Cost and Value Management in Projects, 2nd Edition

Chapter 12Integrating Cost and Value in Projects

Learning Objectives

After completing this lesson, you should be able to:

• Explain project value chain analysis and briefly discuss the steps involved in performing such an analysis.
• Explain the importance of integrating cost and value in projects.
• Discuss the various sources and strategies for integrating cost and value.
• Discuss the various benefits of integrating value and risk management processes.
• Develop a framework for integrating cost and value.

It should be evident from the content of the preceding 11 chapters that achieving project success hinges on effectively managing both project costs and value. The discussions in these chapters, however, focused on the various issues and approaches to individually managing these two critical project success factors. In this chapter, our goal is to unify the concepts and processes of project cost and value management so that these two vital decision areas can be treated as an integrated whole.

We begin our discussion with the concept of a project value chain, which demonstrates the inseparable and interwoven nature of project costs and value. In subsequent sections of this chapter, we present various approaches to simultaneously managing cost and value to achieve project success.

12.1 THE PROJECT VALUE CHAIN

The concept of “value chain” was first articulated by Michael Porter.¹ The essence of Porter's value chain concept is that an organization needs to manage a set of basic ...