Professional Documents
Culture Documents
Project Results
30
Percent late
Over half 190 percent over budget
Over half 220 percent late
Challenges
Making
Human
resources
Communication
Risk and
Procurement
and
Project-driven organizational
environment
selection
Evaluating
Choosing
Implementing
Same
Types of Companies
Project Companies
Must
Their expertise
Resource they have availability
Their chance of winning bid
Preparing
a bid is expensive
They do not want to waste that effort on bids
where they are unlikely to be successful
Non-Project Companies
Must
Models
Models
Types of Models
Stochastic
Model
Deterministic
Model
Criteria
(Continued)
Companies
What
Model Criteria
Realism
Capability
Flexibility
Easy
to use
Inexpensive
Easy to implement
Realism
Needs
Capability
Model
needs to be sophisticated
enough to deal with all projects
Needs
Flexibility
Needs
Easy to Use
Needs
Inexpensive
Do
Easy to Implement
This
cost of an item
Not
Production factors
Safety of process
Other applications of
technology
Change in cost to produce
a unit output
Change in raw materials
usage
Availability of raw materials
Required development time
and cost
Impact on current suppliers
Changes in quality of output
Marketing factors
Size
of potential
market for output
Probable
market
share of output
Time until market
share is acquired
Impact on current
product line
Consumer
acceptance
Impact on consumer
safety
Estimated
life of
output
Spin-off
project
possibilities
Financial Factors
Profitability,
net
present values of
investment
Impact on cash
flows
Payout period
Cash requirements
Time
until break-
even
Size of investment
required
Impact on seasonal
and cyclical
fluctuations
Personnel Factors
Training
requirements
Labor skill
requirements
Availability of
required labor skills
Level of resistance
from current work
force.
models
Numeric models
Nonnumeric Models
Models
Cow
Operating
Necessity
Competitive
Necessity
Line Extension
Comparative
Continued
Benefit
Numeric Models
Profit/profitability
Scoring
Profit/Profitability Models
Models
Payback period
Discounted cash flow (NPV)
Internal rate of return (IRR)
Profitability index
NPV
Payback Period
The
Project Cost
Payback Period
Annual Cash Flow
$100,000
Payback Period
4
$25,000
Continued
Requires
The
NPV Formula
Ft
NPV (project) A0 t 1
t
1 k
n
NPV Example
8
$25,000
NPV (project) $100,000
t
t 1 1 0.15 0.03
$1,939
Finding
Profitability Index
a.k.a.
Disadvantages of Profitability
Models
Ignore
non-monetary factors
Some ignore time value of money
Discounting models (NPV, IRR) are
biased to the short-term
Payback models ignore cash flow after
payback
Scoring Models
Unweighted
factor model
Weighted factor model
Figure 2-2
A good
Figure B
Uncertainty
1.
2.
3.
Accounting data
Measurements
Uncertain information
Accounting Data
1.
2.
3.
Measurements
1.
2.
3.
4.
Uncertain Information
Must
PPP Steps
1.
2.
3.
4.
5.
6.
7.
8.
management
The project managers of major projects
The head of the Project Management Office
Particularly relevant general managers
Those who can identify key opportunities and
risks facing the organization
Anyone who can derail the PPP later on
Derivate projects
Platform projects
Breakthrough projects
R&D projects
the data
Document assumptions
Screen out weaker projects
The fewer projects that need to be
compared and analyzed, the easier the
work
goals
Have competence
Market for offering
How risky
Potential partner
Right resources
Good fit
Use
strengths
Synergistic
Dominated by
another
Has slipped in
desirability
results
Repeat regularly
Improve process
bid
Putting together a project proposal requires a
detailed analysis of the project
Project proposals can take weeks or months
to complete
A more detailed analysis may result in not
bidding on the project
letter
Executive summary
The technical approach
The implementation plan
The plan for logistic support and
administration
Past experience