Project Evaluation and

Programme Management
 Contents

• Business case for a project

• Project portfolio
management
• Project evaluation
• Cash-flow forecasting
• Detailed steps of C-B
Analysis
• Categories of costs and
benefits
 The business case
• Feasibility study is also called as “business case”
• Main focus is to determine whether it would be financially
& technically feasible to develop the S/W.
• Provides a justification for starting the project
• Should show that the benefits of the project will exceed
the costs of development, implementation and operation
(or production)
• Needs to take account of business risks
 Types of feasibility study
• Technical Feasibility

• Financial Feasibility

• Operational Feasibility
 Contents of a business case / feasibility
study
1. Introduction/ 5. The benefits
background 6. Outline implementation
2. The proposed plan
project 7. Costs
3. The market 8. The financial case
4. Organizational and 9. Risks
operational 10. Management plan
infrastructure
 Contents of a business case cont…
• Introduction/background: describes a problem to be
solved or an opportunity to be exploited.
• The proposed project: a brief outline of the project
scope.
• The market: the project could be to develop a new
product (e.g. a new computer game). The likely demand for
the product in the market needs to be assessed.
 Contents of a business case cont…
• Organizational and operational infrastructure: How
the organization would need to change? This would be
important where a new information system application was
being introduced.
• Benefits Normally, these should be expressed in financial
terms. In the end, it is up to the client to assess these – as
they are going to pay for the project.
 Contents of a business case cont…
• Outline implementation plan: How the project is going
to be implemented? This should consider the disruption to
an organization that a project might cause.
• Costs: The implementation plan will supply information to
establish these.
• Financial analysis: Combines costs and benefit data to
establish value of the project
 Contents of a business case cont…
• Risks: Two types
 Project Risk: related to threats to successful project execution.
 Business Risk: related to factors threatening the benefits of the
delivered project.
In business case, main focus is on Business Risk.

• Management Plan: Detailed plan for smooth management of

the organization.
 Project Portfolio Management (PPM)
• Provides an overview of all the projects that an
organization is undertaking.
• Prioritizes the allocation of resources to projects.
• Decides which new projects should be accepted and
which existing ones should be dropped.
Project portfolio management cont …
The concerns of project portfolio management include:
• Evaluating proposals for projects
• Assessing the risk involved with projects
• Deciding how to share resources between projects
• Taking account of dependencies between projects
• Removing duplication between projects
• Ensuring that necessary developments have not
been inadvertently missed.
Project portfolio management cont…
There are three elements (concerns) to PPM:
1. Project portfolio definition
– Create a central record of all projects within an
organization
– Must decide whether to have ALL projects in the
repository or, say, only ICT projects
– Note the difference between new product development
(NPD) projects and renewal projects.
 Project portfolio management cont…
2. Project portfolio management
Actual costing and performance of projects can be
recorded and assessed
3. Project portfolio optimization
Information gathered above can be used to achieve better
balance of projects e.g. some that are risky but potentially
very valuable balanced by less risky but less valuable
projects
 Pros and cons of Project portfolio
management
Pros:
•Allows some small ad-hoc tasks to be done outside the
portfolio e.g. quick fixes to systems.
Cons:
•While the full-time staff are allocated to a project, they may
effectively be part-time because, they still have routine work to
do.
•The official project portfolio may not accurately reflect
organizational activity, if some projects are excluded.
 Evaluation of individual projects
Technical assessment:
• Consists of evaluating whether the required
functionality can be achieved with current affordable
technologies.
• Cost of the technology adopted must be taken into
account in the financial assessment (cost-benefit
analysis).
 Evaluation of individual projects cont...
Financial assessment (Cost benefit analysis):
This relates to an individual [Link] need to:
• Identify all the costs which could be:
– Development costs (e.g. Salary to staffs)
– Set-up cost (e.g. Hardware cost, recruitment and staff training cost)
– Operational cost (e.g. Cost for operating the system after
installation)
• Identify the value of benefits
• Check that benefits are greater than costs
 Cash-flow forecasting
• Like C-B analysis, it is also important to produce a cash-flow
forecast, which indicates when expenditure and income will
take place.
• The development of the project will incur costs. We need to
spend money such as purchasing equipments, staff payment
during project development.
• These expenses cannot wait until income is received from
the project.
• When the system or product is released it will generate
income that gradually pays off costs.
• Also, the timing of costs and income for a product of system
needs to be estimated.
Product/system life cycle cash flows
• We need to know that, whether we can fund these expenses
either from the own resources or by borrowing.
• So, a forecast is needed.

Typical product life-cycle cash-

flow
Cost-benefit analysis – Detailed Steps
1. Identify the costs and benefits pertaining to the project
2. Categorize the various costs and benefits
3. Select a cost-benefit evaluation technique
4. Interpret the results of the analysis
5. Take appropriate action.
 Identify the costs and benefits pertaining
to the project
• Certain costs and benefits are easily identifiable, e.g. direct
costs, such as the price of a computer etc. can be easily
identified.
• Direct benefits often relate one-to-one to direct costs,
especially savings from reducing costs in the activity in
question.
 Identify the costs and benefits pertaining
to the project cont…
• Some direct costs and benefits, may not be well defined,
since they represent estimated costs or benefits that have
some uncertainty, e.g. cost reserved for bad debt.
• A category of costs or benefits that is not easily identifiable
is opportunity costs and benefits. These are the costs or
benefits forgone by selecting one alternative over another.
Categorize various costs and benefits for
analysis
• Tangible or Intangible

• Direct or indirect

• Fixed or variable
Categorize various costs and benefits for
analysis
Tangible costs.
• Tangibility refers to the ease with which costs or benefits
can be measured.
• An outlay of cash for a specific item or activity is referred
to as a tangible cost.
• Examples: purchase of hardware or software, personnel
training, and employee salaries.
 Categorize various costs and benefits for
analysis cont...
Intangible costs
• Costs that are known to exist but whose financial value cannot be
accurately measured.
• Example: employee morale problems caused by a new system or
lowered company Image.
• In some cases, they are easy to Identify but difficult to measure, e.g. the
cost of breakdown of an online system during banking hours will cause
the bank to loose deposits and waste human resources. But, by how
much? Difficult to measure.
• In some cases, these costs may be difficult even to identity, e.g.
improvement in customer satisfaction due to online systems. ystem.
Categorize various costs and benefits for
analysis cont...
Tangible benefits
• Benefits which can be measured/quantified.
• Examples: Benefits due to completing jobs in fewer hours
or producing reports with no errors.
Categorize various costs and benefits for
analysis cont...
Intangible benefits
• Benefits which cannot be easily measured / quantified.
• Example: More satisfied customers or an improved
corporate image.
• Both tangible and intangible costs and benefits, should
be considered in the evaluation process.
• Management often tends to deal irrationally with
intangibles by ignoring them, which should not be.
 Categorize various costs and benefits for
analysis cont...
Direct Costs
• Costs those with which a dollar figure can be directly
associated in a project.
• Easy to quantify in monetary terms.
• For example, the purchase of a box of diskettes for $35 is a
direct cost because we can associate the diskettes with the
dollars expended.
• Other examples: Development cost, setup cost, operational
cost .
Categorize various costs and benefits for
analysis cont...
Direct benefits
• Benefits which can be specifically attributable to the given
project.
• Example: A new online system that can handle 25 percent
more transactions per day.
 Categorize various costs and benefits for
analysis cont...
Indirect costs
• These costs are the results of operations that are not
directly associated with a given system or activity. They are
often referred to as overhead.
• Example: Insurance, maintenance, protection of the
computer center from heat and fire, lighting, and air
conditioning.
• But, it is difficult to determine the proportion of each,
attributable to a specific activity.
Categorize various costs and benefits for
analysis cont...
Indirect benefits
• The benefits which are realized as a by-product of
another activity or system.

• Examples: benefits due to selling of fertilizers in a steel

plant, selling of empty oil containers (tin boxes), etc.
 Categorize various costs and benefits for
analysis cont...
Fixed Costs
• Some costs are constant, regardless of how well a system is
[Link] are called fixed costs.
• Once encountered, they will not recur.
• Examples: Straight-line depreciation of hardware, exempt
employee salaries, and insurance etc.
 Categorize various costs and benefits for
analysis cont...
Variable costs
• These costs are incurred on a regular (weekly, monthly)
basis.
• They are usually proportional to work volume and
continue as long as the system is in operation.
• Example: Costs of computer forms which vary in
proportion to the amount of processing or the length of
the reports required.
Categorize various costs and benefits for
analysis cont...
Fixed benefits
• These benefits are also constant and do not change.
• Example: Benefits due to the decrease in the number of
personnel by 20 percent resulting from the use of a new
computer.
• The benefit of personnel savings may recur every month.
Categorize various costs and benefits for
analysis cont...
Variable Benefits
• On the other hand, these benefits are realized on a regular
basis.
• Example: Consider a safe deposit tracking system that
saves 20 minutes preparing customer notices compared
with the manual system. The amount of time saved varies
with the number of notices produced.
 Summary
• Discussed the concept of business case and its
contents.
• Presented the concerns of project portfolio
management (PPM) and the elements to PPM.
• In order to evaluate individual projects, one has to
carry out
 Technical Assessment
Financial Assessment (C-B Analysis)
 Summary cont …

• Discussed the steps for carrying out C-B Analysis.

• Learnt the different types of costs and benefits with
suitable examples.
• These costs and benefits have to be considered properly in
C-B analysis.
 References :

1. B. Hughes, M. Cotterell, R. Mall, Software Project Management, Sixth Edition,

McGraw Hill Education (India) Pvt. Ltd., 2018.
2. E. M. Awad, Systems Analysis and Design, Second Edition. Galgotia Publications
Pvt. Ltd., 2009.
3. R. Mall, Fundamentals of Software Engineering, Fifth Edition, PHI Learning Pvt. Ltd.,
2018.
Thank you