---
title: "Project selection methods"
subject: "ICT Project Management"
chapter: 7
key: "semester_7/ict_project_management:project-selection-methods"
source: https://www.bctengineer.com/q/semester_7/ict_project_management/project-selection-methods
site: BCT Engineering
---

# Project selection methods

ICT Project Management · Chapter 7: Project Integration Management

- Asked in: year not given
- Video: [01 Project Selection & Initiation](https://www.youtube.com/watch?v=PVDRzAXMxuI) — Free eLearning 
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/ict_project_management/project-selection-methods
- Whole chapter: https://www.bctengineer.com/md/semester_7/ict_project_management/chapter-7

## Question

What are project selection methods?

## Short answer

Project selection methods evaluate proposals to choose those aligning with organisational goals. They include benefit measurement (scoring models, benefit-cost ratio), financial methods (NVP, IRR, payback), constrained optimization, and non-numeric approaches like operating necessity and sacred cow.

## Answer

**Project selection** is the process of evaluating proposed projects and choosing those that best meet organisational goals, since resources are limited. Methods are classified as follows.

#### 1. Benefit measurement (comparative) methods
- **Scoring models**: weighted criteria (strategic fit, ROI, risk, resource availability). Each project receives a weighted score; the highest is selected.
- **Comparative approach / Q-sort**: projects are compared and ranked.
- **Benefit-cost ratio (BCR)**: PV of benefits ÷ PV of costs; accept if > 1.

#### 2. Financial (economic) methods
These are also benefit measurement methods, based on cash flows.
- **Payback period**: time to recover the investment. Shorter is better.
- **Net Present Value (NPV)**: sum of discounted benefits minus costs; accept if NPV > 0.
  $NPV = \sum_{t} \dfrac{CF_t}{(1 + r)^t} - \text{Initial investment}$
- **Return on Investment (ROI)**: (Benefits − Costs) ÷ Costs.
- **Internal Rate of Return (IRR)**: discount rate at which NPV = 0; accept if IRR > required rate.
- **Discounted payback**.

#### 3. Mathematical (constrained optimisation) methods
Linear programming, integer programming, dynamic programming and goal programming, used for large portfolios with resource constraints.

#### 4. Non-numeric methods
- Sacred cow (project suggested by a senior official).
- Operating necessity (to keep the business running).
- Competitive necessity.
- Product line extension.
- Comparative benefit (committee judgment).

| Method | Criterion | Decision rule |
|---|---|---|
| Payback | Time | Shorter is better |
| NPV | Rs value | Positive, highest |
| ROI | % | Higher is better |
| IRR | % | Greater than cost of capital |
| Scoring | Points | Highest score |

#### Selection tips
Use several methods together; include strategic fit and risk, not just finance.

**Example:** Project A has NPV Rs 5 lakh and payback 2 years; project B has NPV Rs 2 lakh and payback 4 years. A is preferred.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. When is a project accepted under the NPV method?
   A. NPV > 0
   B. NPV < 0
   C. NPV = 1
   D. Whenever payback is long
   Answer: A. NPV is discounted benefits minus costs; a positive value means the project adds value. (Key point: NPV rule)

2. What is the IRR?
   A. The time to recover the investment
   B. The discount rate at which NPV equals zero
   C. Benefits divided by costs
   D. The score from weighted criteria
   Answer: B. IRR is the rate that makes NPV zero; accept if it exceeds the required rate. (Key point: IRR)

3. Which is a non-numeric selection method?
   A. Payback period
   B. NPV
   C. Sacred cow
   D. Linear programming
   Answer: C. A sacred cow is a project suggested by a senior official, a non-numeric method. (Key point: Non-numeric)

4. How does a scoring model choose a project?
   A. Selects the shortest payback
   B. Selects the oldest proposal
   C. Selects the lowest cost project
   D. Gives weighted scores to criteria and selects the highest total
   Answer: D. Weighted criteria such as strategic fit, ROI and risk are scored and the highest wins. (Key point: Scoring models)

## Related in other subjects

- [Project selection with high sediment rivers](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Aproject-selection-sediments) — Power Plant Design, chapter 3
- [Interview in selection of personnel](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Ainterview-selection-personnel) — Construction Management, chapter 10, asked 2×
- [Hydropower site selection factors](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Asite-selection-discharge-factors) — Power Plant Design, chapter 3
- [IRR selection among A, B, C, D](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Airr-abcd-mutually-exclusive-combination) — Engineering Economics, chapter 4