Project Selection in Project Management.pptx

Project Selection in Project Management

1. Project selection Project management Institute Staff (2013). A guide to the Project Management Body of Knowledge (PMBOK guide). (8 th Ed.) Pennsylvania, USA: Project Management Institute Grace Kibs .

2. Introduction Project selection is the process of evaluating proposed projects or groups of projects, and then choosing to implement some set of them so that the strategic objectives of the organization will be achieved. Each project will have different costs , benefits and risks and they are uncertain. Selection of a project or a portfolio is difficult. However, selecting the appropriate portfolio of projects is critical as it is the portfolio of projects that determine the organizations success not the completion of the project.

3. Project selection models There are two basic types of project selection models’ Numeric model Nonnumeric model Many organizations use both at the same time or use models that are a combination of both. Nonnumeric as the name implies does not use numbers as inputs while numeric models do. Of the two basic types of selection models, Nonnumeric models are older and simpler and have only a few subtypes to consider

4. Nonnumeric model Sacred cow.- where a senior official proposes an idea for a new product, development of a new market, design and adoption of a global data base and information system, or some other project The operating necessity- whether the project is required in order to keep the system operating, if yes, project costs are examined to keep them as low as is consistent with the project success The competitive necessity-the desire to undertake the project is based on a desire to maintain the company's competitive position in the market. NB/ investment in an operating necessity project takes precedence over a competitive necessity project, but both types may bypass the selection analysis for projects deemed less urgent or less important for the survival of the firm.

5. Nonnumeric Model The product line selection-a project to develop and distribute new products would be judged on the degree to which it fits the company's existing product line, fills a gap, strengthens a weak link, or extends the line in a new, desirable direction Comparative benefit model-here the firm has many projects to consider. Management would like to select a subset of the projects that would most benefit the firm. The company may use several techniques for ordering projects; the Q-Sort method -where projects are divided into three groups, good, fair, poor-according to their relative merits. If any group has more than eight members, its subdivided into two categories i.e. fair plus and fair minus. For less than members they are ordered from best to worst. Projects can be selected in the order of preference.

6. Continued The projects will still be evaluated financially before final selection. Sacred cow has a plus advantage Sustainability-this focuses on long-run profitability rather than short term payoff. Metrics must be developed to measure the results of policy changes to increase sustainability, and this may require developing certain soft measures.

7. Numeric models 1.Profit/profitability- they include. payback period-is the number of years required for a project to repay its initial fixed investment AND discounted cash flow-also net present value. 2. Real options- it's based on financial options approach to valuing prospective capital investment opportunities. Occasionally, firms will approve projects that are forecast to lose money because of other benefits available i.e. Acquire knowledge concerning a specific or new technology Get the firms ‘foot on the door’ Obtain the parts, service, or maintenance portion of the work Allow them to bid on a lucrative contract Improve the competitive position Broaden a product line or line of business

8. Continued 3. scoring-in attempt to overcome the single criterion focus by profitability model, a number of evaluation models that use multiple criteria to evaluate a project are used. Such a method are known as cost benefit analyses. They use monetary and qualitative factors e.g. weighted factor scoring model. 4. Window of opportunity analysis-where cost time and performance specifications analysis must be met before R&D is undertaken 5. Discovery driven planning – this approach funds enough of the project to determine if the initial assumptions concerning costs, benefit etc are accurate .

9. Choosing a project selection model Weighted scoring models are most preferred for several reasons; They allow the multiple objectives of the firm to be reflected on decision taken They are easily adaptable to changes in firms' philosophy or environmental changes They do not suffer from the bias toward the short run that is in profitability models. The assumption for the models That decision making procedures takes place in a rational org environment- not the case

10. Risk considerations in project selection Dealing with estimates of task durations, costs etc. most projects decisions are made under conditions of uncertainty Lack of information on a project- examples are R&D projects. Considerable uncertainty is on when it will be developed, at what cost and whether it will be viable Uncertainty on time and cost- especially on timing and the cash flows it is expected to generate, secondly uncertainty about the direct outcomes of the project, uncertainty about the side effects of the projects; unforeseen consequences