Construct only Flexibility can be fully considered during the May pay a higher cost to contract planning and design phase. progressively for project elements Flexibility can be retained by entering into a If contract entered into upfront for multiple construct only contract for specific project project elements, may not facilitate a real elements as decisions are made to proceed options approach with that project element Does not for innovative solutions to emerge until late in the process No incentive to facilitate a real options approach during operations Flexibility can be considered during the Poor contractual flexibility does not facilitate Design and construct and variants planning phase a real options approach May allow for innovative solutions to emerge No incentive to facilitate a real options at the design stage approach during operations phase Managing contractor Flexibility can be fully considered during the The trigger points, and how they will be planning phase exercised, need to be clearly set out in the contract Allows for innovative solutions to emerge at the design stage No incentive to facilitate a real options approach during operations phase Provides greater flexibility for a real options approach than the traditional design and construct contractor Allows for innovative solutions to be identified early in the process involvement Could improve the ability of the contractor to implement a real options approach Alliance Flexibility can be considered during the The trigger points, and how they will be planning phase exercised, need to be clearly set out in the agreement Use of functional requirements specification rather than design specification could No incentive to facilitate a real options increase design flexibility opportunities approach during operations phase Public Private Use of functional requirements specification Depending on contract, contractor may not Partnership rather than design specification have appropriate incentives to adopt a real increase design flexibility opportunities options approach Contractor involvement in service delivery could provide an incentive to consider inproject options Own Operate Flexibility can be fully considered during the Constrains real options approach does not – (BOO) planning and design phase allow innovative solutions to emerge until after design phase Provides an incentive to facilitate a real options approach during the operations phase Table : Using real options with different procurement methodologies
Construct only Flexibility can be fully considered during the planning and design phase. Flexibility can be retained by entering into a construct only contract for specific project elements as decisions are made to proceed with that project element May pay a higher cost to contract progressively for project elements If contract entered into upfront for multiple project elements, may not facilitate a real options approach Does not for innovative solutions to emerge until late in the process No incentive to facilitate a real options approach during operations Design and construct and variants Flexibility can be considered during the planning phase May allow for innovative solutions to emerge at the design stage Poor contractual flexibility does not facilitate a real options approach No incentive to facilitate a real options approach during operations phase Managing contractor Flexibility can be fully considered during the planning phase Allows for innovative solutions to emerge at the design stage Provides greater flexibility for a real options approach than the traditional design and construct The trigger points, and how they will be exercised, need to be clearly set out in the contract No incentive to facilitate a real options approach during operations phase contractor involvement Allows for innovative solutions to be identified early in the process Could improve the ability of the contractor to implement a real options approach Alliance Flexibility can be considered during the planning phase Use of functional requirements specification rather than design specification could increase design flexibility opportunities The trigger points, and how they will be exercised, need to be clearly set out in the agreement No incentive to facilitate a real options approach during operations phase Public Private Partnership Use of functional requirements specification rather than design specification increase design flexibility opportunities Contractor involvement in service delivery could provide an incentive to consider inproject options Depending on contract, contractor may not have appropriate incentives to adopt a real options approach Own Operate (BOO) Flexibility can be fully considered during the planning and design phase Provides an incentive to facilitate a real options approach during the operations phase Constrains real options approach – does not allow innovative solutions to emerge until after design phase Table : Using real options with different procurement methodologies
Investing%20under%20uncertainty%20-%20real%20options%20ILG%20technical%20supplement%20-%20Version%201%20June%202018.docx