ceesp project management. unit two

7/29/2019 CEESP Project Management. Unit Two

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Project Management

Previous Analysis

Lecturer: Javier Daz lvarez

Electrical EnergyConversion andPower Systems

Universidadde Oviedo


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Previous Analysis

What do I have to think before starting a project?

- Needs

- Targets

- Requirements

- Functional

- Technical


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Needs

Some considerations:

We have to take into account the needs of all the stakeholders. Frequently, they

are contradictory. The direction of the company (helped by the PM if thedesignation has been done) has to balance and prioritize conflictive needs.

It is very important to understand the differences between needs and wishes.

Sometimes, it is important to help the customer to understand its needs and it

could be an opportunity to increase the scope. But the target should be the

satisfaction of the client, the increment of the scope is only a possitve

collateral effect.

Needs: something needed; a requirement; sometimes

something vague


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Needs Project 1. Wind Farm

We need to make a 50 MW wind farm in the following 24 months tomeet the targets of the company.

Project 2. Substation in Oviedo

We need to improve the quality of the electricity distribution in Oviedo.

The key indicators of distribution quality are not as high as they should be.

Project 3. Bridge.

We need a bridge to increase the capacity of a road from 1.000 to

4.000 vehicles per hour.


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Targets Targets should be developed as an evolution of the needs.

They should comply with the five elements of the SMART

model: S: Specific

M: Measurable

A: Agreed upon R: Realistic

T: Time constrained


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Targets Project 1. Wind Farm

Achieve the final reception, the environmental reception and the finalinscription of the wind farm in 24 months.

Project 2. Substation in Oviedo

Construct the substation and sign the Take Over Certificate in twelve

months.

Project 3. Bridge.

Promote and construct the new bridge (4.000 vehicles per hour) in 36

months taking into account the environmental gaps (ciconia nigra).


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Requirements

Functional requirements are the needs of the customer. They

come from the targets. The better defined targets, the betterfunctional requirements well have.

Technical requirements are developed by the project team

to meet with functional requirements.


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Exercise 2.1 Project 1. Tansmission line from nuclear power

station 100 km from Madrid to Madrid.

Needs, targets and requirements

Project 2. Oil refinery in Guadalajara. Needs, targets and requirements


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Project selection

Each company has its own practices

Selection should be as much objective as possible

Most of the times, selection is not only aquantitative issue

Selection should be coordinated with strategictargets of the company


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Selection tools Profit cost ratio

Profit/Cost

Net Present Value

NPV = -I0+((Fi)/(1+r)i)


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Selection tools (II) IRR

Interest rate which makes NPV=0

Payback periode

Time to recover invested money


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Exercise 2.2- Calculate PCR, NPV, IRR and Payback Periode of these projects

Project A Project B Project C Project D Project D

Investment -6500 -6500 -6500 -10000 -10000

Incomes year 1 4000 2500 1000 6000 2000

Expenses year 1 -500 -500 -500 -1000 -1000

Incomes year 2 4000 2500 1000 5000 3000

Expenses year 2 -500 -500 -500 -1000 -1000

Incomes year 3 2000 2500 2000 4000 4000

Expenses year 3 -1000 -1000 -1000 -1000 -1000

Incomes year 4 1000 2500 4000 3000 5000

Expenses year 4 -1000 -1000 -1000 -1000 -1000

Incomes year 5 1000 2500 4000 2000 6000

Expenses year 5 -1000 -1000 -1000 -1000 -1000


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Exercise 2.2. Solution.

Project A Project B Project C Project D Project E

PCR 1,14 1,19 1,14 1,33 1,33

Payback periode 2 years 3,75 years 4,5 years 2,25 years 4 years

NPV 535,26 380,70 - 567,70 2.591,12 1.365,14

IRR 13,33% 10,35% 5,47% 20,27% 12,01%

ceesp project management. unit two

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