PROJECT SELECTION

Definition:

• Project selection is the process of evaluating individual projects or groups of

projects, and then choosing to implement some set of them so that the

objectives of the parent organization will be achieved

For examples:

Several fun shows A construction firm

Project selection

• Need several techniques to help managers

• Managers often use models to abstract

the relevant issues of a problem from the
details in which the problem is
embedded

• Project selection associated with PM

Models represent the problem’s structure and can be useful in
selecting and evaluating projects
Diagrams Flow graph

Graphs Network models

Analogies.
 Criteria for Project Selection Models
Easy
Capability Ease to use
computerizatio
deal with the relevant reasonably convenient, easy
easy and convenient
n to gather,
factors execution, and easily understood
store and manipulate data in the
model.

Realism Flexibility
reality of firm’s decision provide valid results within the Cost
situation account reality range of conditions should be low relative
of firm's limitations to the cost of the project
 NUMERIC AND NON-NUMERIC MODELS
• Both widely used, many organizations use both at the same time, or they use models that are

combinations of the two.

• Nonnumeric models, as the name implies, do not use numbers as inputs. Numeric models do,

but the criteria being measured may be either objective or subjective.

• IMPORTANT:

 the qualities of a project may be represented by numbers, and

 that subjective measures are not necessarily less useful or reliable than objective measures.
Non-Numeric Project Selection Models

Nonnumeric models are older and simpler and have only a few subtypes to consider.
Nonnumeric models are older and simpler and have only
a few subtypes to consider.
Non-Numeric Project Selection Models

01 02 03 04 05

The Sacred Cow The Operating The Competitive The Product Line Comparative Benefit
Necessity Necessity Extension Model
Non-Numeric Project
Selection Models
 The Sacred Cow – suggested by a senior and powerful official in the
organization
 The Operating Necessity – the project is required in order to keep the system
operating
 The Competitive Necessity – the project is necessary to maintain the
company’s competitive position in the market
 The Product Line Extension – projects are judged on the degree to which it
fits the firms’s existing product line, fills a gap, strengthens a weak link, or
extends the line in a new, desirable direction.
 Comparative Benefit Model – several projects are considered and the
projects that would most benefit the firms ‘ll be selected.
Numeric Project Selection Models
(Profit/Profitability)

01 02 03 04 05

Payback Period Average Rate of Discounted Cash Flow Internal Rate of Profitability Index
Return Return (IRR)
the initial fixed Present Value Method NPV of all future
invesment/estimated average annual Finds rate of return expected cash
annual cash inflows profit/average that equates present flows/initial cash
from the project investment value of inflows and investment
outflows
 Numeric Models : Scoring

Constrained
Unweighted Weighted
Factor Factor
Scoring Scoring
Model Model

Unweighted 0-1 Weighted Goal

Factor Model Factor Programmin
Scoring g with
Model Multiple
Objectives
 Risk Considerations in Project
Selection

01 Project Selection 02 Risk 03 Risk analysis

 • Decision-making points: the project's
potential for profitability + its life-cycle cost
• AS The inflow of funds’s limited -> PS’S critical
• During the project selection process, risk
management -> conducted

Project Selection
Project Selection,  Projects as a temporary endeavor are
Risk undertaken to fulfill a vision or an idea.

 Selection of a project to execute is

commonly viewed as the start of a project
and so is the start of risk mitigation
after
 Some of the areas of risks during this
phase are
Business objectives of the
project
 W/O clear business objective
+ not knowing the value,
project  unsuccessful
 -> minimize risk -> projects:
clearly defined business
objective.
 -> project managers + the
project team -> why the
project was selected & how
the project is adding value to
the business
Risk profile of the
organization
 W/O taking into consideration
the risk profile, project 
unsuccessful
 -> the executives -> take into
account WHILE selecting
project & the mix of projects.
 -> project managers + to an
extent the project team
understand the risk profile of
the project stakeholders & the
sponsors.
 To understand risk analysis, the
Benefits of Risk
manager noted the importance of
Analysis examining risk in methodical detail

01 02 03 04 05

Avoid Address Comply with Reduce Minimize

potential regulatory new exposure impact
litigation issues legislation
 INSIGH
Much of that
Many companies
TS
information is
have framework
complex

There’s NO Most Risk analysis is

lack of industries done in extremes
information have best
on risk practices
How to Evaluate Project Through qualitative and quantitative risk analysis, you
can define the potential impacts risks by determining
Risk
impacts to the following aspects of your project:

1 Activity resource estimates

2 Activity duration estimates

3 Schedule

4 Cost estimates

5 Budget

6 Quality

7 Procurements
 The Need for Project Selection Risk
Management

Important types of e.g. a company

project risk are conducted a
addressed by project project to install
selection they are new equipment to
outside the range of
increase capacity
project managers.

Narrowly, the project’s

BUT the project a success  the new
planning team failed to equipment’s installed
evaluate WHETHER successfully, on time
there’s a market for and on budget
the increased supply
made available by the
added capacity.
The Need for Project Selection Risk Management

As illustrated, risk management within project

planning and project execution often fails to
address external project risks. Project
portfolio management provides an
opportunity to account for external risks

As used by
 The project portfolio
proces
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THAN
K YOU