Project Classification, Payback Period Calculation, NPV, And Project Management Structure
Project Classification
The project classification and consideration for classification are shown in the following table.
|
Project |
Classification |
Consideration |
|
Project A |
Strategic |
The new service will significantly enhance the strategic direction of the polyclinic |
|
Project B |
Operational |
This project will enhance the operations of the polyclinic |
|
Project C |
Compliance |
This project ensures the compliance with Singapore Quality Class (SQC) certification |
|
Project D |
Operational |
This project adds a new dimension to the operational aspect of the polyclinic |
|
Project E |
Compliance |
This project ensures compliance with Personal Data Protection Act (PDPA) policies and processes |
|
Project F |
Strategic |
This project is completely strategic in nature |
The payback period calculation is shown in the following tables.
|
Project A |
|||
|
Year |
Cash Flow |
Cumulative Cash Flow |
Payback (Years) |
|
0 |
-250,000 |
-250000 |
|
|
1 |
55000 |
-195000 |
|
|
2 |
55000 |
-140000 |
|
|
3 |
55000 |
-85000 |
|
|
4 |
55000 |
-30000 |
|
|
5 |
55000 |
25000 |
4.545454545 |
|
6 |
55000 |
80000 |
4.545454545 |
Hence, the total payback period for this project is 4.55 years. In addition, from the calculation in the excel sheet, it has been found that the rate of return for this project is 9%.
|
Project B |
|||
|
Year |
Cash Flow |
Cumulative Cash Flow |
Payback (Years) |
|
0 |
-350000 |
-350000 |
|
|
1 |
90000 |
-260000 |
|
|
2 |
90000 |
-170000 |
|
|
3 |
90000 |
-80000 |
|
|
4 |
90000 |
10000 |
3.888888889 |
|
5 |
90000 |
100000 |
3.888888889 |
|
6 |
90000 |
190000 |
3.888888889 |
The total payback period for this project is 3.9 years. Moreover, the rate of return for this project is found to be 14%.
Between the choices of these two projects, the recommended project is Project B as it has less payback period and more rate of return than Project A.
The cash flow and NPV calculation for Projects C and D are shown as follows.
|
Project C |
||||
|
Year |
Inflow |
Outflow |
Net Flow |
Present Value |
|
0 |
0 |
75000 |
-75000 |
-75000 |
|
1 |
40000 |
3000 |
37000 |
35576.92 |
|
2 |
45000 |
3500 |
41500 |
38369.08 |
|
3 |
40000 |
4000 |
36000 |
32003.87 |
|
TOTAL |
125000 |
85500 |
39500 |
|
|
Net Present Value |
30949.87 |
|||
|
IRR |
24.632209% |
|
Project D |
||||
|
Year |
Inflow |
Outflow |
Net Flow |
Present Value |
|
0 |
0 |
90,000 |
-90,000 |
-90000 |
|
1 |
50,000 |
5,000 |
45,000 |
43269.23 |
|
2 |
60,000 |
7,000 |
53,000 |
49001.48 |
|
3 |
67,000 |
9,000 |
58,000 |
51561.79 |
|
TOTAL |
177000 |
111000 |
66000 |
|
|
Net Present Value |
53832.50 |
|||
|
IRR |
31.788880% |
Based on this analysis, TPC should proceed with Project D as it has higher values in both NPV and Internal Rate of Return.
The three criteria for going ahead with Project B are listed as follows.
Criterion 1 is Payback Period. It is the highest ranked because profitability is most essential in any business.
Criterion 2 is Technology. It is medium ranked because technological consideration is one of the major considerations for TPC.
Criterion 3 is Rate of Return. It is lowest ranked because although the rate of return is important, it has less priority than the previous two.
The TWT project is explained based on the seven factors influencing the choice of project management structure as follows.
Deadline – Deadline is a very important aspect of project management. It is important to management deadlines of the project in order to avoid unnecessary complications and cost. The deadline for this particular project is 10th June, 2019.
Budget – The decided budget for this project is $400,000 that must not be exceeded at any cost.
Stakeholders – There will be a number of stakeholders assigned in the project based on the role and function requirements. Some of the stakeholders required will be project manager, technical supervisor, finance manager and others.
Project Members – The project members will include system developers and system testers.
Demand – The project will be based on fulfilling the demands of the patients regarding an efficient system for monitoring their health without having to travel to hospitals and perform various costly tests.
Supply – The systems will be supplied to the patients at certain cost for health monitoring.
Price – The price of the product will be kept as reasonable as possible considering the development costs.
|
Stakeholder Group |
Role in TWT Project |
|
Management Board |
Supervision and change management in the project |
|
Development Team |
Development and testing of the system |
|
Finance Department |
Management and allocation of project funds |
|
Patients |
Provide user requirements for the system |
The revised work breakdown structure is shown as follows.
|
WBS |
Task Name |
Duration |
Start |
Finish |
Predecessors |
|
0 |
TPC Wearable Technology (TWT) Project |
86 days |
Fri 2/1/19 |
Mon 6/10/19 |
|
|
1 |
Project Coordination and Administration |
26 days |
Fri 2/1/19 |
Tue 3/12/19 |
|
|
1.1 |
Conduct Project Kick-Off Meeting |
1 day |
Fri 2/1/19 |
Fri 2/1/19 |
|
|
1.2 |
User Experience (UX) Study |
5 days |
Mon 2/4/19 |
Tue 2/12/19 |
2 |
|
1.3 |
Apply for HSA approval as medical device |
20 days |
Wed 2/13/19 |
Tue 3/12/19 |
3 |
|
1.4 |
Procure wearable devices and cloud computing resources |
20 days |
Wed 2/13/19 |
Tue 3/12/19 |
3 |
|
2 |
Application Development |
74 days |
Wed 2/13/19 |
Thu 5/30/19 |
|
|
2.1 |
Development |
45 days |
Wed 2/13/19 |
Tue 4/16/19 |
|
|
2.1.1 |
Develop mobile app (iOS) |
45 days |
Wed 2/13/19 |
Tue 4/16/19 |
3 |
|
2.1.2 |
Develop mobile app (Android) |
40 days |
Wed 2/13/19 |
Tue 4/9/19 |
3 |
|
2.2 |
Review and Testing |
29 days |
Wed 4/17/19 |
Thu 5/30/19 |
|
|
2.2.1 |
Architecture security review |
4 days |
Wed 4/17/19 |
Tue 4/23/19 |
8,9 |
|
2.2.2 |
Source code reviews |
5 days |
Wed 4/24/19 |
Tue 4/30/19 |
8,9,11 |
|
2.2.3 |
System Integration Testing (SIT) including payment gateway |
10 days |
Thu 5/2/19 |
Wed 5/15/19 |
12 |
|
2.2.4 |
User Acceptance Testing (UAT) |
10 days |
Thu 5/16/19 |
Thu 5/30/19 |
13 |
|
2.2.5 |
Conduct security penetration testing |
5 days |
Thu 5/16/19 |
Thu 5/23/19 |
13 |
|
2.2.6 |
Deployment to production system |
5 days |
Fri 5/24/19 |
Thu 5/30/19 |
15 |
|
3 |
Infrastructure and Security |
11 days |
Fri 5/24/19 |
Mon 6/10/19 |
|
|
3.1 |
Publicise service to pilot patients |
10 days |
Fri 5/24/19 |
Fri 6/7/19 |
15 |
|
3.2 |
Train operations support team |
5 days |
Fri 5/24/19 |
Thu 5/30/19 |
15 |
|
3.3 |
Pay all vendors and suppliers |
3 days |
Fri 5/31/19 |
Tue 6/4/19 |
16 |
|
3.4 |
Launch pilot TWT service |
1 day |
Mon 6/10/19 |
Mon 6/10/19 |
18,19,20 |
Answer to C
The total project duration is 86 days.
The completion date of the project is 10th June, 2019.
The project starts on 1st February and ends on 10th June, 2019. The entire schedule has been created keeping in mind the following.
The working days are Monday to Friday.
Some of the working days are marked as public holidays.
Some of the activities can be simultaneously performed such that the overall duration can be reduced.
|
Item |
Category |
Description of Risk |
Consequence |
|
Risk 1 |
Technical |
Various performance issues may arise due to insufficient testing |
The performance issues will lead to serious complications and reduce the usability of the system |
|
Risk 2 |
External |
The customers may not accept the system |
The entire project will be meaningless and failure |
|
Risk 3 |
Organisational |
The existing staffs may not be technically efficient to maintain the system |
Due to lack of maintenance, the system will fail after a short period of time |
|
Risk 4 |
Project Management |
Schedule may not be followed and the development may take a longer amount of time |
Budget overshoot will occur due to the schedule issue |
Answer to b
The risk response ways and the risk response plan will be selected and performed as shown as follows.
|
Item |
Category |
Risk Response Way |
Risk Response |
|
Risk 1 |
Technical |
Mitigate |
Ensure all tests are done accurately and all the issues are solved before system launch |
|
Risk 2 |
External |
Monitor and Prepare |
Monitor customer response towards new system and receive feedbacks from the customers before launching the system |
|
Risk 3 |
Organisational |
Accept |
Provide technical training to the staffs |
|
Risk 4 |
Project Management |
Transfer |
Instruct project management team to follow schedule and deliver the project within time |
Fleming, Q. W., & Koppelman, J. M. (2016, December). Earned value project management. Project Management Institute.
Harrison, F., & Lock, D. (2017). Advanced project management: a structured approach. Routledge.
Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Leach, L. P. (2014). Critical chain project management. Artech House.