In the first part of this article series, we discussed about fallacies and principal – agent relationships and how Capital Investments project proposals often overestimate benefits and underestimated costs. You can read the first part by clicking this link.

This time we discuss about companies ability to meet requirements for products and services offered to customer and about undeveloped requirements management processes.


Prohoc Oy, the Project Partner for Investors, Owners and Companies of Senior Executives, is fully recognising challenge of initiating, planning, executing and controlling capital investment projects. Prohoc’s Project Partner Services is a service initiative which is focusing on services providing full control of investment initiatives / projects with processing project requirements and compliance thereof, estimating cost and time and managing risk management process for providing accurate forecasts used for decision making, at initiation and during planning as well as during execution of the project.

Even though many obvious causes to these behaviours described earlier are related to psychological biases and misplaced incentives, the root causes could be found from absence of means and methods to manage the expectation of the stakeholders, how to integrate them as requirements into project scope and definition of project objectives, and how to provide educated accurate estimates associated with computed level of risk exposure.

Cost and schedule overruns on some NASA Projects


An undeveloped requirements management process applied or non-existent such, is the well-recognised root cause for the poor performance in projects.*** NASA has issued a report where they can demonstrate the value of the investment into requirements management. With simplification, each 1 € invested in requirements management returned 19 € back. Great ROI – Right?

Project’s cost, schedule and quality are inherently depending on the defined scope of work, which in other hand is definitely depending on the project requirements. It is practically impossible to manage the scope and constraints, if the requirements are not set. So if those are not visible, they will not be evidently fulfilled along the project life cycle. Despite the prudent and diligent estimating effort, it is also an absolute must to acknowledge that there is and will be unknowns in every single project, and the more the complexity is present, the more the unknown factors are imminent. Therefore, “Know your Unknowns” and prepare your team and project for them – Risk management – Allowance, Contingencies/Buffers, and Management Reserves.

Four Absolutes of Quality Management


Let’s define a new aspect to all of this. Quality guru Mr. Philip B. Crosby presented the “Four absolutes of quality management” in his book “Quality is still free”. One absolute he claimed is that Quality means conformance to carefully thought-out requirements.

In order to comply with Mr. Crosby’s 1st absolute, there must be a methodology and actions to process the requirements from higher level needs gradually cascading them into detailed level requirements / specifications, which can be and will be fulfilled (verified and validated) with evidence during the project life cycle phases. The traceability forward and backwards is of essence here. In order to manage such projects, Prohoc Oy is developing a requirements management approach in collaboration with a company providing the digitalized requirements management / collaboration environment.


Another, Supplier / Contractor, aspect is provided by Figure 4, in which requirement is set for a Company to ensure its ability to meet requirements for products and services offered to customer. A review is expected, before commitment, to evaluate the ability to meet the requirements, stated explicitly and implicitly, and in case of absence of documented statement of requirements, such requirements shall be confirmed. There is a need for diligent requirements management and digitalized requirement management environment.

ISO9001:2015 (Figure 5) is also stating strongly that a Company shall determine the essential requirements, of which it is important to mention that the evidence of the compliance with, d) statutory and regulatory requirements as well as e) HSE requirements, is imperative. With developed traceable and collaborative approach, Prohoc Oy has aspiration and ability to support Companies in this effort.

ISO 9001 2015 Clause 8.3.3


Based on the information obtained from referred articles and on my own over 25 years’ experience from capital investment projects, I assure you that the factors described in this article are real and evident causes to the budget (cost/time) overruns. The technical solution is closer than many of you may think, while we can only affect the psychological biases by becoming aware of them and counteracting on them. Also, ISO9001:2015 is definitely setting expectations on organisations for managing the requirements and for applying a risk-based approach. Prohoc’s Partnership Service concept encourages the Executives, Project Champions, Owners and Contractors to focus on – Knowing your Knowns and Managing your Unknowns i.e. Managing Requirements and Risks. We’ll clarify “how” in subsequent issue of Scope magazine. To be continued…

Sami Myllyviita

Sami Myllyviita

VP, Project Partner Services