Class 3 PLANNING AND APPRAISAL OF Infrastructure Planning and Management PLANNING AND APPRAISAL OF MAJOR INFRASTRUCTURE PROJECTS Dr. Sari Abusharar The Islamic University of Gaza Faculty of Engineering Civil Engineering Department Graduate Program Infrastructure Engineering 2 nd Semester 2012
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Class 3
PLANNING AND APPRAISAL OF
I n f r a s t r u c t u r e P l a n n i n g a n d M a n a g e m e n t
PLANNING AND APPRAISAL OF
MAJOR INFRASTRUCTURE PROJECTS
Dr. Sari Abusharar
The Islamic University of Gaza
Faculty of Engineering
Civil Engineering Department
Graduate Program
Infrastructure Engineering
2nd Semester 2012
Outline of Presentation
� Introduction
�Sequence of Studies for a Single Major Infrastructure Project
� First Sage: Preliminary (Or Reconnaissance) Report
� Second Stage: Feasibility Report� Second Stage: Feasibility Report
� Third Stage: Final Design and Preparation of Contract Documents
� Fourth Stage: Construction
� Fifth Stage: Operation
� Formulation of a Major Engineering Project
� Project Costs
Introduction
Most major engineering projects (e.g. large projects, projects has
interstate implications) must undergo a comprehensive series of
studies and approvals before they are authorized and
implemented.
This class will describe typical methodologies to determine the
layout, capacity, and costs of a major project and to carry out the
additional steps that needed in order to plan and implement it.
Interstate Highway System
Interstate Rail System
Sequence of Studies for a Single
Major Infrastructure ProjectMajor Infrastructure Project
A typical complete planning and implementation process
involves a five-stage sequence of reports, documents, and
actions for the project.
Sequence of Studies for a Single Major
Infrastructure Project
preliminary
report
a feasibility
report
preparation
of contract
documents
activities during
construction
Operation
First Sage: Preliminary ReportFirst Sage: Preliminary Report
First Sage: Preliminary Report
This stage consists of office studies, field studies, and the
preparation of a report. This report should answer the
following questions:
�Is a feasible project likely?
�What are approximate estimates of capacity and cost?
�What additional studies are needed to confirm feasibility?
First Sage: Preliminary Report (continued)
Using available information contained in previous reports, maps, and data.
Much of this information may be available from state, and local
governmental agencies, utilities, private firms and other sources. Basic
materials include soils data; water quality information on environmental
conditions, and population and socio-economic data.
Office studies
conditions, and population and socio-economic data.
It is needed to confirm the office studies, to suggest changes in the layouts
and estimates, and to obtain detailed information concerning additional
matters
Field reconnaissance and surveys studies
Second Stage: Feasibility ReportSecond Stage: Feasibility Report
Second Stage: Feasibility Report
This report is authorized in case of the available data in the
preliminary report is not enough and needs more clarification
and details.
The feasibility report provides the basis for an examination by
decision-makers in a government agency or an internationaldecision-makers in a government agency or an international
financial institution, to determine whether a project should be
implemented and/or financed.
The level of engineering detail for such a report is higher than
for a preliminary report but lower than needed for the detailed
design and preparation of drawings and specifications included
in the contract documents for construction.
Second Stage: Feasibility Report (continued)
A comprehensive feasibility report include:
� Descriptions and analyses of the data.
� Confirmation of construction feasibility based on field
and laboratory investigations, studies of project
arrangements and individual project features, andarrangements and individual project features, and
analysis of construction methods (sources of
construction materials, access to the project site,
management of traffic patterns, diversion of water
during construction, etc).
� Recommendations for arrangement of project works,
preliminary plans and other analyses to determine the
principal quantities of construction, a reliable cost
estimate, and discussions of the design criteria
Second Stage: Feasibility Report (continued)
� Construction schedule showing the timing and costs of
project features� Financial analyses projecting the year-by-year costs,
revenues, and subsidies.� Economic analyses of the project, if appropriate (e.g., if� Economic analyses of the project, if appropriate (e.g., if
the sponsor is a federal agency or a regional authority).� Plans for financing construction, and for managing the
construction and operation..
� Institutional and legal requirements� Assessments of the environmental and social impacts of
construction and operation, and other impact studies if
required.
Third Stage: Final Design and
Preparation of Contract DocumentsPreparation of Contract Documents
Third Stage: Final Design and
Preparation of Contract Documents
� Contract documents include plans and specifications that
are sufficiently detailed to obtain tenders (bids) from
qualified construction and equipment contractors. The plansqualified construction and equipment contractors. The plans
(drawings) and specifications are based on additional studies
of the details of project works, the logistics of construction,
other aspects related to temporary and permanent facilities,
and the performance of contractors.
� The sponsor and its engineers and financial specialists
review the tenders made by contractors.
Fourth Stage: ConstructionFourth Stage: Construction
Fourth Stage: Construction
When traditional contracts are employed for the purchase of
construction and equipment, additional detailed drawings
needed during construction are prepared by the sponsor'sneeded during construction are prepared by the sponsor's
engineers and by the contractors subject to the sponsor's
approval. Payments to the contractors are usually made
based on measurements of work in progress or completed, in
accordance with the terms of the contract documents.
Usually, a percentage of each payment is withheld by the
sponsor and released only when the work is entirely
completed and accepted.
Fifth Stage: OperationFifth Stage: Operation
Fifth Stage: Operation
The sponsor may employ outside engineers and other The sponsor may employ outside engineers and other
consultants to assist in operation for a limited period, train
operators, prepare manuals for operation and maintenance,
and monitor the performance of the various facilities. The
operating rules may be changed on the basis of experience
during the operation of the project.
Formulation of a Major Engineering Project
�The engineers (or the interdisciplinary team of
specialists) who participate in project formulation define the
location and arrangement of project components, with
sufficient details concerning their sizes and functions, so
that realistic cost estimates and other studies determining
feasibility can be prepared.feasibility can be prepared.
�During project formulation, the planner starts with an
understanding of the needs to be satisfied and/or the
problems to be solved; evaluates the available data and other
pertinent information; carries out other investigations; and
conceives a plan to utilize land, water, and other resources to
meet the project needs and problems.
Formulation of a Major Engineering Project
(continued)
�Factors affect selection of a preferred alternative:
�Ability to respond to purposes and needs
�Engineering/design feasibility or restrictions
�Severity of environmental impacts
�Uncertainty in impact prediction�Uncertainty in impact prediction
�Irreversibility of impacts
�Degree of beneficial impacts�Costs
�Funding availability and commitment
�Public opinion
�Political support
�Ability to meet statutory requirements
�Permitting agencies concurrence
�Some uncertainties must be assessed primarily by
engineering judgment based on experience and
observations:
�Alternative solutions that are apparently equivalent may not
produce the same results.
Formulation of a Major Engineering Project
(continued)
produce the same results.�Some solutions may offer greater flexibility than others for
potential future modifications of the project purposes to suit
future needs.�Some solutions may include components that are more or less
susceptible to unforeseen construction or operation and
maintenance problems and consequent increases in costs.�In the comparison of alternatives, the planner must also
recognize that alternatives may be favored or not favored, or even
ruled out, depending upon other practical considerations.
Project CostsProject Costs
Project Costs
Estimated of capital cost and annual cost of a prospective
infrastructure project are essential ingredients of a plan and
should be carried out for most infrastructure initiatives except
for operation and maintenance of a routine nature.
Project Costs (continued)
�Capital recovery costs (or ownership costs) are incurred by
purchasing assets to be used in production and service. Usually
Capital costs are nonrecurring (one time costs), where as operating
costs recur as long as an asset is owned.
Capital Cost/ Investment Cost
�The costs of purchase contracts, together with the costs of lands,
land rights, and possibly separate water rights, constitute the total
direct construction costs, not including contingences.
�Engineering supervision of construction (by engineer and/or
owner, not by the contractor) and owner's overhead assigned to the
project and then applied as percentages of the subtotal of direct
costs, including contingences.
Project Costs (continued)
�Contingences are applied, usually as percentages of direct
construction cost components. Contingences cover extra costs that
are paid to contractors during construction de to :
�Differences between estimated quantities of construction and the
quantities actually realized at the project site.
�Omissions of incidental items of work.
�Unforeseen difficulties at the site.�Unforeseen difficulties at the site.
�Changes with lands.
�Other uncertainties not definable when the contractors are awarded.
�The resulting subtotal represents the total costs, except for interest
monies borrowed during construction. If investment costs are
estimated as of the date when construction is completed and
operation starts, it is necessary to add interest during construction
for borrowed funds or for equivalent expected returns on equity funds
used for the construction.
Project Costs (continued)
�Direct construction costs (purchased materials, equipment rental or
ownership, wages or salaries paid to construction and/or installation
personnel, management and supervision, overhead and profit).
Components of Capital Costs
� Contingencies
� Land and Land Rights
� Engineering, supervision of construction, and sponsor overhead
� Timing of project construction and investment costs
Project Costs (continued)
�Maintenance and operation item applies to labor, supplies, and
replacement of short-lived equipments and materials.
Components of Annual Cost
�General administrative expenses are for a portion of the overhead
of the central offices of the owner.
�Renewals and replacements apply only to major structural or
machine elements and are estimated as an annual amount to preserve
the equity of the investment and keep the project in operative order.
�Debt service covers interest and amortization based upon repaying
the investment cost of the project within the useful life of the
project.
�Federal License fees are included (only federal government
agencies are exempt from licensing and payment fees)
Project Costs (continued)
The construction cost indexes are used to take into account inflation. Cost
estimate prepared for a four-year construction project when the applicable
construction cost index was 3000 and the interest rate for construction
funds was 4 percent, can be updated for an index of 4000 and an interest
rate of 8 percent.
Use of Indexes to Adjust Cost Estimates
Homework #3
You should submit a hard copy of your answers in next class
(Tuesday, February 28):
You were selected to design a pumping station in your region. You were selected to design a pumping station in your region.
a. What are the studies to be prepared for this station?
b. Determine a form to estimate the capital and annual cost?