What is Project Evaluation?

Project evaluation is the systematic assessment of a project’s worth or merit, usually

intending to determine whether it was successful. This can be done during or after the project
is completed, and it involves looking at different factors such as time, cost, and resources
used.

Reviewing techniques are important for three main reasons:

1. It can help in tracking the progress and make sure that project is on track to achieve
the goals.
2. It can help to identify areas where problems can occur and stay agile enough to
improve future projects.
3. It will allow to easily communicate plans to streamline the process and move forward.

There are other benefits as well but by proactively keeping those key directives in mind,
project evaluation can become a useful tool in any project management process.

Factors on the basis of which Project Performance will be evaluated

As referenced above, several key factors should be reviewed. Let’s take a look at some of the
most important, and examine some ways in which they can be evaluated.

Time

Not every project has a clear timeline before it begins but also without proper time
management, it can quickly get out of hand thus it’s important to have some way of
determining whether or not the project is on track.
You can use a variety of tools for this, such as Gantt charts or the Critical Path Method
(CPM).

Once a project is started, evaluating the time that each process is taking is important. This
will help to identify any bottlenecks and see if the team is on track to meet the deadline. As
the project gets closer to completion, final review should be done to make sure that
everything is on track.

At the end of a project, once all of the deliverables have been produced, it’s important to
compare the actual time it took to complete the project with the original estimate. This will
help to determine if there were any delays or unexpected problems that arose.

For example, if the project was estimated to take two months but ended up taking four, you
would want to investigate what caused the delay and put in place measures to prevent it from
falling behind schedule again.

Cost
One of the most important factors in any business is profit, and that’s no different when it
comes to projects. It is important to to measure how much money was spent on the project
and compare it to how much money was made. This will help to determine whether or not the
project was successful and, if not, where the money was lost during the project.
There are a few ways to track cost:

 Actual cost: This is the amount of money that was spent on the project. It includes
material costs, labor costs, and any other associated expenses.
 Budgeted cost: This is the amount of money that was planned to be spent on the
project. It may not reflect the actual cost, especially if the project went over budget.
 Actual vs. budgeted cost: This compares the actual cost to the budgeted cost and
shows how much (if any) money was overspent or underspent.

Sometimes, it’s not as simple as comparing against a direct revenue source. For example, a
project may be targeted to increase brand awareness or company culture instead of direct
sales, which may not be easily reflected in the immediate financial reports.
In these cases, it is needed to use a metric that can reflect the long-term value of the project.
Either way, evaluating the cost of a project and comparing it to those predetermined value
metrics is crucial to understanding whether or not it was a success, failure, or if it is even
worth repeating.

Resources Used

When someone mentions resources, the focus often goes to physical materials that may be
consumed in the process of creating something new. In business, resources don’t just
mean physical inventory though, and can instead refer to things like time, energy, and
workforce.

Evaluating how resources are used can helps to answer important questions such as:

 Did we use more or fewer resources than we estimated?

 What were the most and least resource-heavy aspects of the project?
 Which tasks took the longest to complete?
 Did we use the optimal resources for the job?

All of this information can help to make better decisions for future projects.
For example, if burnout employee slowed down a project because there weren’t enough
workers, and may want to consider making new hires or expanding the budget of a certain
department to avoid any future disruptions.

The Best Project Evaluation Methods

You may still feel like you’re in the dark on how to best start evaluating your projects.
Luckily, we have a handy guide for some of the most common techniques and methods used
today.
1. Return on Investment (ROI)

The most popular and common way to evaluate a project is through its return on investment
(ROI). This approach calculates the amount of money gained or lost as a result of the project.
The calculation compares the initial investment with the final revenue generated by the
project. A positive ROI means that the benefits are greater than the costs, while a negative
ROI indicates that the costs outweighed any benefits.

2. Cost-Benefit Analysis (CBA)

A cost-benefit analysis is another one of the most popular and successful techniques for
evaluating projects. It takes into account the costs associated with a project and compares
them to the benefits that are expected to be gained.

Importantly, this does not necessarily need to be measured in revenue, and can instead take
into account other things such as environmental or social benefits.
3. Net Present Value (NPV)

The NPV measures the present value of all cash flows associated with a project — both
benefits and costs. This approach is often used for long-term projects where some cash flows
are received in the future.

NPV takes into account both the time value of money (the fact that money today is worth
more than money tomorrow) and the risks associated with future cash flows. A positive NPV
means that the present value of all benefits exceeds the present value of all costs, while a
negative NPV means the opposite.

4. Internal Rate of Return (IRR)

An IRR is used to determine how profitable a project is. It calculates the rate of return that
would make the net present value of all cash flows from the project equal to zero. This can
help you decide if a project is worth doing, and whether or not it’s worth borrowing money to
finance it. Generally, the higher the IRR, the better the investment.

5. The Payback Period

The payback period method measures how long it will take for a project to generate enough
cash flow to cover its initial costs. It ignores cash flows after the payback period has been
reached. This method is often used when there is uncertainty about future cash flows.

6. Benefit-Cost Ratio (BCR)

Related but slightly different than a CBA, the benefit-cost ratio is an individual number that
can be an easy way to tell if a project is going to provide positive value. A ratio greater than
1.0 would mean that it is expected to provide value, and could then be applied to several
other analysis techniques to determine if the project is worthwhile.

Again, this can include benefits that are not directly tied to revenue, though a value will need
to be assigned. In today’s market, for instance, corporate social responsibility and
sustainability can be just as important as anything else.
7. Risk-Adjusted Discount Rate (RADR)

Instead of just looking at straight costs and benefits, a RADR takes into account the risk
associated with a project and adjusts the discount rate accordingly. This can help you make
better decisions about whether or not to undertake a risky project, giving you a more accurate
estimate of future returns.
Each of these methods has its strengths and weaknesses, and you may find that one works
better for your particular project than another. It’s important to tailor the evaluation method
to the project at hand so that you can get the most accurate results.