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7/29/2019 CEESP Project Management. Unit Two
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Project Management
Previous Analysis
Lecturer: Javier Daz lvarez
Electrical EnergyConversion andPower Systems
Universidadde Oviedo
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Previous Analysis
What do I have to think before starting a project?
- Needs
- Targets
- Requirements
- Functional
- Technical
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Needs
Some considerations:
We have to take into account the needs of all the stakeholders. Frequently, they
are contradictory. The direction of the company (helped by the PM if thedesignation has been done) has to balance and prioritize conflictive needs.
It is very important to understand the differences between needs and wishes.
Sometimes, it is important to help the customer to understand its needs and it
could be an opportunity to increase the scope. But the target should be the
satisfaction of the client, the increment of the scope is only a possitve
collateral effect.
Needs: something needed; a requirement; sometimes
something vague
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Needs Project 1. Wind Farm
We need to make a 50 MW wind farm in the following 24 months tomeet the targets of the company.
Project 2. Substation in Oviedo
We need to improve the quality of the electricity distribution in Oviedo.
The key indicators of distribution quality are not as high as they should be.
Project 3. Bridge.
We need a bridge to increase the capacity of a road from 1.000 to
4.000 vehicles per hour.
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Targets Targets should be developed as an evolution of the needs.
They should comply with the five elements of the SMART
model: S: Specific
M: Measurable
A: Agreed upon R: Realistic
T: Time constrained
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Targets Project 1. Wind Farm
Achieve the final reception, the environmental reception and the finalinscription of the wind farm in 24 months.
Project 2. Substation in Oviedo
Construct the substation and sign the Take Over Certificate in twelve
months.
Project 3. Bridge.
Promote and construct the new bridge (4.000 vehicles per hour) in 36
months taking into account the environmental gaps (ciconia nigra).
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Requirements
Functional requirements are the needs of the customer. They
come from the targets. The better defined targets, the betterfunctional requirements well have.
Technical requirements are developed by the project team
to meet with functional requirements.
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Exercise 2.1 Project 1. Tansmission line from nuclear power
station 100 km from Madrid to Madrid.
Needs, targets and requirements
Project 2. Oil refinery in Guadalajara. Needs, targets and requirements
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Project selection
Each company has its own practices
Selection should be as much objective as possible
Most of the times, selection is not only aquantitative issue
Selection should be coordinated with strategictargets of the company
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Selection tools Profit cost ratio
Profit/Cost
Net Present Value
NPV = -I0+((Fi)/(1+r)i)
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Selection tools (II) IRR
Interest rate which makes NPV=0
Payback periode
Time to recover invested money
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Exercise 2.2- Calculate PCR, NPV, IRR and Payback Periode of these projects
Project A Project B Project C Project D Project D
Investment -6500 -6500 -6500 -10000 -10000
Incomes year 1 4000 2500 1000 6000 2000
Expenses year 1 -500 -500 -500 -1000 -1000
Incomes year 2 4000 2500 1000 5000 3000
Expenses year 2 -500 -500 -500 -1000 -1000
Incomes year 3 2000 2500 2000 4000 4000
Expenses year 3 -1000 -1000 -1000 -1000 -1000
Incomes year 4 1000 2500 4000 3000 5000
Expenses year 4 -1000 -1000 -1000 -1000 -1000
Incomes year 5 1000 2500 4000 2000 6000
Expenses year 5 -1000 -1000 -1000 -1000 -1000
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Exercise 2.2. Solution.
Project A Project B Project C Project D Project E
PCR 1,14 1,19 1,14 1,33 1,33
Payback periode 2 years 3,75 years 4,5 years 2,25 years 4 years
NPV 535,26 380,70 - 567,70 2.591,12 1.365,14
IRR 13,33% 10,35% 5,47% 20,27% 12,01%