I suggest that a prequalification template be designed that can be updated with specific values and conditions in accordance with the latest strategies, tactical plans, and corporate culture.
Actually, most operations will have multiple prequalification models. As an example, let's consider an organization that manages three types of projects: maintenance and utility projects, growth or enhancement projects, and transformation projects. It therefore has a portfolio for each type of project and a separate prequalification model for each category.
Maintenance or utility projects generally support ongoing products and services. When we prioritize these, they might not register as high on the benefits-value scale as some other types of projects.
Figure 3.2-1 The Prequalification Process
Figure 3.2-1 The Prequalification Process
Nevertheless, most organizations earmark funding and resources for these projects. But which ones shall be undertaken?
We can't use the same selection evaluation criteria because these projects will be evaluated to a different standard and set of objectives than the other types of projects. For instance, there may not be a directly measurable value for return on investment (ROI) or net present value (NPV). If we set a single threshold for NPV, maintenance projects might never pass the prequalification test. The strategic plan probably doesn't show anything for maintenance and utility efforts, although we would certainly expect the tactical plans to allocate resources and a budget.
For this category, the prequalification criteria consist more of need and justification data as opposed to cash-based benefits and alignment to strategies. The prequalification questionnaire might ask for evidence of what would suffer if the project were bypassed. It might look for data that shows interdependence with other projects. Some statement of benefits is certainly called for. Alignment criteria cannot be totally ignored. Would we want to select a maintenance project to make improvements to a product or capability that is no longer supported by the firm's strategies? Even for this group, the general PPM practices apply.
Growth or enhancement projects are likely to fall nicely into medium-to-high benefit and high-alignment segments of the ranking criteria. By design, these should be projects that support strategic initiatives and represent increasing value. Such projects are needed to keep the firm in a solid competitive position.
For most organizations that employ PPM techniques, the growth or enhancement projects will comprise the bulk of the projects. You can expect serious competition among the proposed projects, making the portfolio planning process critical to efficient and effective project selection. The development of sound prequalification guidelines will help to keep the project sponsors focused on the business objectives and the selection criteria. It will also make it more difficult for them to get carried away with desired benefits, mistaking them for carefully evaluated benefits.
Setting thresholds and ranges that are aligned with the strategies and the tactical plans will be helpful. These should reflect budget and resource allocation objectives, as well as risk guidelines. The process requires that the high-level strategies be transformed into specific tactical plans, with clearly stated objectives and constraints.
Transformation projects are the opportunities to move the firm to a new level or to introduce new products or services that will dominate the marketplace. This category requires extraordinary diligence starting at the proposal phase. A prequalification model can also be used here, but only as part of the evaluation process. Assuming that the proposed project is aligned with the strategies and guidelines, it will require the preparation of a full business case, complete with three scenarios: most likely, potential upside, and potential downside.
We can expect these projects to exhibit a higher risk profile. However, the potential benefits can be so great as to place the project off the scale when we plot NPV or ROI. There is also a greater sensitivity to the benefits and risk data for transformation projects, especially when there is an indefinite window of opportunity. Multiple scenarios, as presented in the business case, will produce considerably different values for benefits and risk. The range of these values is in itself a value to be considered. A conservative strategy, if that is the culture, would have you rank the more sensitive projects (those with a higher differential between case extremes) a bit lower than a project that has less uncertainty. You can't mix transformation-type projects with growth projects or use the same prequalification criteria for both types of projects.
Transformation projects may be "bet the firm's future" projects. Failure to select the right projects in this category will lead not only to failure of the project, but will also waste the monetary and human resources that could have been used for a better opportunity. It is difficult to sustain business growth without periodic transformation projects. To choose wisely is to protect the future of the enterprise.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.