PROJECT INITIATION
Project initiation is the phase from the acceptance of the Request for Proposal by certain organization to its formally launching.
Request for Proposal and Feasibility Study
The Request for Proposal is a written formulation of the consideration for the project. The feasibility study report is a written report concluding whether the project is feasible after detailed investigation, strict research, technical, economic and environmental analysis, and alternative selections. It is a type of analysis reports more detailed and scientific than the Request for Proposal.
The purposes of the Request for Proposal and feasibility study are to define whether the project is feasible or not, what alternative is adopted if it is feasible, and how the investors and stakeholders will be convinced. Such process is also call project evaluation.
Project evaluation on large or significant projects generally include technical, economic, financial, social and environmental, and organizational feasibility studies. The risk evaluation is also performed if necessary.
Technical Feasibility
A technical feasibility study involves (but is not limited to) considering project location, selection of materials, advancement and applicability of technical alternatives, technical development trends, length of the project life cycle and product life cycle, and conformance to the relevant national technical standards.
Economic Feasibility
An economic feasibility study involves assessing the contribution to, as well as the influence of the project on the national economy, for instance, whether the project objectives are conformable to the goals of the national economic development or not, and the project is beneficial to overcome the bottleneck of the national economic development, or is categorized into restricted industries. The economic feasibility study needs to review the project economic returns. The project economic benefits are calculated using shadow prices, shadow rates, and social present rates. The economic return rates of various technical alternatives should also be considered.
Financial Feasibility
A financial feasibility study involves financially assessing the contribution to, as well as the influence of the project on the project parties, organizations (enterprises). These include the organizational debt structure, capital structure, financial and financing capabilities of the performing organization, and the financial return rate of the organization. The project financial benefits are calculated using market prices, market rates, and market present rates. The financial return rates and return period of various technical alternatives should also be considered.
4.1.4 Social and Environmental Feasibility
A social and environmental feasibility study involves assessing the influence of the project on the environment. Examples include whether the project will be beneficial to the social stability; whether it will be detrimental to the ecological environment; whether it will destroy scare species; and whether it will be accepted by the public.
4.1.5 Organizational Feasibility
An organizational feasibility study involves assessing the influence of the project organization on the project success. Examples include whether the project organization provides the assurance for the project success; whether project parties and organization have adequate credits; whether the project acceptor has excellent operational system to ensure the benefits and sustainable development of the project.
Project Verification and Ratification
After project selection, large projects, especially some public welfare and infrastructure projects funded by the government, require verification. The project sponsor recognizes the necessity and existence of the project and provides the project manager with the authority to apply organizational resources to project activities. The written document for project verification is called project charter.
Many projects require the ratification from the governmental agencies abiding by certain procedure in terms of national codes and regulations. For example, the construction projects should be developed conforming to the national construction procedures. The projects possibly detrimental to the environment should obtain the evaluation and approval from environment protection agencies.
The process that the project is ratified by organizational decision-makers or governmental agencies, and is listed in their development programs is called project initiation.
Some aforementioned processes may be ignored for some smaller projects.
Project Fund Raising
In many cases, the total capital for the completion of the project is ready prior to the project start. The financing for the project therefore plays an important role in project initiation.
The sources of the project capital often fall into two categories, namely, self-owned capital and debts.
Project financing is a debt with limited dunning authority designed specially for financing the project. Build-Operate-Transfer (BOT) is a special form of project financing with concessions from the local government.
In addition to reviewing feasibility of the project, the investors and debtors may pay special emphasis on the finance evaluation to ensure that adequate and reliable finance return can be obtained.
Project Launching
Project launching is the process to appoint project manager, establish project team and project management team, and carry out the detailed project preparation.
The project manager is the representative of the project client, the head of the overall management after project initiation, the core of the project team, and the link to coordinate various project stakeholders. Project manager is responsible for communicating various aspects of the project stakeholders, and coordinating and solving conflicts.
The major responsibilities of the project manager include ensuring satisfaction of project stakeholders, directing and controlling daily work, reporting project performance and changes, and redeeming all progress payment.
When the technical work and management functions are undertaken by the project participants, the team only performing management function is not necessary. In some cases, the core of the project team merely performs the management function, while the technical work is undertaken by others or other organization.