SabPMS#22_Project_Selection

SabPMS#22_Project_Selection

1. the project manager is not tipically involved in project selection

2. Categories of project selection

   • Benefit measurement methods (comparative approach)
     • Murder board (a panel of people who try to shoot down a new projet idea)
     • Peer review
     • scoring models
     • Economic models (described below)
   • Constrained optimization methods (mathematical approach)
     • Linear programming
     • Integer Programming
     • Dynamic programming
     • Multi-Objective programming

3. Economic Models

   • Present Value
     • value today of future cash flows
     • Avoid confuse PV with planned value (also used and described in Cost Management)
   • Net present value
     • Present value of the total benefits (income or revenue) minus the costs over many time periods
     • Provides a means for the organization to compare many projects and select the best (project with best NPV) to initiate
   • Internal rate of return
     • if a company has more than one project to invest, the company may look at the return of them and then select the project with the highest return
     • for exam, just to know the higher the IRR number, the better.
   • Payback period
     • lenght of time it takes for the organization to recover its investment in the project before it starts accumulating profit
       • Project with the shorter payback period is the best choice, but if there are other considerations the best choice might be a project with a longer payback period
   • Cost-benefit analysis
     • Compares the expected costs of the prohect to the portential benefits it could bring the organization
     • the results of analysis is a benefit cost ratio
       • > 1, means benifits are greater than costs
       • = 1, means costs and benefits are the same
       • <1, means the costs are greater than benefits
     • Project Manager may also perform a cost-benefit analysis to determine the best way to implement a project selected

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