For project selection, the Project Management Institute's (PMI's) Project Management Body of Knowledge (PMBOK) Guide assumes you have more than one project from which to choose. By analyzing the options, you can determine which has the greatest value to the company. The formal method for choosing the best option is called a project selection method.
Suppose I have to choose between
- fixing my child's favorite meal and leftovers for my wife, or
- fixing my spouse's favorite and cheese mac for my child.
So I ask, "which gives me the better Return on Investment (ROI)?" To answer the question, I consider
- How much time and money it will take
- How much of a mess I will have to clean up
- Does it align with my goals (fun vs. study time)
- Rewards (somebody else WILLINGLY taking out the trash)
- How long it will take to reap the rewards
- Risks (what if I overcook the macaroni? or burn the steak?)
A Project Manager (PM) will place a priority on each criterion and score the probable outcomes. The sum of the weighted scores for each option yields a total score for that option.
I did this with my daughter last year when she needed to buy a car. The result surprised me and was not at all what I expected, but it turned out to be a great choice.
The primary use of project selection is for choosing between projects. However, one can also used it during the project life cycle. The projected ROI of a project can change, for example, due to changing market or regulatory conditions. If the ROI falls, it might be worth canceling the project so the funds and resources can be applied to a more promising project. This is a special case of selecting between competing opportunities.
The executives of a company I won't name signed a contract to deliver a product on a certain date. If the company failed to deliver on that date, the company would have to pay liquidated damages; and if the company canceled the project, it would have to pay penalties.
Unfortunately, the executives failed to have Engineering review the contract. It turned out that the company could not meet the deadline. The PM tried schedule compression, but as risks turned into issues, it became clear that the project could not meet its deadline.
What should they have done? The company should have used the project selection method to choose between
- Completing the project and paying the liquidated damages
- Canceling the project and paying the penalties.
Copyright 2011, Richard Wheeler