Development of conceptual model of project value dynamics analysis in conditions of uncertainty

Abstract

A conceptual model for analyzing the dynamics of the value of the project, achieved as a result of engineer-ing, under conditions of uncertainty has been developed. In the methodological context, the proposed approach is based on an array of isovalues, each of which corre-sponds to its own level of optimism in forecasting the cash flow for the project. With the increase in the effi-ciency of the project due to engineering, the entire array of iso-value lines’ changes its geometrical position, mov-ing further from the origin (in the four-dimensional space "time-benefit-cost-risk"). The proposed model includes three stages. At the first stage, input information is col-lected and the corresponding analysis is initiated. The result of the second stage is a multivariate cash flow forecast and calculation of the benefit-cost ratio (BCR) and its changes for each scenario. The third stage pro-vides the calculation of the expected BCR and its change, an assessment of the risk of making an erroneous deci-sion and changing this risk as a result of the engineer-ing session. The model makes it possible to calculate the achieved proportion of the static and dynamic vectors of change in the value of the project. In the example con-sidered, the share of the dynamic vector of growth in the value of the project was found to be 35.47 %. The model has an environmental property - the assessment of the success of value engineering under conditions of uncer-tainty is carried out on the basis of the annual total ben-efits and the annual total costs throughout the project cycle. Thus, the analysis takes into account the impact of the project on the environment, which is reflected in the risk assessment. The given case testifies to the feasibility of applying the model in the practice of engineering the value of construction projects.