Monday 13 January 2014

Killing a project?

Killing a project? Just how easy is it to do?

If the project is troubled it can be a relatively straightforward thing to do. And you don't need to apply portfolio management (PPM) concepts to do it. Its just a case of winding up a failed project.

But its often stated that the maturity of an organisation's PPM capability can be measured in its ability to kill projects that are not troubled. The reasoning is that an organisation with a high PPM maturity level will be so in tune with its resource-supply/project-demand equation that it will be able to respond to new opportunities and make space for them by stopping or deferring less valuable inflight projects.

But is it really that easy? When comparing the value of a new opportunity with an inflight one do we take into account the sunk cost expended to date in the latter? If we do a straight NPV comparison at the time of decision the inflight project has already expended some of its costs so its NPV at that point is going to be hard to beat? Alternatively, should we include this sunk cost in the NPV equation?

Another problem is that the estimates for the inflight project are likely to be more accurate than those for a new idea. Should we discount estimates accordingly to account for the different levels of confidence?

There are no hard and fast rules here. All of the industry standards are silent on these questions. Which is curious given that killing projects when appropriate is often cited as one of the key objectives of PPM.

Anyone care to share their ideas?

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