Deck 19: Project Selection and Portfolio Management

Question 1

The Project Portfolio Manager is typically not:

A) Located in a PMO
B) A member of the Project Review Board
C) An advisor to the Executive Management
D) The project sponsor

Answer 1

The project sponsor

Question 2

Project Screening corresponds with:

A) FEL-2
B) FEL-1
C) Portfolio Adjustment
D) Portfolio Selection

Answer 2

FEL-2

Question 3

Often, the value of projects in a portfolio is (check one)

A) derived from quantitative models
B) derived from subjective scoring models
C) derived from a combination of quantitative and subjective models

Answer 3

derived from a combination of quantitative and subjective models

Question 4

The goal of portfolio management is to (check one)

A) maximize the value of outcomes of the projects
B) align the projects in the portfolio with corporate strategies
C) balance the portfolio of project across several possible categories
D) any or all of the above

Question 5

One of the ways in which programs and project portfolios differ, is (check one):

A) Projects within programs are related and may be interdependent while projects in portfolios are unrelated and not interdependent
B) Projects within programs are related and interdependent while projects in portfolios are related but not interdependent
C) Projects within programs are related and interdependent while projects in portfolios are unrelated but interdependent
D) Projects within programs are related and may be interdependent while projects in portfolios may be related and may be interdependent

Question 6

Lack of portfolio management can lead to (check all that apply):

A) mediocre projects stealing resources from important projects
B) seemingly ad hoc decisions about project cancellations or suspensions
C) effective allocation of resources across all projects
D) selection of projects based upon a short-term perspective

Question 7

In general, a company's project portfolio (check all that apply):

A) should align with its business strategies
B) should align with resources available to do the projects
C) should consist largely of projects favored by the CEO
D) should result in projects that once approved are never cancelled
E) might, in fact, contain too many projects

Question 8

The role of the PMO in portfolio management (check all that apply):

A) Provide the project review/governance board with information about proposed projects
B) Decide the business or corporate strategy upon which to base project selection
C) Assess the status and availability of resources for projects
D) Provide the project review/governance board with status information about projects underway
E) Provide managers of multiple projects information to enable them to shift resources among the projects.

Question 9

Overall, the advantages of project portfolio management include (check all that apply):

A) Project resource requirements fit within available resources
B) Eliminating the main sources of project failure
C) Doing the right projects according to business and corporate strategies
D) Putting resources into the right projects, given the criteria for what is "right"
E) Less arbitrariness in new project selection, and in the reallocation of resources among current projects

Question 10

Statement: Individual project managers are responsible for project portfolio management.

Question 11

Statement: Individual managers of multiple projects are responsible for project portfolio management of all the project they manage.

Question 12

Statement: Project portfolio management is somewhat analogous to investment portfolio management.

Question 13

Statement: The presence portfolio management in an organization has impact on the selection/approval of projects.

Question 14

Statement: The practice of project portfolio management, considering the tools and methods available and the issues involved, is straightforward and fairly simple to implement.

Question 15

Statement: A "balanced" project portfolio refers to a portfolio where the sum of the value of "big" project is equal to the sum of the value of "small" projects

Question 16

Statement: Quantitative methods for project evaluation are better than subjective methods simply because they provide results that are objective and unbiased

Question 17

Statement: An important element in portfolio management is knowing the organization's resource capacity for projects.

Question 18

Statement: Portfolio management is assisted by a project gating methodology wherein projects are assessed and reevaluated at specific stages.

Question 19

T/F Individual project managers are responsible for project portfolio management.

Question 20

T/F Individual managers of multiple projects are responsible for project portfolio management of all the project they manage.

Question 21

T/F Project portfolio management is somewhat analogous to investment portfolio management.

Question 22

T/F The presence or absence of portfolio management in an organization has little impact on the selection/approval of projects.

Question 23

T/F The practice of project portfolio management, considering the tools and methods available and the issues involved, is straightforward and fairly simple to implement.

Question 24

Often, the value of projects in a portfolio is (check one)

A) derived from quantitative models
B) derived from subjective scoring models
C) derived from a combination of quantitative and subjective models

Question 25

T/F A "balanced" project portfolio refers to a portfolio where the sum of the value of "big" project is equal to the sum of the value of "small" projects

Question 26

T/F Quantitative methods for project evaluation are better than subjective methods simply because they provide results that are objective and unbiased

Question 27

T/F An important element in portfolio management is knowing the organization's resource capacity for projects.

Question 28

T/F Portfolio management is assisted by a project gating methodology wherein projects are assessed and reevaluated at specific stages.

Question 29

Management determines the relevant ways to categorize projects, and allocates resources to each category. When a project is reviewed for possible selection, it is assigned to a category and given a priority. Actual selection depends on its priority and whether resources in the category are sufficient to allocate to it. This method is called (check one)

A) maximum value of portfolio
B) strategic buckets portfolio
C) balanced project mix portfolio

Question 30

The goal of portfolio management is to (select one)

A) maximize the value of outcomes of the projects
B) align the projects in the portfolio with corporate strategies
C) balance the portfolio of project across several possible categories
D) any or all of the above

Question 31

Lack of portfolio management can lead to (check all that apply):

A) mediocre projects stealing resources from important projects
B) seemingly ad hoc decisions about project cancellations or suspensions
C) effective allocation of resources across all projects
D) selection of projects based upon a short-term perspective

Question 32

In general, a company's project portfolio (check all that apply):

A) should align with its business strategies
B) should align with resources available to do the projects
C) should consist largely of projects favored by the CEO
D) should result in projects that once approved are never cancelled
E) might, in fact, contain too many projects

Question 33

The role of the PMO in portfolio management (check all that apply):

A) Provide the project review/governance board with information about proposed projects
B) Decide the business or corporate strategy upon which to bas project selection
C) Assess the status and availability of resources for projects
D) Provide the project review/governance board with status information about projects underway
E) provide managers of multiple projects information to enable them to shift resources among the projects.

Question 34

Overall, the advantages of project portfolio management include (check all that apply):

A) Project resource requirements fit within available resources
B) Eliminating the main source of project failure
C) Doing the right projects according to business and corporate strategies
D) Putting resources into the right projects, given the criteria for what is "right"
E) Less arbitrariness in new project selection, and in the reallocation of resources among current projects.

Question 35

The project portfolio (check all that apply)

A) Assures that projects and programs align with strategic objectives.
B) Screens and selects projects to achieve strategic objectives within risk and resource limits.
C) Meets with project and program stakeholders to determine their needs
D) Prioritizes programs and projects based upon contribution to strategic objectives, resource requirements, and risks.
E) Works with project managers in setting project plans and budgets.
F) Tries to exploit synergies among programs and projects in a portfolio and to balance them in terms of risk, size, duration, focus, etc.
G) Monitors, reviews, and reassess projects and programs in the portfolio at phase gates for business impact.
H) Reports assessment results and recommendations to project managers.

Question 36

Two approaches are being considered for a new system to track and manage a company's project portfolio: one is for the company's own IT department to develop and install the system, the other is to hire an IT contractor to install one of its existing products. The IT department estimates it can complete the project in 2 years with existing personnel. The department operates as a profit center and, hence, charges for its work. The estimated development and upkeep cost of the system is $ 8 M. The contractor has proposed to install its system in only 6 months for a cost of $10 M, and to maintain it thereafter for an additional cost $20,000 per year, starting after the system has been operational for 6 months. The annual benefit of either system in terms of better-selected and -managed projects is estimated to be at least $20 M. In terms of benefit-cost ratio, which is better? Note: it is expected that the chosen system, whichever, will have to be replaced by something else in 6 years.

Question 37

A bridge is to be constructed as part of a 2-lane highway renovation project. There are two alternatives, one is to construct a 4-lane bridge for $2 M , the other to construct a 2-lane bridge now for $1.5 M and a second 2-lane bridge next to it 10 years for a present value expense of $1.2. A two-lane bridge is considered adequate to handle current traffic volume, although in 10 years volume is expected to increase and require 4 lanes. Looking at a 25 year time horizon, the NPV of maintenance for the 4-lane bridge is $1.8 M; the NPV of maintenance for the initial 2-lane bridge and the later-built 2-lane bridge combined is $1.4 M. Use a B/C analysis to determine which alternative should be adopted. Assume that the "benefit" is the same for both alternatives.

Question 38

Two technologies are being considered for a rocket motor for space tourist vehicles. Costs are estimated for development and initial production (including the plant to produce the motors). Also estimated are the demand and likely profit margins for the motors in terms of NPV. This information along with estimates of the probabilities of success of the development and launch efforts are shown below:
$$\begin{array} { c c c c c l } \text { Motor type } & \text { Development } & \text { Prob } & \text { Production } &\text{Prob}& \text { NPV } \\\text { A } & 50 & 0.70 & 20 & 0.60 & 200 \\\text { B } & 70 & 0.60 & 25 & 0.50 & 250\end{array}$$ Based on ECV, which motor project is better?

Question 39

A pharmaceutical company is developing a new process for producing a virus drug. The expected cost of the effort is $15.5 M, although there is a 20% chance the development effort will fail. Should the effort succeed, the drug will be produced in a new facility that will cost $26 M. Once in the market, the drug is expected to provide a NPV sales profit of $120 M. A competitor is also working on an almost identical process, and should it finish and capture market share first, the NPV sales profit will be only $50 M. The likelihood of the competitor finishing first is estimated at 50%. What is the ECV?

Question 40

Three systems development project are being considered, A, B, and C. The table below shows the rated effectiveness (0-100) of four criteria and the total cost for each of the systems. Projects with a weighted effectiveness less than 80 are rejected. Compare the systems using cost-effectiveness analysis.
$$\begin{array} { | l | c | c | c | c | } \hline & & \text { System } \boldsymbol { A } & \text { System } \boldsymbol { B } & \text { System } C \\\hline \text { Criterias } & W ( \text { weight } \% ) & E & E & E \\\hline \text { Functionality } & 40 & 90 & 80 & 80 \\\hline \text { Scalability } & 10 & 70 & 80 & 75 \\\hline \text { Maintainability } & 20 & 75 & 90 & 70 \\\hline \text { Ease of use } & 30 & 70 & 85 & 95 \\\hline \text { Cost } & & \$ 2.9 \mathrm { M } & \$ 2.5 \mathrm { M } & \$ 3.0 \mathrm {~B} \\\hline\end{array}$$