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 nenew 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, iti 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 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.

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 individuals-
regardless of whether or not such impacts are matched by monetary payments

3
 TM 321 Project Appraisal and Construction Planning Prof. NM Lema,