TOPIC 5: PROJECT SELECTION
Sub-Topics
Criteria of Project Selection
Factors to Consider when Selection Projects
Tools and Techniques of Project Selection
CRITERIA OF PROJECT SELECTION
Project selection is the process of accessing each project idea and enumerating the project with highest priority. It’s a careful study of proposed project, focusing on each project in detail and choosing one of them for further considerations. Criteria for selecting a new project.
a. Needs priotization – This seeks to answer the question, ” Which needs have received the highest potential for impact”
b.External Impact Consideration – This seeks to answer the question “Who else is working in that area of intervention, what are their programme strength and activities, which complement the efforts of your projects. It also seeks to identify the compatibility of the project with other long term projects of the organisation as well as national and international development agenda ”
c. Appropriateness – This seeks to answer the question “Is the project acceptable to the target population and key stake holders groups. (i.e.) would a reproductive health programme be consistent and appropriate with religious and cultural norms.
d. Institutional Capacity – This seeks to answer whether the organisation has the strength and capacity of implementing a project.
e. Resource Availability – This seeks to answer the following question , ” is therepotential for growth , What opportunities exist to leverage resources.
f .Financial Feasibility – It is the rate of return for investment acceptable
g.Technical Feasibility and Sustainability – Can the project be realistically accomplished sustained and maintained
h.Internal Programme Consideration – This seeks to answer the question,” What are the strategic priorities of the organisation in the country /globally, and what priority does the organisation have regarding to the organisation beneficiaries. Criteria for selecting appropriate project selection models.
Realism – It dictates that an effective model must reflect organizational objectives. It must be reasonable in the light of constants such as finance and human resources as well as as taking into account commercial and technical risks.
Capability – This means the model should be flexible to accommodate changes under which the projects is being carried out.
Flexibility – The model should be easily modifiable, that is allow adjustments (i.e) in exchange rates, building cords, etc.
Ease of Use – The models should be simple enough to be used by people of all areas of the organisation. It should be timely and people should be able to assimilate information without training /special skills .
Cost – It should be cost effective that is the cost of obtaining selection information and results should be low enough
Comparability – The models should be broad enough for multiple projects. Should be easy to store and gather information in the computer database and manipulate the data in the model through available computer packages.
FACTORS TO CONSIDER WHEN SELECTION PROJECTS
1. Compatibility of the project with other long term plans – The projects should fit in the mandate of the organisation and the other development plans .
2. Influence of government regulations and control – Projects should meet government regulations so as not to contravene the law
3. Sustainability and social welfare
4. Possibility of licensing and knowhow
5. Competitive advantage in case of profit making projects
6. Compatibility of traditional and custom of any kind of religion
TOOLS AND TECHNIQUES OF PROJECT SELECTION
1.Non Numeric Project Selection Models
These are relatively subjective models that do not involve numbers.
They do not use number as input.
They don’t involve either the use of past or future data.
These models include:
Sacred cow
Operating necessity
Competitive necessity methods
Democracy/Participatory methods
Urgency criteria
Sacred cow
In this model, project ideas are guaranteed by powerful individuals in the community regardless of other people opinion.
Such powerful sources could be; the president, politician, the merchant.
Projects selected this way enjoy maximum support and stand a high chance of a successful completion. However, they may not be viable and sustainable in the long run due to lack of support from the community.
Operating necessity
These are projects that simply keep the system going e.g. online search system, disaster response system and introduction of new production project for example BVR Competitive necessity
They are projects selected where it is deemed it will have competitive edge over the others offering similar services and goods such as Replacing, old show machines which are inefficient ones (i.e.) E- banking services, E- registrations etc.
Product line Extension
This projects are meant to fill in a gap that currently exist. They fit in the organisation product line, strengthens a weak link and fills the gap e.g, a mobile phone with a camera , radio and tracking device
Comparative Benefit Model
These happens when there are many possible projects which are not easily comparable in terms of benefit. Selection is based on benefit even though there may not be define the measure of benefit.
Democracy /Participatory Method
These are projects that are selected on the basis of the majority view. Such methods include: PRA, PUA .Voting may only be involved.
Urgency criteria. The urgency depends on the particular power of the proposer since the project is given
priority solution given /depending on the level of urgency.
2. Numeric Project selection Method
These are models which rely on numbers therefore undertake computations
They are:
Payback period
Average rate of return
Net Present Value
Probability Index
Internal Rate of return
Payback period
Payback period in capital budgeting refers to the time required to recoup the funds expended in an investment, or to reach the break-even point. For example, a $1000 investment made at the start of year 1 which returned $500 at the end of year 1 and year
2 respectively would have a two-year payback period.
Average rate of return
The Average Rate of Return or ARR, measures the profitability of the investments on the basis of the information taken from the financial statements rather than the cash flows. It is also called as Accounting Rate of Return
Net Present Value
Net Present Value (NPV) is the value of all future cash flows (positive and negative) over the entire life of an investment discounted to the present. NPV analysis is a form of intrinsic valuation and is used extensively across finance and accounting for determining the value of a business, investment security, capital project, new venture, cost reduction program, and anything that involves cash flow.
Probability Index
Profitability Index is a capital budgeting tool used to rank projects based on their profitability. It is calculated by dividing the present value of all cash inflows by the initial investment. Projects with higher profitability index are better.
Internal Rate of Return
The internal rate of return is a metric used in financial analysis to estimate the profitability of potential investments. The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cashflow analysis. IRR calculations rely on the same formula as NPV does.
