How Should Project Management Professionals Select the Project?

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Poject Management

Project management professionals have to play a variety of skills. A successful project manager is a strong leader who meticulously leads and accomplishes the projects.   

He or she plays many roles in order to bring the desired outcomes of projects. But there is one thing which stands quite difficult and different for project managers is to have a proper project selection method.

An informed and experienced approach to project selection allows the organizations to more effectively handle projects. It also tries to identify key efforts with more substantial ROIs, and leverage the skills already in place to select projects well-suited for an organization’s particular competencies.

In the end, the final call on which proposals are accepted will normally fall to higher leadership level rather than project managerial level.

However, as a project manager, you should be able to use your experience to help decision-makers towards opting a suitable project while still keeping risks and cost estimates practical. 

What are Project Selection Methods?

You as a project manager work in the organization where you are assigned to handle project contracts. When there are many project proposals on your table, you cannot choose all the projects. This is normally due to the resource constraints.

The company can’t handle all the projects at once so they need to decide which project(s) will bring them maximum profit. 

This is where project selection methods come into the picture. 

There are two fundamental categories of project selection methods:

 

  • Benefit Measurement Methods.
  • Constrained Optimization Methods.

 

Importance of Project Selection

Before going into the two main methods of project selection and their techniques, it’s important to understand why project selection is very important for any organization and project management professionals.

When there are a number of challenging projects to choose from, finding a right project that best suits your team’s skill-sets, level of competences, and has a great chance of success is the first thing for any project management professional and business group to think of. 

But selecting the right project isn’t as simple as just trusting your feelings.

 

  • Benefit Measurement Methods.
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This method is suitable for small projects. It is based on the present value of the estimated money inflow and outflow. In this method, firstly, the cost benefits are calculated and then compared to other projects to take a final decision.

Following are the techniques used in Benefit Measurement Methods:

 

  • Cost-Benefit Ratio

 

It measures the costs of investing in a project against the value of the return once the project is completed.

Projects with a lower cost-benefit ratio or a higher benefit-cost ratio are normally selected in this method.

 

  • Economic Model = Economic Value Added

 

It means the net profit after the deduction of taxes and capital expenditure.

When there are many projects in front of a project manager, the project that has the highest Economic Value Added is chosen. The EVA is generally expressed in numerical terms.

 

  • Payback Period

 

Under this, it takes a look at how long it will take your organization to recoup its expenses with a specific project.

The project that has the shortest Payback Period is preferred since the business group can regain the original investment faster, though it has some exceptions. 

 

  • Scoring Model

 

It is simply that a project selection body looks for a higher score to lower score projects. It lists the relevant criteria according to their importance and priorities. 

 

  • Opportunity Cost

 

Opportunity Cost comes down to what the organization is missing out on by choosing one project over another.

 

  • Discounted Cash Flow

 

This means a future value of money would not be the same as it is today. This is one of the best options to estimate the value of returns that occur over a long period of time rather than immediately after completion.

 

  • Net Present Value
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It is just the difference between the project’s current value of money inflow and the current value of money outflow. The Net Present Value should always be positive in number. When choosing a project, a higher NPV is always preferred.

 

  • Internal Rate of Return

 

It incorporates the NPV into its calculation by setting the NPV to zero. Fundamentally, this means that all money flows from a project (both negative and positive) even each other out.

 

  • Constrained Optimization Methods.

 

These are for larger, more complex projects. It is also known as the Mathematical Model of Project Selection Methods. A number of intricate mathematical calculations are performed here.

The Constrained Optimization Methods are not covered thoroughly in the Project Management Certification exam. For the exam point of view, you just have to know that this is the list of Mathematical Model techniques that are used in the Project Selection Process.

  • Linear Programming.
  • Nonlinear Programming.
  • Integer Programming.
  • Dynamic Programming.
  • Multiple Objective Programming.

To conclude.

As we have seen above, a project selection may be taken place in several ways. It is important for an organization to try different methods and consider a wide range of aspects before choosing a project.

As a project manager, you will be influencing key decision-makers when it comes to project selection process. Your skill-sets, expertise, institutional knowledge to name a few in the field, must become instrumental in ensuring your organization goes only for the most promising of projects.

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