Project Selection Methods Flashcards

Flashcards based on lecture notes about project selection methods.

Project-Oriented Organization

A new kind of organization that deals with the accelerating growth in the number of multiple, simultaneously on-going and often interrelated projects in an organization. It ties projects more closely to the organization’s goal and strategy, and handles the growing number of ongoing projects.

Project Portfolio Process

The process of strategically selecting the best set of projects for implementation—a group of projects balanced by project type, risk, and ranking criteria.

Project Selection

The process of evaluating individual or groups of projects and then choosing to implement a set of them to achieve the parent organization's objectives, often conducted by a committee of senior managers.

Key Questions in Project Selection

Is the project potentially profitable? Does the firm have the knowledge and skills? Does the project build competencies consistent with the firm’s strategic plan? Does the organization have the capacity?

Importance of PM Understanding Project Selection

Project managers should understand why a project was selected to ensure optimal management and achievement of objectives.

Nonnumeric and Numeric

These are two fundamental types of methods for selecting projects.

Sacred Cow

A special pet project advocated by a President or Supervising Manager of the Firm, often championed by a powerful management figure.

Operating/Competitive Necessity

Selects any project necessary for the continued operation of a group and facility, crucial for staying in business.

Comparative Benefits

Organizations select from a list of projects that are complex, difficult to assess, and often non-comparable.

Q-Sort

A convenient way to handle the selection task by separating projects into subsets like 'good', 'fair', and 'poor', then subdividing until no set has more than seven or eight members, and finally ranking the items in each subset.

Numeric Selection Methods

Financial assessment methods like payback period and discounted cash flow, along with scoring methods like the unweighted 0-1 factor method and weighted factor scoring method.

Payback Period

Measures the time it will take to recover the project investment, with shorter paybacks being more desirable.

Discounted Cash Flow

This method considers the time value of money, the inflation rate, and the firm’s ROI hurdle rate for projects by discounting annual cash inflows and outflows to their NPV.

Unweighted 0-1 Factor Method

Lists multiple criteria of significant interest to management, where a selection committee checks off which criteria each project qualifies for.

Weighted Scoring Model

A scoring approach where the total score of a project is calculated based on the score of the project on each criterion and the weight or importance of that criterion.

PM Understanding of Project Selection

PM should understand why the organization selected the specific project; there are two types of project selection methods: numeric and non-numeric.

Best methods for Numeric Project Selection

Discounted cash flow is the best financial method; weighted scoring method is highly useful.