BUS605: Strategic Project Management

Traditionally, construction projects start from the premise that the customers know what they want and what they need. Value creation is, however, more than implementing an extensive set of features. Customers do not seek products or services in themselves, they want solutions that support their processes and create value when used. Therefore, during the project definition phase, the task of project management today is to challenge the customer's self-understanding about the project's objectives, reveal conflicts between the customer and the other stakeholders, and confront the customer's desires by exploring alternatives that were not previously considered. Consequently, new approaches help to expose the customer to alternative means of accomplishing their purposes beyond those they have previously considered and help the customers understand the consequences of their desires. Moreover, early stakeholder involvement enables projects to utilize the knowledge base of the stakeholders.

Relational multiparty contracting and methods have been widely offered as a solution to increasing value creation, not only for the customer but for the other project stakeholders as well. In addition, it has been noted that creating integrated project teams has had a positive impact on project outcomes. In recent years, there has been growing interest in applying relational multi-party contracting to construction projects. In particular, firms in the renovation sector have expressed much interest, because the number of such projects is increasing significantly, but unsettled and fragmented modus operandi increases the risks of budget and schedule overruns, plus low productivity and low customer value.

However, relational contracting has mostly been used in big projects, where the budgets have often been tens, even hundreds, of millions of dollars, while the budgets in typical renovation projects are only a couple of million dollars. Consequently, the procedures of relational contracting are somewhat unfamiliar to many organizations in the construction industry. However, it has already been emphasized that early stakeholder involvement during the project definition phase is one of the cornerstones of value creation. Overall, there is a lack of research about who the involved stakeholders should be and why they should be involved. It is also vital that the number of key stakeholders is manageable, since complexity increases along with the number of stakeholders.

This paper employs content analysis to introduce the process of the project definition phase in relational contracting. The main objective is to examine who the key stakeholders are that should be involved in the project definition phase in order to maximize value creation by identifying the different roles, liabilities, and objectives of the project stakeholders, especially the major ones. In order to achieve this objective, the following research questions (RQs) must be answered.

RQ1: How does early stakeholder involvement affect value creation?
RQ2: What are the stages in the project definition phase?
RQ3: Who are the stakeholders that should be integrated into the project definition phase?

The paper is structured as follows (Figure 1). In order to increase our understanding, we start with a literature review of relevant research, which has two main objectives: to bring out the challenges of value creation in traditional fragmented project delivery methods and to point out how value creation changes when the stakeholders are involved as early as possible. This is followed by an introduction to the project definition process in relational contracting, in order to concretize the content of the project definition process by dividing it into separate stages. A case study was conducted of a renovation project where the project stakeholders were mapped through snowball sampling. Then, the stakeholders were interviewed in order to reveal their roles in the renovation project and to determine which stage each should be involved in during the project definition phase. The last part of this paper contains a discussion, proposes managerial implications, and critically evaluates the study.

Figure 1 The structure of this paper.