PPAE Discuss briefly the contents of DPR of a hydroelectric project Discuss regarding the various appraisals in the preparation

on of a project report giving reference to construction industry Opportunity study/opportunity report 3 sites cement plant/ crusher plant etc Short notes of DPR Short Notes onTEFR

Project entity or a set of task performed to accomplish some objective Project identification begins in response to the specific need or the objectives Project Selection: Project Identification Project Appraisal Project Selection Collection of all above 3 activites..that is..identification, appraisal and selection is known as a detailed project report

Def. of Project Project ID Project Planning TEFR and DPR Project Appraisal Project Execution Project Organization, Project Mgmr & Project Consultants

Project: Unique process consisting of a set of coordinated and controlled activites with start and finish dates, undertaken to achieve an objective conforming to specific requirements including constraints of time, cost, resources. In other words, project is a complex non-routine, one time effort to complete a particular task within requirements and constraints. Project is a scientifically evolved work plan devised to achieve a specific objectives within specified time limit consuming planned resources. Features of a project: Goal/Objective Uniqueness Beginning and End Complexity Specific time, cost, performance requirements

Project Life Cycle recognizes that project have limited life spans and that there are predictable changes in the level of effort and focus over the life of a project. Although every project is unique, most of them go through 4 phases: defining, planning, executing and delivering.

Life cycle of typical construction project : Each project has a predetermined duration with a definite beginning and an end. Although construction project differe in many way, the life span of the project follows a similar pattern. After conception there is gradual vuild up in the use of resources, and it is followed by a long duration plateau nad towards the end there is a rapid run down completion/ Formulation Mobilization Consturction

 The project life cycle phases can be broadly placed In the following categories: o Conception or Identification o Definition or Preparation o Prefeasibility o Feasibility and Financing o Detailed Design o Implementation and Monitoring o Ex post appraisal and impact evaluation

Formulation: Feasibility or inception stage/ Pre investment phase Project Idea Conception Feasibility Studies Investment Appraisal Project Definition ___________________________________

The pre investment phase would usually cover 4 stages: 1. Identification of relevant investment opportunities through appropriate type of opportunity studies 2. Preliminary filtration of the project through pre-feasibility studies 3. Project formulation resulting in Detailed Project Report 4. Techno-Economic Feasibility Report for each project idea conceived worthy for further examination in the previous stage. 5. Final Evaluation & Decision (Appraisal) which is based on technical viablilty, commercial viability, economic viability, environmental viability and managerial viability finally resulting in the evaluation report.

Feasibility Study evaluates project potential o Technical Feasibility o Economic Viability o Financial Implications Contents of Feasibility Report: o Proposed Product Features o Demand Survey Prospective customer; Consumption pattern; Existing market; Govt. Policy; Demand forecast and sale potential o Technical Studies

 Process Selection; Construction Methodology; Location Study; Power and local resources availability; Means of transportation; Scope of work; Wastage disposal arrangements; Construction cost estimates; Preliminary time plan o Financial Implications Sales forecast; Project budget; Capital costs; Profitability trend; Payback period; Net present worth; Cash flow forecast; Source of financing o Economic Viability Highlights social implications; Social cost benefit analysis o Summary of Recommendation ________________________________________ Project(investment) Appraisal o Enables client to Decide on the project concept, time and costs Outline the approach needed to taking the project Appoint key person construction project manager or project coordinator to act as his representative Nominate specialist associated agencies such as architect, designer and consultants as per his requirements. The process of formulation of needs, collection of information, critical examination of concepts and re-examination of needs, may have to be repeated several time over before a project inception finally takes shape. Feasibility studies and its appraisal leads to the definition of o Broad scope of work involved; Project objectives o Outline execution methodology o Preliminary time plan; Resource forecasts o Cash flow pattern and source of funding o Potential risk and problem areas

Feasibility of the Projects: 1. Management Appraisal: Management appraisal is related to the technical and managerial competence, integrity, knowledge of the project, managerial competence of promoters etc. The promoters should have the knowledge and ability to plan, implement and operate the entire project effectively. The past record of the promoters is to be appraised to clarify their ability in handling the projects. 2. Technical Feasibility: Technical feasibility analysis is the systematic gathering and analysis of the data pertaining to the technical inputs required and formation of conclusion there from The availability of raw materials. Power. Sanitary and sewerage services, transportation facility, skilled man power, engineering facilities, maintenance, local people etc are coming under technical analysis This feasibility analysis is very important since its significance lies in the planning the exercises, documentation process, risk minimization process and to get approval. 3. Financial Feasibility: One of the very important factors that a project team should meticulously prepare is the financial viability of the entire project. This involves preparation of cost estimates, means of financing, finanicial institutions, financial projection, BEP, ratio analysis etc. The cost of the project includes the land and site development, building, plant and machinery, technical know-how fees, pre-operative expenses, contingency expense etc. The means of finance includes the share capital, term loan, special capital assistance, investment subsidy, margin money loan etc. The financial projections include profitability estimates, cash flow and projected balance sheet

4. Commercial Appraisal: The scope of the project in the market or the beneficiaries, customer friendly process and preferences, future demand of the supply, effectiveness of the selling arrangement, latest information availability and all areas, government control measures etc. The appraisal involves the assessment of the current market scenario, which enables the project to get adequate demand. Estimation, distribution and advertisement scenario also to be here considered into. 5. Economic Appraisal: How far the project contributes to the development of the sector, industrial development, social development, maximizing the growth of employment, etc. are kept in view while evaluating the economic feasibility of the project. 6. Environmental Analysis: Environmental appraisal concerns with the impact of the environment of the project. The factors include the water, air, land sound, geographical locations etc

Feasibility Studies: A project has to pass through three stages of scrutiny and clearance: 1. Pre-feasibility(PF) (PFR) 2. Techno-economic feasibility(TEF) (TEFR) 3. Detailed Project Report(DPR)

Prefeasibility:

2 components of appraisal: Prefeasibility Study and Feasibility Study PF stage is the stage for completing all the preliminary steps for going into detailed feasibility exercise. This PF is the first attempt in identifying the overall potential and viability of the project. The data and information gathered in the preparation stages earlier are utilized here. PF is the first part of conduction project appraisal. Project formulation report or project opportunity study report or Pre-feasibility report(PFR) are the documents which elicits the preliminary sanction or the first stage clearance by the government and/or the board of directors of any enterprise, for further study of a project. The PFR permits determination of whether or not a complete, detailed feasibility study should be made. PFR utilizes the best available information, but cannot contain precise details and accurate figures. Hence, the accuracy of cost estimates is low. Order of magnitude estimate : +/- 25 to 40 percent Preliminary analysis of alternatives: All the available alternatives are compared to ensure: Best financial and economical output Maximum social benefit for the investment Minimum ecological impact PF compromises of following modules: 1. 2. 3. 4. 5. Marketing/Demand Module Technical/Engineering Module Environmental Module Manpower & Administrative support module Institutional Module

6. 7. 8. 9.

Financial Module Economic Module Social Appraisal/Distributive and Basic needs analysis Use of Secondary data for Pre-feasibility

PFR Contents: Objective of appraisal in all stage to check if the project is viable from the following angles: Project background & description o Project enterprises name and profile, detailing its experience and performance in project implementation o Project description cost of study/investigations already carried out Market demand and plant capacity o Demand pattern, size of market existing size and capacities in the industry, the project size of future growth, Govt and Private sector dev. Programmes. o Approx. present size of demand, past growth graphs, major determinants and indicators o Sales forecast and market plan anticipated competition for the project from existing and potential local and foreign producers and contractors o Estimated annual cost on marketing and sales promotion Materials and inputs o Details of input requirements, their sources, present and potential supply positions and estimate of annual cost of utilities: Raw materials Processed industrial material; bought out components Power, water and other utilities including transportation services Location and site o Alternative locations, descriptions and area of land selected o Estimated cost of land including its development, for each of the proposed locations alteratives, schedule and cost of soil investigation

o Factors influencing the selection of each of the alternatives Project engineering and investment costs o Preliminary determination of scope of project o Process/technology and equipment cost o Civil engineering works- layout of civil works, arrangement of buildings, description of construction materials to be used Site preparation and development Building & special civil works Outdoor works o Estimate of investment cost of civil engineering work Plant organization and overheads o Organization layout for production, sales, administration and mgmt. o Name, profile and experience of the consultant appointed or proposed to be appointed o Estimated overhead cost on site/factory, administration and financial items cost Manpower o Estimated manpower requirements o Estimated annual salaries and wages including allowances, fringe benefits, and long term social and statutory provisions. o Labour housing plan and estimates Implementation schedule o Proposed time schedule o Estimated implementation cost matching the implementation programme. Financial and economic evaluation o Total investment costs which includes estimated fixed assets o Estimated working capital requirements o Total operation cost classified as fixed costs and variable costs o Project financing arrangement proposed which includes proposed capital structure and finance plan, loan/borrowing planned and interest rates and estimate of interest amounts during construction

o Financial evaluation based on estimates Status of clearance and approvals from various central and state governments and departments

Techno-Economic Feasibility Report:

Techno-economic feasibility refers to the estimation of project demand potential and choice of optimal technology. A project may produce goods/services, it is imperative to know the market for such goods/service produced. TEF makes an analysis of the market and technology TEFR is the second stage of evaluation phases where the project scope is defined, its size and methods determined, suitability of site, the required natural resources and raw materials investigated, and more accurate estimates are made, building, offsite facilities and other assets and their costs; And the total feasibility of the proposal is studied in depth and cleared. After TEFR is cleared, the project proposer can spend money on the preparation of the DPR

Mobilization Stage or Preparation Stage/Investment Phase: 1. 2. 3. 4. Project Preliminary Plan Designs and Drawings Specs and Contract Finalization Resource Mobilization and Earmarking Funds

1. Negotiation and Contracting- in this stage basic specs for a project, plant, equipment are drawn up(help of technical consultants)/ Later on bids/tenders are invited and evaluated and legally enforceable duties and responsibilities of different parties and the one incorporate in the contracts are chalked up. Legal assistance may be taken as well. 2. Detailed Project Design and Engineering this covers detailed site investigations and test, design and approval of plant layout, preparation and approval of engineering drawings and blue prints, time schedules, CPM/PERT charts , final selection of technology and equipment and detailed estimating of costs. Processing the project preliminaries so as to enable the commencement of construction stage Involves: o Compiling detailed design and drawings, specs, BOQ so as the complete all the document necessary for contracting works o Planning project execution resources and mobilization plan o Tendering and appointing contracts Project Team (led by project manager and coordinated by project chief planner) includes o Architects and design engineers o Construction engineers from civil, mechanical, electrical and HVAC disciplines o Tendering Stagg, like contract managers and quantity surveyors o Specialist consultants. o Selection manger, supervisor and connected officials

Construction Stage or Execution Stage: Planning and Controlling execution Inducting Resources Construction and Commissioning Final handing over to the client

Mainly two phases: Construction and Erection this phase involves actual construction, erection, installation , interpretation and follow up of the contracts, project management and making of suitable changes in the design and engineering on account of unforeseen factors and changes in the scope Trial runs, commissioning and optimization this phase entails handing over of the project by the contractors to the management/owners

Project execution through contract system Disputes which may arise during course of the project is addressed by the mechanism detailed out in contract Construction at site is supervised and carried out by two teams: o Client team led by project manager o Contractors workforce managed by his construction manager o Diff. between construction manager and project manager Proper record of operating instructions and as-built drawings is maintained The staff and workers necessary for operating and maintaining the facility are trained prior to its taking over The site is cleared of the left out of the construction Client fully safeguards his interest prior to rendering the completion certificate and making final bill payments\ After handing over the site, team prepares a project completion report which includes

o Scope and schedule of work; Important events; contract executed; contact info about suppliers; equipment maintenance manual; asbuilt drawings; cost involved; problems encountered during execution; lesson learned.

Reasons for Project Time overruns across project lifecycle:

Stages Pre planning

External Issues
# Delay in regulatory approvals # Unavailability/delayed availability of funds # Land/site handover

Internal Issues
# Lack of project managers/commercial managers with adequate planning skills # Lack of liasioning officer/planning engineer # Lack of cost managers # Lack of safety officers/environmental practitioners # Lack of planning engineer/commercial managers #Lack of liaison officer #Lack of MEP engineers

Planning and Design

Execution and Monitoring

Closure and Handover

# Lack of strong R&R policies #Ineffective procurement planning # Design/scope change # Delay in regulatory approvals # Delay in decision making # Weak/ineffective procurement planning # Contractual disputes # Unavailability/delayed availability of funds # Lack of strong R&R policies # Delay Land/site handover # Pre-commissioning teething troubles # Contractual disputes

# Lack of project managers/site managers/planning engineers/quantity supervisors # Lack of awareness of modern equipment and technology #Lack of liaison officer and commercial officers # Lack of commissioning, project and site managers, audit and total quality management professionals

Projects are affected by time overruns. These bottleneck below are divided into two phases: 1) Pre execution phase 2) Execution and Closing Phase Reasons for time overruns in the pre execution phase: 1. Delay in land acquisition and site handover is the primary reason for time overruns in the pre execution phases 2. Manifold regulatory approvals from several agencies leading to delay in construction 3. Poor program management resulting in ineffective coordination with other projects and time delay

4. Other reasons include: a. Lack of strong R&R policies b. Delay in decision making c. Ineffective procurement planning Reasons for time overruns in the Execution and Closing Phase: 1. Change in Project scope/design leads to schedule overruns in the execution stage. 2. Insufficient availability of resources a. Project managers, environmental practitioners and safety officers are top three resources the infrastructure industry faces a shortage of and thereby has considerable effect on time overruns. b. Limited availability of skilled labour c. Shortage of good equipment suppliers/contractors 3. Other reasons for time overruns include: a. Contractual disputes b. Industrial relations and law problems c. Geological surprises d. Pre-commissioning teething troubles e. Coordination issues with Project team/vendors f. Geographical challenges and cultural differences g. Delay in regulatory approvals for commissioning h. Ineffective programme managements i. Ineffective project monitoring j. Lack of awareness of modern technology k. Unavailability of funds

Reasons for Cost overruns across the Project Life Cycle Reasons for cost overruns in the pre execution phase: 1. 2. 3. 4. 5. 6. Scope Creep Inadequate DPR, original estimate and budgeting of the project Acquisition of land at Market price High cost of environmental safeguards Poor selection of consultant Lack of strong R&R policies

Reasons for cost overruns in Execution phase: It is to be noted that any delay in project completion makes the initial cost estimates obsolete leading to cost overruns. 1. Material price escalations beyond projections 2. Escalation in labour costs/ineffective utilization of labour 3. Design changes/iterations 4. Incremental financial costs(foreign exchange, borrowing cost etc.) 5. Location and connectivity of project site 6. Inadequate availability of skilled resources 7. Weak contract administration and claim management 8. Weak procurement planning 9. Contractual disputes due to poor framing of contract document 10.Wrong/poor selection of technology/equipment.