What this site is for
The book introduces its methods with worked examples and the mathematics behind them. This site turns them into working tools, so a reader can apply them to a real project rather than only follow the examples.
Two are here now. Real option value, from Chapters 2 and 5 with Appendix 3, says what a project whose delivery date is yours to choose is worth at the confidence you state. The bid-price algorithm of Appendix 8 says what to charge for work wanted by a fixed date. Each opens on the book's own example, and each has a page explaining the model and a user guide.
The book sets out two more algorithms for tools to carry: completion velocity learning (Appendix 2) and the quality confidence model (Appendix 7). They are not on the site yet.
Manage a project as an investment
A project spends money now for a benefit later. Its cost, its schedule and what it will earn are all uncertain when the money is committed, and they stay uncertain until it is done.
The book rests on three principles. Embrace uncertainty: treat every forecast of cost, schedule and value as a spread of outcomes, not a single number. Think like an investor: a project succeeds when it earns the return it was undertaken for. Think in systems: the qualities of what is delivered, such as its reliability and usability, carry money for as long as it is in use.
Put together, they give one figure for what a project is worth, read at a stated confidence. Because it is recomputed from the current estimates, the same figure can steer the project at every review, from the first idea to release.
Why there are two models
What a project is worth depends on how its value responds to the delivery date. There are two cases, and each has its own model.
The date is yours to choose
Real option value
A product ships when the organization decides it is ready. It can ship earlier with less in it or later with more, and what it earns falls the later it reaches the market. The delivery date is one more decision.
The project is worth what a buyer would pay for the right, but not the obligation, to finish it: the value its net present value reaches or beats at the confidence you state. Chapter 5 follows the RSonic Terra System, an outdoor audio and lighting product, from idea to release.
Someone else sets the date
Bid price
A client wants the work by a date that cannot move: a contract deadline, an event, a launch window. The full price is paid for delivery on time, a share of it for a short delay, and nothing after a final date.
Taking the job is a wager. The stake is the cost to complete, the payoff is the price, and the chance of winning is the chance of delivering in time. The model finds the price that earns the return you require at the confidence you state. Chapter 6 follows QNAV bidding to build the landing system for a Mars sample return mission.
To choose, ask who sets the delivery date and what happens to the value when it passes.
The models
Each model is a set of three pages. About the model says what it is for and follows the book's worked example through the life of a project. Run the model takes a reading: it opens on the book's example, so there is a figure on screen before you type anything. The user guide walks through it box by box.
Real option value
The delivery date is yours to choose and the value decays with it. Read what the investment is worth at a confidence you state, and the return on the money still to spend. Chapters 2 and 5, with Appendix 3.
Bid price
The client sets the date and the payment collapses at it, so the engagement is a wager. Read what to bid for a return you require, at a confidence you state. Chapter 2 and Appendix 8.
Through the life of a project
The book's lifecycle has four phases, and each exists to support one decision. Both models answer each of them, with better estimates every time.
- Ideation. Is the idea promising enough to invest in detailed planning?
- Chartering. Do the plans support assigning the people and the money?
- Controlling. Given the progress so far, should the project continue or stop?
- Release. Is it worth delivering now and taking on what follows?
Each About the model page takes its example through the four, and says at each what to type into Run the model.
Using the pages
Run the model works entirely in your browser. Nothing you type is uploaded or shared, and each model keeps its own projects on this computer. Export writes them to a file you keep; Import reads them back.
Every page here is v0.13.3. Run the model prints its version at the left of its toolbar. If it shows an earlier one, your browser is showing an old copy: reload the page.
The book
Every method on these pages is from the book Project Economics Under Uncertainty: From Concept to Realization. Chapter 1 treats estimates as uncertain quantities. Chapter 2 sets out the two investment cases. Chapter 4 lays out the lifecycle, and Chapters 5 and 6 work one example of each case through it. The arithmetic is in Appendix 3, and the bid-price algorithm in Appendix 8.