Mainly drawn from Frigenti & Cominos book 'The practice of project management'

1. Dr Ian Cammack
i.j.Cammack@soton.ac.uk
MSc Project Management
MANG6310: Project Selection

2. Why do we need to do this …
• There is always too much work to do…
• “Offhand project selection leads to ineffective use of resources. Support of a
project to satisfy short-term exigencies may lead to long term fiascos… If a
truly good project prospect arises in the future, they may no longer have the
resource to pursue it because their resources are tied up in marginal
undertakings” (Frame, 1994)
• Need to Balance RISK versus VALUE
• Although sometimes we don’t have much choice …
– E.g. legislation, customer demands etc.

3. Learning Objectives
• To appreciate the sources of projects within a business context
• To understand alternative mechanisms to evaluate possible projects
• To link project selection to a wider strategic context.

4. Sources of new projects
• Market demand
• Business need
• Customer request
• Technological advance
• Legal requirement
• Crisis

5. Project Selection …
Identify specific projects for three of the sources.
Provide a short summary (100 – 200 words) to communicate
why this project ‘makes sense’.

6. https://www.youtube.com/watch?v=78CqcbwFeBA

7. Two Extremes …
Break-even
Fixed Costs
Variable Costs
Sales (Income)

8. Financial Project Evaluation
• Payback Period; how long to recover the costs incurred.
• Return on Investment; cash flow over the whole project.
• Discounted Cash Flow; i.e. £100 today does NOT equal £100 next year
– Net Present Value : value or worth added to the company by carrying out
the project
– Internal Rate of Return : addresses profitability as a %

9. The Strategic Wrapper
Vision
Objectives
GoalsStrategies
Proposals Priorities
SelectionPortfolio
Evaluate
Control
Planning
Initiate
Frigenti & Comninos 2002 p.71

10. Project Proposal Document
Strategic
& Business
Planning
S
O T
W P
E
S
T
L
I
E
D
5 Forces
Project Proposal Document
•Background / Context
•Organizational Need
•Options / Alternatives
•Purpose & Objectives
•Key Stakeholders
•Benefit Realisation Strategy
•Scope & Constraints
•Timing
•Assumptions
•Risks

11. Additional Information: PESTLIED
• Political Local, National International Factors
• Economic Interest rates, taxation
• Social Social trend/tolerance to organisation
• Technical Technological changes affecting demand
• Legal EU, Kyoto etc.
• International Exchange rates
• Environmental ‘Green issues’
• Demographic Availability / skill of workforce

12. Additional Information: 5 Forces
Industry
Competitors
Suppliers Buyers
Substitutes
Potential
Entrants
Porter (1985) Competitive Advantage

13. Additional Information: SWOT
Strengths Weaknesses
Opportunities Threats

14. Three approaches
• Checklist
• Scoring Matrix
• Value v Risk Appraisal

15. Project Appraisal Checklist
Production Method / Time / Disruption / Learning curve / Safety /
External resource
Marketing No. of users / Market share / Customer acceptance /
Image of company / New markets
Financial Payback, NPV, IRR / Cost of system / Borrowing Rqmt /
Financial Risk
Personnel Skills / Training / Employment / Resistance / Ergonomics
/ Morale / Unions
Burke, 1999 p.49-52

16. Scoring Matrix
• Key Advantages:
– Objectivity & Visibility
– Multiple Selection Criteria
– Simple to Use
– Selection Factors Chosen by Senior Mgmt – Defined at Strategic Level
• Key Disadvantages:
– Long-lists
– Factors need weighting
– Garbage in - Garbage out / Playing the Game

17. Scoring Matrix Example
Scores 1 – 5
5 = excellent ; 1 = poor
Weight
(100)
Project
A
Project A
Weighted
Project B Project B
Weighed
Profit Level 15 3 3x15= 45 5 5x15= 75
Time to Enter New
Market
10 4 4x10= 40 1 1x10= 10
Increase in Mkt
Share
13 5 5x13= 65 4 4x13= 52
Manage with
existing workforce
24 4 4x24= 96 2 2x24= 48
Payback Period <
2yrs
20 5 5x20= 100 4 4x20= 80
Consistent with
Current Business
18 1 1x8= 18 1 1x8= 18
TOTAL 100 364 283

18. Success vs Value
Time
Wasters
Quick Wins Quick Wins Strategic Strategic
Time
Wasters
Quick Wins Quick Wins Strategic Strategic
Time
Wasters
Time
Wasters
Quick Wins Quick Wins Strategic
No-Hopers No-Hopers Quick Wins Quick Wins Strategic
No-Hopers No-Hopers No-Hopers Gambles Gambles
Value
HighLow
Risk
High
Low
Frigenti & Comnios 2002 p.114

19. Project Appraisal
FINANCIAL
Overall financial evaluation Value
STRATEGIC
Contribution to Strategy Value
Political / public perception Value
Competitive advantage Value
ORGANISATIONAL / MANAGEMENT
Organizational Culture Value
Contribution to employee satisfaction Value
Change Management Risk
Pace of Change Risk
Execution capability Risk
TECHNICAL
Contribution to corporate architecture Value
Definitional uncertainty Risk
Technical uncertainty Risk
Frigenti & Comnios 2002 p.110 - 118

20. Value v Risk Appraisal
• Overall Financial Evaluation
– Cashflow, NPV (costs v benefits over lifetime)
• Strategic
– Contribute to Critical Success Factors
– Effectiveness and / or Efficiency
– Tension btwn today & 3-5 years hence
• Political / Public Perception
– Serves a wider community
• Contestability
– Advantage over service delivery competitors

21. • Organisational
– Culture (e.g. centralisation / decentralisation)
• Contributes to Job Satisfaction
– Service delivery, health & safety, paperwork, efficiency
• Change Management (Risk)
– Can we facilitate change, change processes, acceptance
• Pace of Change (Risk)
– Initiative overload
• Execution Capability (Risk)
– New / untested skills, specialist expertise / mgmt capability

22. • Compatibility with corporate architecture
– Alignment with Current IT
• Definition Uncertainty (Risk)
– IT Risk in implementation – high probability of future changes
increases risk as does long payback period
• Technical Uncertainty (Risk)
– New / Untried Technology

23. Weight Score Total
1-10 1-5
INANCIAL
Overall financial evaluation Value 10 4 40
TRATEGIC
Contribution to strategy Value 10 5 50
Political / public perception Value 5 4 20
Competitive advantage Value 3 3 9
ORGANISATIONAL / MANAGEMENT
Organizational culture Value 8 4 32
Cont.to employee satisfaction Value 5 5 25
Change management Risk -8 2 -16
Pace of change Risk -9 5 -45
Execution capability Risk -6 1 -6
ECHNICAL
Cont. to corp. architecture Value 5 5 25
Definitional uncertainty Risk -5 3 -15
Technical uncertainty Risk -5 3 -15
Total Value Score 201
Total Risk Score -97
Value-Risk Score 104

24. Project Selection …
Assuming you are planning to go on vacation for the first time.
And that you will be doing this with 4 friends
Identify the specific VALUE & RISK criteria that you could use
to evaluate proposals.
Provide a short summary (100 – 200 words) to communicate why
this framework ‘makes sense’.

25. Graphical Representation of Priorities
Risk -150-100-500
200
100
0
A
K
H
J
I
G
F
E
D
C
B

26. Which model to choose?
• Realism
• Capability
• Flexibility
• Ease of Use
• Cost
• Easy Computerisation

27. Important Lessons
• Discipline
• Proposers will score own highly
• Owners should present them – commitment
• Who should prioritise them – not functional mgrs
• Needs training & consideration

28. Guided Readings
• Meredith & Mandell: Project Management: A Managerial Approach Chapter
2.
• Burke: Project Management: Planning & Control Techniques Chapter 5
• Frigenti & Comnios: The Practice of Project Management