Business Case- This document justifies the project initiative. It describes the business need and how the project aligns with the goals of an organization. A strong business case is needed to get a “go” from the management.
Benefits Management Plan- This document details both the financial as well as intangible benefits (ex: brand name) acquired as an end result of a project. It also defines the metrics that will be used to measure the benefits. This is an important input to develop Project Charter.
Assumption log: This document contains all the assumptions and constraints related to the project.
What are the components of a Project Charter?
Project selection Process: The department and individuals present to the management potential projects. The management then selects projects based on two selection methods i.e benefits measurement and the constrained optimization.
Examples of Benefits measurement method (comparative approach) are Murder board, Peer review, Scoring models, Economic measures. The examples of Constrained Optimization methods are Linear programming, Integer programming, Dynamic programming, Multi-objective programming.
Economic measures for project selection:
- Return on Investment (ROI): It determines profit by calculating benefit received in relation to the cost.
- Present Value (PV): what is todays value of future cash flows.
- PV= FV/(1+r)^n
- Net Present Value (NPV): Higher the NPV better the project prospects of selection. A project with positive NPV is a good choice.
- Internal Rate of Return (IRR)
- Payback Period
- Cost-Benefit Analysis
- Economic Value added (EVA)
- Opportunity costs
- Sunk Costs
- Law of Diminishing returns
- Working Capital
- Depreciation
