We received a project request and defined and documented the
high-level requirements, so it must be time to actually start
working on the projectright? A little
An organization can use a number of techniques to select new projects. You need to understand the basic concepts of these techniques, so that you understand how the project selection process works and are prepared to present the appropriate data for your project.
Project selection is used to determine which proposed projects are approved to move forward. It usually includes the allocation of high-level funding. Project selection may take place using formal documented guidelines, or it may be informal, requiring only the approval of a certain level of management.
Typically, a high-level board or committee will do project
selection. This committee may be cross-functional in nature and
accountable for corporatewide project selection, or selection can
be done on a departmental basis. A committee at the corporate level
A project selection committee uses a set of criteria to evaluate
and select proposed projects. The selection method needs to be
applied consistently across all projects to assure the company is
making the best decision in terms of strategic fit as well as the
best use of limited resources. The exact criteria varies, but
is a formal method of project selection
that helps managers make the best use of limited
There are two primary categories of decision models: benefit measurement methods and constrained optimization models.
Benefit measurement methods provide a means to compare the benefits obtained from project requests by evaluating them using the same criteria. Benefit measurement methods are the most commonly used of the two categories of decision models. Three common benefit measurement methods are cost-benefit analysis, scoring model, and economic model.
calculates the cost, projected
has a predefined list of criteria against
which each project is rated. Each criterion is given both a scoring
range and weighting factor. The weighting factor accounts for the
difference in importance of the various criteria. Scoring models
can include financial data, as well as items such as market value,
organizational expertise to complete the project, innovation, and
fit with corporate culture. Scoring models have a combination of
objective and subjective criteria. The final score for an
individual project request is obtained by calculating the rating
and weighting factor of each criteria. Some companies have a
minimum standard for the scoring model. If this minimum standard is
not obtained, the project will be eliminated from the selection
process. A benefit of the scoring model is that you can place a
heavier weight on a criterion that is of more importance. Using a
An economic model is a series of financial calculations that provide data on the overall financials of the project. A whole book can be dedicated to financial evaluation, so we will give you a brief overview of some of the common terms you may encounter when using an economic model: discounted cash flow, net present value, and internal rate of return.
Discounted Cash Flow (DCF)
Discounted cash flow
Net Present Value (NPV) Net present value (NPV) is the discounted value of future cash flows associated with a business activity. NPV measures increase in wealth and assumes that cash inflows are re-invested as capital. It is a measure of marginal return.
Internal Rate of Return (IRR) Internal rate of return measures the rate of return earned on money committed to a capital investment. IRR states the profitability of an investment as an average percent over the life of the investment.
Constrained optimization models are mathematical models, some of which are very complex and require specially trained resources. They are typically used in very complex projects and require a detailed understanding of statistics and other mathematical concepts. Further discussion of these models is beyond the scope of this book.
Expertise may be sought regarding the
Expert judgment can be used in conjunction with one of the decision models. We have frequently seen a combination of decision models and expert judgment used if the top project request rankings obtained from a decision model are very close to each other.
Companies with an informal project selection process may use
only expert judgment to make project selection decisions. Although
using only expert judgment can simplify the data required to
complete project selection, there are dangers in relying on this
one technique. It is not likely that the project selection
Political influence can also be part of the expert judgment. An executive with a great deal of influence may convince the selection committee to approve a particular project.
IT Project Management: On Track from Start to Finish, Third Edition
The One Page Project Manager for IT Projects: Communicate and Manage Any Project With A Single Sheet of Paper
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