PMI-ACP Study Notes: Project Justification

[PMI-ACP® Exam Study Notes] Project justification looks at how to determine whether a project would be carried out or not while chartering is the formal begin of any projects. These processes apply to both traditional waterfall project management and Agile project management.

Project Justification

The following are a number of concepts/terms used in evaluating a given project:

• Value-based Prioritization – when given a number of proposed projects, assign a financial value in terms of money to every project and choose the one with the best return
• Present Value (PV) vs Net Present Value (NPV)
  • a dollar today worths more than a dollar tomorrow (owing to inflation, etc.)
  • Present Value (PV) indicates the actual value a project worth at present, the larger the better
  • Net Present Value (NPV) is the PV minus the cost
• Internal Rate of Return (IRR) – express the project’s projected return as an interest rate (in %) based on the cost, the larger IRR the better
• Return on Investment (ROI)
  • the return (expressed in percentage) based on the investment
  • (benefit – cost) / benefit * 100%
  • the larger the better (note: the contesting projects need to have comparable scope)
• Compliance – the project would be given high (if not top) priority if it is carried out to meet regulatory requirements

Chartering

If a “GO” is received for a project after the project justification process, the performing organization needs to create a project charter through the chartering process.

• Creating the charter is IMPORTANT and necessary even in Agile project environment
• A charter is the formal document that authorize a project (names the project manager, gives the resources and authority, etc.)

Facts about Project Charter for Agile Projects

• As part of Iteration Zero before the actual project work has begun
• To be signed by senior management to give official authority for the project manager and resource allocation
• Names the project manager (if applicable)
• Addresses the 5W1H (What, Why, Who, When, Where and How) of the project
• Similar to “Develop Project Charter” defined in the PMBOK® Guide but the level of details and assumptions are different: Agile project charters are less detailed and focus on How since Agile projects are progressively elaborated
• Includes high-level requirements, critical success factors, milestones (schedule), and preliminary budget
• Authority must be given to the team to carry out defined Agile processes that may be different from organizational practices (e.g. change management)
• The project charter must be created

Summary

This piece of study notes on PMI-ACP® Exam examines the very first steps in carrying out a project in both Agile or traditional waterfall project management. The project benefit must be evaluated using project justification techniques and the project charter must be created.