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The document outlines the project selection process, emphasizing the importance of evaluating proposed projects to align with organizational objectives. It discusses various project selection models, including numeric and nonnumeric approaches, and highlights the significance of project charters and stakeholder identification in project management. Additionally, it addresses the criteria for project evaluation and the necessary documentation for project proposals.

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0% found this document useful (0 votes)
25 views29 pages

module-2

The document outlines the project selection process, emphasizing the importance of evaluating proposed projects to align with organizational objectives. It discusses various project selection models, including numeric and nonnumeric approaches, and highlights the significance of project charters and stakeholder identification in project management. Additionally, it addresses the criteria for project evaluation and the necessary documentation for project proposals.

Uploaded by

pedopi8050
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Project Selection Model Criteria

Realism Capability Flexibility

Easy
Ease of use Cost
computerization
Project selection

• 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
objectives of the parent organization will be achieved.

• “modelling the problem”


Project • Many more projects than management expected.
portfolio • Inconsistent determination of benefits.
process • Competing projects

• “Interesting” projects that don’t contribute to the strategy.


Symptoms of a
misaligned portfolio • Projects whose costs exceed their benefits.
included:
• Projects with much higher risks than others in the portfolio.

• Lack of tracking against the plan, at least quarterly.


Nature of project
selection models
• Many of the models use financial metrics
such as profits and/or cash flow to measure
the “correctness” of a managerial decision.
Project selection decisions are no
exception, being based primarily on the
degree to which the financial goals of the
organization are met.
Types
There are two basic types of project selection models, numeric and nonnumeric. Both are
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. It is
important to remember that the qualities of a project may be represented by numbers, and
that subjective measures are not necessarily less useful or reliable than objective measures.
Models
• Models do not make decisions—people do. The manager, not the model, bears responsibility for the decision.
The manager may “delegate” the task of making the decision to a model, but the responsibility cannot be
abdicated.
• All models, however sophisticated, are only partial representations of the reality they are meant to reflect.
Reality is far too complex for us to capture more than a small fraction of it in any model. Therefore, no model
can yield an optimal decision except within its own, possibly inadequate, framework.
Non-Numeric models
• The Sacred Cow-the project is suggested by a senior and
powerful official in the organization.
• Often the project is initiated with a simple comment such as, “If you
have a chance, why don’t you look into…,” and there follows an
undeveloped idea for a new product, for the development of a new
market, for the design and adoption of a global data base and
information system, or for some other project requiring an investment
of the fi rm’s resources.
• The immediate result of this bland statement is the creation of a
“project” to investigate whatever the boss has suggested.
• The project is “sacred” in the sense that it will be maintained until
successfully concluded, or until the boss, personally, recognizes the
idea as a failure and terminates it.
The Operating Necessity If a flood is threatening the plant, a project to
build a protective dike does not require much formal evaluation, which
is an example of this scenario.

Example -XYZ Steel Corporation has used this criterion (and the
following criterion also) in evaluating potential projects. If the project is
required in order to keep the system operating, the primary question
becomes: Is the system worth saving at the estimated cost of the
project? If the answer is yes, project costs will be examined to make
sure they are kept as low as is consistent with project success, but the
project will be funded.
• The Competitive Necessity Using this criterion, XYZ Steel undertook a major plant
rebuilding project in the late 1960s in its steel-bar-manufacturing facilities near Chicago.
• It had become apparent to XYZ’s management that the company’s bar mill needed
modernization if the firm was to maintain its competitive position in the Chicago market
area. Although the planning process for the project was quite sophisticated, the decision
to undertake the project was based on a desire to maintain the company’s competitive
position in that market.
• Example education campus enhancements.
• The Product Line Extension In this case, a project to develop and distribute new products would
be judged on the degree to which it fits the firm’s existing product line, fills a gap, strengthens a weak link,
or extends the line in a new, desirable direction. Sometimes careful calculations of profitability are not
required. Decision makers can act on their beliefs about what will be the likely impact on the total system
performance if the new product is added to the line.
• Comparative Benefit Model For this situation, assume that an organization has many projects to
consider, perhaps several dozen. Senior management would like to select a subset of the projects that would
most benefit the fi rm, but the projects do not seem to be easily comparable. For example, some projects
concern potential new products, some require the conduct of a research and development project for a
government agency, some concern changes in production methods, others concern computerization of certain
records, and still others cover a variety of subjects not easily categorized (e.g., a proposal to create a day care
center for employees with small children). The organization has no formal method of selecting projects, but
members of the Selection Committee think that some projects will benefit the firm more than others, even if
they have no precise way to defi ne or measure “benefit.”
• Payback Period

• The payback period for a project is the initial fixed investment in the project
divided by the estimated annual net cash inflows from the project. The ratio of
these quantities is the number of years required for the project to repay its
initial fixed investment.

Numeric • For example, assume a project costs $100,000 to implement and has annual
Models: net cash inflows of $25,000. Then

Profit/Profitab • Payback period = $100,000/$25,000= 4 years


• This method assumes that the cash inflows will persist at least long enough to
ility pay back the investment, and it ignores any cash inflows beyond the payback
period. The method also serves as an (inadequate) proxy for risk. The faster the
investment is recovered, the less the risk to which the fi rm is exposed.
• Discounted Cash Flow Also
referred to as the net present value (NPV)
method, the discounted cash flow method
determines the net present value of all cash
flows by discounting them by the required
rate of return (also known as the hurdle
rate, cutoff rate, and similar terms) as
follows:
Project charter

PROJECT CHARTER IS THE PROCESS OF IN MULTI- PHASE PROJECTS, THIS


DEVELOPING A DOCUMENT THAT PROCESS IS USED TO VALIDATE OR REFINE
FORMALLY AUTHORIZES A PROJECT OR A THE DECISIONS MADE DURING THE
PHASE AND DOCUMENTING INITIAL PREVIOUS ITERATION OF DEVELOP
REQUIREMENTS THAT SATISFY THE PROJECT CHARTER.
STAKEHOLDER’S NEEDS AND
EXPECTATIONS.
. It establishes a partnership between the performing organization and the requesting organization (or
customer, in the case of external projects).

The approved project charter formally initiates the project.

A project manager is identified and assigned as early in the project as is feasible, preferably while the
project charter is being developed and always prior to the start of planning.

It is recommended that the project manager participate in the development of the project charter, as
the project charter provides the project manager with the authority to apply resources to project
activities.
Identify
Stakeholders

• Identify Stakeholders is the


process of identifying all people
or organizations impacted by
the project, and documenting
relevant information regarding
their interests, involvement,
and impact on project success.
• The key benefit of this process is a well-
defined project start and project
boundaries, creation of a formal record
of the project, and a direct way for
senior management to formally accept
and commit to the project.
• This document is a part of the project
management process, which is required
by Customer Relationship Management
(CRM).
• The statement of work (SOW) is a narrative description of products or services to be delivered by the
project.
• For internal projects, the project initiator or sponsor provides the statement of work based on business
needs, product, or service requirements. For external projects, the statement of work can be received from
the customer as part of a bid document, for example, request for proposal, request for information,
request for bid, or as part of a contract. The SOW references:
• Business need. An organization’s business need may be based on a market demand, technological
advance, legal requirement, or government regulation.
• Product scope description. This documents the characteristics of the product that the project will be
undertaken to create. The description should also document the relationship between the products or
services being created and the business need that the project will address.
• Strategic plan. The strategic plan documents the organization’s strategic goals. Therefore, all projects
should be aligned with the strategic plan.
• Business Case
• The business case or similar document provides the necessary information from a business standpoint to
determine whether or not the project is worth the required investment. Typically the business need and the
cost-benefit analysis are contained in the business case to justify the project. The requesting organization or
customer, in the case of external projects, may write the business case. The business case is created as a
result of one or more of the following:
• Market demand (e.g., a car company authorizing a project to build more fuel-efficient cars in
response to gasoline shortages),
• Organizational need (e.g., a training company authorizing a project to create a new course to
increase its revenues),
• Customer request (e.g., an electric utility authorizing a project to build a new substation to serve a
new industrial park),
• Technological advance (e.g., an electronics firm authorizing a new project to develop a faster,
cheaper, and smaller laptop after advances in computer memory and electronics technology),
• Legal requirement (e.g., a paint manufacturer authorizing a project to establish guidelines for
handling toxic materials),
Contract

A contract is an input if the project is being done for an external customer.


• Enterprise Environmental Factors

The enterprise environmental factors that can influence the Develop Project Charter process include, but are
not limited to:
• Governmental or industry standards,
• Organization infrastructure, and
• Marketplace conditions.

Organizational Process Assets

The organizational process assets that can influence the Develop Project Charter process include, but are not
limited to:
• Organizational standard processes, policies, and standardized process definitions for use in the organization;
• Templates (e.g., project charter template); and
• Historical information and lessons learned knowledge base.
• Expert Judgment
• Expert judgment is often used to assess the inputs used to develop the project charter. Such judgment and expertise is applied to any technical and
management details during this process. Such expertise is provided by any group or individual with specialized knowledge or training, and is available from
many sources, including:
• Other units within the organization,
• Consultants,
• Stakeholders, including customers or sponsors,
• Professional and technical associations,
• Industry groups,
• Subject matter experts, and
• Project management office (PMO).
• Develop Project Charter: Outputs
• Project Charter
• The project charter documents the business needs, current understanding of the customer’s needs, and the new product, service, or result that it is
intended to satisfy, such as:
• Project purpose or justification,
• Measurable project objectives and related success criteria,
• High-level requirements,
• High-level project description,
• High-level risks,
• Summary milestone schedule,
• Summary budget,
• it is appropriate to consider what
documentation is needed to evaluate a
Project project that is being considered. The set of
documents submitted for evaluation is
Proposal called the project proposal, whether it is
brief (a page or two) or extensive, and
regardless of the formality with which it is
presented
• These are:
• 1. Which projects should be bid on?
• 2. How should the proposal-preparation process be
organized and staffed?
Problems in • 3. How much should be spent on preparing
preparing proposals for bids?
• 4. How should the bid prices be set? What is the
proposal bidding strategy? Is it ethical?

Request for Proposal (RFP) or Request for Quotation


(RFQ)—more specifically, in the Technical Proposal
Requirements (TPR) that is part of the RFP or RFQ
Contents in
proposal
• All proposals should begin with a short summary statement (an “Executive Summary”) covering the
fundamental nature of the proposal in minimally technical language, as well as the general benefits that
are expected. All proposals should be accompanied by a “cover letter.”
• The cover letter is a key marketing document and is worthy of careful attention. In addition to the
Executive Summary and the cover letter,every proposal should deal with four distinct issues:
• (1) the nature of the technical problem and how it is to be approached;
• (2) the plan for implementing the project once it has been accepted;
• (3) the plan for logistic support and administration of the project; and
• (4) a description of the group proposing to do the work, plus its past experience in similar work
Project Proposal
Contents
Executive Summary

Cover Letter

Nature of the technical problem

Plan for Implementation of Project

Plan for Logistic Support & Administration of the project

Description of group proposing to do the work

Any relevant past experience that can be applied


Clearly defined goals

• Clearly defined roles

• Open and clear communication


Effective • Effective decision making

team • Balanced participation

managem • Valued diversity

• Managed conflict
ent • Positive atmosphere

• Cooperative relationships

• Participative leadership
Team-Building
Activities
• Forming
• Storming
• Norming
• Performing
• Adjourning

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