TECHNOLOGICAL ANALYSIS OF A PROJECT

BY:PALKESH MANGAL

DEFINITION
The analysis for determining the technical viability of the development project is based on the technical data and information given in the PC-I form as well as the earlier experience of carrying out similar projects.

OVERVIEW
Technical analyses of a project is aimed at ensuring the following: To confirm the source of the project proposal, nature of the studies including feasibility studies undertaken before the proposal, and the nature of decisions taken by all relevant authorities involved That the problem or the need to be resolved by the project has been clearly stated That the project has been clearly spelled out with the correct technical design details (such as size, location, timing, and technology) That the required materials have been correctly determined and their source identified That the costs of the project have been clearly established, expected product prices projected, and payment modalities and schedules agreed to

Objective of Technical Analysis

Primary Objective
First and foremost important objective of technical analysis is
to see whether the project idea is feasible or not from technical point of view or not

Secondary Objective
To find out the most optimal formulation of the project
technology, size, location etc.

To find out the cost of project, so that profitability can be

calculated.

Activities in Technical Analysis

Technology selection Material and utilities input requirements Flexibility in product-mix Plant capacity Location and size of the project Machinery and equipment

Technology Selection

The same product or service can generally be obtained using quite different technologies. Electricity, for example, can be generated using solar panels, coal (thermal plants), hydraulic power plants, nuclear power plants and so on. What is important for formulating a successful project is to weigh available alternative technologies and select the one that is most appropriate in the prevailing situation, rather than blindly adopt the latest, state-of-the-art technology assuming that it will work since it works elsewhere.

Technology Selection
Plant Capacity Material and utilities input requirements Investment Outlay and production costs Use by other units Flexibility in Product mix Latest Developments Appropriateness of technology.

Materials and Utilities Input Requirements

These relate to the operation phase of the project, but need to be identified at this stage of the feasibility study to examine the technical feasibility of the proposed system(s). For this, classification of the inputs into following categories will be found useful. - raw materials, - processed materials, - components & sub-assemblies, - spares and wear & tear parts, - water & steam, - gas, fuels and electricity. Next, their qualitative and quantitative requirements (including buffer stocks, where applicable), availability, feasibility alternatives and reliable sources of supply should be carefully ascertained and record. The problems involved in their storage and handling should be also assessed.

Materials and Utilities Input Requirements

Raw-materials Processed Industrial materials and components Auxiliary materials and factory supplies Utilities

Product Mix Flexibility

Another area to be analysed under the technical analysis is flexibility of technology and plan regarding product mix.

Plant Capacity

Determination of an optimum plant size is critical to the success of a project. A plant represents sunk costs and any under utilisation of its capacity means either reduced profits or, for levels below the Break-Even Point, losses. The best possible size of plant & equipment is then recommended after analysing the availability, economics, and practicability of different size options.

Plant Capacity
Technological requirements Input constraints Market conditions Investment cost & resources of firms

Location and Site selection

Initially, as many locations as possible should be identified which meet the most fundamental operational requirements of the proposed project. Availability and characteristics of roads, bridges, railway facilities (like station, yards), air transportation, waterways, ports, etc. depending upon their relevance to the assessed requirements of the project at both implementation and operation stages need to be studied.

These should then be evaluated and an optimum location selected using the criteria of material versus market orientation.

Location and Site selection

Nearness to raw-materials and market Availability of infrastructure Labour situations Government policies Other factors

Machinery and Equipments

Technical analysis of a project idea should include the study of required machinery and equipment to run the project. The machinery and technology required depends on the plant capacity and type of technology selected.

Charts and Layouts

Material Flow Diagram Production Line Diagram Transport Layout Utility Consumption Layout Communication Layout Organisation Layout Plant Layout

Work Schedule
To anticipate problems like to arise during the installation phase and suggest possible means for coping with them To establish the phasing of investments taking into account the availability of finances To develop a plan operations covering the initial period (the running - in period).

Cost of Project

Land and site development Building and civil works Plant and machinery Technical Know-how and Engineering fees Expenses on foreign technicians and training of Indian technicians abroad Preliminary and capital issue expenses. Pre-operative expenses Margin money for working capital Initial cash losses

Means of Financing
Share Capital Term Loan Debenture Capital Deferred Credit Incentive Sources Miscellaneous Sources