Selecting Projects

Project selection can be regarded as 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 organisation will be achieved. In order to select the right projects, decision-aiding models are used in practice. Two types of models can be used: quantitative models and qualitative models. Regardless of the type of model chosen to select a project(s), some basic questions need to be asked at the outset: 

• Will the proposed project maximise profits?
• Will the proposed project maintain market share, consolidate market position or open up new markets?
• Will the project maximise the utilisation of existing resources, e.g. people?
• Will the project maximise the utilisation of existing capacity?
• Will the project boost company's image?
• Will the project increase the risk face by the organisation?
• Is the project scope within the organisation’s current skills and experience?

If the answer to any of the relevant questions is ‘no’, the idea should be further considered. If the answers are primarily positive, the proposed project should be subjected to a screening process. Screening can be done by weighing up the proposed project against a set of criteria contained in a decision-making model. Consider the different types of models that can be used in the screening process: 

Click here to view a video that explains the Difference Between Quantitative and Qualitative Risk Analysis

Quantitative Models

Quantitative or numeric models invariably focus on financial data to support a project proposal. The data generated varies widely, but may include information on the following:

• Return on investment
• Return on net assets
• Break-even and payback period
• Cost of risks
• Net present value and/or internal rate of return
• Cost/benefit analysis
• Sensitivity analysis
• Market data

A large number of organisations using project evaluation and selection models use profit/profitability as the sole measure of acceptability. The main disadvantage of this approach is that it focuses on one decision criterion alone, e.g. payback period. Other numeric/quantitative models often used are scoring models, where a variety of criteria/factors is considered and scored to determine whether a project qualifies or not. The criteria can also be weighted according to their value in contributing to the company objectives at the time.

A detailed list of factors can be developed as appropriate based on:

• Technology
• Marketing
• Finance
• Manufacturing
• Personnel
• Administration

Qualitative Models

Qualitative or non-numeric models, do not use numbers as inputs. Meredith & Mantel [3: 45-47] describe four non-numeric models that are commonplace in many organisations:

The Sacred Cow: Where a senior and powerful official in the organisation suggests a project and the projects are undertaken regardless of the possibility of failure. The project is “sacred” in the sense that it will be maintained until successfully completed or until the official personally recognises the idea as a failure and terminates it.

The Operating Necessity: Where a project is funded in order to protect or maintain an operating system under threat. An example could be the installation of additional power generators as a backup where a problem with regular failures is experienced. Cost/benefit analysis is often used in the decision-making process.

The Competitive Necessity: Where a project is undertaken to maintain the organisation’s competitive position. The refurbishment of a hotel is an example of such a project. Investment in an operating necessity project takes precedence over a competitive necessity project, but both types of projects may bypass the more detailed numeric analysis used for projects deemed less urgent or important to the survival of the organisation.

Comparative Benefit Model: This model is often used when a variety of projects important to the organisation need to be considered, and no formal method of selecting projects exists. A selection committee then decides which projects will benefit the company most, and those projects are then funded. A rating system is often used to prioritise projects in order of importance.

Many organisations use more than one model to select projects. Quantitative and qualitative models can be used in combination with one another, or two numeric models can be used simultaneously. The main objective is to ensure that the right project(s) is selected and funded. Once a project is selected, a process is required to start the project. A project manager who needs to manage the process from this point onwards is appointed at this stage. Young proposes the following start-up process:

Young’s Start-Up Model

Once the initial proposal has passed the first screening (using one or more of the selection models discussed earlier), customer needs have to be defined which will ultimately allow the project team to produce deliverables specifically designed to meet the customer’s expectations. A clear understanding of these needs will allow the development of the requirements that drive the planning process.

Particular effort must be made to understand the customer:

• Explore priority and relative importance to other activities and understand the customer’s environment in which they must operate.
• Use political skills – not all customers are equal, and some needs cannot be addressed.
• Demonstrate technical competence and awareness of the customer’s technical needs.
• Convert ill-defined needs into practical solutions keep an open mind and a creative approach analyse the mixed signals received through personal influences on needs.
• Attempt to expose the hidden expectations.

A clear statement of need should be the end result, which can be reflected back to the customer for validation and acceptance with no ambiguity. Once the customer needs have been identified and accepted, project constraints need to be identified. This should be done in conjunction with the customer in order to gather the information required to guarantee success.

Assumptions about various aspects of the project also need to be clarified and recorded. These assumptions should later be validated as the project is implemented. A final screening must take place once all the relevant information has been gathered. A kick-off/launch meeting should then be held with the project sponsor and the other stakeholders. This meeting should be used to ask as many questions as possible, and to clarify all issues that still need attention.

The outcome of the meeting must be that the technical scope is established; the participants accept basic areas of performance responsibility; and some tentative overall schedules and budgets are spelt out. It is also the ideal opportunity for the project manager to showcase his ability to lead the project team. After this meeting, a formal project definition can be developed.