INTERNATIONAL JOURNAL OF

PROJECT
MANAGEMENT
International Journal of Project Management 22 (2004) 545–551
www.elsevier.com/locate/ijproman

The importance of the early phase: the case of construction

and building projects
a,* b,1
Bjørn Johs. Kolltveit , Kjell Grønhaug
a
Norwegian School of Management, P.O. Box 580, 1302 Sandvika, Norway
b
Norwegian School of Economics and Business Administration, Helleveien 5, 5045 Bergen, Norway
Received 24 June 2003; received in revised form 21 August 2003; accepted 2 March 2004

Abstract

The quality of the execution of the early project phases may dramatically influence the project performance. In spite of this, early
project phases have only attracted limited attention in past research. In this article we address two factors of key importance for
project performance, i.e. uncertainty and the influence of project stakeholders. To shed light on the challenges encountered in the
early phase we also report findings from a large-scale research project in the construction and building industry. We highlight
managerial and theoretical implications.

2004 Published by Elsevier Ltd and IPMA.

Keywords: Construction and building industry; Projects; Value generation; Opportunities in the nature of the early phase

1. Introduction that, at this early stage of a project, little is known about

This article addresses the importance of the early
phase of projects. In spite of the fact that past research
shows that how the early phase of a project is executed
may dramatically influence the project’s value genera-
tion, it is surprising to observe that this has almost been
neglected in the Norwegian construction and building
industry. Another observation is that the current un-
derstanding in this industry is limited as to which aspect
of the early phase has greatest effect on total project
performance. Improved insight into the project’s early
phase allows for better understanding of project value
generation, stronger industrial involvement in the early
phase, improved decisions, and thus better project
execution.
The authors of this paper maintain that two factors in
particular affect project performance; uncertainty and
the influence of the project stakeholders. The reason is
*
Corresponding author. Tel.: +47-67557755; fax: +47-67557678.
E-mail addresses: bjorn.kolltveit@bi.no (B.J. Kolltveit), kjell.
gronhaug@nhh.no (K. Grønhaug).
1
Tel.: +47-55959460; fax: +47-55959430.
the project activities and project execution. This means
that project uncertainty is at its highest during the early
stage of the project, especially for projects with a high
degree of novelty. Additionally, in the case of large and
complex projects, many stakeholders can be involved.
Stakeholders are individuals and/or organisations that
are involved in or may be affected by the project activ-
ities [1], e.g. the project client, project sponsor, project
manager and the employees involved in the project. The
various stakeholders have different interests in and am-
bitions for a project depending on the type of their in-
volvement in the same, and they influence the project
according to what role they play in relation to the pro-
ject. The potential influence of the stakeholders, in
particular the external stakeholders, is highest in the
early phase, before a detailed agenda is set and the cost
involved for making changes is low. This implies that
the early phase of a project development is the most
important time for innovative activities and for planning
a project execution that will optimise project value
generation. In order to maximise this value generation it
is sometimes necessary to allow for continuous innova-
tive activities through the execution phase as well. We

0263-7863/$30.00
2004 Published by Elsevier Ltd and IPMA.

doi:10.1016/j.ijproman.2004.03.002
546 B.J. Kolltveit, K. Grønhaug / International Journal of Project Management 22 (2004) 545–551
argue, however, that in the case of most major projects
in the construction and building industry, conceptual
development and strategic planning should be concen-
trated to the early phase [2].
The rest of the article is organised as follows: in the
next section we report some observations from the re-
search project, Bonus I, which primarily addresses the
opportunities hidden in the nature of the early phase of
major projects in the building industry. The ‘‘driving
question’’ underlying this research project was: ‘‘How
does the way the early phase is executed contribute to
increased value generation’’ [3]. In this project, data
were gathered from many sources. Here we report on
this data collection and afterwards our findings. Finally
we draw conclusions and highlight various implications
of these findings.
2. Projects in the Norwegian construction and building
industry
The Norwegian construction and building industry is
one of the largest and most important industries in the
country, with a turnover of NOK 330 billion and
roughly 300,000 employees. The industry is a project
business industry that undertakes several major and
complex projects every year. The term project business
implies that the parties use a tailor-made institutional
form, i.e. project organisation, for most of their business
activities [4,5]. In recent years this industry has shown
some good project results, but too many of the projects
ended up with significant cost overruns and delayed
delivery times. This is illustrated in the table below.
Table 1 shows the changes in cost from initial esti-
mate to actual cost for five completed large-scale Nor-
wegian projects. Inspection of table one reveals
deviation in delivery time from planned delivery time at
start to actual delivery at completion. The deviations in
project cost vary from 6% saving to 160% overrun. It is
also seen that the delivery time varies from delivered as
scheduled to a time overrun of three years. Table 1
shows that the actual cost of the completed Oslofjord
Tunnel project was 15% higher than the initial estimate
adjusted for inflation. In this case, contractually agreed
changes are not included in the figure. The two projects,
Table 1
Cost and delivery time for construction projects
Project Cost start estimate
(mill NOK)
Romerikporten 800
The National Bank Headquarters 1500
The New National Hospital 2820
The Oslofjord Tunnel 1100
The Gardermoen Airport* 11,400
Oslofjord Tunnel and the Gardermoen Airport, are
perceived as successful because the deviations in cost are
considered relatively small, and both were delivered on
time. The other three projects show significant devia-
tions both in cost and delivery time. The reported de-
viations emphasise the challenge facing the Norwegian
construction and building industry. This problem is not
just a Norwegian phenomenon. Low productivity, ma-
jor project deviations, low profitability, and reluctance
to initiate and implement new developments are also of
concern in the other Scandinavian countries, the UK
and the US. These problems are, however, only partly
recognised by the industry itself. Moreover, the industry
will have to face increased international competition in
the future [6,7].
Observations like these led some Norwegian indus-
trialists to initiate a study to evaluate
• the reliability of project execution, and
• industrial competitiveness in connection with the ex-
ecution of major and complex projects. This study
was undertaken during fall 1999.
One of the major conclusions from this study was
that more effective execution of the early phase of major
and complex projects would give a significant potential
for greater project value generation [3]. This conclusion
is founded primarily on the assumption that a high de-
gree of project uncertainty exists in the early phase, and
on the fact that uncertainty, by its very nature, is asso-
ciated with both upside and downside risk [8]. In order
to improve the project results and financial margins the
project uncertainty must explicitly be taken into ac-
count. We also claim that acceptance of a high degree of
uncertainty is a prerequisite for result improvement [9].
The initial study by the industry led to the Bonus I
project, on which the present paper is based.
3. The Bonus I project
The purpose of this project was to gain insight into
the importance of the early phase of major and complex
projects in the Norwegian construction and building
industry.
The project was conducted with active participation
from seven major industrial companies and organisa-
Cost at completed Cost overrun in % Scheduled delivery Actual delivery
project (mill NOK) date at the start
2100 50 1998 1999
3900 160 1996 1998
5340 89 1997 2000
1270 15 2000 2000
10,700 (6) 1998 1998
 B.J. Kolltveit, K. Grønhaug / International Journal of Project Management 22 (2004) 545–551
tions; Norsk Hydro, Statsbygg, Jernbaneverket, Vei-
direktoratet, NCC Norge AS, Veidekke ASA, Norcon-
sult, and Norwegian Centre for Project Management.
The reason for doing so was to benefit from their
knowledge of this industry, and in particular from their
experience associated with the early project phases. The
Bonus I project established a Board on which all par-
ticipating organisations were represented by one mem-
ber. The Project Board held 13 meetings, and worked to
some degree as a work group. The Board’s decisions
were to a large extent based on consensus. The project
Work Group, consisting of seven members, was another
important organisational unit and was organised ac-
cording to the same principles as the project Board. This
group held seven meetings. Detailed notes were taken at
all Board and Work Group meetings. These notes were
distributed to and discussed within the participating
organisations and commented before the protocols were
approved. This guaranteed, not only the quality of the
details, but also the validity of our observations. All
minutes from the meetings are available [3].
The Bonus I project arranged seminars with invited
speakers and experts from the industry. The expert
seminars were organised as focus group discussions
moderated by the first author, who has extensive expe-
rience from the industry and from project work. De-
tailed notes were taken at the seminars. Because of the
involvement and expertise of the participants and ex-
perts, and the numerous, varied and detailed data, we
are confident that a better understanding of the early
phase of projects was obtained, which would not have
been achieved by more ‘‘superficial’’ approaches.
In addition, data were gathered by means of a tailor-
made questionaire and followed up by personal inter-
views addressing such questions as Bergly [7].
• What activities are included in the early phase?
• How do the parties in the industry execute the early
phase?
The report from the study leading to the Bonus I
project is also available as a source of information.
Content analysis of the available documents, e.g.
minutes, notes, reports etc., was used to identify perti-
nent observations that would enlighten our research
problem. The analysis involved careful examination of
the various documents, implying categorization of the
type of information needed for our research, identifica-
tion of observations, chronological listing of the obser-
vations, and analysis of the listed observations Kolltveit
et al. [3], and this paper. By this method, altogether 262
observations related to execution of the early phases of
major and complex projects in the Norwegian con-
struction and building industry were identified. Of these
observations 26 were related to the potential for in-
creased value generation through more effective execu-
tion of the early phase, 193 to the degree of traditional
execution of the early phase, and the remaining 43 to
547
factors that obstruct the industry from exploiting the
potential of the early phase. In sum, very detailed and
highly valid data were gathered for examination of the
actual research problem in question.
4. Defining the early project phase
The term ‘‘early phase’’ has many definitions. This
made it necessary for the Bonus I project to arrive at a
common understanding of the term. Based on discus-
sions in the Board, Work Group meetings and discus-
sions with experts, it was concluded that for major
projects in the construction and building industry the
early phase should be defined as:
‘‘The process and activities that lead to, and immediately follow,
the decision to undertake feasibility studies and to execute the
main project’’.
This means that the early phase starts before the
decision to start the main project has been taken and
lasts until the activities and processes immediately fol-
lowing the decision to execute the project are completed.
Further, it was concluded that for major projects in this
industry the project early phase can be divided into two
sub-phases; the innovative sub-phase and the planning
sub-phase. In the innovative sub-phase the project
owner, experts such as the architects, and the decision-
making local government are the key stakeholders [1].
This sub-phase continues until the project proposal has
been defined. The main tasks in this part of the early
phase are feasibility studies, value analysis, formulation
of project goals etc. The planning sub-phase starts when
the project proposal is completed, and strategic choices
have to be made [3,7]. Important tasks in this sub-phase
are to develop project and contract strategies, establish
procedures for strategic risk management, benchmark-
ing, planning, estimating etc. This phase lasts until a
decision is taken to execute the project [3]. The key
stakeholders in this sub-phase are the project owner,
architects, contractors and sub-contractors. In this sub-
phase, at least the main representatives of the con-
struction industry should become actively involved in
the project development. This is illustrated in Fig. 1.
(1)
T1 M1 M2 T2
Time
Fig. 1. The early phase for major projects.
548 B.J. Kolltveit, K. Grønhaug / International Journal of Project Management 22 (2004) 545–551
Fig. 1 should be read as follows. The two small tri-
angles illustrate two milestones, i.e. the decision to start
the feasibility studies and the decision to execute the
main project. The point in time T2 marks the end of the
early phase. Curve (1) illustrates that the early phase is
part of the project life cycle.
5. Findings
In this section we report the major findings from the
investigation. The findings are organised in four sections
addressing:
• the challenges of the early project phase
• the participant’s interests in the early project phase
• execution of the early project phase
• what prevents the parties from more effective execu-
tion of the early project phase?
5.1. The challenges of the early phase
As emphasized above, a high degree of uncertainty
exists in the early stage of the project. An important
reason for addressing this challenge of uncertainty is
that this early stage of a project is the phase when the
‘‘technical concept’’ is developed. The technical concept
is ‘‘an approved abstraction of the technical solution
that satisfies the functional, quality and capacity re-
quirements’’ [2]. This implies that the decisions regard-
ing the technical concept must be taken in the early
project phase. Whether a project is perceived as suc-
cessful or not depends on whether the project object
functions in its business as expected. This in turn de-
pends to a high degree on the suitability and function-
ality of the technical concept of the project [2]. This
implies that effective development of the technical con-
cept during the early phase and the quality of the con-
ceptual decisions have a significant impact on future
value generation [10,11], and that effective strategic
choices are required in order to exploit this potential for
value generation. Past studies have shown that ineffec-
tive execution of the early phase of major projects can
lead to conceptual changes later during the implemen-
tation phase, which may significantly increase the
downside risk [2,12]. Andersen et al. [11] argue that the
project stakeholders are usually less qualified to deal
with strategic conceptual issues that could have a sig-
nificant impact on the project result than they are to
control the execution processes that have only a mar-
ginal effect on the project result. This lack of competence
reduces project upside risk and increases downside risk.
5.2. The industry’s interests in the early project phase
Perception forms the participant’s ‘‘reality construc-
tions’’ and influences what they consider important and
take into account. To obtain insight into how the par-
ticipants in the Bonus I project perceive the early phase
a group of 26 experts were asked the following question
at a seminar: ‘‘Do you believe that more effective execu-
tion of the early phase improves the potential for increased
value generation?’’ 25 responses from this discussion
were reported in the notes from the seminar. In addition
there is the conclusion from the study that led to the
Bonus I project. These observations were analysed and
grouped into three categories. The basis for this
grouping relates to the participant’s perception of whe-
ther more effective execution of the early phase for
projects in the construction and building industry in-
fluences the potential for project value generation posi-
tively. Fifty percent of the observations indicated clearly
that more effective execution of the early phase of con-
struction and building projects could have a positive
influence on the project value generation. Fifty percent
of the observations gave vague indications of the same.
An interesting observation is that none of the experts
indicated that the execution of the early phase have ‘‘no
influence’’ on project performance (Table 2).
In the report from the study that led to the Bonus I
project it was clearly stated that more effective execution
of the early project phase give a potential for increased
value generation [13]. Based on this assertion we argue
that the experts within the construction and building
industry believe there is a potential for increased value
generation by more effective execution of the early
phase.
Examples of statements indicating clearly that more
effective execution of the project’s early phase in the
industry concerned have a positive influence on the
potential for increased value generation are [3]:
‘‘We do not utilize the potential for increased value
generation in the early phase’’
‘‘The project and the premises for value generation
are defined in the early phase’’
‘‘We have no experience of allowing resources that
could exploit the potential of the early phase’’
‘‘The parties do not utilise the existing competence
during the early phase’’
‘‘40% of all failures are caused by mistakes in the
early phase’’
Table 2
The interests of the participants in the early phase
Category Observations
No positive influence 0%
Vague indications of an positive influence 50%
Clear indications of an influence 50%
R 100%
Number of observations (n): 26
Observations related to whether more effective execution of the
project early phase will influence the potential for increased value
generation positively.
 B.J. Kolltveit, K. Grønhaug / International Journal of Project Management 22 (2004) 545–551
‘‘Not understanding the importance of the project
early phase results in limited resources for the early
phase work’’
‘‘There exists a low degree of flexibility and we do not
utilize the available potential’’.
Examples of statements indicating vaguely that more
effective execution of the project early phase in the ac-
tual industry will influence positively the potential for
increased value generation are [3].
‘‘The construction industry is being very little in-
volved by the key actors in the early phase’’
‘‘There is no tradition for involving more parties in
the early phase’’
‘‘The early phase is the arena of the project owners’’
‘‘The work in the early project phase has low status’’
5.3. Execution of the early phase
Table 3 refers to activities in the early phases. Alto-
gether 193 observations were collected concerning how
the parties in the construction and building industry
execute this early stage of the project execution. In ex-
amining these observations we apply the two dimen-
sions; ‘‘degree of traditional execution’’, and ‘‘ seeking
opportunities’’. By the first dimension we mean to what
degree the involved parties execute the early phase as
they always have done. The distribution of the obser-
vations in percentages is shown in Table 3.
Table 3 should be read as follows. The observations
are grouped according the degree of traditional execu-
tion and to what extent new opportunities are sought.
Both dimensions are dichotomised and thus providing a
2
2 matrix. The bottom line shows that 172 of the total
of 193 observations relate to traditional execution. We
also see that among those that apply traditional execu-
tion, the great majority – 72% emphasise low downside
risk as compared with only 14% among those who em-
phasize untraditional execution.
Arguments for seeking low downside risk among
those favouring traditional execution were such as:
‘‘We need to to focus on risk reduction’’
‘‘Low risk for project cost and progress’’
‘‘The parties (involved in the project) seek safe posi-
tions and roles, an attitude that restricts the develop-
ment of new roles’’
Table 3
Execution of the early phase of major projects
Seeking Actively seeking opportunities
opportunities Seeking low downside risk
R 100%
n¼
549
Explanations offered to emphasize risk reductions
were such as:
• ‘‘The parties are afraid of new models of collabora-
tion’’
• ‘‘The organisational culture restricts collaboration
between experts’’. These arguments were supported
by other following observations, e.g.
• ‘‘apply risk analyses in the early phase’’
• ‘‘provide a well-prepared basis for contracting’’
Table 3 also shows that 28% of the observations
contained in the column for traditional execution fit into
the upper quadrant on the left side and indicate that
some parties, although choosing a traditional execution
of the early phase, do actively exploit the opportunities
for increased value generation in this phase. Examples
of such observations are:
• ‘‘We have established criteria for choosing alterna-
tives’’
• ‘‘We have established breakdown methods that make
it possible to analyse the various elements of the pro-
ject, including a thorough discussion between the
project manager and the estimator’’
Table 3 shows that only 21 out of 193 observations
indicate an untraditional execution of the early phase in
order to optimise project value generation [3]. Examples
of untraditional execution given by the subjects involved
are:
‘‘Models for managing the opportunities in the na-
ture of uncertainty’’
‘‘Interfaces are burdened with uncertainty, but the
owners of interfaces are also the owners of opportu-
nities’’
‘‘We have to accept uncertainty’’.
Inspection of the bottom line of Table 3, showing
a distribution between traditional and untraditional
execution in the early project phase, reveals that the
construction and building industry tends to be rather
conservative; an industry that carries out its business
as it always has done. The following statement, found to
be common in the industry, supports this conclusion;
‘‘we undertake the early phase as we always have done’’,
and ‘‘there have been very few improvements in this
industry in recent years’’. This conclusion is in accor-
dance with findings from other studies in the same
industry [6].
Degree of traditional execution R
Traditional Untraditional
28% 81% 34%
72% 19% 66%
100% 100%
172 21 193
550 B.J. Kolltveit, K. Grønhaug / International Journal of Project Management 22 (2004) 545–551
Table 4
Factors that obstruct the industry from exploiting the potential of the
early phase
Main groups of observations Number of observations
1. The industrial culture 63%
2. Contracts and incentives 12%
3. Competence 9%
4. Management commitment 7%
5. Execution processes 4.5%
6. Public frame conditions 4.5%
R 100%
The total number of observations (n): 43
5.4. What prevent the parties from more effective
execution of the early project phase?
Based on the conclusion that the construction and
building industry is a very conservative industry, and
does not actively exploit the opportunities for value
generation in the early phase, the following question was
asked: ‘‘What factors prevent the parties from executing
the early phase more effectively?’’
This question was the agenda for the Bonus I expert
seminar held on 6th February 2002 where 26 experts
participated. From the minutes we identified 43 state-
ments pertinent to the above question. These 43 obser-
vations were grouped into six main categories. The
distribution of the observations is shown in Table 4.
Table 4 shows that 63% of the observations relate to
the industrial culture. Examples of such observations
are:
‘‘The culture restricts use of new models’’
‘‘We do it as we always have done’’
‘‘We are afraid of early involvement’’
‘‘The organisational culture is conservative’’
‘‘The conservative industrial culture establishes barri-
ers against exploiting the potential of the early phase’’
‘‘The industrial culture prevents development and
composition of the right competence’’
From the above observations it seems reasonable to
conclude that the main reason for the company’s lack of
interest in exploiting the opportunities hidden in the
nature of uncertainty in the early project phase is the
industrial culture.
Table 4 also shows that the involved experts indicated
contracts and incentives, competence, management
commitment, the execution process, and public frame-
work conditions as other factors that may limit the in-
terest in the early phase.
6. Discussion
One of the fundamental problems associated with the
early phase is the high degree of uncertainty [8,11]. At
this point of development the project database is in-
complete, often making it irrelevant to use precise
methods for data measurement and analysis. It is well
known from research that the most important project
decisions have to be taken in this phase [2], and that this
stage of the project development is a time for conceptual
innovation and creativity [11]. Table 2 confirms that also
key personnel from the construction and building in-
dustry believe that a more effective execution of the early
phase have positive influence on the potential for in-
creased project value generation. Though the number of
observations in Table 2 is modest they are based on
conclusions from discussions between participating ex-
perts in this project. According to the present authors
the observations are both valid and reliable for our
particular research project.
An examination of the observations in Table 3 shows
that 172 observations out of 193, or 89%, fall within
traditional execution of the early phase, implying that
little initiative is shown in order to exploit the oppor-
tunities hidden in the nature of the early phase. Since the
importance of the early phase is well known, also within
the construction and building industry, it is a paradox
that the stakeholders in this industry show so little in-
terest in exploiting the opportunities connected with the
early project phase. There could be several reasons for
this. One is that the project stakeholders may have in-
centives that lead them in another direction [6]. Another
possible explanation could be, as indicated in our ob-
servations, is that the representatives from the actual
industry consider the early phase to be an arena for
other actors e.g. project owners, architects, local gov-
ernment. This is, however, only the case in the innova-
tive sub-phase. According to the present authors, the
actors in this industry should actively try to become
involved in the early innovative sub-phase. This could
benefit all involved parties. The construction and
building industry also tends to overlook the planning
sub-phase, where opportunities to influence project va-
lue generation already exist. Altogether, these observa-
tions indicate that this industry tends to overlook the
opportunities hidden in the nature of the early project
phase.
From Table 3 we see that 72% of the observations fit
in with the lower quadrant, indicating that the industry
concerned is rather conservative and focuses on low risk.
Nevertheless construction projects suffer from devia-
tions in cost and delivery time, see Table 1. This is an-
other paradox.
In the research project Bonus I a separate expert
seminar was arranged to address this problem and dis-
cuss which factors prevent the industry from exploiting
the opportunities connected with the early phase. Our
research shows clearly that the industrial culture is the
most important factor that is most important in this
context, see Table 4. This conclusion should be of major
 B.J. Kolltveit, K. Grønhaug / International Journal of Project Management 22 (2004) 545–551
concern for the top management of the companies in the
Norwegian construction and building industry. The top
management of these companies should take actions and
change the industrial culture. They should establish and
maintain a new industrial culture that stimulates the
parties to exploit the opportunities inherent in the early
project phase.
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