15Project Management, Planning, and Control. http://dx.doi.org/10.1016/B978-0-08-098324-0.00004-4Copyright © 2014 Albert Lester. Published by Elsevier Ltd. All rights reserved.

CHAPTER 4

Project Context (Project Environment)

Projects are influenced by a multitude of factors which can be external or internal to the organization responsible for its management and execution. The important thing for the project manager is to recognize what these factors are and how they impact on the project during the various phases from inception to final handover, or even disposal.

These external or internal influences are known as the project context or project environment. The external factors making up this environment are the client or customer, various external consultants, contractors, suppliers, competitors, politicians, national and local government agencies, public utilities, pressure groups, the end users, and even the general public. Internal influences include the organization’s management, the project team, internal departments, (technical and financial), and possibly the shareholders.

Figure 4.1 illustrates the project surrounded by its external environment.

All these influences are neatly encapsulated by the acronym PESTLE, which stands for • Political• Economic• Social• Technical• Legal• Environmental

A detailed discussion of these areas of influence is given below.

Political

Here, two types of politics have to be considered.

Chapter OutlinePolitical 15Economic 17Social (or Sociological) 17Technical 18Legal 19Environmental 19

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First, there are the internal politics that inevitably occur in all organizations whether govern-mental, commercial, industrial, or academic and which manifest themselves in the opinions and attitudes of the different stakeholders in these organizations. The relationships to the project by these stakeholders can vary from the very supportive to the downright antagonistic, but depending on their field of influence, they must be considered and managed. Even within an apparently cohesive project, team jealousies and personal vested interests can have a disruptive influence the project manager has to recognize and diffuse.

The fact that a project relies on clients, consultants, contractors (with their numerous subcon-tractors), material and service suppliers, statutory authorities, and, of course, the end user, all of which may have their own agenda and preferences, gives some idea of the potential political problems that may occur.

Second, there are the external politics, over which neither the sponsor nor the project manager may have much, if any, control. Any project that has international ramifications is potentially subject to disruption due to the national or international political situation. In the middle of a project, the government may change and impose additional import, export, or exchange restrictions, impose penal working conditions, or even cancel contracts altogether. For overseas construction contracts in countries with inherently unstable economies or governments, sudden coups or revolutions may require the whole construc-tion team to be evacuated at short notice. Such a situation should have been envisaged,

Figure 4.1The project environment

Project Context (Project Environment) 17

evaluated, and planned for as part of the political risk assessment when the project was first considered.

Even on a less dramatic level, the political interplay between national and local government, lobbyists, and pressure groups has to be taken into consideration as can be appreciated when the project consists of a road by-pass, reservoir, power station, or airport extension.

Economic

Here again there are two levels of influence: internal or micro-economic, and external or macro-economic.

The internal economics relate to the viability of the project and the soundness of the business case. Unless there is a net gain, whether financial or non-financial, such as required by prestige, environmental, social service, or national security considerations, there is no point in even considering embarking on a project. It is vital therefore that financial models and proven accoun-tancy techniques are applied during the evaluation phase to ensure the economic viability of the project. These tests must be applied at regular intervals throughout the life of a project to check that with the inevitable changes that may be required, it is still worthwhile to proceed. The decision to abort the whole project at any stage after the design stage is clearly not taken lightly, but once the economic argument has been lost, it may in the end be the better option. A typical example is the case of an oil-fired power station that had to be mothballed over halfway through construction, when the price of fuel oil rose above the level at which power generation was no longer economic. It is not uncommon for projects to be shelved when the cost of financing the work has to be increased and the resulting interest payments exceed the foreseeable revenues.

The external economics, often related to the political climate, can have a serious influence on the project. Higher interest rates or exchange rates, and additional taxes on labour, materials, or the end product, can seriously affect the viability of the project. A manufacturer may abandon the construction of a factory in its home country and transfer the project abroad if just one of these factors changes enough to make such a move economically desirable. Again, changes to fiscal and interest movements must be constantly monitored so that representations can be made to government or the project curtailed. Other factors that can affect a project are tariff barriers, interstate taxes, temporary embargoes, shipping restrictions such as only being permitted to use conference line vessels, and special licenses.

Social (or Sociological)

Many projects and indeed most construction projects inevitably affect the community in whose area they are carried out. It is vital therefore to inform the residents in the affected areas as early as possible of the intent, purpose, and benefits to the organization and community of the project.

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This may require a public relations campaign to be initiated, which includes meetings, exploratory discussions, consultations at various levels, and possible trade-offs. This is particularly important when public funding from central or local government is involved or when public spaces and access facilities are affected. A typical example of a trade-off is when a developer wishes to build a shopping centre, the local authority may demand that it include a recreation area or leisure park for free use by the public.

Some projects cannot even be started without first being subjected to a public enquiry, environmental impact assessment, route surveys, or lengthy planning procedures. There are always pressure groups who have a special interest in a particular project, and it is vital that they are given the opportunity to state their case while at the same time informing them of the positive and often less desirable implications. The ability to listen to their points of view and give sympathetic attention to their grievances is essential, but as it is almost impossible to satisfy all the parties, compromises may be necessary. The last thing a project manager wants are constant demonstrations and disruptions while the project is being carried out.

On another level, the whole object of the project may be to enhance the environment and facilities of the community, in which case the involvement of local organizations can be very helpful in focusing on areas which give the maximum benefit and avoiding pitfalls which only people with local knowledge are aware of. A useful method to ensure local involvement is to set up advisory committees or even invite a local representative to be part of the project management team.

Technical

It goes without saying that unless the project is technically sound, it will end in failure. Whether the project involves rolling out a new financial service product or building a power station, the technology must be in place or be developed as the work proceeds. The mecha-nisms by which these technical requirements are implemented have to be firmed up at a very early stage after a rigorous risk assessment of all the realistically available options. Each option may then be subjected to a separate feasibility study and investment appraisal. Alternatives to be considered may include: • Shouldin-houseorexternaldesign,manufacture,orinstallationbeused?• Shouldexistingfacilitiesbeusedorshouldnewonesbeacquired?• Shouldone’sownmanagementteambeusedorshouldspecialistprojectmanagersbe

appointed?• Shouldexistingcomponents(ordocuments)beincorporated?• Whatistheanticipatedlifeoftheendproduct(deliverable)andhowsoonmustitbe

updated?

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• Arematerialsavailableonalong-termbasisandwhatalternativescanbesubstituted?• Whatisthenatureandsizeofthemarketandcanthismarketbeexpanded?

These and many more technical questions have to be asked and assessed before a decision can be made to proceed with the project. The financial implications of these factors can then be fed into the overall investment appraisal, which includes the commercial and financing and environmental considerations.

Legal

One of the fundamental requirements of a contract, and by implication a project, is that it is legal. In other words, if it is illegal in a certain country to build a brewery, little protection can be expected from the law.

The relationships between the contracting parties must be confirmed in a legally binding contract that complies with the laws (and preferably customs) of the participating organiza-tions. The documents themselves have to be legally acceptable and equitable, and unfair and unreasonable clauses must be eliminated.

Where suppliers of materials, equipment, or services are based in countries other than the main contracting parties, the laws of those countries have to be complied with in order to minimize future problems regarding deliveries and payments.

In the event of disputes, the law under which the contract is administered and adjudicated must be written into the contract together with the location of the court for litigation.

Generally, project managers are strongly advised always to take legal advice from specialists in contract law and especially, where applicable, in international law.

The project context includes the established conditions of contract and other standard forms and documents used by industry, and can also include all the legal, political, and commercial requirements stipulated by international bodies as well as national and local governments in their project management procedures and procurement practices.

Environmental

Some of the environmental aspects of a project have already been alluded to under ‘Social’, from which it became apparent that environmental impact assessments are highly desirable where they are not already mandatory.

The location of the project clearly has an enormous influence on the cost and completion time. The same type of plant or factory can be constructed in the UK, in the Sahara desert, in China, or even on an offshore platform, but the problems, costs, and construction times can be

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very different. The following considerations must therefore be taken into account when deciding to carry out a project in a particular area of the world: • Temperature(daytimeandnighttime)indifferentseasons• Rainyseasons(monsoon)• Tornadoortyphoonseasons• Accessbyroad,rail,water,orair• Groundconditionsandearthquakezones• Possiblegroundcontamination• Nearbyriversandlakes• Istheprojectonshoreoroffshore?• Tidesandstormconditions• Nearbyquarriesforrawmaterials• Doestheprojectinvolvetheuseofradioactivematerials?

Most countries now have strict legislation to prevent or restrict emissions of polluting sub-stances whether solids, liquids, or gases. In addition noise restrictions may apply at various times and cultural or religious laws may prohibit work at specified times or on special days in the year.

The following list is a very small sample of over 15000 web pages covering European Eco-nomic Community (EEC) directives and gives some idea of the regulations that may have to be followed when carrying out a project.

EC Directive 85/337/EEC Environmental impact assessment97/11/EEC Assessment of effects on certain public & private projects92/43/EEC Chapter 4 Environment86/278/EEC Protection of the environment90/313/EEC Sustainable development90/679/EEC Substances hazardous to health79/409/EEC Conservation of natural habitats96/82/EEC COMAH (Control of major accident hazards)91/156/EEC Control of pollution87/217/EEC Air pollution89/427/EEC Air pollution80/779/EEC Air quality limit values75/442/EEC Ozone depleting substances89/427/EEC Quality limit of sulphur dioxide80/1268/EEC Fuel & CO2 emissions91/698/EEC Hazardous waste78/659/EEC Quality standard of water80/68/EEC Ground water directive80/778/EEC Spring waters89/336/EEC Noise emissions