Friday 16 June 2023

The Significance of Effective Project Evaluation and Management

Project Evaluation


1 The importance and necessity of project evaluation

With the further standardization and improvement of China's infrastructure construction market management, winning bids at reasonable low prices is a common method used in bidding in the construction market. 


Especially in the current situation of the country's tightening monetary policy and reducing infrastructure construction investment, enterprises want to survive in the fierce market competition, seek development and obtain ideal economic benefits, must establish a sound pre-target evaluation and post-bid evaluation mechanism, which is one of the important means to improve the core competitiveness of enterprises, in order to better survive and develop.


As a tool to strengthen enterprise operation and management, organize construction, determine costs and allocation, project evaluation is the basis for enterprises to manage planned contracts, determine project costs, conduct technical and economic evaluation of construction plans, and realize economic accounting.


2 The main role of project evaluation:


2.1 Effectively prevent and resist the risks of contract conditions.


The pre-target assessment is to determine the minimum cost and bidding red line of the project, while the internal quota and internal price system of the enterprise reflect the actual resource allocation capacity, labor productivity and comprehensive management level, and the bidding quotation and pre-bid evaluation prepared on this basis can avoid over- or under-quotation. 


Winning the bid can ensure the economic benefits of the project and prevent and resist the unit price risk of contract conditions to a certain extent.


2.2 Reasonably prepare the construction organization design.


In the process of preparing the construction organization design, formulating the schedule, and organizing the implementation according to the plan, it will inevitably involve the rational allocation of resources such as manpower, materials, machinery and equipment, and indirect costs.  

Only on the basis of enterprise evaluation can we ensure the scientific of the resource allocation of construction organization design and the rationality of the plan.


2.3 Reasonably carry out project responsibility cost contracting.


The ultimate goal of enterprise management is to pursue profit maximization, and responsibility cost contracting of engineering projects is one of the important means to maximize profits.


 At present, the main problem in the contracting of project responsibility costs is the lack of objective and fair criteria for determining the contracting base. Therefore, the post-bid evaluation of the project is the scientific basis for determining the contracting base and determining the project cost.


2.4 It is conducive to mobilizing the subjective initiative of employees.


After the project evaluation, the responsibility cost of the project department is determined. 


If employees want to get the expected remuneration, they must complete the tasks limited by the enterprise assessment, and if they want to exceed the tasks and reduce the cost of the project, they must actively exert the subjective initiative of all employees in the construction, strengthen secondary operation, improve the construction process, reasonably organize the use of turnover materials, machinery and equipment, and save resources and other costs such as material machines.


3 How to conduct project evaluation in a fair, impartial, and scientific manner.


Project evaluation is the most straightforward way to determine the cost of project liability. There are two types of project evaluation: pre-bid evaluation and post-bid evaluation.


The pre-target assessment is actually a calculation of the direct cost of the project in advance, so as to prevent the expected reduction from being too large, and the bottom is significantly lower than the actual construction cost control red line of the enterprise. 

In principle, enterprises should resolutely not bid for projects that are bound to form losses, so as to effectively avoid the risk of business contracting. Pre-bid evaluation is also an important means for enterprises to bid according to market conditions and their own strength in project bidding, and ultimately improve the winning rate of construction enterprises, contract engineering construction projects and better control the cost process during construction.


This requires our enterprises to conduct pre-bid assessment in a timely manner based on the correct understanding of their own productivity level and the actual situation. With the pre-bid evaluation cost control red line, we can have a clear idea when bidding and quotation, so that the quotation is no longer blind, avoid the loss or scrapping caused by blindly reducing or over-quoting, achieve fair and reasonable competition, effectively prevent the phenomenon of excessive price reduction below the cost quotation, and can cope with complex and fierce market competition.


 Reasonable determination of quotation is the key to winning the competition of "bidding and bidding" and contracting construction projects, and pre-bid evaluation is the basis of reasonable quotation. 


The pre-bid evaluation should also be based on the requirements of the bidding documents, the internal quota of the enterprise, the construction organization design, the unit price of materials, machinery, and labor for on-site investigation to formulate the manufacturing cost of the project, and then add the minimum management fee standard required by the enterprise to calculate the red line value of the bidding quotation.


The post-bid evaluation of the project is a comprehensive evaluation of the project, including the direct responsibility cost of the project, the evaluation of project safety, quality, construction period and efficiency. 


The post-bid evaluation of the project is even more important, which can guide the project department to control the project cost based on this in construction and production and can also analyze and summarize based on this in monthly economic activities. The evaluation of engineering projects should adhere to the principles of seeking truth from facts, objectivity, and impartiality, and scientific and advanced. Evaluators should abide by discipline, be honest, adhere to principles, and ensure the quality of work. 


The project evaluation shall be carried out according to the following information:


(1) the spirit of the bidding documents, the owner's requirements, bidding materials, engineering construction contracts, supplementary contracts, and relevant meeting minutes.

(2) Project construction estimate (budget) quota, enterprise internal quota and labor subcontracting price system.

(3) Construction investigation of construction site hydrology, meteorology, spoil site, leased land, large and small land, traffic road, communication, etc.

(4) Approved construction plan and implementation "construction organization design", input plan for man, material, machine, turnover material, and large machinery.

(5) On-site actual investigation of the price of leased land, temporary housing, floor materials, machinery, labor, etc.

(6) The quota standard and management fee standard of the project department approved by the enterprise.

(7) the external environment and the difficulty of construction claims.

(8) Necessary expenses of the project department to achieve quality, safety, and construction goals.

(9) Relevant expenses that the project department must bear within the enterprise.

(10) Project manager, secretary, chief engineer competition commitment.


The steps and contents of the project evaluation are:


1. According to the list of quantities of the construction contract, combined with the construction drawing design engineering quantity, the labor cost (including some small materials and small tools) is determined according to the chapters of the internal quota of the enterprise, and the labor cost cannot be adjusted during the construction process. 

2. According to the construction drawing design, the list of quantities, the fixed material consumption level of the enterprise, and the design of various concrete mix ratios, calculate the quantity, specification and model of the main materials required for construction, and calculate the material cost according to the current survey of the material market price. 


During the evaluation, all the main turnover materials required for the construction of the project and their costs are calculated according to the large-scale formwork and turnover material input required by the implementation construction organization design. In the process of project implementation, if the price of the main ground material does rise or fall by a certain proportion, the unit price of the material fee should be adjusted, but the quantity of main materials, templates and turnover materials cannot be changed. 


3. According to the construction drawing design, bill of quantities, internal quota mechanical consumption level of the enterprise, implementation construction organization design requirements, and construction period, calculate the number and use time of large machinery and equipment (small mechanical equipment to be included in the unit price of labor subcontracting) that the construction project department needs to configure. 


Then calculate the mechanical cost required for the construction of the project according to the unit price of the company's existing machinery and equipment and the unit price of mechanical equipment in the market, and the mechanical cost cannot be adjusted during the construction process ( Mechanical construction that can be contracted according to the engineering quantity should calculate the mechanical cost according to the engineering quantity as much as possible, and try not to calculate according to the mechanical shift). 


4. According to the scale of the project, the provisions of the company's project management measures, and the requirements of the owner's bidding documents. 


The calculate the number of management personnel to be equipped for the project, calculate the salary of the management personnel (including the salary surcharge, hardware and insurance and other financial expenses that should be borne by the project department) according to the per capita salary level of the enterprise in the previous year, and calculate the indirect costs required by the project department during the construction period according to the internal quota level of the enterprise. 


5. According to the requirements of the bidding documents and the actual construction and production needs on the site, the cost of large and small temporary facilities is calculated. 


6. Calculate the safety production cost to be invested according to the bidding documents and construction organization design. The sum of the above six items plus the tax paid is the direct cost of the project department. The labor cost in the above assessment report must have the unit price and quantity of labor cost for each sub-project.



With detailed project evaluation data, the project department can be guided to conduct labor service bidding, material bidding, machinery, staffing, and organizing construction and production. At the same time, it can also enable the project department to find out in time in the monthly cost analysis whether the actual cost in the construction process has deviated from the assessment responsibility cost, why such deviation occurs, and what measures should be taken to remedy it. 


Project evaluation can also guide the project department where it can invest less and save costs. In the project inspection, the enterprise can also check the cost of the project department one by one according to the evaluation indicators, find problems in time and require them to be rectified.


The establishment of enterprise project evaluation puts forward higher requirements for the budgeting ability, planning ability and business level of engineering project management evaluators, and enterprise leaders must have full understanding and sufficient attention. 


The project evaluation should be supervised by a deputy general manager of the company, and a fixed 5-10 professionals with rich practical experience in planning, technology, finance, equipment and materials, management and other professionals should be selected to set up an evaluation team. In the evaluation of different projects, technical personnel of different specialties will be dispatched to participate. 


The project department should also actively participate in the project evaluation to jointly discover the shortcomings and advantages in the evaluation. To improve the fairness, accuracy, and factual nature of assessments.


Through the establishment, improvement and implementation of project evaluation, the pertinence, correctness and fairness of the enterprise's responsibility cost and process end assessment of each project can be improved, so that each project department is in a benign competitive environment. 


With the criterion of project evaluation and pricing, the scientific nature of the final quotation decision is improved in the bidding and quotation, and the settlement of the completed project has a scientific basis. In short, fair, and scientific project evaluation can play a vital role in controlling costs, increasing economic benefits, and promoting the improvement of core competitiveness of enterprises.

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