This chapter initiated our discussion of the project management process by describing procedures for evaluating and selecting projects. We first outlined some criteria for project selection models and then discussed the general nature of these models. From this basic overview, the chapter then described the types of models in use and their advantages and disadvantages. Considering the degree of uncertainty associated with many projects, a section was devoted to selection models concerned with risk and uncertainty. Concluding the discussion, some general comments were made about data requirements and the use of these models. Finally, two sections discussed the documentation of the evaluation/selection process via project proposals and the general trend of selection models in the past and for the probable future.
The following specific points were made in the chapter.
• Primary model selection criteria are realism, capability, flexibility, ease of use, and cost.
• Preparatory steps in using a model include identifying the firm's objectives, weighting them relative to each other, and determining the probable impacts of the project on the firm's competitive abilities.
• Project selection models can generally be classified as either numeric or nonnumeric; numeric models are further subdivided into profitability and scoring categories.
• Nonnumeric models include the sacred cow, the operating necessity, the competitive necessity. and comparative benefit.
• Profitability models include such standard forms as payback period, rate of return, discounted cash flow, and profitability index.
• Scoring models, the authors' preference, include the unweighted 0-1 factor model, the unweighted factor scoring model, the weighted factor scoring model, the constrained weighted factor scoring model, Dean and Nishry's model, and goal programming with multiple objectives.
• For handling uncertainty, fro forma documents, risk analysis, and simulation with sensitivity analyses are all helpful.
• Special care should be taken with the data used in project selection models. Of concern are data taken from an accounting data base, how data are measured and conceived, and the effect of technological shock.
• Project proposals generally consist of a number of sections: the technical approach, the implementation plan, the plan for logistic support and administration, and past experience.
• The history of project selection models has shown an increase in the use of formal models, particularly profitability models. We feel the future will extend the use of multiple criteria and simulation models, especially with the wide use of the microcomputer.
In the next chapter we consider the selection of the appropriate manager for a project and what characteristics are most helpful for such a position. We also address the issue of the project manager's special role, and the demands and responsibilities of this critical position.
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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.