Managing

Engineering
Projects
(Money and Suppliers)
by: Alvin M. Lipata

Money

Money or Funds - are

any item or verifiable
record that is generally
accepted as payment for
goods and services and
repayment of debts in a
particular country and is
easily converted to such a
form.

Main functions of money:

Medium of exchange
Unit of account
Store of value
Standard of deferred
payment

Sources of Finance for

Engineering Projects:
Commercial banks
Pension funds
Insurance companies
Credit agencies
Development banks

Other Sources:
Institutional investors
Large corporations
Investment banks
Utility subsidiaries
Vendors and contractors

Project Finance - is the term

used to describe the financing
of a particular legal entity
whose cash flows and revenues
will be accepted by the lender
as a source of funds from
which the loan will be repaid.

Types of Loans:
Mortgage
Equal instalments of principal
Maturity loan
Debentures

Financial Risks:
Interest
Payback
Loan
Equity
Dividends
Currencies

Revenue Risks:
Demand
Toll
Developments

COST and PRICE

Cost refers to the cost
attributable to an element of work,
including direct overheads.
Price refers to the cost of an
element of work, plus an
allowance for general overheads,
insurances, taxes, finance and
profit.

Suppliers

Suppliers, whether major

subcontractors or providers
of components or simple
services, are important
contributors to the success or
failure of the project.

External Suppliers to projects,

whether they provide services,
must also be organized and
controlled.
A typical project might require
the use of external test services,
design and manufacture of
subsystems, both hardware and
software.

Good suppliers are eager

to support users of their
products and services, and
this support is often
without cost.

For example, most

suppliers of engineering
components and materials
provide free applications
advice, in addition to data
and handbooks.

Suppliers must not be

selected on the basis of
price alone. The practice
of selection based on
lowest cost tendering is
very poor engineering,
and not very good shortterm economics.

Therefore, suppliers
should not be selected by
the project leader, not by
separate tender boards or
purchasing departments.

Long-term partnerships
should be developed with
key suppliers particularly
when support is required
over long period for
projects.

These partnerships should

mirror the philosophy
applied to the selection of
key personnel within the
project organization:
TRUST and COMMITMENT.

This approach can result in

better communication and
much stronger
commitment to the project
by the chosen suppliers.

THANK YOU!!!