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5.1 Business Case & Strategic Selection
Before a project is authorized, it must be justified. The organization needs to know: Is this investment better than all the other options? In the 2026 era, this choice is driven by Value Realization.
📄 The Business Case
The Business Case is a pre-project document that provides the economic feasibility study. It answers the "Why?"
Economic Feasibility
Do the financial rewards outweigh the costs and risks? (NPV, IRR analysis).
Strategic Alignment
How does this project support the organization's 2026-2030 strategic roadmap?
Benefits Realization
What specific value (tangible or intangible) will be delivered to the customer?
📊 Project Selection Metrics
The PMP exam expects you to choose projects based on cold, hard data.
NPV
Net Present Value
Higher is Better
The total value in today's dollars. If NPV > 0, the project is profitable.
IRR
Internal Rate of Return
Higher is Better
The interest rate the project "earns." Compare this to the company's hurdle rate.
BCR
Benefit-Cost Ratio
> 1.0 is Better
For every $1 spent, how much do we get back? A BCR of 1.5 = $1.50 return per $1 spent.
Payback
Payback Period
Shorter is Better
The time it takes to recover the initial investment.
🚦 Exam Trap: NPV is King
If Project A has a 2-year payback and $10k NPV, but Project B has a 4-year payback and $80k NPV, pick Project B. NPV reflects the true scale of value delivery.
🛠️ The Benefits Management Plan
Pairing with the Business Case, this defines how and when value will be measured.
- Strategic KPIs: Contribution to ESG or market share goals.
- Benefit Owner: The person (usually a stakeholder) responsible for measuring value after the project closes.
- Realization Timeline: Short-term vs. Long-term value.
📝 Exam Insight: If a project no longer aligns with the strategy defined in the Business Case, the PM must escalate to the Sponsor. Projects that don't deliver value should not exist.