alsultan, M., Jun, J., Lambert, J. H. (2020). Program evaluation of highway access with innovative risk-cost-benefit analysis. Reliability Engineering & System Safety, 193, 106649. doi: https://doi.org/10.1016/j.ress.2019.106649
- Kahraman, C., Tolga, E., Ulukan, Z. (2000). Justification of manufacturing technologies using fuzzy benefit/cost ratio analysis. International Journal of Production Economics, 66 (1), 45–52. doi: https://doi.org/10.1016/s0925-5273(99)00103-6
- Garrote, J., Bernal, N., Díez-Herrero, A., Martins, L. R., Bodoque, J. M. (2019). Civil engineering works versus self-protection measures for the mitigation of floods economic risk. A case study from a new classification criterion for cost-benefit analysis. International Journal of Disaster Risk Reduction, 37, 101157. doi: https://doi.org/10.1016/j.ijdrr.2019.101157
- Pivorienė, A. (2017). Real Options and Discounted Cash Flow Analysis to Assess Strategic Investment Projects. Economics and Business, 30 (1), 91–101. doi: https://doi.org/10.1515/eb-2017-0008
- Martinuzzi, A., Blok, V., Brem, A., Stahl, B., Schönherr, N. (2018). Responsible Research and Innovation in Industry – Challenges, Insights and Perspectives. Sustainability, 10 (3), 702. doi: https://doi.org/10.3390/su10030702
- Cao, Y., Wan, N., Zhang, H., Zhang, X., Zhou, Q. (2020). Linking environmental regulation and economic growth through technological innovation and resource consumption: Analysis of spatial interaction patterns of urban agglomerations. Ecological Indicators, 112, 106062. doi: https://doi.org/10.1016/j.ecolind.2019.106062
- Sofia, D., Gioiella, F., Lotrecchiano, N., Giuliano, A. (2020). Cost-benefit analysis to support decarbonization scenario for 2030: A case study in Italy. Energy Policy, 137, 111137. doi: https://doi.org/10.1016/j.enpol.2019.111137
- Kong, L., Ma, B. (2020). Evaluation of environmental impact of construction waste disposal based on fuzzy set analysis. Environmental Technology & Innovation, 19, 100877. doi: https://doi.org/10.1016/j.eti.2020.100877
- Manzoor, T., Rovenskaya, E., Muhammad, A. (2016). Game-theoretic insights into the role of environmentalism and social-ecological relevance: A cognitive model of resource consumption. Ecological Modelling, 340, 74–85. doi: https://doi.org/10.1016/j.ecolmodel.2016.09.007
- Hendiani, S., Bagherpour, M., Mahmoudi, A., Liao, H. (2020). Z-number based earned value management (ZEVM): A novel pragmatic contribution towards a possibilistic cost-duration assessment. Computers & Industrial Engineering, 143, 106430. doi: https://doi.org/10.1016/j.cie.2020.106430
- Muriana, C., Vizzini, G. (2017). Project risk management: A deterministic quantitative technique for assessment and mitigation. International Journal of Project Management, 35 (3), 320–340. doi: https://doi.org/10.1016/j.ijproman.2017.01.010
- Durga Sruthi, M., Aravindan, A. (2020). Performance measurement of schedule and cost analysis by using earned value management for a residential building. Materials Today: Proceedings, 33, 524–532. doi: https://doi.org/10.1016/j.matpr.2020.05.210
- Mishakova, A., Vakhrushkina, A., Murgul, V., Sazonova, T. (2016). Project Control Based on a Mutual Application of Pert and Earned Value Management Methods. Procedia Engineering, 165, 1812–1817. doi: https://doi.org/10.1016/j.proeng.2016.11.927
- Koke, B., Moehler, R. C. (2019). Earned Green Value management for project management: A systematic review. Journal of Cleaner Production, 230, 180–197. doi: https://doi.org/10.1016/j.jclepro.2019.05.079
- Khodeir, L. M., El Ghandour, A. (2019). Examining the role of value management in controlling cost overrun [application on residential construction projects in Egypt]. Ain Shams Engineering Journal, 10 (3), 471–479. doi: https://doi.org/10.1016/j.asej.2018.11.008
- Cherrier, H., Türe, M. (2020). Value dynamics in ordinary object disposal. Journal of Business Research, 116, 221–228. doi: https://doi.org/10.1016/j.jbusres.2020.05.022
- Odimabo, O., Oduoza, C. F. (2018). Guidelines to Aid Project Managers in Conceptualising and Implementing Risk Management in Building Projects. Procedia Manufacturing, 17, 515–522. doi: https://doi.org/10.1016/j.promfg.2018.10.091
- Value Standard and Body of Knowledge (2007). SAVE International. Available at: http://www.pinnacleresults.com/images/VE_Standard_from_SAVE.pdf
- Paquin, J.-P., Gauthier, C., Morin, P.-P. (2016). The downside risk of project portfolios: The impact of capital investment projects and the value of project efficiency and project risk management programmes. International Journal of Project Management, 34 (8), 1460–1470. doi: https://doi.org/10.1016/j.ijproman.2016.07.009
- Wang, L., Kunc, M., Bai, S. (2017). Realizing value from project implementation under uncertainty: An exploratory study using system dynamics. International Journal of Project Management, 35 (3), 341–352. doi: https://doi.org/10.1016/j.ijproman.2017.01.009
- Willumsen, P., Oehmen, J., Stingl, V., Geraldi, J. (2019). Value creation through project risk management. International Journal of Project Management, 37 (5), 731–749. doi: https://doi.org/10.1016/j.ijproman.2019.01.007
- Lambert, M., Riera, B., Martel, G. (1999). Application of functional analysis techniques to supervisory systems. Reliability Engineering & System Safety, 64 (2), 209–224. doi: https://doi.org/10.1016/s0951-8320(98)00064-7
- Boehnert, J. (2018). Anthropocene Economics and Design: Heterodox Economics for Design Transitions. She Ji: The Journal of Design, Economics, and Innovation, 4 (4), 355–374. doi: https://doi.org/10.1016/j.sheji.2018.10.002
- Hensher, M. (2020). Incorporating environmental impacts into the economic evaluation of health care systems: Perspectives from ecological economics. Resources, Conservation and Recycling, 154, 104623. doi: https://doi.org/10.1016/j.resconrec.2019.104623
- González Jiménez, L., Blanco Pascual, L. (2008). Multicriteria cash-flow modeling and project value-multiples for two-stage project valuation. International Journal of Project Management, 26 (2), 185–194. doi: https://doi.org/10.1016/j.ijproman.2007.03.012
- Keshk, A. M., Maarouf, I., Annany, Y. (2018). Special studies in management of construction project risks, risk concept, plan building, risk quantitative and qualitative analysis, risk response strategies. Alexandria Engineering Journal, 57 (4), 3179–3187. doi: https://doi.org/10.1016/j.aej.2017.12.003
- Buehring, J., Bishop, P. C. (2020). Foresight and Design: New Support for Strategic Decision Making. She Ji: The Journal of Design, Economics, and Innovation, 6 (3), 408–432. doi: https://doi.org/10.1016/j.sheji.2020.07.002
- Sanchez, F., Bonjour, E., Micaelli, J.-P., Monticolo, D. (2020). An Approach Based on Bayesian Network for Improving Project Management Maturity: An Application to Reduce Cost Overrun Risks in Engineering Projects. Computers in Industry, 119, 103227. doi: https://doi.org/10.1016/j.compind.2020.103227
- Bugrov, O., Bugrova, O. (2017). Formation of a cumulative model for managing the value of construction projects. Eastern-European Journal of Enterprise Technologies, 5 (3 (89)), 14–22. doi: https://doi.org/10.15587/1729-4061.2017.110112
- Whitney, P. (2015). Design and the Economy of Choice. She Ji: The Journal of Design, Economics, and Innovation, 1 (1), 58–80. doi: https://doi.org/10.1016/j.sheji.2015.09.001
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Olena Bugrova, Olexander Bugrov
![Creative Commons License](http://i.creativecommons.org/l/by/4.0/88x31.png)
This work is licensed under a Creative Commons Attribution 4.0 International License.
The consolidation and conditions for the transfer of copyright (identification of authorship) is carried out in the License Agreement. In particular, the authors reserve the right to the authorship of their manuscript and transfer the first publication of this work to the journal under the terms of the Creative Commons CC BY license. At the same time, they have the right to conclude on their own additional agreements concerning the non-exclusive distribution of the work in the form in which it was published by this journal, but provided that the link to the first publication of the article in this journal is preserved.
A license agreement is a document in which the author warrants that he/she owns all copyright for the work (manuscript, article, etc.).
The authors, signing the License Agreement with TECHNOLOGY CENTER PC, have all rights to the further use of their work, provided that they link to our edition in which the work was published.
According to the terms of the License Agreement, the Publisher TECHNOLOGY CENTER PC does not take away your copyrights and receives permission from the authors to use and dissemination of the publication through the world's scientific resources (own electronic resources, scientometric databases, repositories, libraries, etc.).
In the absence of a signed License Agreement or in the absence of this agreement of identifiers allowing to identify the identity of the author, the editors have no right to work with the manuscript.
It is important to remember that there is another type of agreement between authors and publishers – when copyright is transferred from the authors to the publisher. In this case, the authors lose ownership of their work and may not use it in any way.