PROJECT SELECTION

PROJECT SELECTION AND CRITERIA OF CHOICE:

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. This same systematic process can be
applied to any area of the organizations business in which choices must be made
between compet- 5426ch02.qxd_jt 9/19/02 10:38 AM Page 40 ing alternatives.
Project selection is only one of many decisions associated with project
management. To deal with all of these problems, we use decision aiding models.
When a firm chooses a project selection model, the following criteria, based on
Souder (1973), are most important.
1. Realism The model should reflect the reality of the managers decision
situation, including the multiple objectives of both the firm and its managers.
Without a common measurement system, direct comparison of different projects is
impossible.
2. Capability The model should be sophisticated enough to deal with multiple time
periods, simulate various situations both internal and external to the project (e.g.,
strikes, interest rate changes), and optimize the decision. An optimizing model will
make the comparisons that management deems important, consider major risks
and constraints on the projects, and then select the best overall project or set of
projects.
3. Flexibility The model should give valid results within the range of conditions that
the firm might experience. It should have the ability to be easily modified, or to be
self-adjusting in response to changes in the firms environment; for example, tax
laws change, new technological advancements alter risk levels, and, above all, the
organizations goals change. 42 CHAPTER 2 / STRATEGIC MANAGEMENT AND
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4. Ease of use The model should be reasonably convenient, not take a long time to
execute, and be easy to use and understand. The models variables should also
relate one-to-one with those real-world parameters the managers believe significant
to the project. Finally, it should be easy to simulate the expected outcomes
associated with investments in different project portfolios.
5. Cost Data-gathering and modeling costs should be low relative to the cost of the
project and must surely be less than the potential benefits of the project. All costs
should be considered, including the costs of data management and of running the
model.

6. Easy computerization It must be easy and convenient to gather and store the
information in a computer database, and to manipulate data in the model through
use of a widely available, standard computer package such as Excel, Lotus 1-23, Quattro Pro, and like programs. The same ease and convenience should apply
to transferring the information to any standard decision support system.