Microsoft recently released the ability to switch the security mode for your Project Online instance directly in Project Online itself. Previously, this switch could only be made in the SharePoint Admin center by a SharePoint Admin making it a bit more challenging for users who are Project Online Admins to make this change.
By default, SharePoint Permission mode is used when a Project Online instance is created. SharePoint Permission mode means the security will be managed in SharePoint groups. We recommend switching to Project Permission Mode as it allows for a lot more granularity when it comes to setting permissions.
The Project Online Administrator will have permissions to make this change.
First, from in Project Online, navigate to Server (PWA) Settings
Then, click on Additional Server Settings under Operational Policies
Finally, switch to Project Permission Mode
Warning: Switching the permissions mode will wipe out any custom security groups without warning if you have them configured!