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N.O.E. Olsson / International Journal of Project Management 24 (2006) 66–74 69by the projectÕs effectiveness. The project manager ismade the guardian of efficiency.2.7. Changes and extensionsChanges and extensions are a source of major disagreementsbetween different actors in projects. PMI[23] defines the management of both changes and extensionsas scope change control.Many authors, including [1,4,24], have pointed toscope changes as a key driver to cost overruns of projects.From a project management and contractor perspective,scope changes are generally seen asundesirables, even though contractors can see changesas a possibility to improve the profit from the projects[25]. Scope changes are key issues when discussing flexibility,but project flexibility as discussed in this paper isa wider concept than scope change management.A typical scope change is proposed because the usersor project owner wants to increase the effectiveness ofthe project. As shown by Ibbs et al. [26] using benefitto-costratio, the reduction in efficiency might be compensatedby a higher increase in effectiveness, dependingon the timing and type of change. Two sources of conflictsrelated to scope changes can be identified. Conflictsmay arise regarding: (a) the quantification of the increasein effectiveness and reduction in efficiency; (b)the responsibility for the reduction in efficiency.Based on a study of 448 projects, Dvir and Lechler[27] showed that changes in both plans and goals of projectstypically reduce both the efficiency and customersatisfaction of engineering projects.Many textbooks on project management, including[3,28], include explanations and illustrations that illustratethat the scope change cost is typically low in thefront-end phase of projects, and getting higher and higheras time goes by. This increase in scope change costover time is widely accepted as a rule of thumb, and isa major challenge to project flexibility. Once a projecthas been decided upon and the planning or executionhas begun, changes are likely to reduce the efficiencyof the project, as shown by Hanna et al. [30]. However,Poppendieck and Poppendieck [29] argue that the almostexponential increase in scope change cost over timein a project is not always applicable to IT-projects.Some types of changes are less damaging to efficiencythan others. An alternative approach to project flexibilityis to identify areas or types of changes that are lesschallenging to accommodate in projects than otherchanges. Thus, at least two different strategies can bechosen to manage scope changes: (a) to avoid them or(b) to reduce the negative impact from changes that docome. A change requires that something already hasbeen decided. One key purpose of the flexibility strategiesidentified in Fig. 1 is to achieve flexibility withoutcreating scope changes in the project. In this way, scopechanges might be avoided or reduced by the use of latelocking of projects and by not taking decisions until onereally have to. Scope changes may also be avoided bythe use of flexibility in the product.2.8. Contracting and incentivesIncentives for different project stakeholders arestrongly related to the contracting structure of a projectand other financial obligations. A common tool forachieving flexibility in projects is the use of option basedcontracts, which enables a continuous locking of theprojects. Mahmoud-Jouini et al. [20] discusses timemanagement in projects. Their discussion also includesflexibility aspects. They point out that a key factor increating win–win situations between the stakeholdersin Engineering, Procurement and Construction (EPS)contracts lies in flexibility of contracts and the implicitrelations that are created by the contracts. Garel andMidler [31] studied contractual structures that enablefront-loading and coherent incentives for manufacturersand suppliers in the automotive industry. Their analysisis based on a game theory approach, where dealing withflexibility can be a win–win or zero-sum game betweenthe stakeholders. In co-development of automotiveparts, the supplier gets no additional payments for lateidentification of need for modifications in the designphase. The supplier therefore has strong incentives toprovide engineering expertise to work closely with themanufacturer in order to understand the needs and theproduction process [31].The users are a group of stakeholders that often donot have direct contracts related to the projects. Theirincentives are therefore less connected to the direct costof the project, and more often connected to the qualityand usability of the final result.3. Empirical indicationsA study was carried out to investigate to what extentthe results from the theoretical review of project flexibilitycorresponds with observations from a number ofprojects. This section of the paper describes the datamaterial, discusses the applied methodology and presentsthe results from the study.3.1. Data collection and analysisA qualitative case study research approach has beenused in this study. In the terminology of Yin [32], theanalysis is a multi-case study. The study is based on ananalysis of 18 Norwegian projects. Information relatedto the projects has been obtained from two main sources:third party evaluation reports and personal experiencefrom consulting and applied research engagements. The