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What is a project?

 A projectis an allocation of capital and


human resources to achieve time-specific
objectives.
 Before projects begin, the underlying
"concept" must be proposed, evaluated and
approved.
Project Selection

must be
fair and
objective
business project
value viability
Viability
the degree to which a given project will provide
the expected return on investment.
can be measured by three key variables

value

probability of
alignment sucess
Project Selection Methods
Which Method Should I Use?
Small and not Large and
very complex complex

Constrained
Benefits optimization
measurement method
model
Benefit Measurement Methods

 may be used alone or in combination


 calculate the cost and benefits and
 compare them with other projects to
make a decision.
Discounted Cash Flow
•The worth of money received today is more than
the money received in the future.
•E.g. The value 10,000 Php after ten years will be
far lower than the current value of 10,000 Php.
We have to consider the concept of discounted
cash flow while calculating the cost invested and
return on investment.
Benefit Measurement Methods
Cost Benefit Analysis
BCR: ratio between the present value of
inflow (cost invested in the project) and the
present value of outflow (value of return
from the project).
The project with a higher Benefit-Cost
Ratio (BCR) will be selected.
Economic Model

EVA: net profit after deducting all taxes


and capital investiture
The project with a higher Economic
Value Added (EVA) will be selected.
Scoring Model
Criteria Met Selection
. Setting objectives (highest
(Ideal) (Scoring) scoring)
list a few weigh them The project
relevant criteria according to their with the
priorities and highest score
importance add all will be
these weighted selected.
values
Payback Period

the time required to recover the cost


invested in the project.
The project with the minimum
payback period will be selected if other
parameters are the same.
Net Present Value (NPV)
difference between the current value
of cash inflow and the current value of
cash outflow of the project.
NPV should always be positive, and
the project with the highest NPV will be
the better option.
 The value of all future cash flows over the entire
life of an investment discounted to the present.
Cash
flow—the
total
amount of
money
being
transferred
into and out
of a
business.
Internal Rate of Return (IRR)
the rate at which the present value of the
outflow is equal to the present value of
inflows. (NPV =0)
You will select the project with the highest
IRR if you have many projects to choose
from.
Opportunity Cost
cost that we are giving up by choosing
some other project
You will choose the project with the
lesser opportunity cost if you have many
projects.
Constrained Optimization Methods
Used for large projects requiring complex
mathematical calculations
Linear Programming
Non-Linear Programming
Integer Programming
Dynamic Programming
Constrained Optimization Methods
Profit optimization is the ultimate
goal. You need to consider the
difference between the profits of the
project you are primarily interested in
and the next best alternative.
Review
Project Approval

 allows a review by the


appropriate authority
of the project
information and
management
approach.
 it is the confirmation that the project
information and management strategy
have been developed to a level of
detail sufficient to proceed with the
project objectives and requirements.
Project Activation
 involves
the coordination and allocation of
resources to make a project operational.
 responsibilities and authorities are
delegated to make decisions related to
personnel, legal, financial and administrative
matter.
 It is bringing together all
the different members of
the project team like the
professionals, technicians,
resource personnel, and
others like the consultants,
contractor, suppliers and
policy makers.
Technical analysts
and professionals
Request entered work with
requester on
business case

Resources identified
Project process Budget appropriated
activated Priority & goals
aligned
References:
https://www.ittoolkit.com/articles/project-proposals, April 30 2019
https://smallbusiness.chron.com/strategic-management-project-selection-
15544.html May 1 2019
http://www.pacificinvasivesinitiative.org/rk/project/1_Project_Selection.html
May 1 2019
https://www.coursehero.com/file/p4knrc9t/3-What-are-the-stages-called-in-
the-four-stage-planning-process-for-project/ May 1 2019
https://www.tutorialspoint.com/management_concepts/project_selection_m
ethod.htm May 1 2019
https://pmstudycircle.com/2014/03/project-selection-methods/ May 1 2019
https://www.youtube.com/watch?v=dms07djR5bM, May 3, 2019
https://www.youtube.com/watch?v=NI8NkQDlj74, May 3, 2019
https://www.youtube.com/watch?v=Sw0CpNLCaks, May 3, 2019
Thank you!