Value Management Beyond Earned Value


By Ingemund Jordanger and Ole Jonny Klakegg

Faveo Project Management

Trondheim, Norway


In project management, value concepts are normally limited to earned value related to fulfillment of project scope. This paper presents a business-by-project concept. The objective is to optimize project life-time utility. The utility function includes both monetary utility – normally Net Present Value (NPV) – and qualitative utilities. Project utility is included as a decision parameter encompassing the traditional parameters time, cost and quality. Decisions support is based on a Multi Criteria Decision Analysis (MCDA) technique. The uncertainty dimension is introduced in both quantitative and qualitative parameters. Management tools based on the concept have been applied in several projects, primarily in early phases. Examples of use are presented. To successfully implement value management in projects, active support from management and in-depth ownership among all key actors is essential. The value management concept presented, represents a general applicable concept even though it has been developed for use in construction and infrastructure projects.

Key words: Value Management; Project management; Multi Criteria Decision Analysis, Uncertainty Management

1. Introduction

The objective of the value management concept presented in this paper is to improve value creation in projects.  The context of value management here is decision making in projects, especially in relation to conceptual phase evaluations. An overall value management challenge in most real world projects is to balance quantitative values (ref. “hard” paradigms) and qualitative values (ref. “soft” paradigms).  The term value includes both monetary and qualitative values. Monetary value is measured by Net Present Value, while qualitative values are expressed by measurement scales and utility functions. Utility functions include decision relevant uncertainties in this value management concept. Utility value equivalents are used when combining quantitative and qualitative values.


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Editor’s note:  Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English. This paper was originally presented at the 26th IPMA World Congress in Crete, Greece, published in the Congress Proceedings and video recorded (http://pmgreece.gr/video.pdf).  Paper  republished here with permission of the author and PM Greece, organizers of the 26th IPMA World Congress

About the Authors

ingemund-jordangerflag-norwayIngemund Jordanger

Ingemund Jordanger is a Civil Engineer in Software Engineering with a PhD in Project Management (1985). He has more than 30 years of experience in project management; researcher for more than 5 years in manufacturing industry (SINTEF), 16 years in oil & gas industry (Statoil) and consultant for more than 10 years in building industry within construction and infrastructure projects (Faveo Management).  Member of Faveo Management Advisory Board, with special responsibility for value management. Special  interest in value-, risk- and uncertainty management, project evaluations, cost/benefit analysis, optimization of project and portfolio profitability. He has published several papers on project and portfolio management at national and international conferences.  Ingemund can be contacted at [email protected].

ole-jonny-klakeggflag-norwayOle Jonny Klakegg

Ole Jonny Klakegg has 23 years of experience in research, teaching and consulting within project management. Currently he is combining two half time positions as Professor at Department of Civil and Transport Engineering, Norwegian university of Science and Technology (NTNU), and as R&D Director of Faveo Project Management, the largest project management consultancy company in Scandinavia based in Norway and Sweden.