Edited by: Miroslaw J. Skibniewski & Miklos Hajdu https://doi.org/10.3311/CCC2022-018
Characteristics of Project Portfolio Management in the Construction Industry
Patricia Pionorio
1and Zoltán Sebestyén
21 Budapest University of Technology and Economics, Budapest, Hungary, pionorio.patricia@edu.bme.hu
2 Budapest University of Technology and Economics, Budapest, Hungary, sebestyen.zoltan@gtk.bme.hu
Abstract
Researchers have invested a significant amount of time and effort into investigating the process of portfolio management. Topics that have been covered in these studies include the value of the project, the distribution of resources, and decision-making processes regarding the selection of projects. Research on the significance of managing a project portfolio has been going on for many years, and its relevance only seems to be growing as new industries come into being. The fundamental objective of the PPM is to boost company profits via increased financial returns and successful project completion. The issues of this literature review include Project Portfolio Management (PPM) and the significance of its implementation in the building and construction industry.
© 2022 The Authors. Published by Diamond Congress Ltd.
Peer-review under responsibility of the scientific committee of the Creative Construction Conference 2022.
Keywords: construction industry, construction management, literature review, PPM, project portfolio management.
1. Introduction
Many businesses are pursuing a way of formalizing project management and using it as an organizational structure in the right direction instead of dealing with a one-time event in their operations. This method can handle all types of assets and operations, increasing the organization’s use of PPM to manage their project portfolios strategically. Its growth can be seen through the enterprises’ increased capital investment in the project portfolio field [1,2].
For the foundation of the discipline of Portfolio Performance Management (PPM), several researchers have attempted to combine the theory of portfolios with PPM implementation within the NPD and R&D areas [2].
PPM manages investments to finish projects on time by focusing on each project’s scope, timing, and budget. Projects are evaluated and valued according to a pre-defined portfolio of projects [3]. Hansen and Svejvig (2022) undertook extensive research and developed an onion-like model to represent how the topic advances. It is noticeable from the organic onion example that each layer has grown unhesitatingly over the previous seven decades [2].
2. Methodology
This paper is a literature review on project portfolio management (PPM) and its use in the construction business. A lot of searching and reading was performed to develop this paper, following the steps of finding the appropriate keywords, filtering the articles mainly related to the subject of study, and evaluating the selected articles.
The first step was to look for reviews of books and articles about project portfolio management (PPM) on academic platforms. After gathering all the relevant material, the main keywords used in this research were established and used to prepare the search string. After setting the main keywords, the second step was to evaluate the articles’ titles and abstracts and select the ones with the most relevant content to the research goal. Lastly, the third step evaluated the chosen articles, thoroughly reading and classifying them into fundamental concepts and construction industry applications.
3. Project Portfolio Management
PPM is a technique that takes care of each project individually, focusing on the three limitations of scope, time, and money. It selects and manages projects as investments to execute the best initiatives on time, periodically locating, assessing, and valuing projects based on a predetermined portfolio. Based on the organization’s resources, the output is a prioritized list of initiatives to start, re-prioritize, or cancel [1,2].
To ensure that projects are completed on time, PPM evaluates and manages them in the same way as a portfolio of investments. Effective portfolio management adds value by connecting projects with the organization’s strategic goals, maximizing scarce resources, and fostering collaboration amongst projects.
A poorly managed project portfolio falls short of the plans due to taking the wrong initiatives to prioritize the tasks [4].
All the projects have to compete for limited resources (people, time, and money) because there are not enough resources to undertake every project that fits the organization’s minimal standards. Effective project organizations prioritize the best projects with limited resources instead of attempting to accomplish everything by overloading project teams [1].
Research in PPM has shown that this topic is dynamic and has grown through its engagement throughout history. Some of them get more developed and stronger, while others reach a point where they have not been used as much anymore and go in a different direction [2].
3.1. PPM categories
Figure 5. The onion model of seven decades of PPM knowledge by Hansen & Svejvig (2022).
Hansen and Svejvig illustrated the development of the topic by using a model in the form of an onion (see Figure 1). The metaphor of the organic onion has become more complex over the course of the past seven
3.1.1. Portfolio selection and optimization
The selection of project portfolios for a company is noteworthy, considering that for many companies, it is not easy to decide which projects to include in their portfolio [1]. This is a common management assignment that takes place within the context of the business planning process, which plays a significant role in determining the long-term success of the entire company [5].
In the post-World War II era, the need for a process that would guide how to choose suitable projects emerged, enhancing studies in this field, and researchers managed to incorporate new management ideas to help with selection. Its main goal is to determine the best combination of projects to minimize investment risks and maximize limited resources and stakeholder needs [2].
The leading portfolio selection techniques in studied literature include ad hoc approaches, comparative approaches, scoring models, portfolio matrices, and optimization models [1,6].
3.1.2. Management of project ideas
It handles the issues to ensure efficiency in bringing a new product to the market, enabling and supporting the PPM selection process. In the postwar optimism, research and development institutes were needed to manage new ideas and get them to market. Discussions on managing PPM issues and preconditions for PPM success have made PPM more effective and efficient [2,7,8].
3.1.3. From the fuzzy portfolio front end to decisions and its ongoing implementation
In order for a project to be successful, several choices need to be selected and implemented. As a result of a decline in market demand, businesses became increasingly interested in developing novel approaches during the 1970s and 1980s [7]. These approaches included minimizing the amount of wasted labor, cutting back on resource consumption, and improving project selection and monitoring. As the researchers understood PPM as an ongoing process, they developed the stage-gate model. According to this model, project teams are responsible for providing information, analyzing the project, and making decisions [2,7].
The stage-gate methodology is used the same way as before, but it is now more scalable, versatile, and beneficial for agile operations [2,9].
3.1.4. Governance, maturity, and conceptual models
It is recognized how techniques and models work together to make PPM successful. As a decision-making system in the 1990s, researchers developed models to illustrate how PPM blends strategy and stakeholder decisions with methodology and projects, and data [1]. People and organizations can now assess their progress considering these “best practices” structures, which have gained traction recently. However, academics are dubious of best practices on the one hand and link them to success on the other. The widespread dispute among scientists regarding the importance of these methodologies has inspired many new researchers to pursue the field [2].
3.1.5. Strategy-oriented approaches
It indicates what is contained in the conceptual view and serves as an integrative term for the whole process. PPM’s strategic impacts were first examined in certain studies after the efficiency of PPM was emphasized, and researchers are currently broadening their scope by incorporating effectiveness into their analyses.
The idea of value and success in PPM has slowly moved away from projects and products and toward value, reinforcing the importance of PPM research focused on managing the creation of value in portfolios. As a result, there is an improvement in setting up a strategic approach to internal and external environments [2,10].
3.1.6. Projects as a practice and alternative epistemologies
Using logical models and focusing on real-world circumstances broadens the scope of research, making it more useful. As a result of these additional contributions, PPM research became more practical and diversified. More than rational motivations influence PPM decisions and practices. Several studies have been conducted on the various roles of stakeholders, project managers, and the PMO in implementing PPM in the real world [1,2,7].
3.1.7. Readiness to change
It describes the strategy’s creation process and the effort put into its execution. The organizational environment uncertainty expanded with the rise of businesses participating in the global innovation market, encouraging PPM researchers to focus on an organization’s adaptability to unexpected change [2,10].
Although many theories have been developed to help organizations become more adaptable and agile, it is challenging for organizations to implement agile portfolios because of how people and management operate and think [2,4,10].
3.2. Project Portfolio Management and Industries
PPM manages investments to complete projects on time by focusing on the project’s scope, timing, and budget. The portfolio is used to locate, appraise, and value initiatives and the resources available to the company to define their priority [3]. Since its beginnings, PPM has been used in many areas, such as IT projects, research and development, oil exploration [5], and the construction industry [6,11–13].
A long-standing observation in the construction business states that most building projects do not succeed in achieving their stated goals. Only forty percent of construction projects are finished according to the goals and aspirations that were initially articulated by management [2]. A predicted profit could turn into a loss in the current highly competitive climate if the strategy, budget, or timetable are implemented incorrectly [11,12].
Kozlov (2017) suggests that construction firms should find new methods to make choices, govern their operations, and improve project management approaches [6]. A construction portfolio composed of many different projects simultaneously has an average risk lower than each project individually [13].
Project portfolio management is an essential concept for managing complex project landscapes. Even though most businesses are more familiar with project management, it is still new in construction. [12].
4. Conclusion
Although Project Portfolio Management has been studied for decades, the issue is still current and growing with the expansion of industries today. The keywords were used to select papers and books on the issue for the study. This article explores the core concepts of Project Portfolio Management (PPM) and the significance of PPM implementation in the construction industry.
5. References
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Project Management Journal. 2022 Jun;53(3):277-94. https://doi.org/10.1177/87569728221089537 [3] Levin G. What is Project Portfolio Management?. AACE International Transactions. 2008:TC31.
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