Economic

Here again there are two levels of influence: internal or micro-economic, and external or macro-economic.

The internal economics relate to the viability of the project and the soundness of the business case. Unless there is a net gain, whether financial or non-financial, such as required by prestige, environmental, social service or national security considerations, there is no point in even considering embarking on a project. It is vital therefore that financial models and proven accountancy techniques are applied during the evaluation phase to ensure the economic viability of the project. These tests must be applied at regular intervals throughout the life of a project to check that with the inevitable changes that may be required, it is still worthwhile to proceed. The decision to abort the whole project at any stage after the design stage is clearly not taken lightly, but once the economic argument has been lost, it may in the end be the better option.

A typical example is the case of an oil-fired power station which had to be mothballed over halfway through construction, when the price of fuel oil rose above the level at which power generation was no longer economic. It is not uncommon for projects to be shelved when the cost of financing the work has to be increased and the resulting interest payments exceed the foreseeable revenues.

The external economics, often related to the political climate, can have a serious influence on the project. Higher interest rates or exchange rates, and additional taxes on labour, materials or the end product, can seriously affect the viability of the project. A manufacturer may abandon the construction of a factory in his home country and transfer the project abroad if just one of these factors changes enough to make such a move economically desirable. Again changes to fiscal and interest movements must be constantly monitored so that representations can be made to government or the project curtailed. Other factors which can affect a project are tariff barriers, interstate taxes, temporary embargoes, shipping restrictions such as only being permitted to use conference line vessels and special licenses.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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