Even Point Benefit Cost Weekly Class Questions 20

PJM480 MOD3 Peer Discussion Responses

Please respond to both POST1: and POST2: in at least 200 words

Initial Post:

How should project selection criteria be determined? Define at least 5 criteria and why they are important to the process.

POST1:

Class,

Project selection criteria should be determined based on the goals of
the organization. Project selection itself is described as a process
aimed at the evaluation of projects to choose ones that meet the
requirements of the parent organization (Geng et al., 2018). Sharifi and
Safari (2016) assert that while the common place thought is that
projects are selected based on risk versus reward, there is much more to
it than that. Choosing though should look at several factors to select
the best project or projects to proceed with.

First, the ability to complete the project needs to be looked at.
This can be related to having enough resources or knowledge to complete
the project or having them tied up with other projects and unable to
commit to the desired timeline. Without them, the project is destined to
fail.

Some criteria are numbers based (Geng et al., 2018). This includes
both the evaluation of long-term fiscal value the project brings and
return on investment. By maximizing the return on investment, something
that may be a short term project could provide a needed spike in cash
flow where a longer project that is costlier may have a better long-term
payoff but be brought up when the organization is in a cash
preservation mode. In each of these cases, the criteria may result in
delaying a project or choosing a project based on current needs.

Other non-number based criteria may include the legal need to address
something in order to stay in compliance with local or federal laws.
Failing to do so puts the organization at risk for legal action. Another
may be based on the desire to be better perceived by the public. A
company like British Petroleum taking on projects to increase public
opinion after an environmental disaster they caused is one example of
the importance of public image and the need to do something when an
organization’s brand becomes tarnished.

Thanks,
Ben

References

Geng, S., Chuah, K. B., Law, K. M. Y., Cheung, C. K., Chau, Y. C.,
& Rui, C. (2018). Knowledge Contribution as a Factor in Project
Selection. Project Management Journal, 49(1), 25–41. Retrieved from https://www.pmi.org/learning/library/knowledge-con…

Sharifi, M. M. & Safari, M. (2016). Application of net cash flow at risk in project portfolio selection. Project Management Journal, 47(4), 68–78. Retrieved from https://www.pmi.org/learning/library/net-cash-flow…

POST2:

There
are many types and approaches to project selection criteria. Project
criteria methods will play an active role during project initiating
phase. The project manager seldom has any involvement during the project
selection process. However, understanding the essentials of various
project selection criteria adds value to the overall project. One of the
most common challenges in project management is determining whether a
project is successful PMBOK (2017). That said the PMBOK has five
criteria for successful project selection that include different
financial tools as a measure for project success. The identified
financial measures are not only a measure for project success but are
also tools for project selection. Also, with an even more importance,
project success criteria should have a link to the organizational
strategy. Five tools for successful project selection are:

1. Net present Value
   1. Delta between the present value of cash inflows and the present value of cash outflows over a period
2. Return on Investment
   1. Performance measure used to evaluate the efficiency of an investment
      or compare the efficiency of several different investments. ROI tries
      to directly measure the amount of return on a particular investment,
      relative to the investment’s cost
3. Internal Rate of Return
   1. Interest rate at which the net present value of all the cash flows
      (both positive and negative) from a project or investment equal zero.
      Internal rate of return is used to evaluate the attractiveness of a
      project or investment.
4. Payback Period
   1. Time it takes to recover the cost of an investment. Simply put, the
      payback period is the length of time an investment reaches a break-even
      point
5. Benefit Cost Ration
   1. Ratio used in a cost-benefit analysis to summarize the overall
      relationship between the relative costs and benefits of a proposed
      project. … If a project has a BCR greater than 1.0, the project is
      expected to deliver a positive net present value to a firm and its
      investors.

References

A Guide to the Project Management Body of Knowledge (PMBOK Guide) Sixth Edition. (2017). Newtown Square, PA: Project Management Institute.

Milošević, D., & Martinelli, R. J. (2016). Project management toolbox (Second ed.). Hoboken, NJ: John Wiley & Sons.

Kerzner, H. (2013). Project management: A systems approach to
planning, scheduling and controlling (11th ed.). New York, NY: Wiley