9 Projects Procurement 60

8/2/2019 9 Projects Procurement 60

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PROJECT PROCUREMENTROJECT PROCUREMENT


2/23

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


4/23

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


5/23

(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


6/23

(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


7/23

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.


9/23

(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



10/23

(Rs/$.000Rs/$.000Itemstems Localocal

CurrencyurrencyForeignoreign


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.



11/23

(Rs/$.000Rs/$.000Itemstems Localocal



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.



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(Rs/$.000)Rs/$.000)Itemstems Localocal



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


13/23

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


14/23

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


16/23

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


19/23

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


20/23

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


21/23

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


22/23

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


23/23

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.

Documents

9 Projects Procurement 60