Project Apprasial

Imperial College of Engineering and Research,
Wagholi, Pune.
SUBJECT PROJECT PLANNING AND ENGINEERING
ECONOMICS
CODE
SEM SECOND
CLASS THIRD YEAR CIVIL
DIVISION A
A. YEAR 2019-20
UNIT VI
TITLE OF UNIT Project Appraisal
SUBJECT
TEACHER-
VINAYAK R. PAYGHAN

PROJECT APPRAISAL
Introduction
Project appraisal is the detailed evaluation
of the project to identify the feasibility of
project for sectors i.e. political, social,
environmental, techno-legal,, financial for
successful completion of project.

PROJECT APPRAISAL
Introduction
•Is an evolution or estimation of value.
•Every organisation have to survive and grow.
•However it is necessary for them to undertake different project
as per the need in i.e. current and in future need of the society.
•There are two aims of such organisation one is the fill the need
and second one to gain the profit.

PROJECT APPRAISAL
Introduction
•No project should undertake which may pollute the
environment, lead to the deforestation, merging of land,
destruction of natural resources.
•To select, and complete any project" money" is needed.
•Final goal of any organisation is that to make a profit for his
organisation.

TYPES OF PROJECT APPRAISAL
1.
Political
appraisal
2. Social
appraisal
3.
Environmental
appraisal
4. Techno legal
appraisal
5. Financial
appraisal
6.
Economical
appraisal

1. Political appraisal
• Political appraisal is done by member which is selected
by committee.
• The member is selected by an community so the main of
this appraisal is to be focused on the community goal.
• In this type of Appraisal it is observed that the goal of
the project and goal of the community is to be same.
• As well as the objective of the and need of the project
should match with the community goal.

1. Political appraisal
The final decision taken by and member depend upon
1. There is an any changes in propose a project change
should be accepted.
2. The project is depend upon the project promoter.
3. The project is sanction or rejected by and
government.

2. Social appraisal
•Development of any sector use the benefit to the
society that is economical benefit, social benefit,
environmental benefit, financial benefit etc.
•Social appraisal help to take review from the project
idea to design ,implementation, monitoring etc. in the
respect of social aspect.
•The social aspect means the stakeholder.

2. Social appraisal
•The main purpose of social appraisal to see impact of
the development of a project on different stakeholders
of the project, to make chances of a participation and
contribution in the project.
•Stockholder maybe group of people, organisation,
individuals.
•If Stockholder are not interested in a project then they
take away investment from the respective project.

3. Environmental appraisal
•This appraisal help to determine whether the project
will have any adverse effect on the environment.
•This appraisal give idea account biophysical and
social impact of the project.
•Most countries have designed and one organisation
named as EIA.

3. Environmental appraisal
•EIA- environmental impact assessment
•EIA- design number of policy and legislation to identify impact and
mitigation for the approval of project in the view of environment.
•Objective
1.To take and select proper method for the environmental appraisal.
2. To assess the financial economic report.
3. To improve the current method.

•4. Techno legal appraisal
•To execute a construction project contractor is key
factor, actually execute and complete the all task of
construction work.
•Written agreement between the owner and contractor
is known as techno-legal appraisal.
•This agreement include the number of terms and
condition related how to work executed.

•4. Techno legal appraisal
•This agreement binding Both owner as well as to the
contractor.
•The agreement can be modified as per the
requirement of the project.
•This agreement help to avoid dispute between or
during work and also help to complete project within a
given time.

5. Financial appraisal
•Finance is important parameter in every project.
•Financial appraisal of small project is obtained by
adding all cost required to complete the project so
financial appraisal for small project is easy.

5. Financial appraisal
•For Complex project, where number of activity simultaneously
is going on i.e. Project like earthen Dam, gravity dam, bridges
railway etc. In such project financial appraisal is not easy task.
In such type of project cost benefit analysis method is used.
•CBA- consider the capital spending, operational cost, revenue.
•The over all rate of return determined in the form of CBA i.e.
net present value

6. Economical appraisal
•Economic appraisal means analysis of soundness of the project,
quantification of the project, evaluation of the project and benefits
of the project.
•Social cost benefit analysis is used to determine the usefulness of
the proposed project.
•It Facilitate choice between the, the idea of project work and
alternative investment option.
•This technique is very useful for the public sector investment.

CBA ANALYSIS
It is the division of benefits from a project i.e. cash inflow
to cost involved i.e. cash outflow.
It is quantitative tool used to identify cost benefit of
particular project.
Project selection-
The project gives the maximum benefit cost
ratio(BCR) is selected.
Or Benefit cost analysis

CBA ANALYSIS
Need of CBA
To identify
1. Weather project will necessary for community.
2. Net benefit
3. Common platform
4. Reflection of project value in to community
5. Quantitative measures for net profit.

CBA ANALYSIS
Process of CBA
CBA assessment involves identifying quantifying and where
possible valuing money terms off cost benefits. Following steps
were taken for CBA
1. Determine scope and objective
2. Assess the constraints
3. Consider the alternative
4. Identify quantify
5. Calculate Net present values

CBA ANALYSIS
CBA analysis
While doing CBA analysis following Should be considered,
1. What is the scope and objective of the project
2. What are the different constraints
3. What are the different alternative method to determine CBA analysis
4. How to identify, quantify off the alternative
5. Net present value
6. Uncertainty
7. NPV, BCR, and IRR

CBA ANALYSIS
1.0 WHAT IS THE SCOPE AND OBJECTIVE OF THE
PROJECT
•Objective of the project will be well define with
respect to the market requirement and government
rules and regulations.
•The objective are outcome based.

CBA ANALYSIS
2.0 CONSTRAINTS
The of curing during project must be analyse.
Constraints maybe
1. Financial
2. Institutional
3. Environmental
4. Political, etc.
One of the constraints may contribute in project delay.

CBA ANALYSIS
In this stage of CBA analysis alternatives identified and
specified.
This alternative maybe
•Financial
•Material resources
•Manpower resources
•Machinery Resources
Various agencies are to be list out and priority wise
highlighted.
3. What are the different alternative method to determine
CBA analysis

CBA ANALYSIS
In this stage in various alternatives where identified and
sequentially arrange so as to get the most benefit.
It Include initial cost, capital cost, operating and
maintenance cost, etc benefit as
•In terms of money
•In terms of revenue
•In terms of long term savings
•other then money
4. How to identify, quantify off the alternative

CBA ANALYSIS
5. Net present value-
CBA
• NPV -
• NET PRESENT VALUE
DISCOUNTE
D CASH
FLOW
• IRR
• INTERNAL RATE OF RETURN
FINANCIAL
APPRISAL
• PROFITABILITY OR
• DESIRABILITY INDEX

CBA ANALYSIS
•5. Net present value
•This is also known as discounted cash flow
method.
•In this method all cash inflow and outflow are
discounted at a minimum acceptable rate of
return in terms of firms cost capital.
•This method is based on the time value of
money.

CBA ANALYSIS
NPV is calculated by
Where,
Bt= benefit at a time t
n= life of project
i= discount rate
t=Number of year

CBA ANALYSIS
IMPORTANT PONTS
1. NPV > 0 project is acceptable
2. NPV < 0 project is to be REJECT
3. NPV of the benefits from project should be greater than NPV of a cost
of the project .
4.The difference between two NPV should positive.

CBA ANALYSIS
Merit S
1. This method really credible because it works on time value of money.
2. The cash flow considered throughout the project life span.
3. Discount rate can be changed in terms of NPV calculation.
4. This method help to select project.
Limitations of NPV
1. This method is difficult to understand and use as compared to pay back
method.
2. Calculation of discount rate is critical.
3. Method not suitable for multi purpose project.

CBA ANALYSIS
6. Uncertainty-
•Uncertainty analysis critical component analysis.
•Is based on add MP is based on the future cost and future benefits.
•It also important there may be chances to gain return less then as
per our calculations.
•CBA analysis this is also important to consider this point.
•Uncertainty analysis done by changing values of
• discount rate
• cost rate.

CBA ANALYSIS
IRR- internal rate of return
This is also known as discounted cash flow method.
In this method all cash inflow and outflow are discounted at a minimum
acceptable rate of return in terms of firms cost capital.
This method is based on the time value of money.
The internal rate of return on an investment or project is the "annualized
effective compounded return rate" or "rate of return" that makes the net
present value (NPV as NET*1/(1+IRR)^year) of all cash flows (both
positive and negative) from a particular investment equal to zero

CBA ANALYSIS
The IRR of an investment is the discount rate at which
the net present value of costs (negative cash flows) of
the investment equals the net present value of the
benefits (positive cash flows) of the investment.

CBA ANALYSIS
•It is an indicator of the efficiency, quality, or yield of
an investment.
•This is in contrast with the net present value, which is
an indicator of the value or magnitude of an
investment.
•An investment is considered acceptable if its internal
rate of return is greater than an established minimum
acceptable rate of return or cost of capital.

CBA ANALYSIS
it is the rate of return at which the present value
of excepted cash flow of a project exactly equal the
original investment.
IRR of a project is the discount rate which make its
NPV = 0 (ZERO)

CBA analysis
Important Point-
•Trail and error method.
•NPV = 0
i = Internal rate of return

CBA ANALYSIS
Formula =
1.
Put NPV = 0 FIND i

CBA ANALYSIS
Answer-
Select highest IRR Value

CBA analysis
BCR – BENEFIT COST RATIO-
Formula =

CBA ANALYSIS
BCR – BENEFIT COST RATIO-
Select-
BCR –Higher values

PAY BACK PERIOD
It is a period within which original cost of project is
recovered.
Pay Back Period = Cost Of The Project
Annual Cash Inflow

PAY BACK PERIOD
1. if cash inflows are un even take cumulative Cash
inflow and find time to recover original cost.
2. where the cash inflows are same but timing
different choose the project which has higher as
inflows in the initial years.

PAY BACK PERIOD
Steps-
1. Write title of project.
2. Determine cumulative cash flow.
3. Find break even point.
4. Find pay back period by using formula.
5. Write answer.

PAY BACK PERIOD
Steps-
formula
=

BREAK EVEN ANALYSIS
• This method is used to study of the effect on profit
with respect to the price, volume production and
cost of production changes.
• This method is used to establish the relationship
between the profit and cost.

BREAK EVEN ANALYSIS
This method is used to determine BREAK EVEN POINT.
BEP- is point where loss = profit i.e. equilibrium.
If Sales of company fall down, company may increase
sales by using
reducing selling price
lower down fixed price
reducing variable cost.

BREAK EVEN ANALYSIS
Formula-
1 break even point =
fixed price
Selling price per unit - variable cost per unit

BREAK EVEN ANALYSIS
Formula-
2.break even sales= break even quantity x selling price
3. Actual production cost/quantity=
Numbers of units x cost

STUDY OF PROJECT FEASIBILITY
As the name implies, a feasibility analysis is used to determine
the viability of an idea, such as ensuring a project is legally
and technically feasible as well as economically justifiable. It
tells us whether a project is worth the investment—in some
cases, a project may not be doable. There can be many
reasons for this, including requiring too many resources,
which not only prevents those resources from performing
other tasks but also may cost more than an organization
would earn back by taking on a project that isn’t profitable.

Types of Feasibility Study
A feasibility analysis evaluates the project’s potential
for success; therefore, perceived objectivity is an
essential factor in the credibility of the study for
potential investors and lending institutions. There are
five types of feasibility study—separate areas that a
feasibility study examines, described below.

1.0 Technical Feasibility
This assessment focuses on the technical resources
available to the organization. It helps organizations
determine whether the technical resources meet
capacity and whether the technical team is capable of
converting the ideas into working systems. Technical
feasibility also involves the evaluation of the
hardware, software, and other technical requirements
of the proposed system. As an exaggerated example,
an organization wouldn’t want to try to put Star Trek’s
transporters in their building—currently, this project is
not technically feasible.

2.0 Economic Feasibility
This assessment typically involves a cost/ benefits
analysis of the project, helping organizations
determine the viability, cost, and benefits associated
with a project before financial resources are allocated.
It also serves as an independent project assessment
and enhances project credibility—helping decision-
makers determine the positive economic benefits to
the organization that the proposed project will provide.

3.0 Legal Feasibility
This assessment investigates whether any aspect of the
proposed project conflicts with legal requirements like
zoning laws, data protection acts or social media laws.
Let’s say an organization wants to construct a new
office building in a specific location. A feasibility
study might reveal the organization’s ideal location
isn’t zoned for that type of business. That organization
has just saved considerable time and effort by learning
that their project was not feasible right from the
beginning.

4.0 Operational Feasibility
This assessment involves undertaking a study to
analyze and determine whether—and how well—the
organization’s needs can be met by completing the
project. Operational feasibility studies also examine
how a project plan satisfies the requirements identified
in the requirements analysis phase of system
development.

5.0 Scheduling Feasibility
This assessment is the most important for project success; after
all, a project will fail if not completed on time. In scheduling
feasibility, an organization estimates how much time the project
will take to complete.
When these areas have all been examined, the feasibility analysis
helps identify any constraints the proposed project may face,
including:
Internal Project Constraints:- Technical, Technology, Budget,
Resource, etc.
Internal Corporate Constraints:- Financial, Marketing, Export,
etc.
External Constraints: - Logistics, Environment, Laws, and
Regulations, etc.

Importance of Feasibility Study
•Improves project teams’ focus
•Identifies new opportunities
•Provides valuable information for a “go/no-go”
decision
•Narrows the business alternatives
•Identifies a valid reason to undertake the project
•Enhances the success rate by evaluating multiple
parameters

Importance of Feasibility Study
•Aids decision-making on the project
•Identifies reasons not to proceed
•Apart from the approaches to feasibility study listed
above, some projects also require other constraints to
be analyzed -
•Internal Project Constraints: Technical, Technology,
Budget, Resource, etc.
•Internal Corporate Constraints: Financial, Marketing,
Export, etc.
•External Constraints: Logistics, Environment, Laws
and Regulations, etc.

DETAILED PROJECT REPORT
•Detailed Project Reports (DPRs) are the outputs of
planning and design phase of a project.
•DPR is a very detailed and elaborate plan for a
project indicating overall programme, different roles
and responsibilities, activities and resources required
for the project.

Steps of preparation of DPR:
•Client interacts with consultant.
•Consultant takes all required inputs from client & do
necessary first phase studies.
•Client evaluates it & makes all necessary changes &
requests consultant to do the necessary modifications.
•Consultant submits the revised draft for approval.
•Consultant submits the final DPR after getting
approval from client.

The main sub-division in a DPR is:-
General Information of the project.
Background and the experience of the project
promoters.
Details and working result of industrial concerns
already owned and promoted by the project promoters.

Details of the proposed project:-
Plant capacity
Manufacturing procedure adopted
Technical knowhow/ tie-ups.
Management teams for the project.

•Details of land, buildings and plant and machinery.
•Details of infrastructural facilities (power, water
supply, transport facilities etc.)
•Raw material requirement/ availability.
•Effluents produced by the project & treatment
procedures adopted.
•Labour requirement and availability.

Schedule of implement of the project.
•Project cost.
•Means of financial projects.
•Working capital requirement/arrangements made.
•Marketing and selling arrangement made.
•Profitability and cash flow estimates.
•Mode of repayment of loans.
•Government approvals. Local body consents and
statutory permissions.
•Details of collaterals security that can offer to the
financial institutions.

ROLE OF PROJECT MANAGEMENT COUNSULTANT
•A consulting engineer or construction consultant can
be termed as the one who is completely independent
and professional engineer and performs well detailed
engineering services to his client on an agreed sum of
money. The prerequisites of a consulting engineer are
that he has to be registered in the state or the
country resides to perform as a Professional Engineer.

Roles of a construction consultant:-
1.0 Consultation
Consultation is the situation which arise when a
person needs and an opinion regarding a technical
engineering problem from an expert civil engineering
consultant. This may be requiring varied amount of
time depending upon the critical nature of the
problem. The duration of consultation may be brief or
may be extended to some duration or may require
considerable travel to the site.

2.0 Investigation of Problem
The construction consultant needs to study the
problem over the field which might involve some
amount engineering calculations and where as
some consultants may also require pay visit to the site
and inspect the structure and the equipments over the
construction site. Consultants also need to review the
reports and investigation prepared
by client’s management an engineers.

3.0 Feasibility reports
These reports play a crucial role in determining the
feasibility of the project after obtain the results of
survey and engineering studies performed over the
site. These reports are also necessary in order to
confirm the engineering solution adopted to
confirm with the economic feasibility of the structure.
The aspects considered in the feasibility report are the
requirements and the special needs of the project,
estimated construction cost, alternate solution
and expert recommendation and conclusions.

4.0 Engineering design
This aspect includes the dimensions and physical
characteristics of the structure to be constructed. The
dimensions of the structure are presented in the form of
drawing which in laymen terms are refereed as
blueprint. These blueprint are supplemented with along
with written documents, commonly known as
specifications.
Plans and specifications are curatively studied by
consultant in order to direct the contractor regarding the
work expected from him. The design process is also
helpful in preparing the list of the materials to be procured
often known as bill of quantizes to initiate the
construction process.

Roles of a construction consultant:- PRE TENDR STAGE
•Client’s Requirement
•Reconnaissance Survey
•Conceptual alternatives
•Cost Estimate
•Prefeasibility report
•Meeting and presentation
•Approval

Roles of a construction consultant:- PRE TENDR STAGE
•Drawings
•Detailed Engineering Design
•Project Costing
•Economic Analysis
•Environmental Impact
•Assessment
•Approval from Client’s side

Roles of a construction consultant:- POST TENDR STAGE
•Follow up of Documentary work
•Follow up in execution stage
•Supervision
•Review of Progress Reports and Work Programme
•Quality Checking and Maintenance
•Meeting correspondence
•Billing

Roles of a construction consultant:- POST TENDR STAGE
•Billing
•Project Close-up stage
•Operation stage
•Bottleneck issue situations

Project Apprasial

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