Project selection is one of the most important decisions in any organisation, as it forms the basis to delivering the goals of an organisation and balancing the available resources. Selecting the right project includes evaluating criteria in relation to the firm’s strategy, resources, and capacity.
This article provides a discussion of what project selection is, the criteria involved in the selection process, and several approaches towards selection of projects.
“Project selection therefore means the assessment and choice of a project from a set of options available.”
It precedes the project management lifecycle and investigates which organisational projects are viable, relevant to strategic plans, and will bring the greatest value to the business. This entails evaluation of proposed projects most often on merits such as profitability, risk, strategic relevance to the organisation and availability of resources.
Project selection criteria are the parameters or norms used to assess and select the most suitable project for an organisation. These criteria assist in sorting out the projects that are not in the company’s strategic direction or that perhaps are bound to collapse. Here are some essential project selection criteria to consider:
Strategic alignment makes sure that a given project corresponds to an organisation’s vision, mission, and future goals and objectives. Projects that are aligned well with the firm strategic plan will be a candidate for the necessary resources and attention. These projects are strategic because they are closely linked to the achievement of corporate objectives of the organisation. Hence, the need to ensure the projects that extend or create a vision for the organisation must be prioritised in a bid to address this issue.
Feasibility answers the question of whether a project is possible in the context of the organisation’s resources, technology and time. A feasible project can be done with the current level of expertise and within the provided budget without experiencing too much stress. The evaluation is done on technical and operational levels with regard to the project involvement to avoid organisational interruptions. A project that is feasible minimises failure as it plans how and when to use the available resources.
Cost benefit analysis is a way of comparing the expense required by a project against the amount of advantage to ascertain its economic value. This process determines the return on investment (ROI) so that the key-decision makers can pinpoint which investments bring the most profit as to the cost of the investment. Since high ROI activities are financially beneficial, and offer improved financial returns, making them desirable for adoption. Due to the emphasis on value generation, this criterion guarantees resource allocation among those processes that would provide maximum value.
Risk assessment is often said to be the process of identifying and analysing the risks and uncertainties associated with a given project. It enables the finding of some potential problems and provides an opportunity for coming up with strategies to prevent risks. Speaking of the risk of each project, lower risk is preferred, however high risk can be also considered in case it has potential profit. Risk management increases the prospects of project success therefore making it a part of project appraisal.
In the context of project planning, scalability relates to the ability of a project to be expanded or enlarged in scope without sacrificing efficiency. Sustainability identifies means through which a project can yield long-term value without utilising resources or causing negative effects. That is why efficient projects are those that are scalable and can be sustained and adapted to continually meet the needs of the clients and give results. Emphasising these traits guarantees that a given project will always be of value and will contribute to the strength and development of an organisation.
Project selection techniques are defined as techniques used in the evaluation and selection of projects. It is important to note that each method is suitable for a set of organisations or projects. Here are some widely used methods:
Cost-Benefit Analysis (CBA): Helps compare different costs and opportunities of a project, which will then help make an informed decision on the basis of the company's financial status.
Economic Value Added (EVA): Valued at how the project is helping to enhance the shareholder value creation.
Return on Investment (ROI): Determines the percentage return on the invested resources in order to evaluate the project’s profitability.
Net Present Value (NPV): Expresses the worth of a project in present value form and appraises the future cash flows with a view of arriving at the financial viability of the project.
Weighted Scoring Model: Gives some points to different aspects of the project and then averages these points by some given coefficients. According to preference, projects with the highest score are given priority.
Decision Tree Analysis: An information graphic tool to predict the potential consequences and probable losses in different projects.
SWOT Analysis: Used to compare the projects using the monitoring of various strengths, weaknesses, opportunities and threats with the view of comparing the projects.
Feasibility Study: Offers a detailed evaluation of each project’s feasibility, which will help make better decisions.
In conclusion, project selection is a complex process of decision-making, which implies consideration of various criteria and factors. The guidelines for project selection include compatibility, feasibility, and risk management, while the tools of project selection include cost analysis and the SWOT analysis. When targeting these criteria and methods, organisations will be able to choose projects that correspond to its aims and capacities, optimising success.
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