9 projects procurement 60
TRANSCRIPT
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PROJECT PROCUREMENTROJECT PROCUREMENT
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PROJECT CYCLEROJECT CYCLE
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THE PROJECT CYCLETHE PROJECT CYCLE
IdentificationIdentification
Appraisal / ViabilityAppraisal / Viability
Funding Sources(Internal/External)Funding Sources(Internal/External)
Project ImplementationProject Implementation
Procurement Process(Plants,CivilProcurement Process(Plants,CivilWorks,Consultants servicesWorks,Consultants services
Project Monitoring & SupervisionProject Monitoring & Supervision Project Completion & Commercial ProductionProject Completion & Commercial Production
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Project Cost Analysisroject Cost Analysis- Elements or Components of Project Cost.lements or Components of Project Cost.o Landando Serviceserviceso Buildinguildingo Machinery / Equipmentachinery / Equipmento Preproduction Expensesreproduction Expenseso Interest during Constructionnterest during Constructiono Preoperational Expensesreoperational Expenseso Strategytrategyo Scheduleschedules
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(Figures in 000)Figures in 000)Localocal Foreignoreign TotalotalLand and DevelopmentLand and Development
Building and Civil worksBuilding and Civil worksPlant and MachineryPlant and Machinery
Insurance, Freight andInsurance, Freight and
ClearanceClearance
Import DutyImport Duty
Import SurchargeImport Surcharge
Know-How & ConsultancyKnow-How & Consultancy
Inland FreightInland Freight
Proforma of Project Cost Estimates
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(Figures in 000)Figures in 000)Localocal Foreignoreign Totalotal
Erection and InstallationErection and Installation
Preproduction ExpensesPreproduction Expenses
Interest / FC DuringInterest / FC DuringConstructionConstruction
Furniture & FixturesFurniture & Fixtures
Transport & VehiclesTransport & Vehicles
ContingenciesContingencies
TotalotalNet Initial workinget Initial workingCapitalapitalTotal Costotal Cost
Proforma of Project Cost EstimatesCont
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Project Cost Estimates for XYZroject Cost Estimates for XYZCoconut Oils Limitedoconut Oils Limited(Rs/$.000)Rs/$.000)
Itemstems LocalocalCurrencurrenc
ForeignoreignCurrencurrenc
Totalotal Totalotal
I.I. Land, Site Development andLand, Site Development andInfrastructureInfrastructure
1.1. LandLand
2.2. Land ImprovementsLand Improvements
3.3. Site Development, Access Roads,Site Development, Access Roads,
4.4. wharf facilitieswharf facilities
5.5. Contingency 16% (except land)Contingency 16% (except land)
6.6. Escalation; 14% (except land)Escalation; 14% (except land)
SUBTOTAL:SUBTOTAL:
10201020
205205
12431243
27722772
675675
590590
11881188
190190
167167
10201020
205205
12431243
39603960
865865
757757
80508050
102202102202
0.50.5
124.3124.3
369369
86.586.5
75.775.7
805805
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(Rs/$.000)Rs/$.000)Itemstems LocalocalCurrencyurrency ForeignoreignCurrencyurrency Totalotal Totalotal
II.II. Building and Civil WorksBuilding and Civil Works
1.1.Production: 2000 sq.m. at 1100Production: 2000 sq.m. at 1100
Rs/q.mRs/q.m
2.2.Warehouse: 1500 sq.m. at 900Warehouse: 1500 sq.m. at 900
Rs.sq.mRs.sq.m
3.3.Utility: 600 sq.m at 1000 Rs/sq.mUtility: 600 sq.m at 1000 Rs/sq.m4.4.Administrative: 500 sq.m. at 1500Administrative: 500 sq.m. at 1500
Rs/sq.mRs/sq.m
5.5.Contingency: 16%Contingency: 16%
6.6.Escalation: 14%Escalation: 14%SUBTOTALSUBTOTAL
15401540
945945
420420
525525
549549
480480
660660
405405
180180
225225
235235
206206
22002200
13501350
600600
750750
784784
686686
63706370
220220
135135
6060
7575
78.478.4
68.468.4
637637
Project Cost Estimates for XYZroject Cost Estimates for XYZCoconut Oils Limitedoconut Oils LimitedCont.ont.
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(Rs/$.000)Rs/$.000)Itemstems Localocal
CcycyForeignoreign
CurrencyurrencyTotalotal Totalotal
IIIIII Machinery and EquipmentMachinery and Equipment
1.1.Oil milling (delivered)Oil milling (delivered)
2.2.Solvent extraction (delivered)Solvent extraction (delivered)
3.3.Cake handling and palletizing (delivered)Cake handling and palletizing (delivered)
4.4.Oil auxilizry storeage & pumpingOil auxilizry storeage & pumping(delivered)(delivered)
5.5.Utilities: water storage and pumpingUtilities: water storage and pumping
(delivered)(delivered)
6.6.Other utility equipment (delivered)Other utility equipment (delivered)7.7.Lahoratory and maintenance equipmentLahoratory and maintenance equipment
10581058
--
418418
321321
847847
869869
160160
70827082
69526952
16721672
23522352
847847
53355335
640640
81408140
69526952
20902090
26732673
16941694
62046204
800800
814814
695.2695.2
209209
267.3267.3
169.4169.4
620.4620.4
8080
Project Cost Estimates for XYZroject Cost Estimates for XYZCoconut Oils Limitedoconut Oils LimitedCont.ont.
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(Rs/$.000Rs/$.000Itemstems Localocal
CurrencyurrencyForeignoreign
CurrencyurrencyTotalotal Totalotal
IIIIII Machinery and EquipmentMachinery and Equipment
8.8. Miscellanies Equipment/MachineryMiscellanies Equipment/Machinery(delivered)(delivered)
9.9. Erection Costs (7.5% 1-1)Erection Costs (7.5% 1-1)
10.10. Spare partsSpare parts
11.11. Transp. & handling equipmentTransp. & handling equipment(delivered)(delivered)12.12. Furniture, fixtures, office equipmentFurniture, fixtures, office equipment
(delivered)(delivered)
13.13. Contingency: 4% of 1-12Contingency: 4% of 1-12
14.14. Escalation: 8% of 1-12Escalation: 8% of 1-12
SUBTOTAL:SUBTOTAL:
462462
301301
139139
981981
480480
291291
582582
18461846
20142014
12471247
328328
--
11631163
23262326
23102310
23152315
23562356
13091309
480480
14541454
29082908
16121612
2323
231.231.
138.138.
130.130.
44
145.145.
920.920.
161.161.
Project Cost Estimates for XYZroject Cost Estimates for XYZCoconut Oils Limitedoconut Oils LimitedCont.ont.
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(Rs/$.000Rs/$.000Itemstems Localocal
CurrencyurrencyForeignoreign
CurrencyurrencyTotalotal Totalotal
IVIV Engineering Fees / Consultant Fees:Engineering Fees / Consultant Fees:
1.1.Engineering feeEngineering fee
2.2.Management consultant feeManagement consultant fee
SUBTOTAL:SUBTOTAL:
--
696696
916916
--
916916
696696
16121612
91.91.
69.69.
161.161.
V.V. Preproduction and Launching Expenses:Preproduction and Launching Expenses:
1.1.Project Development CostProject Development Cost 149149 447447 596596 59.59.
Project Cost Estimates for XYZroject Cost Estimates for XYZCoconut Oils Limitedoconut Oils LimitedCont.ont.
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(Rs/$.000)Rs/$.000)Itemstems Localocal
CurrencyurrencyForeignoreign
CurrencyurrencyTotalotal Totalotal
TOTAL CAPITAL COSTTOTAL CAPITAL COST
TOTAL PROJECT COSTTOTAL PROJECT COST
TOTAL PROJECT COSTTOTAL PROJECT COST
1962919629
1141811418
3104731047
4165141651
--
4165141651
6128061280
1141811418
7269872698
6126128
114.114.8
7269.7269.8
Project Cost Estimates for XYZCoconut Oils LimitedCont.
Note: Rs10 = 1 US Dollar
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Project Cost Estimateroject Cost Estimate 1.. Estimate vs Budgetstimate vs Budget2.. Importance of Cost Estimatemportance of Cost Estimate3.. Escalation of Project Costsscalation of Project Costs4.. Inflationnflation5.. Evolution of Project Cost Estimatevolution of Project Cost Estimate6.. Cost Consciousnessost Consciousness
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Cost Estimates and theirost Estimates and theirchecking:hecking:A.. Break up the project cost into its variousreak up the project cost into its various
components.omponents.B.. Trace each of these component costrace each of these component cost
estimates to the physical facil ities needed,stimates to the physical facil ities needed,and check that these are on reasonablend check that these are on reasonablebases.ases.
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Cont.Cont.
C.. Visualizing as much as possible in specificisualizing as much as possible in specificterms i.e. f low charts, layouts, organizationerms i.e. f low charts, layouts, organizationcharts covering all staff and labor, sell ingharts covering all staff and labor, sell ingarrangements, storage arrangements, andrrangements, storage arrangements, andso on. (the more detailed the work done,o on. (the more detailed the work done,the better an estimate can be) ;he better an estimate can be) ;
D..Using factors and percentages in somesing factors and percentages in somesituations, which may be rule-of-thumbituations, which may be rule-of-thumbestimates or more rigorously calculated:stimates or more rigorously calculated:andnd
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Project Financingroject FinancingEquity/ Own FundsEquity/ Own FundsGovt GrantsGovt Grants
Loans/Borrowed FundsLoans/Borrowed Funds
Financial/ Economic JustificationFinancial/ Economic Justification
Cost of BorrowingCost of Borrowing
Cost of own FundsCost of own Funds
Procedures for Utilizing fundsProcedures for Utilizing funds
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PROBLEMS DURINGROBLEMS DURINGIMPLEMENTATION STAGEMPLEMENTATION STAGE
Summary of SourcesSummary of Sources Time over runTime over run
Cost over runCost over run
Mixture of the two.Mixture of the two.
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SUMMARY OF REASONS.SUMMARY OF REASONS.
TIME OVER RUNSIME OVER RUNS Preparatory delays/ LocationPreparatory delays/ Location Civil works constructionCivil works construction
Procurement of machineryProcurement of machinery
General causesGeneral causesCOST RUNS OVER RUNS:OST RUNS OVER RUNS: InflationInflation
Under-estimation of BOQsUnder-estimation of BOQs Abnormal price increasesAbnormal price increases Time over runTime over run
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PREPARATORY DELAYS/PREPARATORY DELAYS/LOCATIONLOCATION Reappraisal and commitment of funds by variousReappraisal and commitment of funds by various
institutions/authorities.institutions/authorities.
Variations in terms and conditions.Variations in terms and conditions.
Credit documentation disputes.Credit documentation disputes.
Disagreement on legal agreements government procedures andDisagreement on legal agreements government procedures and
regulations.regulations.
Political rivalries.Political rivalries.
Legal Disputes on ownershipLegal Disputes on ownership
Defective titles of landDefective titles of land Cumbersome ProceduresCumbersome Procedures
Price appreciation in real estatePrice appreciation in real estate
Disputes on locationDisputes on location
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CIVIL WORKS CONSTRUCTIONCIVIL WORKS CONSTRUCTION
Tendering and re-tendering.endering and re-tendering. Disputes amongst contractors.isputes amongst contractors. Shortage of funds with the contractorshortage of funds with the contractors Shortage of funds with the projecthortage of funds with the project Non availability of materialson availability of materials Increase in prices of material cement/steelncrease in prices of material cement/steel Mobilization and demobilizationobilization and demobilization Natural calamitiesatural calamities
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PROCUREMENT OF MACHINERYPROCUREMENT OF MACHINERY
Tendering and retenderingendering and retendering Guarantees/warranteesuarantees/warrantees Currency depreciation/fluctuationurrency depreciation/fluctuation Non availability of foreign exchangeon availability of foreign exchange Rejection of machineryejection of machinery Short shipmentshort shipments Synchronization of activities of variousynchronization of activities of varioussuppliers.uppliers. Liquidation of the machinery suppliers iniquidation of the machinery suppliers inbetweenetween Natural calamities warsatural calamities wars
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GENERAL CAUSESGENERAL CAUSES
Changes in projects scopehanges in projects scope Political changes and changes in their prioritiesolitical changes and changes in their priorities Inadequacy of the appraisal:nadequacy of the appraisal: With purposeith purpose Without purposeithout purpose Changes in personnel in the fundinghanges in personnel in the fundinginstitutions/deptts. and moods of the projectnstitutions/deptts. and moods of the projectsupervisors.upervisors. Changes in PERT sequencinghanges in PERT sequencing Arrangements of additional fundsrrangements of additional funds Dispute between sponsorsispute between sponsors
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CAUSES OF FAILURESCAUSES OF FAILURES
Delay in completion, resulting in costelay in completion, resulting in costincreasencrease Capital cost overruns.apital cost overruns. Technical failureechnical failure Financial failure of the contractor.inancial failure of the contractor. Un insured casualty losses.n insured casualty losses. Raw materials:aw materials: Price increaserice increase Shortage of raw material.hortage of raw material.7.. Technical obsolescence.echnical obsolescence.8.. Loss of competitive position in the market.oss of competitive position in the market.