1.1 Introduction to Chapter 1

In the general introduction, I examined the notions of risk, vulnerability, and points of vulnerability; I introduced the constant k, and I expanded somewhat on the notion of opportunity among other themes. I have noted that the concept of points of vulnerability (POVs) is underdeveloped both in the scientific literature and in feasibility studies. I also decided to discuss feasibility studies and POVs by using the four Ps model. Put simply, POVs are inherent in any one of the four Ps—Plans, Processes, People, and Power—when they combine during the transformation phase to become Plan’, Processes’, People’, and Power’ that sees where the initial project idea becomes a reality. A product will eventually be delivered to eager clients.

We now know that feasibility studies must focus on POVs, even if this involves playing devil’s advocate when it would be much more pleasant to believe in the project with, at times, our eyes closed.

The present section, consisting of three chapters (1, 2, and 3), addresses the first of the four Ps: Plans. A Plan is about establishing a vision: proper modeling so that all facets of the project are laid out, with set measurements.

All projects worthy of this name have a plan. In the case of the Québec Multifunctional Amphitheatre (QMA), a master plan was designed and the main architectural working document, called the PFT (Programme fonctionnel et technologique or “Functional and Technological Program”) was roughly composed of the following sections: levels, lots, sectors, special areas (e.g., corporate rooms, lounges, press rooms, and suites.), utility areas (e.g., hydro room), parking, and so forth. The main costs were listed as

1. Art (for art works displayed within the amphitheater—roughly C$1.5 million).

2. Construction: Construction manager’s fees (the firm Pomerleau), construction work, equipment and material, legal costs, owners’ fees (Québec City), professional services (including the firm Genivar for project management), and professional trades headed by the firm SAGP, and various other costs).

3. Reserves: For risks (C$21.1 million), contingencies related to conception and planning (roughly C$7.6 million), construction (C$10 million), inflation (C$12 million for the work, C$2 million for the furniture), as well as conformity and budget reserve.

4. The city’s infrastructure.

The reserve funds are monetary provisions set aside to address unplanned and unfortunate events; including, when these are internally controlled, what could become POVs in that they express a Contingency Strategy (CS). In this case of a project that was four years in the making (from initial budgeting in 2011 to completion on September 1, 2015), it is fair to assume that it was susceptible to some construction mishaps. Contingencies account for approximately 10% of the total estimated cost of the project (C$39 million/C$400 million). This significant amount goes to show the importance of risks and POVs.

In the present chapter, I will discuss further project elements such as Dominant (DS) and Contingency (CS) strategies. I will start by defining what a project is and the different facets it can take. I will propose a way of modeling projects. Modeling is a useful tool for finding dark or wobbly spots. A proper model is much like an architectural plan; a faulty plan would prompt a manager’s reaction because he/she would detect the possibilities of land mines, so to speak. As some authors have put it, the goal is to read the early warning signs of what could go wrong.¹ A project that is not adequately conceived will contain languid spots that the experienced manager will recognize.

I complete my modeling effort by examining what prefeasibility and feasibility studies are composed of, and will end with a conclusion.

1.2 Toward a definition of projects

The word “project” comes from the Latin words projectum and prociere, which mean to “throw something forward”;² it is implied that something is put forth with some sense of anticipation.

According to one project leader that I interviewed:

A project is a self-contained activity (or set of activities) that has three stages: a start, a production stage, and a completion, aimed at achieving a defined outcome. Generally, projects abide by a budget and a discrete timeline as well as by specific quality requirements.³

Different models have been proposed with respect to projects; in some, a project consists of benefits, hypotheses, and plans to list just these items. For some authors,⁴ a project is composed of a program, goals and effects, and of some sense of rationale (reason for being). Various scholars⁵ compare projects with systems that encompass cost challenges, manpower, priorities, schedules, technical know-how, as well as a spectrum of personalities that may be entangled in tugs-of-war. Projects have also been defined as a dynamic “set of interrelated units”⁶ that share a common purpose. Indeed, during the transformation phase, the four Ps come together to produce forecasted outputs, including deliverables. Raising the question of the feasibility of a project is to ask whether it can hold up for all of its life cycle and achieve the desired results.

The newest version of the Project Management Body of Knowledge (PMBOK)⁷ describes projects as follows: they are a temporary effort that aims to create a product or a service. They have a beginning and an end and can be short, medium, or long term. They are bounded by a set of parameters, which, if not respected, cause them to lose their reason for being. Typically, a project team dissolves once their project is completed.

Projects are temporary efforts by definition. Suppose the Mervel Farm project turns out to be a success and that the entrepreneurs, as well as the City of Pierreville and the National Capital Commission (NCC), decide to repeat the experience for as long as it is profitable over the subsequent years after the first year trial. It is no longer a project: it becomes an operation. Some authors indicate that projects have no fixed tools while operations do, that projects are unique while operations consist of repetitive activities,⁸ and that a project is singular while operations can run different processes with different objectives at a time. It has been said that projects differ from operations in that innovative versus conservative solutions are preferred; furthermore, change is of the essence in projects as opposed to the incremental procedures of regular operations. Finally, projects develop in uncertain conditions, whereas operations assume stability.

Projects are “unique, temporary packets of efforts”⁹ where cohesion among stakeholders is more important than drive, which was the old industrial paradigm. Some sources also cite time and uniqueness as defining elements of projects,¹⁰ and add the notion of change (transformation), the multifunctional role of employees, and uncertainty.

According to one project association,¹¹ a project consists of a series of actions aligned according to a specific goal and a set mission, which has a beginning and an end. Some authors define a project as a singular, non-repetitive activity, framed by a calendar, which is subject to uncertainty and which sees the union of distinct and complementary competencies in order to instill change or progress.¹² Field and academic experts argue that project management is about problem resolution, a process that is sometimes clustered in highly flexible horizontal or rigid vertical organizational structures. Other scholars present project management in terms of financial, human, and technical allocation effectuated in order to reach an objective by a particular deadline.¹³ It has also been said that project management is about behavior, action, and knowledge.

It is relevant to delineate a project by what it is and what it is not—this palliates for the many imbroglios that could exist among stakeholders. The Mervel Farm project is a venue for urban families to experience some kind of farming lifestyle through activities and the acquisition of agriproducts. What it is not, by any means, is an amusement park. The core of the Mervel Farm project is in educating the local population, who, it is assumed, have a stake in the values of local environment-friendly products (produce and crafts); hence, two of its target customer groups are families and primary schools. It is not designed to be an entertainment site or a zoo: would-be customers would be disappointed if they didn’t find paintball activities and wild animals or academics locked in a cage!

Properly defining and modeling a project is crucial. One of the most common causes of project failure that is consistently listed by experts, project management authorities, and marketing companies as well as academics having researched the field, is the fact that the mission of the project is poorly understood by the stakeholders, most particularly by the team members.

While the PMBOK stipulates that a project generates products, services, or unique results, I wish to clarify that in reality, products and services are results by themselves. A project is actually a concrete effort aimed at producing a deliverable, which may be a product (such as an amphitheater), a service (such as an improved way of distributing the mail), or a process (such as a new way of making an electronic component or floor tiles). Some authors pretend that scientific research is a project, although this research is not done within a limited duration, it is periodic, and time (calendar) is of the essence in the definition of projects. Researchers have a schedule (a beginning and an end) to their projects. To summarize, the deliverables of a project are a product, service, process, or scientific research—nothing else. A project can conceivably deliver both a product and a service, the Mervel Farm being a case in point (a product would be a craft item and a service would be renting parts of the site to groups wanting to run social activities at that location).

Another definition has been provided: a project is a process in itself.¹⁴ This process calls for the transformation of resources to produce a result in order to meet preset objectives, conditional to budget, human, material, and temporal constraints. The concept of the transformation of inputs into outputs within a framework of constraints is certainly adequate. As seen in the introduction, transformation (or change¹⁵) is at the heart of any project. I use parallelograms in Figure 1.1 as a code: they entail that I am referring to processes, which necessarily implies a set of constraints (we shall see that I use other geometrical forms, such as bubbles, for other kinds of modeling in Chapter 5). There are three types of constraints: walls, ceilings, and floors. To make matters clearer, I draw lines around the parallelograms where I believe that constraints prevail within the realm of projects (Figure 1.1).

In Figure 1.1, each step has a ceiling and a floor and there are two walls, one at the beginning of the process and one at the end of the process—these relate to the calendar (beginning and end), costs (ceilings), as well as norms of quality (floors). The ceiling is the maximum amount of money the promoter wants to dedicate to inputs, transformation, and outputs, and the floor represents the minimum quality required to guarantee that the process is functional. The beginning walls indicate the mandatory start-up time for the system. The end wall is when, for example, the outputs are due (in the case of the Montréal Olympic games, the infrastructures had to be functional, even if not complete, a day before the opening of the Olympiads at the latest, that is, on July 16, 1976).

Concerning the QMA, the entry ceiling consisted of 40 million dollars’ worth of equipment and material invested to start the construction project in a timely manner. The ceiling for the entire project was the monetary cap set at 400 million dollars. The end wall was the deadline for completion of September 1, 2015.

In the case of an operation, there is no absolute end wall because there is no deadline as there is with a project. Note that the fact that there is an entry wall only at the start of the diagram and an end wall only at the end of the diagram, as well as ceilings and floors on every step along the way (inputs, transformation, and outputs), is what makes this system a closed dynamic system. This will have important repercussions in my mathematical analysis when I treat the People aspect of a project and when evaluating the effect of the error term ɛ (chaos) seen in the general introduction and to be reviewed in Chapter 7 on Power. Put it this way: as a member of the project team, my strategic behavior is going to change if I think I’ll never see a colleague again after I start arguing with him versus if I know that we are in it together for the long run. In the first case, I have an escape; in the second, I don’t and that person may have an opportunity to retaliate against me in insidious ways, which could temper my bad character. My Dominant strategy is dramatically altered by the fact that the system is closed.¹⁶

We can use these entry and end walls, ceilings, and floors in an intuitive way. Say, for example, that we are planning a concert whereby all the Stradivarius violin musicians/owners of the world will perform Maurice Ravel’s famous bolero. The concert will only take place once—after all, regrouping all the Stradivarius violin musicians/owners in one location at one point in time is a feat, and a hazardous one at that. What if the stage collapses while the musicians perform? Let’s assume, very conservatively, that the project necessitates an initial investment input of US$50,000 and a cash flow of US$25,000 to carry it until tickets start selling. The beginning ceiling is US$75,000 because the project will simply not materialize without this amount of money but will be deemed too expensive if more money is initially needed. Let’s also assume that the maximum a bank is willing to loan for the hiring of the musicians and music director is US$35,000. One can proceed with the same kind of logic throughout the project model. One would obtain something like that shown in Figure 1.2 (I provide a simplified version).

The beginning floor would contain the norms of quality assigned to the project: only the authenticated Stradivarius violins would be eligible to participate. The point I am making is that if it is true that a project has a beginning and an end, is a transformation process, and is subject to some constraints (such as time), then we should be able to quantify this. Figure 1.2 represents an overview of the project that anyone can understand. That’s a very good start because, as mentioned, one of the major causes of project failure is misalignment among the stakeholders.¹⁷ A poorly defined project leads to a lame implementation of the plan.

Remember that inputs are structurally composed of four components, the four Ps, so that we could refine the model displayed in Figure 1.2 in more details if we wanted to, by showing the four Ps pointing at the input parallelogram.

Each project is unique and glaringly “contextualized”—the Montréal Olympic Stadium (MOS) is a prime example. It simply cannot be integrally copied so that each project has its own model with its own set of walls, ceilings, and floors.¹⁸ Each project has positive and potentially negative impacts (e.g., promoting the City of Montréal worldwide while, in the process, accumulating a huge debt that 3.5 million Québec taxpayers had to reimburse over the course of 30 years).

If we rely solely on the PMBOK definition, the Montréal Olympic Stadium as seen by an individual back in 1970 would have appeared feasible: it had a beginning (the opening ceremony on July 17, 1976), and an end (the closing ceremony held on August 1, 1976), it was affordable, it was a unique product, and it would have a positive impact. However “bad apples” and inherent POVs such as the presence of “Unfits” (uncontrolled Forces of Production, FP_nc) eventually transformed the positive expectations into a painful reality.

We now have set a tentative definition of the concept of “projects” and have started to produce a model that exemplifies this definition. I will now attempt to improve it.

1.3 Completing the definition

In my opinion, some project definitions must be refined.¹⁹ The model in Figure 1.3 presents the major aspects of the definition of a project from the output point of view; I will resort to this model extensively when discussing my feasibility analytical method.

This model suggests that outputs are expressed by one or more of three items that are deemed to be tangibles (as opposed to intangibles).²⁰ Note that for large projects, all three components should be included in the definition of the project; for small projects, however, the requirement for the three outputs may not be obligatory or realistic (e.g., smaller projects may not produce a Book of Knowledge). We have (1) an innovative product, service, process, or research—also called the “deliverables”; (2) some official documentation (any large project is vastly documented—referred to as “Formalized Knowledge” or else at times “Corporate Knowledge Base”²¹); and (3) some impacts that can be positive and/or negative.

If one person tells us, in a game of charades, that he/she has seen something that is a product, we may think that they are referring to a “project”. If they add that the something generated some formalized knowledge, we would be even more inclined to think that project is the miracle word. If they add at last that it generated some impact, then we will be 100% sure that they are talking about a project. The functional variables lead us toward finding the identity of the subject being discussed.

Each component is dependent on one another. The impacts are intimately linked to the product and knowledge is always knowledge of something, such as a product.

I will complete this model as I move along with my analysis. For now, the reader should probably get a feeling that it is not enough to simply define a project in tentative terms. The more precise we are with its definition, the better we will be able to tackle its POVs. Note that just as we quantified the input portion of the model and could have quantified its structural components (the four Ps), we could quantify the three different kinds of outputs displayed in Figure 1.3. As mentioned, it is also a good idea, from a very practical point of view, to spell out what the project is not and, more succinctly, what is not part of the project.²² Indeed, my own experience with young entrepreneurs is that the majority of them do not fully comprehend the limits of their proposed business and expand beyond (often way beyond) its core definition, extrapolating into areas that are not at all related to the realm of the initial project.

1.4 Documentation

PMBOK²³ provides a roster of documents that are typically included in a full-scope project. They are gathered to serve the collective memory. I am inspired by PMBOK in classifying key documents as shown in Table 1.1.

To the PMBOK list, we must add documents that are relevant to People, such as those that address job description, marginal benefits, pay, and so forth. We find here the four Ps yet again. I assume that the four types of documents listed in Table 1.1 are not an essential part of an average project (for large projects, however, they should be). A small project could simply use a semiformal document addressing guidelines and have no set of highly technical standards. If we wanted to adopt the same kind of approach that we relied on so far in terms of modeling our findings, we would have Figure 1.4.

The project feasibility analyst must support his/her decisions based on accurate documentation, which should include an investigation into POVs. I strongly recommend that the analyst finds existing measures and metrics or else that they formulate a set of measures so that all key items found in the various documents have a quantitative aspect. This is in line with his/her role to ascertain that norms of quality are respected.

Suppose the analyst believes that confidence (Trust) in a project team is important,²⁴ then he/she must find ways to measure this in advance. In the realm of a project, trust is established when group members recognize each other’s skills and/or when they are seen as honest.²⁵ Often, because team members are brought together and work within a tight time line, they have no choice but to display so-called “swift trust”²⁶—trust is a given from the get-go because there is no choice in the matter when the tasks must be accomplished. Measuring skills and honesty should be planned. Should the cooperation between stakeholders and the ability to quell problems jointly and listen to others be deemed important for the evolution of the project,²⁷ then the analyst would have to develop a scale or else use an existing one. It is up to the project evaluator to decide what should be measured (and become part of an official set of documents) and how to measure it. This may be important to secure the realization of the project. As an example, some authors have determined that trust, mutual respect, and stakeholder partnerships are features that lead to success. As stated by one of the project managers in an interview that I conducted:

Through the course of my career, I have been called to oversee a number of international projects, one of which, as an example, was with the aluminum company Alcan in Arvida, Québec, Canada. The C$4.7 MM project was realized on time, below budget (at C$2.96 MM), and within the quality specifications set up front. What allowed us to successfully complete the projects can be attributed to a number of factors. We were inventive; we took great care in defining the project and in addressing environmental concerns right up front. We hired an extremely competent team, which was very much committed and which worked with flexibility and rigor. It is this combination of efforts and talents that drove us to the finish line.²⁸

1.5 Impacts

Most projects (especially large ones) spawn positive and/or negative impacts. A tendency for promoters is to dispel negative impacts or to hide them altogether in order to get financing; this is a mistake, of course, because recognizing negative impacts is a way of improving the project before it starts. If the impacts, whether positive or negative, are found to be overwhelming, then the project should not go ahead. Some authors who discuss the case of the Montréal Olympic Games²⁹ mention impacts such as the upgrading of the transportation system, the redesign of some neighborhoods, and the reshaping of the city topography. The Montréal Olympic Games project called for improvements in these three areas. There are few projects worth this name that do not produce positive and/or negative impacts of any sort: a promoter who doesn’t think so is probably hiding some POVs. Put it this way: you can never satisfy everyone. So someone, somewhere, will feel that they are the victim of the project, whether it’s because they judge that there is excessive dust, crowding, noise, or that they face a hike in the cost of living or have to be displaced. They may express environmental concerns or displeasure with the layout, and so forth. Take Yale University, for example; the town of New Haven should have been thrilled with the expansion of this emblem of academic achievement, consistently ranked among the top five universities in the United States. Yet, some residents are not pleased with it: traffic has worsened, tax revenues are lost on what could have been residential lands, and neighborhoods were razed.

Not all impacts need to generate concerns, however. In the QMA case, a number of delays were deemed to have no impact on the project, as they were not critical and were easily corrected. Examples are shown in Table 1.2.

While delays were experienced, the impacts were not significant; for all intents and purposes, the project would be (and was) completed on time.

So far, we have seen that a project can fit the emerging model shown in Figure 1.5.

We can read this flow of diagrams as follows: producers (e.g., project promoters), clients (existing or potential), regulators, and so-called bad apples interact as People. A plan is devised, Processes are conceived, and a line of authority is set (Power). The four Ps form the project’s inputs, which are transformed and which then produce, over time, some outputs. Transformation implies change.

Of note, some last-minute modifications may actually be beneficial. For example, in the QMA project, the construction of a lot labeled “1-B 3.1” saw a cost reduction of some C$26,000. In fact, the final cost of the project was 30 million dollars below initial estimates, which goes to show that savings can be made along the way. This may be an indication that identifying POVs could actually help reduce costs, rather than merely preventing them from rising above budget. This is no scientific proof, but it remains a notion to keep in mind. I assume, therefore, that tackling POVs can present a dual advantage: the possibility of reducing costs (by way of finding inventive ways to rethink a particular process) and preventing the swelling of costs due to processing problems.

An examination of the reasons for changes made that deviate from the initial plan (i.e., vs. the PFT document) in the QMA case shows that the majority of them were related to functionality (more than 99%) as opposed to design (less than 1% in the case of the style of the floors for the artists’ foyer), and that they were explained by a limited number of reasons, as shown in Table 1.3.

The outputs, according to my model, are expressed by a deliverable (e.g., a product), by some formal knowledge (e.g., Book of Knowledge), and by some impacts (positive and/or negative). In the case of the QMA, the end book (the final report) was prepared by the chief engineer of the company William Sale Partnership (WSP) Global, the project managing company. This book contains various topics in the following sequence: an executive summary, some comments with respect to the calendar of events, costs, risks, supply chain management, construction operations, management of changes, management of quality, main concerns (i.e., the identification of potential POVs), equipment, Key Performance Indicators (KPIs), critical path analysis, content analysis, and recommendations. The appendixes include a follow-up on tenders, environmental concerns (Leadership in Energy and Environmental Design [LEED] certification), and so forth.

As mentioned, small projects do not naturally lead to formalized knowledge or have an impact. Large projects, however, see the creation of some form of official knowledge and do have impacts on the way of life of the population they serve. A large project is all of this and no less! For each element (each parallelogram) and among each element (the arrows), there is a potential for POVs to sneak in.

A project has a certain number of characteristics, which we have touched on so far: it is unique (Plan), it spans over a predetermined period (Plan), it requires some level of innovation (Process), it faces challenges (Process), it is an answer to a need/an opportunity (People), and it involves stakeholders (People and Power). Should any of these features not be present, one must conclude that it is not a “project” in the pure sense of the term. Each one of these characteristics must be present; strictly speaking, a promoter who brings forward a plan to put new asphalt on his/her office’s driveway is not dealing with a project in a way that would require project management knowledge. On the other hand, a project must be expressed by at least two of the following outputs: deliverables, formalized knowledge, and/or impacts. Essentially, this is what the feasibility expert must look for when evaluating projects. The expert will want to fill in Table 1.4 to double-check that he is indeed dealing with a project truly worth its name.

The rule dictates that each input characteristic and at least two outputs should be present; if so, the feasibility analyst can define the proposal as a project worth its name.

I arrive at the following definition of a project:

1.6 Intangibles

Intangibles refer to elements of the project that cannot be measured and that are not necessarily an integral part of the project. PMBOK 5 (p. 51) mentions that “examples of intangible elements include goodwill, brand recognition, public benefit, and trademarks.” Negative intangibles include “loss of reputation, reduced moral staff, and loss of valuable corporate knowledge when many experienced technical and managerial staff are forced to leave the organization through (…) staff reduction.”³⁰ A positive example is the strong bond that develops between stakeholders such as team members, as they embark on a project. Perhaps this friendship may be useful in another venture should the same people be brought together again. This will make the new project that much easier to get underway. Intangibles are immaterial. Some impacts are intangibles. For example, CAID—the Canadian Agency for International Development or l’Agence canadienne de développement international (ACDI) in French—developed an aid program for a rural community in Africa to build a small slaughterhouse.³¹ The need arose from the fact that local village members slaughtered their cattle in an open field where cattle manure was scattered, in the full heat of the sun.

The project definition actually changed dramatically depending on the stakeholders. The engineers at CAID wanted to build a slaughterhouse that met Canadian regulations (at an astronomical cost), a feat impossible to accomplish given the lack of infrastructure³² and experience from local builders. The local government was content with four walls and a roof (at a reasonable cost; yet unduly maintaining the danger of meat contamination). The villagers did not care so much because they had been slaughtering cattle in the open field for generations.

The slaughterhouse was eventually built with somewhat of a faint adhesion to the strict Canadian construction code. However, a problematic intangible impact emerged: the head of the village, seeing that other local communities wanted to either use the slaughterhouse or else the open field that had been cleaned of waste, saw the opportunity to invigorate his power and earn money by leasing the house and the field. This lack of cultural understanding and cohesiveness led to social problems and some animosity that had not been predicted by the Canadian agency.³³ Cohesion was certainly not achieved, far from it, regretfully.

Said one project leader in a different circumstance about the importance of cohesiveness:

AF Thériault is probably the best kept secret in this 9000-people community (Clare). There is a high degree of pride in what we are doing and this, along with human bonds, carries over from one project to the next when team members are allocated to different projects. These transfers, which can be lateral or spread over time, provide a natural boost to the project right from the start. It reduces our project costs because our teams are readily cohesive.³⁴

1.7 Classification of projects

Projects can take many forms, of course; China’s Great Wall was a response to a need for security against northern tribes’ invasions, the Concord airplane was seen as a business opportunity, the Egyptian pyramids were constructed as a tribute to the Gods and to guard the Pharaohs, the Mona Lisa painting was a project apparently based on a commission by a wealthy individual, the movie 2001 Space Odyssey materialized out of a vision of the world to come, and the Sherman Antitrust Act was designed to protect consumers. Many more projects can be listed: the Callaway Nuclear Plant, the Long Island Lighting project, the Shoreham project, the Supersonic Transport program, the Trans-Alaska Pipeline System, and so forth. Our economy is all about projects.³⁵ According to some authors, projects are at the basis of our economic action given our increasingly complex and uncertain environment.³⁶

Projects respond to a need, a desire, a problem, or a source of discomfort (overall, to an opportunity as seen from the point of view of the promoter), take different forms (e.g., work of art), and require some level of innovation.

Not all projects are born out of known needs. Some ingenious promoters actually design projects around so-called latent needs. These needs have not been formalized or universally recognized yet; they are dormant, or put differently, unconscious. For example, while Facebook did not exist for millions of years, its growth points to the fact that it initially addressed a latent need. In our fast-paced society, people found it more and more difficult to communicate de visu, yet they became more and more open to communication with strangers or with past, long-forgotten acquaintances. Often, it can be said that many projects are born out of the realization of a latent need (read: opportunity). The relevance of this fact is that with the need being latent, it is actually hard to ascertain—its full characteristics are unknown. Uncertainty³⁷ inhabits every project, hence the importance of pinpointing POVs.

Generally, besides monetary concerns,³⁸ the needs of projects fall within eight categories: communication, clothing, education, entertainment/sport, food/beverage/tobacco, health (and related industries), housing, and transportation. Money is actually a means to fulfill the needs associated with one of these eight categories of basic human life.

If we take the Québec Multifunctional Amphitheatre as an example, obviously, this is a structure that belongs to the sport and entertainment industry. But the inside fabric of it also takes into consideration specific needs that pertain to one of the other eight categories listed in the previous paragraph. In particular, of prime concern to the builders were the following: the availability of toilets; the control of sediment,³⁹ heat, and light; noise; rainfall and water inflitration; the quality of air, including ventilation, smoke and dust control (this was on the agenda when deciding on sealed concrete floors vs. decorative floors), both during construction⁴⁰ and once the project was completed; and finally, security (cameras, etc.).

In the general introduction, I discussed the notion of opportunity; this relates to one of these basic human need categories. Products that address these needs are paid for by a banking/financing system. Financial projects are, ultimately, designed to satisfy one of these eight basic needs. It is most useful for the feasibility analyst to recognize which need or needs is or are addressed by the project, because this sets the context in which this project matures. It also provides points for comparison with other (past) projects.

Projects are private, public, or a mixture of both (PPP⁴¹) and come in different sizes.

Some authors attribute the following engineering hours depending on project size:

• Small projects are 10,000–100,000 engineering hours

• Medium projects are 100,001–500,000 engineering hours

• Large projects are over 500,000 engineering hours

We have already established that larger projects tend to see deliverables, formalized knowledge, and impacts as defining conditions. Because these three elements have a high level of colinearity, they cannot be characterized as structural process elements; however, the feasibility analyst wants to keep in mind that they are, nevertheless, fundamental considerations in larger projects.

Whatever type or size, I prefer to adopt a system that classifies projects according to the four Ps (three Ps in reality because a Plan is not an option), as in Table 1.5.

There are soft and hard projects. In the first case, the deliverable is said to be intangible (e.g., a new television program), and in the second, to be tangible (e.g., a building).

A three-dimensional model that includes projects of all kinds (nuclear, petrochemical, roads, etc.), has been presented⁴²; in it, projects are positioned according to market risk (x-axis), technical risk (y-axis), and social/institutional risk (z-axis). However, this is debatable: are all contextual risks included in this three-dimensional framework? Probably not. Does a society and do institutions represent risks in a pure sense? Unlikely.

1.8 Value

We can also define the project based on the concept of “value”. A project is more than simply manufacturing a product, developing a service, designing a process, or conducting scientific research; it is generating perceived value.

Perceived value is the total value attributed to the project, including what it produces in terms of intangibles, as seen by the users/clients.⁴³ Figure 1.6 illustrates this modified project definition.

Intangibles, as demonstrated by the aforementioned African example, can turn out to be major POVs. To predict them, an analysis of the motivation (the opportunity⁴⁴) behind the project from the point of view of each important stakeholder is mandatory.⁴⁵ In this example, the opportunity is based on a needs assessment by the CAID, on the desire of the local government (it is an opportunistic maneuver to gain the village’s political support), and on virtually nothing for the local community (from its point of view). This chasm in the motivations (or put differently, in opportunities) is undoubtedly a POV, but one that starts poisoning the project after its completion. Indeed, divergent stakeholders’ interests are a major risk and POV.

The role of the project feasibility analyst is to determine the value of the proposed project;⁴⁶ the value estimate cannot be valid without an appreciation of the POVs. From an analytical point of view, there are actually three kinds of value: perceived value, added value, and residual value. A large gap between them is also an indication of potential POVs.

Perceived value is in the eyes of the users of the project. The perceived value of the slaughterhouse evolved from being nothing but a disruption of a lifestyle for the local community chief to a source of wealth (as he eventually rented land to nearby village dwellers). It is calculated as follows:

$$\begin{array}{cc}\text{Perceived value = }\frac{\text{Perceived quality}}{\text{Costs}}=\frac{\text{Functionality+Design }}{\text{Costs}}& \left(1.1\right)\end{array}$$

I have shown in the previous section (Table 1.3) that optimization of functionality and design (to a lesser extent) is indeed the core reason for changes in the QMA case. My various examples of research show that consumers systematically allocate their perceived value at the ratio of quality to cost, where quality is defined by the summation of functionality and design. Put simply, consumers will say: “This product provides excellent functionality (meets my needs) and has a beautiful design while being reasonably priced—it’s a great buy.”

Recall that the four Ps are subject to norms of quality. Plans, Processes, People, and Power must strive to meet the standards set up front before the project starts; failing that, completion is likely hindered, costs bulge, and quality suffers. On the topic of standards, it has been said:

When dealing with improving efficiency of project management practices within an organization, it is important to put some standards in place. As binding as it may seem to the project manager (each project being different from the previous ones) standards give a basis to build upon in terms of both quality assurance and sharpened project monitoring and control.

It is difficult to evaluate the efficiency of a process if the project manager does not have a reference to compare it with. Standards help establishing ways to execute the project that the management processes. Preliminary schedules and budgets as well as a project charter presented in a standardized way do simplify the analysis and the decision process of the project manager.

Moreover, it may be time consuming to establish a new set of documents to run a project (project charter, change requests, issue register, etc.). Having some pre-defined standards avoids ‘re-inventing the wheel’. Sharing information in a multi-site organization is often a considerable challenge; standards serve as facilitators for communication, monitoring and reporting.⁴⁷

Added value is the actual total cost of the project, computed by adding the cost of each material and service unit used along the transformation stages. It is constructed from an accounting point of view only (including interest charges), as follows:

$$\begin{array}{cc}\text{Added value=}\underset{t=1}{\overset{5}{\mathrm{\Sigma }}}\text{Actual charges attributed to the project}& \left(1.2\right)\end{array}$$

where:

Added value is not concerned with intangibles. Perceived value is most concerned with them. Thus, a large dichotomy between the two sets of values indicates the presence of POVs, because often intangibles host or else foster POVs.

There is a third type of value—the residual value. It is often forgotten, but is best exemplified by way of the car industry. What brought Toyota ahead of General Motors (GM) over the decades has been the fact that the reselling price of Toyota cars and trucks is higher, on a par basis, than that of GM cars and trucks. Toyota’s vehicles do not always depreciate as much as GM vehicles so that over the long term, a consumer ends up paying less; he has fewer worries buying a Toyota versus a GM car. At least many consumers and car rating organizations think so. The same concept applies to projects: once the Montréal Olympic Stadium’s main reason for being had ended, that is, once the Olympic Games were over, what could be done with the infrastructures determined the residual value of the project. As it turned out, it has been somewhat of a nightmare since the City of Montréal eventually lost its baseball team (the Expos), which played at the stadium; furthermore, the facility has experienced many difficulties due to the harsh Québec winters. Parts of the structure have fallen down. Residual value is related to norms of quality as quality persists over time.

We can express the three types of values by way of the stylized diagram in Figure 1.7.

A feasibility analyst spends some of their time looking at the lack of harmonization between the three types of value in order to uncover POVs.

Projects address latent needs in the vast majority of cases. Part of the reason why these needs are latent is that they did not have a way of expressing themselves out in the open. Innovation is the key to awakening latent needs. Thus, latent needs and innovation go hand in hand. This can be exemplified in a natural context. Darwin, during his trip around the world, observed a flower (named Angraecum sesquipedalein) in Madagascar; its spur was so deep it would have required a bird with a long beak to reach its nectar, but such a bird (or even such an insect) had never been seen. Based on the assumption that the shape of the flower served a purpose (was an innovative process), Darwin concluded that there had to be a bird with a long enough beak to enjoy its nectar, and that bird had a need to feed. This was eventually found to be the case.

A typical POV occurs when a latent need and the corresponding innovation don’t match—there is no need to discuss whether the innovation is too flimsy to fulfill the need. Thus, we can assume

$\begin{array}{cc}\text{POV}\approx |\text{Perceived value}-\text{Added value}|& \left(1.3\right)\end{array}$

Functionality is the capacity of an innovation to respond to a need. In short, if a project does not offer the necessary functionality that it commands, then, most probably, there will be hurdles down the road: the Plan will have to be revised. Processes are not going to prove efficient and/or efficacious, People will start arguing, and management will have to deal with all kinds of issues and headaches.

The functionality of the QMA is well established since it can adequately meet the need to host either sporting or entertainment events, one of those sporting events being the formerly latent need/desire to have an National Hockey League (NHL) franchise (it now is no longer latent as steps have actually been taken to try to get the franchise).

1.8.1 Errors and risks

Errors made during planning may or may not represent a potential for failure. Errors can even be beneficial. According to the Darwinian principle of evolution, species evolved by way of accidental genetic mutations that, by pure chance, have turned out to benefit the survival of individuals. Through sexual reproduction, changes are transmitted to the next generation, a process that may facilitate the making of more errors.

Errors may result from “acts of nature” or “acts of God” as is commonly known. Essentially, the feasibility analyst can ignore no POVs. They are generally classified according to their treatment,⁴⁸ just like for risks:

1. They have been resolved and documented

2. They are still active and pose a potential hazard

3. They deserve continuous monitoring

The use of tables such as Table 1.6⁴⁹ is common in project management—we saw that the QMA managers had such a table named “concerns” (préoccupations).

One way of classifying risks and POVs is by their levels of complexity, based on the assumption that complex projects present more risks (and imply more POVs) because there are more variables to control and possibly more uncontrollable variables.⁵⁰

1.9 Innovation

Innovation is an intrinsic characteristic of projects. It necessitates walking off the normal paths set for doing things: this is what makes projects so exciting. As it has been once indicated when discussing research: “(…) any significant research requires that one tries out new paths and faces ambiguity to define new variables (…).”⁵¹ Indeed, projects are spoiled with ambiguity and unknown variables that make them good targets for POVs to carve a niche in, mature, and take their toll on management and team members’ efforts.

Patents and copyright certificates are indicators of the innovative aspects of projects. A truly innovative project must meet three criteria:

1. It must be unique

2. It must be useful

3. It should not consist of existing scattered elements that are put together without adding real value (functionality and design costs)

From this definition alone, one can guess that innovation is a diagonal process,⁵² because it certainly means walking off the normal path, and venturing toward the unknown.

All innovations are based on an underlying concept; for example, ink, papers, parchment, pens, even sand or rocks can be used to convey the concept of written communication, and more precisely, take for granted the ability of receivers to read a given message. Similarly, airplanes, balloons, Delta planes, kites, and zeppelins all have “flight” as an underlying concept, or more precisely, the capacity to use air to travel. Most innovations emanate from a source inspired by nature. Velcro, for example, is based on the plant Arctium lappa L.

In essence, a project is innovative if it is expressed by all or most of the following functional elements (F): it has some kind of evolutionary goal; it has the capacity to take various forms; it may have various degrees of evolution; it implies that a compromise has been made (in a project, the compromise is between time, costs, and norms of quality); it has been inspired by a source such as Nature; it is a response to a problem (e.g., social or technological), need, desire, or discomfort; or finally, in the case of a project, it must have a certain utility (not all innovations are useful).

Some authors have presented a model that suggests that complexity and innovation define the two extremes of one single axis.⁵³ This implies that novel ideas cannot be complex, an observation that I question. What seems to occur in real life is that engineers try to balance functionality and design: a great design may not provide high functionality whereas great functionality comes at the expense of design. Products that succeed, such as the iPad, excel at mixing both contingencies through innovation.

From this perspective, innovation is the response to the merging of functionality and design, or, put differently, an expression of their matching levels. The best scenario is that 100% functionality is achieved while a top (ergonomic and hedonic) design is conceived. Since we know that functionality and design participate in the concept of value, we can affirm that a good innovation creates value given that costs are kept under control. Thus, when [Innovation | Costs] increases (↑), theoretically, the value of the project is boosted (↑). I can state this using my process modeling system, which I will explain in Chapter 4 on Processes (Figure 1.8).

Noting that costs are a factor (a negative influence factor I⁻), and taking into account that a great balance between functionality and design is usually achieved after much research (in fact, the complexity often comes from having to reconcile the demands of both functionality and design), finding the ultimate solution is a challenge. I propose that the horizontal axis of a model describing innovation be representative of costs and that the vertical axis be representative of functionality versus design. I thus temporarily present the following stylized model with respect to innovation (Figure 1.9).

Because this model includes all three components of the project value formula (functionality, design, and costs), it can be labeled “initial value proposition of a project”. This proposition contains, de facto, the critical elements that a potential investor would want to see when a project is first presented to them (they’ll generally worry about Processes—e.g., calendars of activities—People, and Power later on). It would precede the project charter, which once approved “formally initiates the project.”⁵⁴

Thus, the initial value proposition of a project is the first formal representation of a plan for a project. I would venture to say that all plans start with this. It is from this initial value proposition that the requirement for a prefeasibility study derives.⁵⁵

1.10 Conclusion to Chapter 1

To the best of my knowledge, this chapter has done what few books or articles on project management and feasibility assessment have done. I have defined projects in a detailed, logical way so that a profound understanding of projects can be attained by the stakeholders. I have presented eight areas of human activities. I have introduced the notions of the three values—added, perceived, and residual—showing how they are linked together. I have recognized the importance of intangibles and of latent needs. I have established the notion of the initial value proposition. I have briefly presented the concept of closed dynamic systems, defined by their walls, ceilings, and floors. I have continued to articulate project knowledge around the concept of POVs.

This knowledge allows us to move forward and discuss prefeasibility studies, which we will do in Chapter 2.

1.11 What we have learned about POVs: Chapter 1

POVs …

1. Are seldom discussed in scientific literature and in feasibility studies.

2. Express a CS, when internally controlled.

3. Are exemplified by such elements as Unfits (FP_nc).

4. Can be hidden (and often are indeed).

5. Can present a dual advantage, if tackled: the possibility of reducing costs (by way of finding inventive ways to rethink a particular process) and preventing the rise of costs due to processing problems.

6. Can sneak in along the process chain: inputs–transformation–outputs.

7. Can jeopardize a project after its completion.

8. Create uncertainty.

9. Are associated with ambiguity and unknown variables.

10. Are hosted or fostered by intangibles.

11. Require an analysis of the motivation (the opportunity) behind the project from the point of view of each important stakeholder.

12. Can be spotted by a large difference between perceived value, added value, and residual value.

13. Typically occur when a latent need and the corresponding innovation don’t match.

14. Are associated with a Short strategy (when not tackled).

1.12 Key managerial considerations: Chapter 1

1. Ensure a full and accurate definition of the project

2. Explicitly define inputs and outputs

3. Identify the three values: perceived, added, and residual

4. Examine functionality, design, and costs

1.13 Case study Chapter 1: Maine East Pharmacy⁵⁶

This pharmacy is located in a small town in the northeastern United States. It is a pharmacy that doesn’t have the support of a larger group or chain, which could provide merchandising advice and sales force assistance. It is active on a number of Internet networks such as Facebook.

The owner has paid for market research over the years in an effort to boost his sales and to accelerate product turnover. His project is to redesign his store and customer interface to improve his business. Some of the key findings from past research are listed in Table Case 1.A.

The store is located in a small town where the population is aging, with 21% being over 65 years old, and with the median age being 50. The percentage of children aged 0–14 is about 13. The average yearly income is US$20,000.

The store employs four pharmacists, five pharmacy assistants, one dietician, one part-time nurse, one part-time orthopedic insole specialist, as well as 15 employees assigned to various duties. The customers judge the staff to be pleasant.

Competition comes from two food retailer outlets located four miles away, a specialty store (five miles away), a local alcohol outlet (10 miles away), three drugstores (15, 24, and 40 miles away), and one Walmart (40 miles away).

Maine East Pharmacy (MEP) offers a large assortment of products and services. With respect to products, profit centers are as shown in Table Case 1.B.

MEP also offers a number of services: ear piercing, foot care, passport photos, photocopies and lamination, prescription refills by phone or online, as well as an adjacent coffee and food bar (which has a door connecting to the pharmacy) and an adjacent gas station (owned by a different owner), both of which attract a lot of customers.

When a customer enters the store for the first time, they can immediately notice, consciously or not, that the floor plan is somewhat hectic and cumbersome. There are dead spots along/between shelves, the flow of products does not follow a standard pharmacy floor plan, there is an unused large room at the back, and there is an empty room leading to a storage space that is antique looking. Many products are not combined by type/category; products are located in antagonistic ways (HABA⁵⁷ next to pet foods, etc.). In short, the place is cluttered, offers mismatched items, has dead spots, and presents obstacles to the eager customers moving through the store.

There are two entry/exit points, but each one has major efficiency problems. The main entrance provides erroneous information: it promotes the adjacent coffee place, which in fact has its own door.

In the pharmacy retail business, the main hall that the customer faces once they walk in should normally be devoted to high-priced items (usually perfumes and the like), as the customer’s wallet is full. In the case of the MEP, precious space is dedicated to low profit items such as inexpensive candies, which may convey the wrong image (Table Case 1.C).

The main exit provides a hindrance to purchasing. The items on sale cannot be purchased until after the client has paid for these other products and is leaving.

The customer is unlikely to step back and wait in line once more in order to buy a magazine or a phone card.

Many products are put side by side when in fact they do not belong together, thus rebuffing customers (e.g., pet food beside ladies” products). Many aisles are cluttered: this creates dead spots, which disrupt the customer’s line of thinking (and purchasing objectives) and confuse them (see Table Case 1.D).

An analysis of the computerized inventory system shows the following:

1. The coding system does not make it easy to group products by category or function, which renders in-depth analysis of data nearly impossible.

   Table Case 1.C MEP’s floor

   

2. In some cases, the same kinds of products are entered in two different categories (e.g., “Glad zipper freezer” in “kitchen/bath/closet” and “Ziploc Freezer bag” in “household products.”

3. Some products do not seem to be properly identified (e.g., “U by Kotex wipes” is entered as “paper products”).

4. Cards, which are very profitable, must be better described (e.g., according to event instead of simply “cards, greetings”) so cross-merchandising can be planned with special occasion items.

5. The coding is not systematic: sometimes the description mentions “lady” products, sometimes “women,” sometimes “feminine.”

This business offers many unique opportunities that can be easily transformed into profit centers. MEP would be advised to put itself in the eye of the customer and see how the store’s current layout could cause apprehension for customers, who enter at an average rate of 30/h in this 1000 square foot area.

Overall, the observations of the flow of customers wandering into the store point to the fact that many sales are lost because the store (and the adjacent services—the café, the gas station) is cluttered; its layout and product placement impede the customer’s ability to move around and make fast decisions. Products are not placed in a way that entices customers to open their wallets. More typically, expensive items are offered first, with impulse items being placed near the cashier, which in this case is not happening.

Endnotes

1. Haji-Kazemi et al. (2015).
2. Dalal (2012, p. 2).
3. Oakley, G. Interviewed March 2, 2016.
4. Such as Dingle (1985).
5. Morris and Pinto (2004, p. 9).
6. O’Shaugnessy (1992, p. 10).
7. PMBOK 5th edition.
8. Cleland and King (1988).
9. Gilbreath, in Cleland and King (1998, pp. 3, 13).
10. For example, The Stationary Office (TSO) (2009, pp. 4–5).
11. Association francophone de management de projet (AFITEP): « Le projet est un ensemble d′actions à réaliser pour satisfaire un objectif défini, dans le cadre d′une mission précise, et pour la réalisation desquelles on a identifiénon seulement un début, mais aussi une fin » (Afitep 2000, p. 3).
12. Asquin et al. (2005).
13. Austin and Luecke (2011).
14. O’Shaugnessy (1992, p. 2).
15. More than ever, we live in a world of changes—fast, intense, revolutionary.
16. In the economic system for the last 200 years, opportunities to retaliate were minimal; a producer could escape another producer’s vengeful actions or a government’s investigation by moving into a remote country, or by silencing consumers by way of gag lawsuits. This is becoming less and less true; greater accountability and accessibility put a fence around the economic system.
17. O’Shaugnessy (1992, p. 51).
18. The increasing capacity of firms to tailor their products to individual needs goes along these lines—Dell computers being a prime example.
19. For example that of the PMBOK and of O’Shaugnessy (1992).
20. In fact, by at least two of the three forms of outputs: deliverables, knowledge, and impacts.
21. This includes historical records and lessons learned—see Mulcahy (2013, p. 33).
22. See Mulcahy (2013, p. 173).
23. PMBOK 5th edition (2013, p. 122).
24. For example, Berg and Karlsen (2007, p. 8).
25. Russel and Stone (2002).
26. Meyerson et al. (1996).
27. Bstieler and Hemmert (2010, p. 485).
28. Girard, A. Interviewed October 2015.
29. Roult and Lefebvre (2012, p. 1).
30. Bourne (2015, p. 53).
31. Source: Therrien, G. Interviewed March 2015.
32. We have seen the importance of infrastructures in the introductory chapter.
33. Relate this to the African v. Haiti case toward the end of this book.
34. Oakley, G. Interviewed March 2, 2016.
35. See Corriveau (2007).
36. Courtot (1998).
37. I will discuss uncertainty in detail in Chapter 7 on Power.
38. Besides from the sex industry and the illicit drug industry or similar activities.
39. Another plan exists to that effect: “Plan de gestion pour le contrôle de l’érosion et des sédiments” (Plan for the control of erosion and sediments). The translation is by me as is the case for every translation in this book.
40. A full plan exists to that effect: “Plan de gestion de la quality de l’air durant la construction” (Plan for the control of air quality during construction). The translation is by the author as is the case for every translation in this book.
41. “Private–Public Partnership.” These have been described as the new modern economic paradigm (see Cartlidge 2006; Bolz 2012, p. 11).
42. Miller and Lessard (2000).
43. PMBOK 5 (p. 15) refers to “business value” as the entire value of the business, which amounts to tangible and intangible assets; however, the link to projects appears unclear to us.
44. From my perspective, motivation and opportunity are two sides of the same coin. Motivation belongs to customers; opportunity to suppliers.
45. This will be discussed in more details in Chapter 7 on Power.
46. We will see that the higher the g-spread level, whether positively or negatively, the more the project value is compromised.
47. Bourgoin, D. Interviewed February 2016.
48. Morris and Pinto (2004, p. 37).
49. Adapted from Morris and Pinto (2004).
50. Complexity will be discussed in Chapter 7 on Power.
51. Parkhe (1993, p. 229).
52. We will discuss straight linear and diagonal processes in Chapter 4 on processes.
53. Sauser et al. (2009).
54. PMBOK 5 (p. 67).
55. There are many tools available to foster innovation such as conceptual maps, brainstorming, and the likes.
56. The name has been changed.
57. HABA: Health and Beauty Aid.
58. Other examples: forecasting reports, trend reports.
59. Examples: earned value reports, progress reports, status report, and variance reports.
60. Units are as follows: 24.5 mm = 1 inch, 0.3048 m = 1 foot.
61. The metric system is used in Québec and in Canada.
62. Of course, some projects can belong to more than one axis (more than one P).
63. SKU: Stock-keeping unit.
64. Elbows are located at the edge of aisles.