# Lean and Flexible Project Delivery
## 4 Discussion--The Utility of the Proposed Operational System
### Utility Evaluation Using a Real Case
However, when demand turns to be different, this approach is leading to iterations and rework loops in three out of four phases (Team Selection and Alignment, Design, and Construction. See [60] for details on the impacted activities and their cost-duration estimates). In the proactive approach, with an option implemented in the Team Selection and Alignment phase, rework loops are limited to the Design and Construction phases, and the decision process is staged: with first-stage decision D1 before learning the demand, developed to fit both demand scenarios, and second-stage decisions developed to fit the observed demand (denote D2 Al1 for stable demand, and D2 Al2 for increased demand). Table 3 shows the impact of demand changes on project performance (costs and durations) for the three solutions: deterministic, reactive, and proactive, respectively. The results are given for the subproject of dental clinic design and for the entire project (the latter in parentheses). For calculations, we assumed that 33 days equal one unit of time, and USD 1 million equals one unit of cost. Observe that when demand is as expected, the deterministic solution outperforms the flexible one. However, this solution performs badly if demand turns out to be different from the expected one: We report over 300% increase in costs and time for the subproject, an increase in duration from 2.25 to 6.95, and increase in costs from 5.6 to 17.3. For the entire project, we note an 11.3% increase in project duration and 7.8% increase in total costs. Whether this is acceptable is subject to a collaborative discussion across stakeholders. Under the proactive strategy, the subproject duration is 2.9 and the cost 7.2, for both demand scenarios. This performance is somewhat lower than the best possible when everything is (assumed) known, but far better than that of the reactive plan. \begin{table}
\begin{tabular}{l c c c c c} \hline  & **Planning** & **Demand** & **Lost Demand** & **Duration Subproject** & **Costs Subproject** \\  & **Solution** & **Satisfied** & & **(Entire Project)** & **(Entire Project)** \\ \hline \multirow{2}{*}{Demand scenario 1} & Deterministic & 10 & 0 & 2.25 (20.8) & 5.6 (75) \\  & Proactive & 10 & 0 & 2.9 (21.45) & 7.2 (76.6) \\  & Deterministic & 10 & 10 & 2.25 (20.8) & 5.6 (75) \\  & Reactive & 20 & 0 & 6.95 (25.5) & 17.3 (86.7) \\  & Proactive & 20 & 0 & 2.9 (21.5) & 7.2 (76.6) \\ \hline \end{tabular}
\end{table} 
Table 3: Comparing different planning approaches to handle the uncertainty at hand. To answer the question of which decision to choose, we applied the stochastic decision tree approach and calculated the value of flexibility--the difference between the expected value of the project with and without options. This value was evaluated under two situations: (i) high belief in unchanged/stable demand (common assumption in practice), with probability 0.9; and (ii) equal belief in the two demand scenarios, with probability 0.5 (which practically means limited predictability, and the context of the paper at hand). Without additional information on the future demand, the latter is the correct assumption. The decision tree under high belief in stable demand is shown by Figure 4, with the rectangular nodes representing decisions and valuation nodes and the circular nodes representing chance (uncertainty) nodes. The decision process moves upward in the decision tree. The performance measures are provided in the decision tree, for both the subproject and the entire project. The expected subproject costs with the option (7.2) minus the expected costs without the option (6.77) suggest that the value of flexibility is negative (higher costs means negative value). This, in order, suggests that the fixed design solution, with all decisions taken early and reaction to a materialized change, should be chosen. This is not unexpected; options and flexibility are less valued under low levels of uncertainty.