Evaluating Mandated and Ongoing Projects
By Miley W. Merkhofer
Although some organizations exempt mandated and ongoing projects from formal evaluation, my recommendation is that both types of projects should be routinely evaluated just as “discretionary projects” are evaluated. In some organizations, “mandated” projects consume almost the entire budget. Very strict criteria should be established for labeling projects mandatory to ensure that they are defined with minimum possible scope and cost. Add-ons that go beyond what is strictly required should be defined as discretionary projects (alternative versions of a mandated project may be defined, with the requirement that at least one version be selected—see below). Formally evaluating mandated projects promotes consistency, provides useful information, and helps the organization ensure that all of the benefits of mandated projects are, in fact, achieved.
Evaluating ongoing projects for continued funding is useful to ensure that struggling or obsolete projects do not prevent funds from being available to meet more-pressing needs. Where possible, large, long-duration initiatives should be reframed as a series of smaller projects. For example, in the case of a software project, it may be better to make incremental funding decisions to develop improved versions rather than deciding whether to create one big Version 1.0 that does everything. The concept is to identify small “chunks” of work of the minimum size and scope necessary to generate some measurable benefit.
Although project managers often object to re-evaluating their previously-approved projects, requiring ongoing projects to be re-evaluated is not unfair or overly burdensome to the managers of those projects. Not as much effort is required to re-evaluate an ongoing project because template inputs need only to be updated rather than generated “from scratch.” Estimates tend to get less uncertain as a project proceeds in its life cycle, and providing up-to-date inputs allows portfolio information to be kept current.
Also, ongoing projects normally have an advantage in the competition. Indpendent projects should be priorized based on the ratio of benefit-to-cost; the relevant costs are the remaining costs needed to obtain the anticipated project benefits, exclusive of costs already spent. Furthermore, when evaluating on-going projects, the costs of terminating a project must be considered. Avoiding contract termination costs, staff reassignment costs, etc., are legitimate benefits of continuing the project. Thus, achieving the required bang-for-the-buck usually isn’t difficult for ongoing projects. If an ongoing project is eliminated, the decision should be regarded by all as an instance of successful resource reallocation, not as a personal failure on the part of a project manager.
Miley W. (Lee) Merkhofer, Ph.D., is an author and practitioner in the field of decision analysis who specializes in assisting organizations in implementing project portfolio management. He has served on advisory panels for several government agencies and has received grants and research awards for work in the area. Lee is an editor of the journal Decision Analysis.
Prior to becoming an independent consultant, Lee was a Partner of PriceWaterhouseCoopers, where he founded that organization’s capital allocation and project prioritization business practice. Lee is a founding partner of Folio Technologies LLC, a provider of web-based, project portfolio management software.
Lee received his Ph.D. in engineering economic systems from Stanford University. He is the author of the book Decision Science and Social Risk Management and co-author of the book Risk Assessment Methods..
Additional papers on project portfolio management can be found on Lee’s website, www.prioritysystem.com. E-mail: lmerkhofer@prioritysystem.com.
