PROJECT DEVELOPMENT

PROCESS
LECTURE: 2
PROJECT DEVELOPMENT PROCESS
For an effective and efficient construction and project management it is
very important to know the project development process. The project
development of a project varies from Private to Public Sector. However,
the basic concept remains same which includes the following steps:
1. Project Concept / Project Charter
2. Project Studies, Investigations and Feasibilities
3. Project Proposal / PC-I
4. Project Approvals & Fund Releases
5. Design and Specifications
6. Tendering and Contracting
7. Construction & Installation
8. Testing and Commissioning
9. Operation & Maintenance
ii. Project Studies, Investigation and
Feasibilities
• The Final approval decision on the project is usually a mix of:
 preliminary design basis study- review the statutory requirements,
codes and standards.
 technical- geological, climatic, geographical aspects of a construction
project.
 financial/economic- cost estimation technique and provide first
preliminary cost estimates.
 socioeconomic- financial and social issues together.
 environmental- potential effects of the project on the environment
 political parameters

• It will considers various alternatives of projects and identify potential conflict

areas.
ii. Project Studies, Investigation and
Feasibilities
ii. Project Studies, Investigation and
Feasibilities
• Technical: • Social and Environmental:
 Multi-Weighted Scoring Models
 Environmental Impact
 Priority Analysis
 Project Definition Rating Index
Assessment
(PDRI)  Stakeholder Analysis &
 Preliminary Survey of Site Management Plan
 Geotechnical Investigation
 Topographical and water table
studies • Miscellaneous:
 Preliminary (Conceptual) design
 Organizational Capacity
 Developing Cost basis and
Estimation analysis
 Construction Method  Procedure for Tendering and
 Technical Feasibility (complete doc) Contracting
• Economical Financial:  SWOT Analysis
 Net present value (NPV)
 Internal Rate of Return IRR
 Return on Investment Method
 Payback Period Method
 Benefit Cost Ratio Method
TECHNICAL STUDIES AND INVESTIGATIONS
ii. Project Studies, Investigation and
Feasibilities
Multi Weighted Scoring Model
• A weighted scoring model is a tool that
provides a systematic process for
selecting projects based on many criteria.
• Steps in identifying a weighted scoring
model:
1. Identify criteria important to the project selection
process.
2. Assign weights (percentages) to each criterion so
they add up to 100 percent.
3. Assign scores to each criterion for each project.
4. Multiply the scores by the weights to get the total
weighted scores.
• The higher the weighted score, the better.
ii. Project Studies, Investigation and
Feasibilities
Technical: Weighted Scoring Model
ii. Project Studies, Investigation and
Feasibilities
Priority analysis
ii. Project Studies, Investigation and
Feasibilities
Technical: Project Definition Rating Index (PDRI)
PDRI Building Projects

Section I: Basis of Project Decision

–Three categories, 18 elements
–“Right project”
Section II: Basis of Design
–Four categories, 32 elements
–“Right product”
Section III: Execution Approach
–Four categories, 14 elements
–“Right way”
PDRI for Buildings
(Reference: PDRI Building Projects, Implementation Resource,
CII, University of Texas at Austin,TX )

A. Business Strategy
I. Basis of Project Decision B. Owner Philosophy
C. Project Requirements
D. Site Information
E. Building Programming
F. Building/Project Design Para
II. Basis of Design meters
G. Equipment
H. Procurement Strategy
J. Deliverables
III. Execution Approach
K. Project Control
L Project Execution Plan
Definition Levels
(Reference: PDRI Building Projects, Implementation Resource,
CII, University of Texas at Austin,TX )

Definition Level

0 Not Applicable

1 Complete Definition

2 Minor Deficiencies

3 Some Deficiencies

4 Major Deficiencies

5 Incomplete or Poor Definition

PDRI (Section, Categories and Elements)
PDRI (Section, Categories and Elements)
Comparison of Projects with PDRI Above and
Below 200 — Building Projects
(Reference: CII, University of Texas at Austin,TX )

PDRI Score

Performance < 200 > 200

Cost 1% over budget 10% over budget

Schedule on schedule 21% behind schedule

A PDRI score of 200 or less has been shown to greatly increase the
probability of a successful project.
ECONOMICAL AND FINANCIAL
 ii. Project Studies, Investigation and
Feasibilities
Economical Financial: Net Present Value analysis
• Net present value (NPV) analysis is a method of calculating
the expected net monetary gain or loss from a project by
discounting all expected future cash inflows and outflows to
the present point in time.

• Projects with a positive NPV should be considered if

financial value is a key criterion.

• The higher the NPV, the better.

• The Net Present Value (NPV) Model
• Positive NPV: the project meets the minimum desired rate of return
and is eligible for further consideration.
• Negative NPV: project is rejected.
• Project A has an initial investment of $700,000 and
projected cash inflows of $225,000 for 5 years.

• Project B has an initial investment of $400,000 and

projected cash inflows of $110,000 for 5 years.

Find
NPV = ?
Internal Rate of Return for the Projects = ?
Payback Period for Projects = ?
Net Present Value (NPV) and Internal Rate of Return (IRR):
Example Comparing Two Projects

EXHIBIT 2.3
 ii. Project Studies, Investigation and
Feasibilities
Economical & Financial: Return on Investment/Internal Rate
of Return
• Return on investment (ROI) is calculated by subtracting the project
costs from the benefits and then dividing by the costs.

• ROI = (Total discounted benefits - Total discounted costs)

Discounted costs
• The higher the ROI, the better.
• Many organizations have a required rate of return or minimum
acceptable rate of return on investment for projects.

Return on the investment

 ii. Project Studies, Investigation and
Feasibilities

Economical & Financial: Payback Period

• Another important financial consideration is payback analysis.

• The payback period is the amount of time it will take to recoup, in the
form of net cash inflows, the total dollars invested in a project.
• Payback occurs when the cumulative discounted benefits and costs are
greater than zero.
• Many organizations want projects to have a fairly short payback period.
ii. Project Studies, Investigation and
Feasibilities
Economical & Financial: Payback Period
Limitations of payback:

• Ignores the time value of money.

• Assumes cash inflows for the investment period (and not beyond).
• Does not consider profitability.
ii. Project Studies, Investigation and
Feasibilities

Economical & Financial: Benefit over Cost Ratio Method

The B/C ratio is defined as the ratio of the equivalent worth of benefits
to the equivalent worth of costs.

Conventional Benefit Cost Ratio

ii. Project Studies, Investigation and
Feasibilities
Social and Environmental: EA, EIA & SEA
• Environmental assessment (EA) is the assessment of
the environmental consequences (positive and negative) of a plan,
policy, program or projects prior to the decision for implementation of
proposed action or project.

The term "environmental impact assessment" (EIA) is usually used when

environmental studies applied to actual project by individuals or companies or
Govt. organizations.

The term "strategic environmental assessment" (SEA) applies to policies,

plans and programmes most often proposed by the Govt. Environmental
assessments may be governed by rules of administrative procedure regarding
public participation and documentation of decision making, and may be subject
to judicial review as per laws of the Country.
iii. Project Proposal / PC-I Document
Project proposal is a document that transforms an idea or policy into details of
an effective project. It includes in-depth information about concept, scope,
feasibility, the outputs, outcomes, costs, stakeholders, major risks and an
estimate of the time & resource required.

iv. Project Approval

• One the Technical, Economical, Financial, Environmental and / or
Social feasibility / viability of project is established then project is
discussed on competent forum for approval.
• Competent forum differ from organization to organization e.g. CEO,
Board of Director, Head of Organization, PDWP, CDWP etc.
• After approval by competent authority, funds are released for
implementation of project. Funds are released by Financed Department
/ Ministry in case of public sector projects.
v. Design and Specification
• Finalized Conceptual Design
• Preparation of specification
• Detailed Design
• Working Drawing
– Welding Design
• Misc. Items
– Earthwork (Excavation/Backfill)
Design
– Pipeline Design
– Insulation Design
– Cathodic Protection
• Detailed Design
– Foundation Design
– Super Structure Design
– Water Supply and
Sewerage
vi. Tendering and Contracting

The main purpose of a tender design or a bid design is to:

• describe the complexity of the structure and

• to determine the construction quantities

allowing the contractors to prepare a bid for the

construction work.
 vi. Tendering and Contracting
Request for
bids (RFB)

Public Bids
Preparation
Design Specification Advertisement Received
of Tender
Completion Preparation
Document

Expression
of Interest Openings of
Bids

Bids review and

Selection of
Bidder for Neg.

Notice to Pre- Verification Negotiation

Proceed Construction Contract
of Document On Terms &
(NTP) Conference Award
(Ins. Bonds) Conditions
vii. Construction and Installation
PROJECT ADMINISTRATION
• Comprehensive administration starting from initial project through daily
administration by proactively managing project quality, schedule, and budget.
SCHEDULE ANALYSIS
• Development of Schedules / CPM scheduling / baseline schedules, analyzing
and minimizing deviations, evaluating logic changes and contract compliance.
Measurement and minimizing deviations from baseline, critical path components
and monthly review of contractors’ updated schedules.
CONSTRUCTION MANAGEMENT & INSPECTION
• Claims and Change order management, Inspection for ensuring compliance of
construction activities and finished product with contract requirements, special
project provisions and project plans and specifications.
MATERIALS TESTING
• During Construction, materials testing are performed to assure that the materials
and workmanship conform to plans and specifications, Quality Assurance/Quality
Control programs and the accurate, timely documentation of all test results and
related activity.
viii. Testing and Commissioning
• Its important for the client to take over project from
contractor after proper validation/evaluated for quality of
work or specification presumed by client in tender
document.
• Destructive tests
• Non-Destructive test
• For Building
• U/S pulse velocity tester
• Core Cutting Method
• Rebound Hammer Test / Pandit / Schemid Hammer
• Bar Scanner / Detector
• Other scanning devices
ix. Operation & Maintenance
• Inhouse
• Outsources
Companies are available for facility management
Need proper Planning and Budgeting for O&M