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?