Using Customer Criteria to Evaluate Project Proposals

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  • 0:03 Project Proposal Evaluation
  • 2:01 Proposal Evaluation Worksheet
  • 3:17 Evaluation Example
  • 4:26 Lesson Summary
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Lesson Transcript
Instructor: Olga Bugajenko

Olga is a registered PRINCE2 Practitioner and has a master's degree in project management.

In this lesson, we'll discuss the need for the project proposal evaluation and create a project evaluation worksheet. You'll then be able to practice using the worksheet by selecting the better project.

Project Proposal Evaluation

The projects an organization implements should deliver maximum benefits to it and improve its competitive position, thus the project portfolio must be aligned to the strategic objectives of the organization. To achieve this alignment, multiple project evaluation and selection models are used.

Before the organization begins to evaluate a project proposal, it's important to recognize what type of project it is. There are three types of projects any organization must include in their portfolio:

  • Compliance projects are ''must do'' projects, mandatory to continue operating and defined by the legal requirements of the industry or country.

  • Operational projects are projects improving the current performance and reducing the current operational costs of the organization.

  • Strategic projects are linked to the long-term vision of the organization and include the development of new products and entering new markets.

When evaluating project proposals, the organization will employ two types of selection criteria: financial and nonfinancial.

  • Financial criteria should be used when there is a high certainty about the future cash flows of the project. Two of the most popular financial models used for project proposal evaluation are payback and net present value (NPV). Payback model estimates the time it will takes to recover the original investment in the project. Net present value model calculates the present value of all project cash flow, assuming a certain return on investment.

  • Non-financial criteria take into consideration the strategic, or long-term, importance of the project. Examples of such criteria include evaluating whether a project will help to capture the market share, create a competitive advantage in the market, or improve the brand image.

When selecting the best project proposal, the organization might choose to employ a multi-criteria model, combining financial and non-financial criteria in the evaluation.

Proposal Evaluation Worksheet

To create a Proposal Evaluation Worksheet, the organization must use the following three steps: select the evaluation criteria, choose a scoring system, and choose an appropriate weighting for each criteria.

The first step is to select the evaluation criteria, either financial or non-financial, that capture the potential value of the proposed project. These could also be statements evaluating project approach, previous experience of the organization with the sector, price, and schedule estimates. An example of such criteria can be whether the project is in line with the legal regulations or whether the project covers operational costs.

Next, the organization chooses a scoring system that will be used for evaluating each criterion. This can be as simple as Yes or No with 1 point awarded for Yes and 0 points awarded for No. Alternatively, the scoring can be from 0 to 10.

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