Project and Construction Management

Lecture #2

Construction Project Initiation and Feasibility Study

Part 2: Technical Assessment

Department of Civil Engineering, Sharif University of Technology

By: Dr. Amin Alvanchi and Dr. Hamed Kashani

Construction Engineering and Management

Outline

Introduction

a. Methods of producing service/ product

b. Capacity analysis

c. Equipment & material to be constructed

d. Material & supplies required for operation

e. Organization required for operation

f. Utility and auxiliary equipment to be constructed

g. Buildings & facilities required to be constructed

h. Location analysis

i. High level schedule

2

3

Introduction

Why this project?

Project Feasibility

Studies

Project Charter

1. Market assessment

2.Technical Assessment

3. Financial Assessment

4. Conclusion

4

Introduction

1. Market assessment

2.Technical Assessment

3. Financial Assessment

4. Conclusion

a. Methods of producing service/ product

b. Capacity analysis

c. Equipment & material to be constructed

d. Material & supplies required for operation

e. Organization required for operation

g. Buildings & facilities required to be constructed

h. Location analysis

i. High level schedule

f.Utility and auxiliary equipment to be constructed

5

A technical assessment in many cases requires specific areas of

expertise to be able to do the assessment. Examples:

Technical assessment of a power plant project

Technical assessment of a refinery project

Technical assessment of a dam project

Technical assessment of a steel mill project

Can you find a person who knows technical issues of all these projects?

What are we expected to do during the “technical assessment” stage?

We, as construction project managers, are not expected to be familiar

with the technical details of all projects we manage; we are not expected

to directly conduct all parts of the project’s “technical assessment”.

Introduction

6

In many cases we need to hire consultants (individual or company) who

are familiar with the technical aspects of our project.

Our main mission is to properly define what we expect out of the

technical assessment work and to be able to use the findings for the rest

of our feasibility study.

Introduction

“Technical

assessment”

responsibility

distribution:

Technical

expert in

charge with

FS expert

supervision

FS expert in

charge with

Technical

expert

consultation

a. Methods of producing service/ product

b. Capacity analysis

c. Equipment & material to be constructed

d. Material & supplies required for operation

e. Organization required for operation

g. Buildings & facilities required to be constructed

h. Location analysis

i. High level schedule

f.Utility and auxiliary equipment to be constructed

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a. Methods of producing service/ product

Here we identify, detail and analyze possible methods for producing service/

product required!

A person familiar with technical aspects of required service/ product should be in

charge of this part.

A comprehensive literature review should be conducted to be able to identify

prevalent alternative methods of doing the job!

This step is a good candidate for doing a Value Engineering (VE or مهندسی ارزش)!

VE is a systematic method to improve the value (= output / input) of products/

services in need. It follows three basic steps:

1) Function analysis; to identify critical functions 2) Alternative method creation;

how to meet the need 3) Alternative evaluation; to choose the best alternative

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a. Methods of producing service/ product

Main outputs of this step are 1) detail explanations of alternative methods of

producing service/ product 2) comparison between advantages and

disadvantages of different methods 3) a service/ product production method(s)

recommended

Decision tree is a main tool for evaluating and selecting/ recommending most

suitable alternatives. We are going to discuss it more in later lectures!

Example: Different alternatives for responding to Tehran-Shomal transportations

needs:

1) Upgrading current roads including: Haraz, Firoozkooh and Chaloos

2) Setting new economical and fast transit bus from Tehran to Shomal

3) Building a new freeway

4) Building a high-speed railway

You need to explain the detail of each alternative method! What does every

method mean? What are the extent of their implementation methods?

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a. Methods of producing service/ product

Example (cont’d): Advantages and disadvantages

Score alternative project methods and pic the best one which fulfills the

requirements!

Advantages Disadvantages

Upgrading

roads

- Relatively a cheap method

- Relatively in short construction time

- Limitations of the initial design

- Lengthy routes

Transit bus

- The cheapest method

- Shortest construction duration

- Possibility of income

-Responds to a portion of demand

- Can be used as complementary

method to the others

Freeway

- Can respond to most of demands

- Can reduce the road length

- Can reduce fuel consumption

-Can increase travel safety

- Possibility of income

-The most expensive method

- Long implementation time

Railway

-Can increase travel safety

-Possibility of income

- An expensive method

- Long implementation time

-Responds to a portion of demand

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a. Methods of producing service/ product

Example (cont’d): Advantages and disadvantages/ ranking

After choosing the alternative method, you need to outline the selected

method’s steps!

Advantages Disadvantages Mark

Upgrading

roads

- Relatively a cheap method (10)

- Relatively in short construction time

(10)

- Limitations of the initial design (10)

- Lengthy routes (5)5

Transit

bus

- The cheapest method (15)

- Shortest construction duration (10)

- Possibility of income (5)

-Responds to a portion of demand (X)

- Can only be used as complementary

method to the others (X)

X

Freeway

- Can respond to most of demands (20)

- Can reduce the road length (5)

- Can reduce fuel consumption (10)

-Can increase travel safety (10)

- Possibility of income (5)

- -The most expensive method (20)

- - Long implementation time (10)20

Railway-Can increase travel safety (10)

-Possibility of income (5)

- An expensive method (10)

- Long implementation time (10)

-Responds to a portion of demand (X)

X

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a. Methods of producing service/ product

Main steps of freeway construction (sample high level method):

1) Freeway preliminary study and conceptual design

2) Freeway detail design

3) Freeway construction

1) Cleaning and excavation,

2) Sub-base layers construction

3) Base layers construction

4) Surface layers construction

5) Bridges construction

6) Tunnels construction

7) Utility (light, drainage system, phone, etc.)

8) Traffic elements installation

9) Service buildings construction

4) Freeway Operation and maintenance

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c. Capacity analysis

Scale of the project and the output capacity of constructed project

during operation phase depends on several effective factors, including:

Net demand/ need: basically main incentive for the project construction is

to respond to the need/ demand identified for the project.

Question: What if the service/ product produced after a project’s construction

(or during operation phase of a project) does not meet the need for the

project?

Question: What if output service/ product goes beyond the demand?

Example: There is a power supply shortage of 20 MW during the high

demand hours of the day for a city. Our suggestion for the capacity of the new

power plant to be constructed is 20 MW!

Example: Current north-south roads can respond to maximum of 20k p-car/h.

If the city’s rush- hour demand for north-south roads is 25k p-car/h. We

recommend a road capacity of 5k p-car/h to the city.

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b. Capacity analysis

Example: Currently there is a room for additional cement export of 15 M

Ton/year. Our recommended capacity to a cement plant investor is the

maximum capacity of 15 M Ton/year.

Technical possibility: Capacity of a project is depended on many technical

effective factors, including size and number of equipment, supply rate of raw

material and supplies, space availability, etc. Often these effective factors limit

us to specific number of project capacities.

Example: When it comes to the road construction, the minimum car traffic

capacity we can get for a two-way road is a road with two lanes provide a

capacity of (for example) 1000 cars per hour. In such cases we can not

construct a road with exact capacity of 1150 cars per hour. We are either to

choose 1000 or 2000 cars per hour capacity!

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b. Capacity analysis

Economic possibility: Normally, a higher capacity results in a lowered

overhead cost per service/ product unit and causes a decreased cost of

service/ product units. In other word facilities with higher capacities usually

have more competitive advantages. For many industries a minimum

economic capacity, below which owners can not sell their services/ products

in economical prices, is defined. This economical capacity is changed over

time due to the supply and demand as well as raw material, resources and

technological changes.

Example: Minimum refinery capacity to stay in an economic scale is 200k

barrel/day.

Other factors: Other factors such as number of working shifts, number of

working days, etc. also affect final capacity of project during operation phase.

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What type of equipment and technology is required for producing

product/service?

What costs are involved for purchasing and setting up the equipment?

What costs are involved for operating the equipment?

Equipment suppliers:

Who are the potential suppliers of the equipment?

Where are they located?

What source of service and warranties do they provide?

How long it will take to acquire the equipment and begin operations?

c. Equipment and material to be constructed

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For every alternative method of production we need to collect information

or different set of machineries.

Specifications, capacities & costs must be described in detail. Example

1, 2.

Make sure to consider customs duty, transportation, insurance and

possible legal costs and fees of equipment.

c. Equipment and material to be constructed

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d. Material & supplies required for operation

How much material and supplies is required to produce products/ services? How

much do they cost?

Volume of material is determined from every alternative method process

considering the capacity chosen!

Volume of supplies (including water, electricity, natural gas, lubricants, spare

parts, etc.) are determined from equipment specification.

Cost of main materials (e.g., natural gas for a power plant, bitumen and

aggregate for a asphalt plant, cement, water and aggregate for concrete batch

plant) need to be accurately determined!

We need to get quotes from main suppliers to make sure about the cost.

Sometimes we need to use forecasting methods to estimate the cost of material

during the operation phase

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How much material and supplies is required to produce products/ services? How

much do they cost?

Volume of material is determined from process of every alternative method

considering the capacity chosen!

Volume of supplies (including water, electricity, natural gas, lubricants, spare

parts, etc.) are determined from equipment specification.

Cost of main materials (e.g., natural gas for a power plant, bitumen and

aggregate for a asphalt plant, cement, water and aggregate for concrete batch

plant) need to be accurately determined!

d. Material & supplies required for operation

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Many times you need to get quotes from main suppliers to make sure

about the cost.

Exact specification of materials need to be determined for any possible

preparation for material transportation and storage!

Example 1

d. Material & supplies required for operation

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e. Organization required for operation

How project is going to be run after construction?

Which organizational departments are needed?

What expertise are required?

How many workers are going to work with in different work stations?

What is the expected salary for each group of workers?

Example 1

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f. Utility & auxiliary equipment to be constructed

Utility or auxiliary equipment include service machineries and facilities

(e.g., generator, water tank, boiler, etc.) need to be constructed!

In industrial projects majority utilities and auxiliary equipment are going

to be used for operating main equipment. So main portion of capacity

estimation is calculated based on volume estimated for equipment

supplies.

Organization’s staff also require utilities. We need to update utility and

auxiliary equipment volume after completing building and civil work

calculations!

Example 1

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g. Buildings & facilities to be constructed

Production buildings is calculated based on equipment sizes and layouts

Warehouses and storage rooms is calculated based on material and supplies

for operation (e.g., area to store material and supplies of one month of operation)

Office buildings is calculated based on organizational chart

Service buildings (restaurant, medical room, praying room, etc.) is calculated

based on organizational chart

Security room

Parking area is calculated based on organizational chart

Power house and utility buildings is calculated based on utility and auxiliary

equipment calculated (you might need to update utility required after estimation

of other building areas)

Land is calculated based area of different buildings calculated

Example 1

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h. Location analysis

Different factors are consider for selecting a project location:

Close to the target market

Close to the raw material

Existence of experts

Tax incentives and supportive laws

Local concerns for developing a region

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i. High level schedule

Consider main technical requirements to develop a high level

schedule.

Time to complete the design

Time to deliver equipment

Time to construction buildings

Time to install equipment

Time to do trial operation and testing

Example 1

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Home assignment 3

After complete market assessment, we ended up with a net

demand for a 150 beds general hospital in the west Tehran.

Follow technical assessment steps and prepare your (up to 10

pages) technical assessment report for this project.

Due one week!

Thank you!