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Project priorities

Better Practice results: The cumulative effect of projects given priority is steady progress toward entity goals; proposals are prepared in a cost effective manner due to widely understood guidance on the criteria for assessing projects.

The assessment and approval of project proposals will usually involve two types of decisions:

• screening decisions – relating to whether a proposal meets a preset standard required for consideration; and
• prioritising decisions – assigning priority to a proposal to help choose those proposals that make best use of limited resources, such as capital and skills.

For some project proposals, the main screening and prioritising process will include the Budget process. The Department of Finance and Deregulation advises entities of relevant criteria each year as part of the Budget process.

Nevertheless, many project proposals will be assessed primarily within an entity. It is better practice for an entity to define and document their approach to screening and prioritising of project proposals, and to publicise this approach to staff involved in preparing proposals. Having the approach widely understood will help staff prepare proposals that are well-targeted and do not need re-working to meet the screening criteria.

To be most effective, the approach to screening and prioritising should address both the feasibility of projects, and their contribution to achieving progress on entity goals and priorities. These goals and priorities often involve meeting a combination of immediate program delivery needs, internal efficiency improvements, and investments in future capability, with the proportions in each area varying according to circumstances.

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Screening

Typical criteria used for screening project proposals are listed in the table below. As noted in the following discussion, there may be exceptions to the screening process – this allows some practical flexibility while providing the efficiency and focus of screening for most proposals.

SCREENING CRITERIA	COMMENT
Alignment to broader goals	The project can demonstrate alignment with, and preferably a specific contribution to, corporate goals of the entity, and to relevant government goals, strategies and policy priorities.
Risk (including identifying all risks, mitigating as appropriate, and the resulting chance of project success).	Using the level of risk as a screening factor helps focus project proponents on developing proposals within the entity’s preferred risk profile, and simplifies the subsequent assessment of projects. Different entities will have different risk preferences, depending on their role and circumstances. One option is to set different risk thresholds for different categories of projects, for example by size, or by who will be affected by the project. Some entities may set a general requirement of low residual risk, with exceptions on a case by case basis.
Rate of return	For projects where the main objective is an internal cost reduction, a minimum rate of return on the investment can be set at the entity level. Entities may wish to consider a relatively high rate of return – for example 20% or more – to offset the risk of not achieving targeted savings.
Duration	An entity may wish to specify a maximum duration – for example 18 months – for a project to deliver a useful product. Larger initiatives would be required to be packaged as a program of smaller, individually approved projects.
Legislative and policy compliance	New systems and business processes should meet relevant legislative requirements, such as the Privacy Act, and security policies. Any associated effort should be identified and included in the project budget.
ICT standards compliance	ICT elements of projects should comply with the entity’s preferred ICT architecture. Any areas of non-compliance (for example, for reasons of urgency) should be identified and the cost of subsequent remediation included in the project lifecycle costing.
Endorsement	The proposal has been endorsed by nominated parties, for example the project sponsor and affected operational areas.
Completeness and presentation	The proposal provides the information needed for assessment and is presented in the entity’s standard format. This assists review and comparison.

The above list is intended as an indication of the range of issues which are commonly used as screening criteria. Each entity should consider which criteria are most appropriate to their circumstances.

In general, proposals which do not meet the screening criteria would not proceed to further consideration. Either the area preparing the proposal would ensure it met the criteria prior to submission, or a difficulty would be identified by a committee secretariat who would then assist the proponent to resolve the issue.

There may be occasions where proposals fail the screening criteria but are still worth further consideration. For example, a project might involve more risk than would normally be acceptable but no other alternatives to address the problem have been identified. In such cases it is better practice to document the reasons for proceeding and make the issue visible to decision-makers.

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Prioritising

In principle, project proposals can be prioritised by the extent to which they provide value for money. In practice, defining a common notion of ‘value’ across many different types of projects can be difficult. In addition, the likely uncertainty in cost and value estimates suggests caution in relying solely on numerical methods.

A practical approach to prioritising proposals, to assist decisions on funding, could involve the following elements:

Group projects by outcome focus, to allow like-with-like comparisons	Entities will typically have project proposals focusing on distinct areas, such as improved customer service, internal efficiency, program implementation, or maintenance of business-as-usual activities. Grouping similar projects will allow a specific measure of value to be used to compare projects within that group. For example: client service improvements could be measured by the number of clients affected and the degree of improvement; internal efficiency projects measured by the net present value of reductions agreed to future budgets; and program implementation options measured by the implementation cost needed to meet the requested timeframe at low risk. Focusing effort on improving the reliability of a common, well-chosen measure for a group of projects is often of more value to decision-makers than the same effort devoted to more complex comparisons of multiple measures.
Provide top-down guidance on overall funding preferred for different outcome areas	Top-down guidance – for example, from the entity executive as part of annual strategic planning – on the project funding preferred for each outcome area will allow approval decisions in each area to be made by comparing projects on a common basis. The available funds can be allocated to the highest prioritised projects in each area. It is also useful to have top-down guidance on the funding balance between current needs and longer term investments.
Using multiple criteria analysis	When there are many projects, it may be useful to score each project on a set of criteria, such as internal savings, savings to clients of time and money, improvements to flexibility, and utilisation of existing assets (such as software components, equipment or property). This type of analysis is often used in procurement evaluation. This scoring can be used to highlight aspects of projects which are of importance to the entity, and help inform judgements on the relative merits of proposals. For example, it may help identify that of three projects with a similar financial cost/benefit, one project has several desirable characteristics not present in the others. It is also possible to assign weightings to each of the criteria and then calculate a single composite score for each project. Such composite measures of project value are, necessarily, a simplification of the issues, and may be more useful in indicating projects of broadly lower value than in making distinctions between higher value projects.
Use resource availability – such as skills and capital – as a fine-tuning factor	In practice, approving proposals solely on the basis of their relative priority may not be feasible, due to various resource constraints. Accordingly it is good practice to fine-tune project approvals to take into account the availability of limited resources, such as capital and recurrent funding, and scarce skills, such as staff needed for ICT development and testing, and the development of legislation and regulations.

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