TECHNICAL

ANALYSIS
I. Nature and Scope
It involves the estimation of the following

a. Alternative ways of carrying out the project;

b. Engineering characteristics of each alternative;
c. Requirements of physical resources for each alternative;
d. Plan for construction and operational phases of alternative.
II. What are Technical Alternatives?
Technical alternatives refers to mutually exclusive schemes of meeting a project's
objectives, i.e., catering to the demand that the project is meant to fulfill.

● Technology or production process

● Location
● Size or scale
● Timing of implementation
II. What are Technical Alternatives?
Alternative solutions need not always be dramatically innovative, as in the following cases:

a. Reform in existing administrative system or existing regulations that would improve the
operational efficiency of the existing facility and thus effectively increase the capacity of the
supply system
b. Rationalization of the tariff system would make the utilization of facilities and services more
efficient.
c. Modification of physical layout and location of production/service facilities may reduce the
need for additional storage or transport facilities.
d. Capital investments to enhance the capacity of an existing facility.
III. Alternative Technology or Production Processes
a. Product type

Quality. Transportation between to places may be provided by building a railroad, or a

road. The quality of service will be different in the two cases. Similarly, two villages may
be connected either by a brick road, a concrete road or an asphalt road.
Product range (by-products and multiple line production). In addition to producing
sugar, a sugarcane factory may also produce alcohol from molasses and fuel for cooking
using the crushed cane.
Stages of processing. Wood products may be sold either as logs, lumber or furniture
III. Alternative Technology or Production Processes
b. Production Technique
Technical process. Power may be generated either through a hydroelectric plant, a
thermal plant or a solar unit.
Equipment. For the same technical process, different types of equipment may be adopted.
Raw materials. In thermal power plant, either coal or oil may be used as fuel.
Level of technology. A dam may be constructed either by using a large number of labor
and few machines or more machines and few labor.
IV. Alternative Location
a. Geographical distribution of demand is an important determinant in project location.
b. Transportation costs influence the choices of location.
c. Choice of location is sometimes determined by the availability of resources required by
alternative production processes.
d. Technical or engineering specifications are important determinant of location
e. Sometimes, the location of the project is determined by some priority objective.
f. Lastly, right-of-way and social acceptance considerations cannot be overemphasized in
the choice of project location.
V. Alternative Scales or Sizes
a. Volume and nature of demand are important determinants of the project scale.
b. Sometimes the production process requires a minimum scale of operations.
c. The availability and cost of raw materials may, sometimes, limit the size or scale of
operations.
d. Economies of scale may dictate that the size be pretty big to cover the largest market.
VI. Alternative Timing
a) The level of output or the production capacity to be installed by a certain date will
determine the appropriate time of starting a project.
b) If the magnitude of required funding is exceptionally large and can only come in
installments, the availability of funds would be a major consideration in phasing the project
implementation.
c) Sometimes technical factors would determine the timing of a project. If a labor intensive
technique is adopted for project construction rather than a capital intensive technique, it will
require a larger construction period and the project would have to be initiated accordingly.
d) If seasonal weather variations can affect the pace of work, the timing has to be suitably
adjusted for this factor.
VII. Technical Research, Survey and Tests
● Fields of research and investigation, e.g., topography, hydrology, and soil investigation.
● Geographical coverage. The territorial extent needs to be defined for each field of
investigation.
● Degree of detail. It refers to both the spatial unit of disaggregation (e.g. one soil boring
for every 10 kilometers or every hectare) and other technical details (e.g., boring up to
30 meters and more complex laboratory soil tests).
● Responsible agencies. Surveys may be undertaken either by the agency's internal forces,
other specialized entities, or private contractors.
● Schedule. A timetable showing the sequential interrelationships of the different research
operations needed to ensure prompt completion of the work.
● Budget. Estimates are made based on the resource requirements of the research program.
VIII. Description and Basis of Site Layout
Site and land use planning involves, firstly, a consideration of the physical characteristics
of the area to determine its capabilities for various developmental purposes. A "sieve
map," which grades the various sections of the area according to the degree of physical
difficulty in developing them, is helpful in allocating the land for different uses. From this
map can be noted the areas with steep slopes, low-lying sections liable to flooding, areas
with weak subsoil, etc., and other sections that restrict development except at high cost. At
the same time, areas easily suitable for various developmental uses (residential, industrial,
etc.) can be shown.
IX. Design of Basic Civil Works
Design standards:

● Performance standards, or those relating to the structural characteristics of the

facilities as well as the quality of the product
● Accommodation standards or those pertaining to the capacity of the facilities.
 IX. Design of Basic Civil Works
Design of the basic civil works;

● Design criteria and standards

● Results of topographic surveys, soils and minerals test, and related engineering
investigations:
● Architectural plans of buildings, transport network, storage system, water supply
facilities, drainage, and special structures (e.g., powerhouse or substations);
● Engineering plans of the above facilities;
● Quantity estimates; and
● Specification of materials and method of construction
X. Description of Auxiliary Engineering Projects
Apart from the basic facilities, projects usually include additional facilities to supply the
goods/ services needed by:
● the project's technical production/operation; and
● the persons who will work on the project.
X. Description of Auxiliary Engineering Projects
The main areas to be considered are the following:
● determination of size and location based on project requirements;
● layout of facilities in the site;
● establishment of design standards;
● preliminary surveys;
● architectural design;
● structural design;
● quantity estimates;
● specifications.
XI. Physical Resource Requirements
Five basic types:
● capital
● equipment;
● manpower;
● natural resources;
● materials; and
● utilities.
11.1 Pre-Operational vs. Operational Resource Requirements

A distinction ought to be made between the resources required for the project's pre-operational or investment
stage and those necessary during its operational phases.
The pre-operational phase is usually divided into: (1) final design or detailed engineering; and (2) actual
construction or installation.
Estimates of physical resource requirements and corresponding costs for the pre-operational stage should be
specified according to the above activities.
In the case of the operational phase, resources must be estimated for both: (1) actual production; and (2)
operation and maintenance works.
Maintenance is necessary to keep the facilities in proper operating condition. While it varies from project to
project, two major components of maintenance may be identified: (1) routine maintenance; and (2) periodic
maintenance.
11.2 Local vs. Foreign Sources
Whether resources are to be obtained locally or from foreign sources must be specified.
This is relevant in the financial and economic evaluation where price adjustments are
made differently for domestic and foreign resources. Such delineation will also serve as
basis for financing arrangements to be subsequently made.
11.3 Choice of Machinery and Equipment
The choice of equipment to be used is influenced by the following factors:
1. production process;
2. scale of output;
3. anticipated company operations;
4. costs and availability of spare parts; and
5. performance reliability.
11.4 Labor Requirements
A detailed breakdown of the specific types of manpower required for the construction and
operation of the project should be provided. Wages, fringe benefits and other forms of
compensation for both local and foreign personnel must be specified.
11.5 Materials
Resource analysis should include adequate descriptions and specifications of materials
needed in the pre-operational and operational phases together with the relevant factors for
selecting said materials. A material balance or material process chart should likewise be
presented.
11.6 Utilities
The significance of water and energy resources varies according to the nature of the
project. In any case, an analysis has to be conducted to determine whether it would be
cheaper for the project to generate its own power or to obtain it from an external source.
Requirements for electricity, fuel, water and steam should be specified according to use
and quantity. The analysis should also indicate alternative sources, costs and availability
of these resources.
11.7 Waste Disposal
Methods of disposing used water and waste materials must likewise be considered. The
study should include a description of the nature and quantity of waste to be disposed of,
and the waste disposal methods being considered as compared to methods used in other
plants. Estimates of corresponding costs should also be provided.
11.8 Schedule of Resource Requirements
From the results of the resource analysis and based on construction and operation
schedules discussed in the succeeding section, a schedule should be prepared indicating
the quantities and sources of the different types of resources over the investment period
and the project's operational lifetime. This will form the basis for the subsequent costing
and the economic/financial feasibility calculations.
XII. Construction Schedule
1. Division of construction into practical operational stages;
2. Breakdown of each construction stage into major construction operations;
3. General sequence of construction activities, identifying the main elements
controlling time and costs;
4. Description of construction methods to be used, specifying where manual labor vs.
automation will be used;
5. Phased engineering and construction schedule, preferably in the form of PERT/CPM
diagram; and
6. Program of utilization of physical resources indicating the types and quantities of
manpower, materials, equipment, etc., needed for given time periods.
XIII. Conclusions on Technical Feasibility
By integrating the results of the foregoing technical studies, an overall conclusion can be
drawn regarding the technical soundness of each alternative scheme. In summary, a
project is considered technically justified if:
1. Its size, location and production process is commensurate with the demand;
2. All its engineering features are reasonably defined and found to be architecturally
adequate;
3. Input resources are available in the required quantities and qualities; and
4. There is assurance that the facilities will produce the quantities and qualities of the
goods/ services required on a continuing and dependable basis.
XIV. Cost Analysis
Cost analysis is integral to the study of technical alternative schemes. Only by introducing
prices can the various technical solutions be rendered comparable. Such an analysis should
be jointly undertaken by the engineers and economists to ensure that both the project's
technical and economic merits and demerits are adequately assessed.
14.1 Major Cost Items
The major items covered in cost analysis are: (1) investment expenditures; and (2)
operational expenditures.
These estimates serve as basis for the subsequent evaluation of the project's financial and
economic profitability.
14.2 Methods of Estimating Costs
Sources of information include:
1. Cost structure of similar projects previously undertaken;
2. Price survey among possible suppliers;
3. Tariff publications; industry or sector surveys of salaries and wages, materials cost and
utility rates; official rules regulating industry pricing, etc.; and
4. Expertise of technical consultants.
14.3 Principal Sources of Errors
The principal sources of errors in cost estimation include:
1. Inadequate technical analysis;
2. Underestimation of investment expenditures;
3. Exclusion of working capital;
4. Over-optimistic estimates of costs and outputs in the early years of operation; and
5. Absence of explicit assumptions about the future trends of costs.
THANK YOU!!!