Introduction to Project Appraisal

Draft Notes

Notes: T M 321 Pr oj ect App A pprr aisal and Pro Pr oj ect Pl Planning 2.0 I NTRODUCTI NTRODUCTI ON T O PROJ ECT APPRAI APPRA I SAL 2.1

Constr onstructi uction on Proje oject M anag anagement – Def Definiti nition on and Proce ocess

Definition - Project Project is any undertaking with a defined starting point and defined objectives by which comple pletion tion is is defined. In In p practi ractice ce most proj projects ects depend on fini fi nite te or li limited ted resource resources s by which which the objecti objectives ves are to be be accompli plished. shed. Defi Defini niti tion on – Pr P r oje oject mana manage gement  The  The art of dir dire ecting ing and coordina inating ing human and material ial re resources throughout the life of  a project project by using using manage anagement ent technique techniques to achieve achieve prede predetermined objecti objectives ves of  scope, scope, cost, cost, time, quality and participants satisfaction. satisfaction. Emphasis is given to the word satisfaction  This  This is the key ing ingredien ient of a successful ful p prrojec ject. A su successful ful p prrojec ject is one in which ich all the stakehol stakeholde ders rs fee feel equa equallly good about about the end end result. result. Civil Engineering Projects Civil vi l engi engine neering ering projects roj ects today today are far far more compli plicated than they have have ever been been,, embracing bracing several veral disci discipl pliines and including ncluding increa increasingly singly large larger sums of money, large larger number of parties rti es and therefore refore continual continually re requiri quiring ne new techni technique ques of projec projectt management.

2.2

Stage Stages of a Constr onstructi uction on Proje oject

When hen viewi viewing ng a project proj ect as a system, it i t is is dynamic and and of and and ever-chan ver-changi ging ng status starting from idea or concept through to operation and maintenance. maintenance. These may be grouped into into several veral main proje proj ect stage stages as as shown in in Ta Table ble 2.1 2.1 and and Fi Fig. 2.1 Briefin [Ide [Idea & Pre Prelimin limina ar A

raisa isal]

Definition or Design [App [A ppraisal raisal,, Pre Preliminary Design & Detailed design sign]]

 Ten  Tendering [se [sellecti ecting a contractor contractor / award contract]

Construction

Commissioning F ig. 2.1 T ypical Stage Stages of of a Con Cons struction tr uction Proj Pr oje ect 1  TM 321 Proje Projec ct Apprais raisa al an and Con Construc ruction ion Plan Planning ing

Prof Prof. NM Lem Lema,

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 AND MAINTENANCE

2.3

Organization for operation and maintenance Project review

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. 

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2  TM 321 Project Appraisal and Construction Planning

Prof. NM Lema,

Draft Notes 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 befinanced 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 individualsregardless of whether or not such impacts are matched by monetary payments

3  TM 321 Project Appraisal and Construction Planning

Prof. NM Lema,