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Project Selection in Large Engineering Construction Programs

SECOND EDITION

By Bob Prieto

Princeton, New Jersey, USA
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One of the most important steps in implementation of a program management approach is the selection of the projects which will comprise the program. This selection process, done appropriately, is neither intuitively obvious nor simple. Done poorly, the program may achieve less than optimum results or be exposed to risks which may degrade its value over time. Project selection must flow from strategy which in turn is defined by an organization’s strategic business objectives. Key performance indicators which are established to assure strategic business objectives are met, must cascade down through strategy assessment into overall project portfolio assessment and ultimately into individual projects.

The selection of the portfolio of projects that will comprise the program must:

  • optimize multiple strategic business objectives
  • address sequencing required for optimization
  • address interdependencies between projects
  • reflect real world resource constraints
  • enhance program (and organizational) flexibility and resiliency

Programs which experience weak project selection may have failed to:

  • maintain focus on strategic business objectives allowing biases to enter the process
  • establish a sufficiently strong methodology for project portfolio evaluation, often only considering one primary strategic business objective without attention to other such objectives
  • appropriately cascade metrics down to the assessment of project portfolio performance
  • inadequately reflect uncertainty and risks in portfolio evaluation

Weak project selection will result in lower value capture and, to the extent to which project selection appears to be driven by non-objective factors, undermine organizational honesty and openness.

Projects selection must be monitored as well as project performance under program management. This is an area which requires increased focus in the engineering and construction industry. Changes in market conditions, resource constraints, risk levels or execution performance may drive a re-evaluation of the portfolio which shows that redeployment of resources is in the best interest of achieving the programs strategic business objectives even when sunk costs and commitments are fully considered.

Termination of a previously selected project may be a simpler matter if it is performing below expectations (schedule delays, cost overruns) but when driven by a reduction in the benefits that will accrue or value derived it is a much harder matter. Who wants to be the program manager who terminates a strong performing project (ahead of schedule, under budget)?

More (including footnotes & references) …

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Editor’s note: Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English.  Original publication acknowledged; authors retain copyright.  This paper was originally published in the PM World Today eJournal in June 2011.  It is republished here with author’s permission.


About the Author

image-10243.jpgbob prietoBob Prieto 

Senior Vice President

Fluor 

Princeton, NJ, USA 

Bob Prieto is a senior vice president of Fluor, one of the largest, publicly traded engineering and construction companies in the world. He is responsible for strategy for the firm’s Industrial & Infrastructure group which focuses on the development and delivery of large, complex projects worldwide. The group encompasses three major business lines including Infrastructure, with an emphasis on Public Private Partnerships; Mining; and Industrial Services. Bob consults with owners of large engineering & construction capital construction programs across all market sectors in the development of programmatic delivery strategies encompassing planning, engineering, procurement, construction and financing. He is author of “Strategic Program Management”, “The Giga Factor: Program Management in the Engineering and Construction Industry” and “Application of Life Cycle Analysis in the Capital Assets Industry” published by the Construction Management Association of America (CMAA) and “Topics in Strategic Program Management” as well as over 450 other papers and presentations.

Bob is a member of the ASCE Industry Leaders Council, National Academy of Construction and a Fellow of the Construction Management Association of America. Bob served until 2006 as one of three U.S. presidential appointees to the Asia Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC), working with U.S. and Asia-Pacific business leaders to shape the framework for trade and economic growth and had previously served as both as Chairman of the Engineering and Construction Governors of the World Economic Forum and co-chair of the infrastructure task force formed after September 11th by the New York City Chamber of Commerce.  Previously, he served as Chairman at Parsons Brinckerhoff (PB), one of the world’s leading engineering companies.  Bob Prieto can be contacted at [email protected].