Project Identification and Selection PDF

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Idea screening , Project Identification, Pre feasibility and Feasibility analysis...

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-Dr.%Karishma Chaudhary

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Project(Identification(Process Project(Initiation Pre(feasibility(Studies Feasibility(Studies Project(Break(Even(and(its(Managerial( implications

ØProjects have a major role to play in the economic development of a country. ØSince the introduction of planning in our economy, we have been investing large amount of money in projects related to industry, minerals, power, transportation, irrigation, education etc. with a view to improve the socio-economic conditions of the people.

• These(projects(are(designed(with(the(aim(of( efficient(management,(earning(adequate( return(to(provide(for(future(development(with( their(own(resources.(But(experience(shows( that(there(are(several(shortcomings(in(the( ultimate(success(of(achieving(the(objectives(of( the(proposed(project.

CHARACTERISTICS)OF)A)PROJECT • • • • • • • • • • •

Objectives Life)cycle Uniqueness Team)Work Complexity Risk)and)uncertainty Customer)specific)nature Change Optimality Sub-contracting Unity)in)diversity

PROJECT)FAMILY)TREE • A(project(normally(originates(from(a(plan,(national(plan(or( corporate(plan.(In(normal(scheme(of(things,(the(family(tree(for(a( project(would(be(as(given(below • Plan(=(National/Corporate(plan(with(target(for(growth. • Programme(=(health(programme,(educational(programme,(R&D( programme. • Project(=(Power(plant,(hospital,(housing(project(etc. • Work(Package(=(Water(supply,(power(supply(and(distribution( package. • Task(=(Award(of(water(supply(contract,(construction(&( foundation. • Activity(=(Excavation,(laying(of(cable,(preparation(of(drawing.

CLASSIFICATION)OF)PROJECTS

PROJECT)LIFE)CYCLE • • • • • •

Identification Initial(formulation Evaluation((selection(or(rejection) Final(formulation((or(selection) Implementation Completion(and(operation

Project Selection process

PROJECT)SELECTION)PROCESS § Identification(of(a(new(project(is(a(complex(problem.( Project(selection(process(starts(with(the(generation(of( project(ideas.( § In(order(to(select(the(most(promising(project,(the( entrepreneur(needs(to(generate(a(few(ideas(about(the( possible(project(one(can(undertake.( • The(project(ideas(as(a(process(of(identification(of(a( project(begins(with(an(analytical(survey(of(the( economy((also(known(as(pre-investment(surveys).( • The(surveys(and(studies(will(give(us(ideas.(The(process( of(project(selection(consists(of(following(stages(:

Project(selection(Process

• The(process(of(project(selection(consists(of(following stages(: • Idea(generation • Environment(appraisal. • Corporate(appraisal • Scouting(for(project(ideas. • Preliminary(screening. • Project(rating(index • Sources(of(positive(Net(Present(Value. • Entrepreneur(qualities.

• You(have(an(idea,(you(take(this(idea(and(you( pull(all(the(things(that(need(to(come(together( and(it’s(called(‘believing.’(Innovation(boils( down(to(conceive(it,(believe(it,(achieve(it.(( •

Leon%Royer%retired%executive%director,%3M%Leadership%Development%Center,%Human% Resources,%formerly%a%technical%director

Innovation(Value(Chain Innovation) Value)Chain

Idea( Generation

InHouse/Within( a(unit

Collaboration( across(units

Idea( Conversion

External

Selection

Diffusion

Development

Source: Innovation Value Chain/The Sophisticated Innovator/HBR June 2007

In-House)

Idea)Generation

q High(quality(Ideas( generated(( within(a( unit. Idea)Generation

Collaboration)across)units q High(quality(ideas( generated(due(to(sharing( of(thoughts(and(ideas(of( the(people(of(different( departments

InHouse/Within) a)unit

External q High(quality(ideas( generated(( from( outside(the(( firm

Collaboration) across)units

External

Idea(Conversion Ø Select q Screening(of(ideas(to( select(the(best( feasible(idea

Idea( Conversion

q Initial(funding

Ø Development q Movement(from(idea( to(first(result.

Selection

Development

Diffusion ØDiffusion

q Penetration(in( desired(geographical( locations,(market(,( channel,(customer( group.

Diffusion

Innovative(companies(create(an(environment( that(fosters(the(right(tension(with “and( thinking.” •

One(critical(balance(at(3M(is(between(present(AND(future(concerns.( Quarterly(results(are(important(but(should(not(be(the(sole(focus;(staying( relevant(is(also(important(but(cannot(come(at(the(cost(of(current( performance.(3M)has)several)mechanisms)to)sustain)this)“and) thinking.”)Employing)the Thirty)Percent)Rule,)30%)of)each)division’s) revenues)must)come)from)products)introduced)in)the)last)four)years.( This(is tracked rigorously,(and(employee(bonuses(are(based(on( successful(achievement(of(this(goal.(3M(also(uses(“and(thinking”(in(their( three-tiered(research(structure.(Each(research(area(has(a(unique(focus:( Business(Unit(Laboratories(focus(on(specific(markets,(with(near-term( products;(Sector(Laboratories,(on(applications(with(3-to-10(year(time( horizons;(and(Corporate(Laboratories,(on(basic(research(with(a(time( horizon(of(as(long(as(20(years.

Top(50(Innovative(Companies • https://www.visualcapitalist.com/top-50most-innovative-companies-2020/

Samsung • • https://www.youtube.com/watch?v=pU0hb2Srj4

Idea)Generation):- Project(selection(process(starts(with(the(generation(of(a(project idea.(Ideas(are(based(on(technological(breakthroughs(and(most(of(the(project( ideas(are((variants(of(present(products(or(services.(To(stimulate(the(flow(of(ideas,( the(following(are(helpful: SWOT)Analysis):SWOT(is(an(acronym(for(strengths,(weaknesses,(opportunities(and threats.(SWOT(analysis(represents(conscious,(deliberate(and(systematic(effort(by(an organization(to(identify(opportunities(that(can(be(profitably(exploited(by(it.( Periodic)SWOT)analysis)facilitates)the)generation)of)ideas. Operational(objectives(of(a(firm(may(be(one(or(more(of(the(following. •(Cost(reduction. •(Productivity(improvement. •(Increase(in(capacity(utilisation. •(Improvement(in(contribution(margin

Fostering)a)conducive)climate):- To(tap(the(creativity(of(people(and(to(harness( their(entrepreneurial(skills,(a(conducive(organization(climate(has(to(be( fostered.(Two(conspicuous(examples(of(organization(which(have(been( exceptionally(successful(in(tapping(the(creativity(of(employees(are(the(Bell( Telephone(Laboratory(and(the(3M(Corporation.(While(the(former(has( succeeded(in(harnessing(creativity(by(providing(an(unconstrained( environment,(the(latter(has(effectively(nurtured(the(entrepreneurial(skills( of(its(employees(as(sources(of(idea(generation.(The(project(ideas(can(be( generated(from(various(internal(and(external(sources.(These(are(:•(Knowledge(of(market,(products,(and(services. •(Knowledge(of(potential(customer(choice. •(Emerging(trends(in(demand(for(particular(product. •(Scope(for(producing(substitute(product. •(Market(survey(&(research. •(Going(through(Professional(magazines. •(Making(visits(to(trade(and(exhibitions. •(Government(guidelines(&(policy. •(Ideas(given(by(the(experienced(person. •(Ideas(by(own(experience. •(SWOT(analysis.

• SWOT(analysis(is(normally(performed(during(the(initial( project(start-up(phase(so(that(the(elements(of(the( analysis(can(form(the(basis(of(the(project(plan,(but(it( can(also(be(used(later(in(the(project(if(the(project(is( running(into(difficulties(with(scheduling,(deliverables(or( budget(and(needs(to(be(brought(back(on(track. • For)example,)if)a)certain)key)activity)in)the)project) requires)new)software,)a)SWOT)Analysis)can)be)used) to)assess)the)risks)and)the)opportunities)of) purchasing)the)software)and)training)staff)in)its)use)in) order)to)help)with)the)resource)planning.

Performing(a(SWOT(Analysis • • • • •

A)SWOT)analysis)session)should)always)have)a)clear)objective)and)it)is)the)Project) Manager's)responsibility)to)communicate)that)objective)to)all)those)present)at) the)session.) A(typical(session(will)include)all)stakeholders,)where)possible,)and)key)members) of)the)project)team.) If(the(analysis(is(being)performed)at)the)start)of)a)project,)the)objective)is)likely)to) be)fully)identifying)all)required)activities)and)potential)risks)so)that)a)proper)plan) can)be)put)in)place.) However,(if)it)is)being)conducted)during)an)ongoing)project,)the)objective)may)be) to)re-assess)the)budget)or)schedule. Because(the(objectives(of(a(SWOT(Analysis(can(vary(so(too(can(the(questions(used( to(elicit(the(required(information.(For(this(reason(there(is(not(a(standard(set(of(predefined(questions(that(will(meet(every(situation,(but(every(session(must(have(a(set( of(questions(written(down(before(the(session(to(ensure(the(attendees(remained( focussed.(This,(again,(is(the(project(manager's(responsibility.(Depending(on(the( urgency(of(completing(the(analysis(and(starting(the(project(planning(phase,(it(may( be(necessary(to(send(out(the(questions(in(advance(to(allow(attendees(the( opportunity(of(gathering(any(relevant(information(in(advance.

Strengths Does)the)company)have)the)necessary) skills)in-house? Has)a)budget)been)assigned)to)the) project? What)are)the)business)benefits)of) completing)the)project? Will)the)project)require)new)technology) or)equipment? How)experienced)is)the)project)team)on) similar)projects?

Weakness Is)there)a)reliable)estimate)of)costs) available? Does)the)company)have)the)budget)to) provide)contingency)funding? What)are)the)drawbacks)of)the)project? Will)parts)of)the)project)need)to)be) outsourced? Is)the)proposed)schedule)realistic?

Opportunities Can(a(local(project(be(leveraged( nationally(or(internationally? Do(the(competitors(have(any( weaknesses? What(are(the(latest(industry(trends? Are(there(any(new,(or(imminent,( technology(developments?

Threats Is(there(well-established(competition( already(in(the(marketplace? Are(experienced(staff(difficult(to( replace? Has(new(technology(been(fully(tested? Could(national(or(global(economic( conditions(affect(the(project?

• Typical(questions(for(each(part(of(the(SWOT( Analysis(are(listed(below: The(list(of(questions(to(use(in(a(SWOT(analysis( could,(obviously,(be(much(longer(than(the(basic( questions(listed(above,(but(using(these(in(your( own(particular(project(will(provide(a(good( starting(point.(Performing(a(thorough(SWOT( analysis(at(the(beginning,(or(any(stage,(of(a( project(will(provide(you(with(detailed(information( to(help(you(in(the(planning(and(decision-making( processes(of(a(project.

• https://hbr.org/2013/08/the-innovationmindset-in-acti-3 • https://www2.deloitte.com/us/en/pages/oper ations/solutions/enterprise-crowdsourcingsolution-pixel.html

What%is%pre-feasibility%study? • •

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Pre-feasibility study is a preliminary study undertaken to determine, analyze, and select the best business scenarios. In this study, we assume we have more than one business scenarios, then we want to know which one is the best, both technically and financially. In pre-feasibility we select the best idea among several ideas. It will be hard and takes time if we explore each scenario deeply. Therefore, shortcut method is acceptable in this early stage and can be used to determine minor components of investment and production cost. If the selected scenario is considered feasible, it is recommended to continue the study to feasibility to get deeper analysis of the selected project scenario.

What%is%feasibility%study? • Feasibility)Study:(A(closer(examination(of(cost(and(benefit( of(a(project(to(ascertain(whether(it(is(viable,(feasible(and( profitable(to(undertake(as(a(venture. • Feasibility)Report:(A(written(document(plan(or(a(blue(print( of(operation(of(a(business(project. • Investment:(Commitment(of(fund(or(money(in(the( purchase(of(an(asset(or(a(contribution(of(assets(intended( for(installation(to(yield(return(in(the(business(concern. • The difference between(feasibility(study(and(pre-feasibility( study.(We(first(consider(to(arrange(pre-feasibility(study(if( we(still(don’t(have(idea(how(to(get(financial(resource(to( execute(the(project.(Unlike(pre-feasibility(study,(we(must(be( ready(for(financial(resources(if(we(move(to(feasibility(study.

• Sometimes,(we(put(term bankable before(feasibility( study.(Adding(this(term(simply(means(that(the(level(of( effort(that(has(been(incorporated(into(the(study(is( sufficient(for(outsourcing(financing,(provided(the( project(is(feasible.(Typically(“bankable”(means(an( overall(accuracy(level(of(+/- 15%(on(the(feasibility( study. • To(some(industry,(the(act(of(commissioning(a( “bankable”(feasibility(study(has(come(to(mean(that(the( project(is(feasible.(As(a(result,(they(assume(if(they(ask( for(a(“bankable”(feasibility(study,(they(will(get(the( study(which(shows(the(project(is(feasible.

• The%Accuracy • It(is(obvious(that(feasibility(study(will(be(more( accurate(than(pre-feasibility(both(in(technical( aspect(or(financial(analysis(aspect.(Association( for(the(Advancement(of(Cost(Engineering( (AACE(International)(has(made(the( classification(of(capital(cost(estimates.

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Based(on(the(table(above,(the(accuracy(of(pre-feasibility(study(may(be(Class(5.(On( the(other(hand,(the(accuracy(of(feasibility(study(should(be(class(4.(The(highest(the( class(of(capital(cost(estimates,(the(more(accurate(the(determination(of(capital(cost.

Pre-feasibility(of(mining(projects • What)is)a)prefeasibility)study? • Prefeasibility studies are an early stage analysis of a potential mining project. They are conducted by a small team and designed to give company stakeholders the basic information they need to green light a project or choose between potential investments. Prefeasibility studies typically give an overview of a mining project’s logistics, capital requirements, key challenges and other information deemed important to the decision-making process. When and why do companies undertake them? • Prefeasibility studies act as one of the first explorations of a potential investment, following a preliminary resource report. Based on the data procured by various assessments, a prefeasibility study may occur. Companies use these studies to collect information before investing millions of dollars into tasks like acquiring permits or research equipment.

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What)information)do)they)include? In(addition(to(information(relating(to(geological(models(and(mine(design,( prefeasibility(studies(also(take(into(account(factors(that(may(impact(or( interfere(with(the(final(project.(That)can)involve)community)issues,) geographic)obstacles,)permit)challenges)and)more. A(comprehensive(prefeasibility(study(should(include(detailed(designs(and( descriptions(for(mine(operation,(as(well(as(cost(estimates,(project(risks,( safety(issues(and(other(important(information.(There(should(also(be( multiple(options(included(in(the(study(for(tackling(different(issues,(as(that( will(provide(organizations(with(more(ways(to(overcome(potential( challenges. What)happens)if)results)of)the)prefeasibility)study)are)positive?) Negative? If(a(prefeasibility(study(results(in(a(positive(base-case(scenario,(the( company(will(likely(move(on(to(the(next(stage:(a(feasibility(study.(If)the) study)is)negative,)organizations)may)head)back)to)the)drawing)board)or) abandon)the)potential)project)altogether.

• What)is)a)feasibility)study? • Feasibility studies are in-depth reports on many of the same topics as prefeasibility studies. They are meant to be much more accurate than prefeasibility studies and require more resources to conduct. Feasibility studies should offer estimates that are within 10- to 20percent accuracy, whereas prefeasibility studies are allowed to run between 20 and 30 percent. • These studies are intended to evaluate if a mineral reserve can be mined effectively and will be profitable. Detailed feasibility studies are also used as the basis for a project’s capital estimates. • When and why do companies undertake them? • At this point in the process, organizations already have large sums of money at stake and a drive to see their project through to completion. Feasibility studies are all about reducing risks and addressing potential issues that may complicate a project. The studies also include information that is helpful for stakeholders like local governments or environmental analysts.

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What)information)do)they)include? Feasibility studies cover many important points, including technical, economic, legal, operational and scheduling issues related to a project. Good feasibility studies should be able to address questions across these topics. A study should feature information about whether a project is technically possible, how much it will cost, whether it’s in accordance with the law, how operations will work and when it can be completed. Market analysis research can also be a vital part of the feasibility study phase. This type of research is intended to ensure that there is demand for the metal or commodity a project may produce. Market research also helps to zero in on competition in the marketplace. This type of information on markets and demand is especially valuable for investors. What happens if results of the feasibility study are positive? Negative? Feasibility studies act as tools that provide CEOs and mining engineers with as much detailed information as possible to make intelligent and strategic decisions regarding a project. Decisions will vary, but can include choices like canceling projects, bringing in partners, increasing investment or changing schedules. Why should investors care? Both prefeasibility and feasibility studies can provide investors with useful updates on the progress of a company’s project. These studies help create a more concrete picture about a company’s milestones and challenges moving forward.

Idea(generation(continued• Environment)appraisal):- An(entrepreneur(or(a(firm( systematically(appraise(the(environment(and(assess( its(competitive(abilities.(For(the(purposes(of( monitoring,(the(business(environment(may(be( divided(into(six(broad(sectors(as(shown(below.

Economic)Sector • State(of(the(economy((key( macroeconomic( factors,unemployment,(GDP(etc.) • Overall(rate(of(growth •(Cyclical(fluctuations((seasonal( patterns) •(Inflation(rate •(Growth(rate(of(primary,(secondary( and(tertiary(sector •(Growth(rate(of(world(economy •(Trade(surplus(and(deficits •(Balance(of(Payment Technological)Sector •(Emergence(of(new(technologies(IT,( nanotechnology,educational technology(,(robotics,(AI(etc) •(Access(to(technical(know-how,( foreign(as(well(as(indigenous

Government)Sector •(Industrial(policy(IP)- does(it(encourage( development(of(all(sectors(of(economy •(Government(programmes(and(projects(( education,(poverty((alleviation,(infrastructure) •(Tax(structure(GST,(Income(tax,(customs(duty,( central(excise(duty(etc.) •(EXIM(policy(ease(of(doing(business,(procedures) •(Financing(norms(interest(rate,((security) •(Subsidies(incentives(and(concessions •(Monetary(policy(inflation(and(interest(rate) Socio-demographic)Sector •(Population(trends •(Age(shifts(in(population •(Income(distribution(combined(wealth,(net(worth( of(individuals) •(Educational(profile •(Employment(of(women •(Attitudes(toward(consumption(and(investment

Competition)Sector •(Number(of(firms(in(the(industry(and(the(market(share(of(the(top few •(Degree(of(homogeneity(and(differentiation(among(the(products •(Entry(barrier(high(start(up(costs,(policies) •(Comparison(with(substitutes(in(term(of(quality(and(price •(Marketing(polices(and(practices Supplier)Sector •(Availability(and(cost(of(raw(material •(Availability(and(cost(of(energy • •(Availability(and(cost(of(capital

To(prepare(strategic(plans Corporate)Appraisal):- A(realistic(appraisal(of(corpora...