Thursday 17 February 2022

Investment and operational phases of the project

The investment phase, or project implementation phase, involves a wide range of consulting and project work, mainly in the field of project management. During this phase, the following points are fulfilled:

  • establishing a legal, financial, organizational basis for the implementation of the project;
  • acquisition and transfer of technology;
  • land acquisition, construction work and installation of equipment;
  • production marketing, as well as ensuring the supply and formation of the company's administration;
  • recruitment and training of personnel;

commissioning and launching of enterprises.

At the stage of preparation and tendering, the most important role is played by the wide involvement of domestic and international suppliers of raw materials, materials, equipment that offer their participation in this project. Negotiations and conclusion of agreements are related to legal obligations arising from the transfer of technology, construction of buildings, purchase and installation of machinery and equipment, as well as financing. At this stage, agreements are signed between the investor or the entrepreneur, on the one hand, and the financial institution, consultants, suppliers of raw materials and other resources, on the other.

The stage of engineering and technical design involves the preparation of the site, the final choice of technology and equipment, the implementation of the entire range of work on planning and drawing up a construction schedule, as well as the preparation of route and technological maps, large-scale drawings and various schemes.

The construction stage contains the preparation of the site for construction, construction of buildings and other civil construction works, as well as the supply and installation of equipment in accordance with certain programs and schedules.

 Production marketing directly analyzes the readiness of the market for the appearance of the project product, as well as determines the measures that contribute to the implementation of effective sales policy, the organization of the promotion of goods to the market. At this stage, a critical level of supply of this product is determined, as well as possible methods of stimulating sales, including advertising, price incentives for buyers, sellers and intermediaries.

Recruitment and training of personnel is carried out simultaneously with the construction stage and can be crucial for the expected growth of productivity and efficiency of the enterprise. This stage is especially important for large-scale projects related to the involvement of a significant number of workers to whom serious requirements are put forward in professional and qualification training. Training is an integral part of the investment phase for projects that use new technologies, know-how that require special skills in personnel, as well as new methods of work that increase the efficiency of projects in general.

Commissioning and launching of the enterprise, as a rule, is short in time, but the period of the project is technically important. It connects the investment phase with the operational phase.

Commissioning of the project covers the following types of work:

  • pre-exploitation inspections;
  • trial launches;
  • operational tests;
  • adoption.

For commissioning requires the supply of resources, materials and labor to the construction site. Effective and balanced time distribution of these supplies requires a schedule for the implementation of this process. The simplest and most popular method of dividing the project implementation process into various actions and determining the duration of each of them is called the Gantt graph.

Good planning and effective project management should ensure that all stages of the investment phase are implemented in accordance with the planned regulations. Successful implementation of the project requires effective coordination of various activities, which can be achieved only with careful calendar planning. To do this, use the critical path method and the method of evaluation and analysis of the project.

If in the pre-investment phase the main criterion for assessing its success is the quality and reliability of the project, then in the investment phase, the time factor is of paramount importance, which is associated with the need to keep the project within the forecast data obtained in the justification.

The operational phase should be considered both from the point of view of short-term and long-term principles. The first relates to the beginning of production, when there may be problems associated with the use of technology, equipment or insufficient productivity due to a lack of qualified personnel. Most of these problems are formed in the phase of the project.

The long-term approach concerns the chosen strategy and the total costs of production and marketing, as well as sales revenues. These factors are directly related to the forecast made in the pre-investment phase. If strategies and prospective assessments turn out to be wrong, making any adjustments will not only be difficult, but also extremely expensive.

In this phase, the following stages are distinguished:

  • production operation;
  •  replacement and updates;
  • expansion and innovation;

final evaluation of the project.

Production operation actually determines to what extent the results of the project meet the goals set. The functioning of the enterprise in the production mode requires compliance with control over the cost structure, rationalization of current production and marketing costs, which allows to achieve profitable work, to realize the financial capacity of the project, which, in turn, allows you to get a planned return on investment.

The stage of replacement and renewal plays a significant role in the implementation of large-scale projects that are important for individual enterprises, as well as for industries, regions and the country as a whole. Since the process of preparation and investment for such projects may take more than one year, at the time of operation there is a need to update the process containing technical and technological verification, investment or withdrawal of investments, additional training, the introduction of preventive maintenance and quality control, improvement of financial and organizational management.

Rehabilitation research is a process that is expensive and requires additional costs and the work of qualified experts.

Expansion and innovation as components of the operational phase are possible in the case when it is necessary to increase the number of main and by-products produced, without changes in the nomenclature, production program by adding new similar products, etc. This expansion is possible with the help of the following methods:

  • improvement of technology;
  • increase in the capacity of all production;
  • introduction of a new variable work schedule;
  • increase in production capacity of the weakest units of the production chain.

The introduction of new products may lead to the installation of new production lines within the existing enterprise or, depending on the scale of production, to the construction of new workshops on a separate site. However, such an extension should already be considered as a new project.

The final evaluation of the project is carried out after the implementation of the project and is actually a retrospective analysis of all the work performed on the project. The evaluation of the project, on the one hand, provides an opportunity to establish the success factors or causes of the project failure (will serve as an information base for the development of subsequent project solutions), on the other hand, to determine how efficiently resources were used to achieve the project goals (it is the basis of the report on the expenditure of funds for investors and other project participants).

The final evaluation of the project allows us to answer the following questions:

  • Were the goals of the project clearly defined and was it possible to achieve them?
  • Were the technical solutions selected acceptable to the project?
  • Were the environmental, socio-economic and commercial conditions for the project evaluated correctly?
  • Did the project participants receive the benefits provided by the project?
  • Was there an overspending of resources (including financial) for the preparation and implementation of the project?
  • Has the planned rate of return been achieved, or did investors receive the return on invested capital?

 The most important point in the evaluation of the project is the collection of information that allows, on the basis of generalization of successful or unsuccessful experience of design decisions, to avoid mistakes in the preparation and development of future projects.

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