Risk-Based and Economic-Based Alternative’s Selection (RBEBAS)

This chapter is devoted to selection of project alternatives by finding a trade-off between risk exposures and economic benefits of evaluated alternatives. The selection bridges the gap between project business case and development of project scope that answers the business case. (It is presumed that the business case is robust enough to adequately answer the predicted project external environment.) The risk-based and economic-based alternative’s selection (RBEBAS) methodology has three components in its PRM system: framework, process and tools. The RBEBAS process includes steps to generate viable project alternatives, differentiate them regarding their risk exposures, shortlist alternatives that meet risk exposure criteria and select an alternative from the shortlisted with the best economic benefits. Game theory is drawn to clearly formulate decision-making criteria: minimax (minimization of maximum risk exposure) and maximin (maximization of minimal economic benefits). A requirement of one additional selection criterion is hinted—flexibility constraint—that allows avoid locking in any alternative if the external environment substantially changes in future. Implications of this as a part of transition to monitor-and-adopt decision-making are fathomed in consecutive chapters. A simplistic RBEBAS business case is reviewed that is built on three generic business risks used as alternative’s differentiators.