Linear programming method is a type of constrained optimization method of project selection.

In this method, you look towards reducing the project cost by efficiently reducing the duration of the
project. You look for running an activity in its normal time or the crash time. The crash time of the
activity enables you to reduce the activity time or the project as a whole.

When you complete only a specific activity for a duration that incurs the smallest cost, you term it as the
normal time. You crash an activity by spending more efforts to make sure that the activity takes lesser
time to complete. Adding efforts to the activity definitely increases the cost. However, when you include
overhead costs, you might realize that running multiple activities at crash level is financially
advantageous, if it reduces the overall duration and overhead costs.However, one of the most important
aspects of the project you need to consider is if crashing an activity reduces the overall time of the
project. For example, if the activity does not lie in the critical path of the project, then you might not
want to consider crashing the activity. Critical path of the project is the sequence of the activities that
you need to perform from start to end, considering that you can perform other activities, which can be
another sequence of activities, in parallel. The alternate sequence of activities that you perform in
parallel is known as an alternate path.

At times, you might realize that crashing activities in the critical path might result in making an alternate
path a critical path because the time required to complete such path is now more than the former
critical path. In such a case, if you justify the costs involved, you can consider further crashing the
activities of the new critical path too.

Crashing an activity means that you reduce the time required to complete the activity by adding
additional resources, including man power and machinery. This not only adds efforts and reduces the
time required to complete the activity faster, but also increases the cost for completing the activity.

Consider the following table of activities for a simple project that indicates the normal and crash time
along with the costs of various activities of a project. The table also indicates the dependencies of
various activities:

Normal Crash

Activity Predecessor Week Cost Week Cost

A – 2 80 1 150

B A 3 90 2 120

C A 4 120 2 180

D B, c 2 100 2 100

E D 1 50 1 50

F E 1.5 200 0.5 300

Consider the activity f. This activity requires four weeks to complete. However, you can crash this
activity to two weeks with an additional cost of $ 150. However, there is always proportionality
between the time of reduction and additional cost. Therefore, if you want to crash the activity f by two
weeks, you can calculate the cost of activity by calculating the slope cost and then the cost of activity
as follows:

Slope cost = (crash cost – normal cost) / (normal time - crash time)

Cost of activity = normal cost + (slope cost * crash time)

Applying the preceding formulas, we can calculate the activity cost of activity f as:

Slope cost = (300 – 200) / 1

= 100

Cost of activity = 200 + (100 * 0.5)

= 250

You can calculate the cost of activity for each activity and sum all of the costs to arrive at the final cost
of project. You can also represent the activities from the table with a network diagram to understand
the dependencies of the activities. The following is the network diagram for the sample project:

t happens many times in life that you have many choices when selecting the best
option. For example, you may have the option to select which movie you want to
see or where you should go for your next vacation.

You may make the decision just randomly, or based upon your experience or
suggestions from your family members or friends in your life.

However, in professional life when you have been given options to make a
selection, you go by a set of rules because here, the stakes are high and you
cannot afford to make a wrong decision.

Suppose your organization has received many projects, but your organization
cannot undertake all projects at once due to resource constraints. Therefore,
your organization has to decide to select a project, which is less risky and could
provide them with maximum profit and recognition.

There are various methods which help you choose your project wisely. These
methods can be divided into two categories:
 1. Benefit Measurement Methods
2. Constrained Optimization Method
Although there is a difference among methodologies used in each technique, the
basic principle and ultimate goal are the same, which is to provide your
organization with the maximum profit and recognition.

Every organization has a defined process that helps them to choose the right
project aligned with its strategic objectives.

Generally, this process is performed by upper management such as the Steering

Committee, Project Management Office (PMO), Project Selection Committee,
etc.

They will evaluate many areas while evaluating the project, such as:

 Whether they are capable of doing it or not

 If they have all the resources required to complete the project
 If it will help them achieve their objective (recognition and maximum profit)
Now, we will discuss each type of project selection method.

Benefit Measurement Methods

This technique is widely used in the selection of projects, which is based on the
present value of estimated cash inflow and outflow. Here, you calculate the cost
and benefits and then compare them with other projects to make a decision.

We have to understand one crucial concept before we move to benefit

measurement techniques: Discounted Cash Flows.

Discounted Cash Flow

We all know that the worth of money received today is more than the money
received in the future. For example, the value 10,000 USD after ten years will not
be the same as today; its worth will be far lower than the current value of 10,000
USD.

Therefore, we have to consider the concept of discounted cash flow while

calculating the cost invested and return on investment.

Now, let us get back to benefits measurement methods.

The following is a list of techniques used in benefit measurement methods:

 Benefit/Cost Ratio
 Economic Model (Economic Value Added)
 Scoring Model
 Payback Period
 Net Present Value
 Discounted Cash Flow
 Internal Rate of Return
 Opportunity Cost
Benefit/Cost Ratio
This technique is also known as the Cost or Benefit Ratio.

As the name implies, it is the ratio between the present value of inflow (cost
invested in the project) and the present value of outflow (value of return from the
project). If the budget is not a constraint, the project with a higher Benefit-Cost
Ratio (BCR) will be selected.

Economic Value Added (EVA)

Economic Value Added (EVA) is a performance metric that calculates the worth
creation for the organization and defines the return on capital (ROC). It is the net
profit after deducting all taxes and capital expenditure.

The project with the higher Economic Value Added (EVA) will be selected if you
have many projects. Please note that EVA is expressed in dollar value, not a
percentage.

Scoring Model
This is more like an objective technique. Here, the project selection committee
will list a few relevant criteria, weigh them according to their priorities and
importance, and then will add all these weighted values.

The project with the highest score will be selected once you complete scoring the
projects.

Payback Period
This is the ratio of total cash out with an average per period cash in. In other
words, it is the time required to recover the cost invested in the project.
The project with the minimum payback period will be selected if other parameters
are the same.

Net Present Value (NPV)

This is the difference between the current value of cash inflow and the current
value of cash outflow of the project. Net Present Value (NPV) should always be
positive, and the project with the highest NPV will be the better option.

Internal Rate of Return (IRR)

This is the interest rate at which the Net Present Value becomes zero. In other
words, you can say that it is the rate at which the present value of the outflow is
equal to the present value of inflows.

You will select the project with the highest IRR if you have many projects to
choose from.

Opportunity Cost
This is the cost that we are giving up by choosing some other project. You will
choose the project with the lesser opportunity cost if you have many projects.

These are the few benefits measurement techniques used in the selection of
projects. In general, for most organizations benefits measurement methods are
enough to lead them to a decision.

Constrained Optimization Methods

This model is also known as the Mathematical Model of project selection, which
is used for large projects requiring complex mathematical calculations.

The following is the list of techniques used in the Mathematical Model of project
selection:

 Linear Programming
 Non-linear Programming
 Integer Programming
 Dynamic Programming
A detailed discussion of these topics is out of the scope of the PMP Certification
exam. For the PMP exam, all you need to know is that these are the
Mathematical Model techniques and are used in project selection.
Summary
Project selection techniques help you to select a project which could provide you
with a better return on investment and recognition. There are various methods to
select a project; however, if the project is small and not very complex, you will go
for the benefits measurement model. You will go for the constrained optimization
method if it is a large and complex project.

Project Appraisal is a consistent process of reviewing a given

project and evaluating its content to approve or reject this project, through
analyzing the problem or need to be addressed by the project, generating
solution options (alternatives) for solving the problem, selecting the most
feasible option, conducting a feasibility analysis of that option, creating the
solution statement, and identifying all people and organizations concerned
with or affected by the project and its expected outcomes. It is an attempt to
justify the project through analysis, which is a way to determine project
feasibility and cost-effectiveness.