On Monday morning I start my new job as a Project Manager. In this role I will be in charge of business reviews for different directors across my organization, as well as process improvement, and acting as a systems expert/liaison for my group. This will be my first project management role in my career and I am very excited about it. One of my first on-boarding duties is to be the point person for capital purchases prioritization. This will be my first time dealing with prioritization of capital purchases. Given this fact, I decided that I needed and wanted to look more into selection of projects in general and specifically capital purchases to get up to speed on best practices within my industry.
In our first class, we went over project selection techniques from chapter two of our book. Some of the models that were discussed were:
- The Payback Model
- Net Present Value (NPV) Model
- Checklist Model
- Multi-Weighted Scoring Model
After learning more about these methods in class, I definitely believe that using just one of these methods to select a project would not be a good idea. However, a mixed approach would be the best course of action in making the best choice for all stakeholders involved. I believe it really comes down to aligning the criteria with the strategic plan of the organization. Some organization’s project selection criteria are going to vary a great deal from others. For example, a nonprofit hospital’s criteria may not value financial criteria as much as other nonfinancial criteria. Obviously, the institution still has to keep the lights on, but the organization may want to do that while providing the best care to all demographics in their community.
So at this point I wanted to take a look at what resources were available online regarding this topic in addition to the guidance our book gave. At first I found multiple presentations and articles regarding systems that could be purchased in order to make the whole capital purchasing selection process run smoother for organizations:
Then I found a link or two for consultants who could help in the planning or implementation phase of capital projects.
https://www.ecri.org/Forms/Documents/MS10047.pdf
Finally I came upon a link that gave me some great information regarding what some folks in my industry are currently doing versus what they should be doing regarding capital project selection.
http://www.hfma.org/Content.aspx?id=2691
After taking a look at the various resources available online, I have come to several conclusions regarding the best capital project selection process. First and most importantly, there must be an overall company strategy that Senior Management has set for the company to strive for. Secondly, there are no silver bullets or one process works for all in the capital project selection process. Third, this process should be a living thing that gets discussed throughout the fiscal year, not just when budget season rolls around.
First and foremost congratulations on your new position! Secondly, thanks for sharing this post. Your links were very helpful and help to fully analyze the problem from all aspects.
This is a definitely a difficult problem that hospitals and companies that make products/provide services that can affect the well-being of people must address. Ethically speaking, you always want to provide the best service possible. Financially speaking, that is not possible. As you have mentioned, there is no one-size-fits-all method of evaluating projects. However, I think if you can explain the financial ramifications of capital decisions (ex. buying the fully-loaded but costly mercedez vs fully-functional but budget-friendly toyota camry) and their impact on cash flow and future upgrades, the functional team may provide more accurate risk/opportunity estimates and assumptions.
Also, as we know many times these decisions are made on educated guess-timates of soft benefits. Having a knowledge of the equipment and how it is used in daily operations may give you provide you with that extra knowledge that could act as a tie-breaker when certain projects are too close to call based on your analysis of IRR, NPV, payback, etc.
Your final point is the most important. Technology, and especially medical technology, is evolving quickly. Defining periodic points throughout the year for self-reflection regarding the process and the actual results garnered from the process can provide valuable insights. From there, you can tweak your methodology and continuously improve on it.