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Project Management: A Managerial Approach 4/e: by Jack R. Meredith and Samuel J. Mantel, JR
Project Management: A Managerial Approach 4/e: by Jack R. Meredith and Samuel J. Mantel, JR
Chapter 2
Project Selection
Project Selection
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
Managers often use decision-aiding models to
extract the relevant issues of a problem from the
details in which the problem is embedded
Models represent the problem’s structure and can
be useful in selecting and evaluating projects
Chapter 2-1
Criteria for Project
Selection Models
Realism - reality of manager’s decision
Capability- able to simulate different scenarios and optimize the
decision
Flexibility - provide valid results within the range of conditions
Ease of Use - reasonably convenient, easy execution, and easily
understood
Cost - Data gathering and modeling costs should be low relative to
the cost of the project
Easy Computerization - must be easy and convenient to gather,
store and manipulate data in the model
Chapter 2-2
Nature of Project Selection
Models
Chapter 2-3
Nonnumeric Models
Sacred Cow - project is suggested by a senior and powerful
official in the organization
Operating Necessity - the project is required to keep the
system running
Competitive Necessity - project is necessary to sustain a
competitive position
Product Line Extension - projects are judged on how they
fit with current product line, fill a gap, strengthen a weak link, or
extend the line in a new desirable way.
Comparative Benefit Model - several projects are
considered and the one with the most benefit to the firm is selected
Chapter 2-4
Numeric Models:
Profit/Profitability
Payback period - initial fixed investment/estimated annual
cash inflows from the project
Average Rate of Return - average annual
profit/average investment
Discounted Cash Flow - Present Value Method
Internal Rate of Return - Finds rate of return that
equates present value of inflows and outflows
Profitability Index - NPV of all future expected cash
flows/initial cash investment
Chapter 2-5
Numeric Models: Scoring
Chapter 2-6
Risk Versus Uncertainty
Analysis Under Uncertainty - The Management of
Risk
The difference between risk and uncertainty
Risk - when the decision maker knows the
probability of each and every state of nature and thus
each and every outcome. An expected value of each
alternative action can be determined
Uncertainty - when a decision maker has
information that is not complete and therefore cannot
determine the expected value of each alternative
Chapter 2-7
Risk Analysis
Chapter 2-9
Risk Analysis
Chapter 2-10
Information Base for
Selections
Accounting Data
Measurements
Subjective vs. Objective
Quantitative vs. Qualitative
Reliable vs. Unreliable
Valid vs. Invalid
Technological Shock
Chapter 2-11
Project Proposals
Which projects should be bid on?
How should the proposal-preparation
process be organized and staffed?
How much should be spent on preparing
proposals for bids?
How should the bid prices be set?
What is the bidding strategy? Is it ethical?
Chapter 2-12
Project Proposal
Contents
Executive Summary
Cover Letter
Nature of the technical problem
Plan for Implementation of Project
Plan for Logistic Support & Administration of the
project
Description of group proposing to do the work
Any relevant past experience that can be applied
Chapter 2-13
Summary
Chapter 2-16
Project Selection
Questions?
Chapter 2-17
Project Selection
Picture Files
Project Selection
Figure 2-1
Project Selection
Figure 2-2
Project Selection
Table Files
Project Selection
Project Selection
Project Selection
Project Selection
Project Selection
Project Selection
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