Draft Notes Notes: TM 321 Project Appraisal and Project Planning

2.0 INTRODUCTION TO PROJECT APPRAISAL 2.1 Construction Project Management – Definition and Process Definition - Project Project is any undertaking with a defined starting point and defined objectives by which completion is defined. In practice most projects depend on finite or limited resources by which the objectives are to be accomplished. Definition – Project management The art of directing and coordinating human and material resources throughout the life of a project by using management techniques to achieve predetermined objectives of scope, cost, time, quality and participants satisfaction. Emphasis is given to the word satisfaction This is the key ingredient of a successful project. A successful project is one in which all the stakeholders feel equally good about the end result. Civil Engineering Projects Civil engineering projects today are far more complicated than they have ever been, embracing several disciplines and including increasingly larger sums of money, larger number of parties and therefore continually requiring new techniques of project management. 2.2 Stages of a Construction Project When viewing a project as a system, it is dynamic and of and ever-changing status starting from idea or concept through to operation and maintenance. These may be grouped into several main project stages as shown in Table 2.1 and Fig. 2.1

Definition or Design [Appraisal, Preliminary Design & Detailed design]

Tendering [selecting a contractor / award contract]

Construction

Fig. 2.1 Typical Stages of a Construction Project

Commissioning

Briefing [Idea & Preliminary Appraisal]

TM 321 Project Appraisal and Construction Planning Prof. NM Lema,

1

Draft Notes Table 2.1 Main conventional stages of a Construction Project

APPRAISAL: Asses alternative strategies of meeting needs.

Establish technical and economic feasibility Derive master plan. DEFINITION: Conceptual design Design review Sanction DESIGN: Detailed design Design review

TENDERING: Contract packages Procurement/ tendering Contract award CONSTRUCTION: Site Construction Manufacture Installation Quality control Expediting COMMISSIONING: Engineering and performance tests Acceptance

OPERATION Organization for operation and maintenance AND Project review MAINTENANCE

2.3 Rationale for project Appraisal Project management has to consider the effect of early decisions and actions on total project cost.

Decisions taken in the appraisal, definition and detailed design stage have the most significant impact on the final cost of the project.

Decisions taken during design and construction have limited influence on the final cost of the project.

Consequently, •Engineering input to appraisal is vital on matters of scope, design, quality

duration and cost. •Management of decisions relevant to design, construction and

procurement has a significant impact on final cost. Engineering decision making has to consider a number of other social-economic factors in order to fit within the total development process. Project appraisal is one of such methods that ensure this.

TM 321 Project Appraisal and Construction Planning Prof. NM Lema,

2

Draft Notes

TM 321 Project Appraisal and Construction Planning Prof. NM Lema,

3

Definition Project Appraisal can be further divided into Financial Appraisal and Economic Appraisal. What is Financial Appraisal? Financial Appraisal is a method used to evaluate the viability of a proposed project by assessing the value of net cash flows that result from its implementation. Projects may involve asset constrain purchase, lease or sale and may be financed in a wide variety of ways:- grants, borrowings, revenues, supplier finance or a combination of these. How does Financial Appraisal differ from Economic Appraisal? Financial appraisals differ from economic appraisals in the scope of their investigation, the range of impacts analysed and the methodology used A financial appraisal essentially views investment decisions from the perspective of the organization undertaking the investment. It therefore measures only the direct effects on the cash flow of the organization of an investment decision. By contrast, an economic appraisal considers not only the impact of a project on the organization sponsoring the project, but also considers the external benefits and costs of the project for other government agencies, private sector enterprises and individuals-regardless of whether or not such impacts are matched by monetary payments