Chapter I

Generation and Screening of Project Idea

Aim
The aim of this chapter is to:

explain the basic concept of behind project idea and its role in organisational growth

analyse different phases of business development cycle

introduce project decision and estimate the magnitude of risk in it

Objectives
The objectives of this chapter are to:

explain the features of project ideas in terms of investments, skills and efficiencies

define the project decision and its nature and also elaborate the magnitude of risk in project decision

discuss the project development cycle and categorise it in pre-investment, investment and operation phases

explain the basic fundamental of project ideas and generation of project ideas

enlist the various factors influencing the project idea generation

Learning outcome
At the end of this chapter, the students will be able to:

understand the meaning of project idea, its features and nature

get an idea of various risks which involves on idea generation

recognise how to generate project ideas

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1.1 Introduction
A project can be defined as planned set of interconnected jobs to be executed over a fixed period and within certain
cost and other limitations. It is a term related to something different from routine and regular activities. It takes
shape to meet the customers/consumers needs for goods, services and/or products. The main idea behind a project
is to identify the gap in terms of consumer needs for goods and services and attempt to fill up this gap.

1.2 Features of Project

A project is often a one time endeavour unlike production, which is a repetitive process.

It requires large investment without any accrual of revenues during the project stage.

It needs skilled and efficient people who can complete the task within a stringent time period and at estimated
costs.

It is necessary to have special purpose equipments and new technologies for successful completion of a project
in a short span of time.

One more peculiar feature of any project can be the use of specialised multi-disciplinary teams for its execution.
It also sets a platform for development and use of new technologies, techniques.

1.3 Nature of Project Decisions

Project decisions are usually complex and long term investment decisions involving commitment of not only
financial resources but also other valuable resources including personnel, facilities and time.

These aim at creation or improvement of new products or fixed assets (like land, buildings, hospitals, factories,
roads, power stations etc.) to meet the needs and objectives of the investor.

All such decisions, whether in public or private sector, necessarily entail some risk due to their future orientation.
The risk may arise from miscalculated resources, time and cost overruns, setting up of non viable units or
building up excessive capacities. Magnitude of these risks can be reduced considerably by following a rationale
approach in which:
A sufficiently large number of good quality alternatives should be available, which should be mutually
exclusive (there is no common outcome between two events or alternatives).

Suppose an organisation wants to invest in two different machines named A and B. Following are some
of the features of the two machines
A: maintenance cost and production is more
B: maintenance cost is less and price and production is more
For machine A, the risk is maintenance cost and for B it is the price of product (machine). Both are
burden and risk for the organisation. So these two alternatives are different and priority of risk is also
different. So these two alternatives are called mutually exclusive.
Reliable and adequate information is gathered about each alternative including sub options.
The sub options and alternatives are (in the order) subjected to systematic and objective evaluation in relation
to technical, economic, financial and other pertinent parameters for selection of the best course of action.

Most industrial and commercial projects require large outlays and are highly involved on account of geographical,
technological, economic, environmental, legal and other factors including trans-national dealings.

Once resources are committed to them, it is rather difficult to retract without suffering large losses. It is therefore
important that project decisions are taken after much careful consideration so that the scarce resources like
skilled workforce, fossil fuel items, etc., are utilised in the most effective and economic manner.

On the other hand, rigorously following the steps outlined above may prove too time consuming and costly.
For example, while considering setting up of a new steel plant, several man-months and lakhs of rupees may
have to be spent to analyse the viability of various alternatives/processes/technologies and to evaluate the costs
and benefits associated with each.

And after going through this elaborate exercise, if the results indicate no alternative as suitable one, then the
project concept needs to be abandoned? Thus, it is important to follow a systematic approach in arriving at
project decisions which will have an element of risk involved whose impact can be minimised with appropriate
tools of project management.

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1.4 Project Development Cycle

A typical project would go through development process having following three distinct phases. Detailed description
is mentioned in the table below.

Pre-investment phase leading to the authorisation (investment decision) for a particular project idea under
prevailing conditions.

Investment phase involving detailed design and actual implementation, leading to fructification of erection
of relevant assets.

Operation phase following the commissioning (or start up) of the completed project. Now the project would
hopefully produce the stream of benefits for when it was originally conceived.
Phases

Description

Pre-Investment

identification of the relevant opportunities through appropriate opportunity studies

generation of detailed feasibility report for each project idea
obtaining a clear picture of the project investments like expectations and requirements
of various stakeholders

Investment

negotiation with various stakeholders who play an important role in investments. The
stakeholders are financers, owners and technical consultants etc.
next step is the detailed design and test of the infrastructure project and approval of
engineering drawings blue prints, PERT charts and detailed estimation of cost
last step is for actual correction and erections of the entire investment report and figure
out the estimated cost. Then the contractor hand over the entire project report to the
management

Operation

this phase involves day to day operations of the project and also extraction of expected
result
Table 1.1 Project development phases

1.5 Project Ideas

The search of a promising project idea is a first step towards establishing a successful venture. The key to success
is getting into the right business at right time.

However the accomplishment of this advice is difficult as the good business opportunities tend to be elusive.
Identification of such opportunities requires imagination, sensitivity to environmental changes and realistic
assessment of what a firm can do.

This task is partly structured, partly unstructured, partly dependent on convergent thinking, partly dependent on
divergent thinking, partly requires objective analysis of quantifiable factors, partly requiring subjective analysis
of qualitative factors, partly amenable to control, partly dependent on fortuitous circumstances.

1.6 Generation of Project Ideas

Any new project idea is based on significant technology breakthrough and involves combining of existing technologies
or offer variants of present products or services. Often the project idea generation follows a haphazard and casual
approach. To stimulate the flow of ideas, following tools may prove helpful.
1.6.1 SWOT Analysis
SWOT is the acronym for Strengths, Weaknesses, Opportunities and Threats. It represents a conscious, deliberate
and systematic effort by an organisation to identify opportunities that can be profitably exploited by it. Periodic
SWOT analysis facilitates the generation of ideas. The factors in SWOT analysis will vary from project to project.
Some of the common features of SWOT analysis include:

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Strengths

Weaknesses

brand reputation
customer satisfaction
less cost and more
production
strong distribution
channel
optimum utilisation
of scarce resources

a weak brand name

poor reputation
among customers
high cost structure
lack of access to
the best natural
resources
lack of access to key
distribution channels

Opportunities
unfulfilled customer
needs
new technologies
removal of
international trade
barrier

Strength

Weakness

Opportunities

Threats

Threats
new regulations
entry of new
competitor
increasing trade
barriers

Fig. 1.1 Swot analysis

1.6.2 Clear Articulation of Objectives
The operational objectives of a firm may be one or more of the following:

cost reduction

productivity improvement

increase in capacity utilisation

improvement in contribution margin

expansion into promising fields

A clear articulation and prioritisation of objectives helps in channelising the efforts of employees and insists them
to think more creatively.

1.7 Factors Influencing Project Idea Generation and Execution

Any promising investment idea enables the business organisation or entrepreneur to exploit opportunities in external
environment (market) by drawing on its competitive strengths. Hence, the firm must systematically monitor the
environment and assess its competitive abilities. The factors influencing the project idea generation and investment
decisions can be broadly classified in six major categories as discussed below:
Economic sector

state of the economy

overall rate of growth

growth rate of primary (concerned industry), secondary (associated industries) and tertiary (society as a whole)
sectors

cyclical fluctuations (seasonal availability of resources, fluctuating interest rates)

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linkages to world economy

trade surplus or deficits

balance of payment situations

Governmental sector

industrial policies

governmental policies, programs and projects

tax framework

subsidies, incentives and concessions

import and export policies

financing norms

lending conditions of financial institutions and commercial banks

Technological sector

emergence of new technologies

receptiveness on the part of industry

Socio-demographic sector

population trends

age shifts in the population

income distribution

educational profile

employment of women

attitude towards consumption and investment

Competition sector

number of firms in the industry and the market share of the top few (four or five companies)

degree of homogeneity and differentiation among the products

entry barriers

comparison with substitutes in terms of quality, price, appeal and functional performance

marketing policies and practices

Supplier sector

availability and cost of raw materials and sub assemblies

availability and cost of energy and man power

1.8 Corporate Appraisal

Apart from external environment (market) assessment and identification of external factors influencing the project idea
generation and investment decisions, it is equally important for the organisation to undertake an internal corporate
appraisal, so as to identify its inherent strengths and weaknesses based on which the profitability exploitation potential
can be assessed. Some of the important factors to be considered in corporate appraisal are as listed below:
1.8.1 Marketing and Distribution

Market structure: Market structure is basically influenced by pricing, supply, barriers to new entry and
competition. Various market structures are like perfect competition, monopoly market and oligopoly market.

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Perfect competition: In perfect competition numbers of competitors are more for a single type of product.
For example, in automobile industry, the competition is more at global level with companies like Toyota, GM
motors, Tata motors, Maruti, Hyundai, etc.

Monopoly: Single player or less number of players exists in monopoly market. So the supply of product is less
and price is more.

Product line: Different product within same product range at different price point is called as product line.
For example, Hindustan Unilever has a wide range of product line such as detergent, cosmetics and food
products.

Market share: Market share is calculated by taking the companys sales over the period and dividing it by the
total sales of the industry over the same period.

Distribution network: Entire chain of distribution, starting from suppliers to consumers falls under distribution
network.

Customer loyalty: Customer loyalty is used to describe the behaviour with frequent customers as well as giving
the good rating and reviews of the products/services.

Marketing and distribution costs: It is the cost incurred due to various marketing activities like advertising,
campaigning and promotions and also due distribution costs.

1.8.2 Production and Operations

condition and capacity of plant and machinery

availability of raw materials, sub-assemblies and power

degree of vertical integration

location advantage

cost of structure

1.8.3 Research and Development

research capabilities of the firm

track record of new product development

laboratories and testing facilities

coordination between research and operations

1.8.4 Corporate Resources and Personnel

corporate image

clout with governmental and regulatory agencies

dynamism of top management

competence and commitment of employees

state of industrial relations

1.8.5 Finance and Accounting

financial leverage and borrowing capacity

cost of capital

tax situation

relations with stakeholders and creditors

accounting and control systems

cash flow and liquidity

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1.9 Source of Generation of Project Ideas

Good project ideas a key to success are elusive. Identifying a new worthwhile project is a very complex problem.
It involves careful analysis of various options and a suitable project idea may emerge from these options. Some of
these options are explained below.
1.9.1 Performance of Existing Projects and Systems

Performance of existing projects and systems provides a good indication about the nature of a particular industry.
An analysis of the profitability and breakeven point of different industries will offer adequate information
about the financial health of different industrial sectors.

However, caution must be exercised as the figures emerging out of this analysis presents an overall picture and
one should not get carried away with present performance alone.

Any decision should be taken after careful study of performance of project/system/industry in various stages of
business cycle. Thus, entering an industry where most of the projects/systems are in saturation stage of business
cycle may prove to be disastrous.

1.9.2 Availability of Raw Materials

Easy availability of good quality raw materials at cheaper prices is a definite indication that some projects can
make use of this option and sustain market competition.

For example, setting up food processing projects in a predominantly agrarian zone will be a profitable business
proposition.

Likewise, setting up chemical processing industries and projects in areas abundant with mineral ores can be a
good decision.

1.9.3 Availability of Skilled Labour

Based on availability of local skilled labour, suitable industries can be set up that can make better use of the
work force.

1.9.4 Import-Export Statistics

Import-export statistics may reveal potential that remains untapped. Higher proportion of import of a particular
product and increasing trend in its import indicates that a product which can serve as an import substitute can
be produced locally.

Similarly, higher proportion of export of a particular product and increasing trend in its export indicates high
export potential for the product.

1.9.5 Price Trends

The trend in the price of various products/services may give an indication about the demand supply relationship.
If the general price level is rising during the past few years and if the rise in price level of a particular product
is steeper than the rise in the general price level, it may indicate a demand supply gap.

Further detailed study may be undertaken to ascertain the extent of demand-supply gap.

1.9.6 Data from Various Sources

Various publications government, banks and financial institutions, consultancy organisations, manufacturers
associations, export promotions councils, research institutions and international agencies contain data and
statistics which may indicate prospective ventures.

A study of the working results and balance sheets of the existing companies and agencies will be useful in
knowing the sectors if the industry that are performing well.

Study of profitability, break even level, earnings per share of various industries may indicate those industries
where opportunities exist for new investments.

Breakeven point: Cost and expenses are equal to revenue generated.

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1.9.7 Research Laboratories

Research laboratories that are engaged in identifying new products/processes often offer new avenues for
commercial exploitation.

However proper care should be taken before attempting to go for large scale production of products that have
been proved in the laboratory to ensure that conditions under which the products are developed in the laboratory
can be simulated in the actual production line also.

Failure to correctly simulate laboratory conditions may lead to failure when the product is produced in large
scale.

1.9.8 Consumption Abroad

Those entrepreneurs who are willing to take higher risks can identify projects for the manufacture of products
or supply of services which are new to the country, but extensively used abroad.

Thus, observing the consumption patterns abroad will help to identify projects with export potential.

1.9.9 Identifying Unfulfilled Psychological Needs

For well established, multi brand product groups, there may be unsatisfied psychological needs, though the
physical needs of the consumers might have been satisfied.

Mainly consumer goods fall under this category. Unfulfilled psychological needs of customers would be like
the strength of the brand vis--vis its competitors; trust component developed by a particular product/brand,
affordability issues and so on.

1.9.10 Plan Outlays and Government Guidelines

The Government plays an important role in the economy of a country. Governments plan outlays in different
sectors of economy provide useful pointers towards possible investment opportunities.

They indicate the potential demand for goods, products, services and/or facilities by different sectors the society.
The Department of Industrial Development, Government of India, publishes Guidelines to Industries annually,
which is a valuable source of information to identify the scope of new investments.

This publication provides information about the production performance of different sectors of industries, the
licensed and installed capacity, scope for future exports, location and structure of industries etc.

1.9.11 Analysis of Economic and Social Trends

An analysis of economic and social trends of the society will be very helpful in identifying and projecting the
demands for various goods and services.

Changing economic conditions and consumer preferences provide new business opportunities.

1.9.12 Possibility of Revival of Sick Units

In any economy there are many industrial units that might have become sick or are becoming sick.

An industry that has become weak/sick might still have capacity to become financially viable proposition provided
the reason for the weakness/sickness are purely due to factors that are internal to the organisations.

Infusion of capital, provision of complementary inputs, and revamping of organisational structures and applications
of innovative entrepreneurial skills may be some corrective measures to revive the sick or weak unit.

1.9.13 Examine the Inputs and Outputs of Various Industries

An analysis of the inputs and outputs of various industries may generate project ideas. Opportunities exist when:

materials, purchased parts or supplies are presently being procured from distant sources with time lag and
transportation costs

several firms produce internally some components/parts which can be supplied at lower cost by a single
manufacturer who can enjoy economies of scale

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similarly the study of output of the existing industries may reveal opportunities for adding value through further
processing of the main outputs, by products as well as waste products

1.9.14 Attending Trade Fairs

National and international trade fairs provide an excellent opportunity to get to know about new products and
developments.

1.9.15 Stimulate Creativity for Generating New Project Ideas

New product ideas may be generated by thinking along the following lines:

modification

rearrangement

reversal

magnification

reduction

substitution

adaptation

combinations

1.10 Screening of Project Ideas

Based on the preceding discussions on methods for generating project ideas, it can be understood that a number
of options would be available for new project and investment decisions.

However an effective screening mechanism is required for eliminating ideas which are not as per requirements.
Important aspects to be considered for screening of project ideas can be:
compatibility with the promoter
consistency with government priorities
availability of inputs
adequacy of market
reasonableness of cost
acceptability of risk level

1.10.1 Compatibility with Promoter

The idea must be compatible with the interest, objectives and resources available with the entrepreneur or organisation.
A real opportunity has three characteristics:

it fits the objectives of the organisation/project/entrepreneur

it is accessible to all concerned stake holders

it offers the prospect of rapid growth and high return on invested capital

1.10.2 Consistency with Governmental Priorities

The project idea must be feasible given the national goals and governmental regulatory framework. The questions
to be raised in this context are:

Is the project consistent with the national goals and priorities?

Are there any environmental effects contrary to governmental regulations?

Can the foreign exchange requirements of the project be easily accommodated?

Will there be any difficulty in obtaining the licence of the project?

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1.10.3 Availability of Inputs

The resources and inputs required for the project must be reasonably assured. To assess this, the following questions
need to be answered:

Are the capital requirements of the project within manageable limits?

Can the technical knowhow required for the project be obtained?

Are the raw materials required for the project available domestically at a reasonable cost? If the raw materials
have to be imported will there be problems?

Is the power supply for the project reasonably obtainable from external sources and captive power sources?

1.10.4 Adequacy of Markets

The size of the present market must offer the prospect of adequate sales volume. Further, there should be a potential
for growth and a reasonable return on investment. To justify the adequacy of the market the following factors need
to be examined:

total present domestic market

competitors and their market share

export markets

quality price profile of the product vis--vis competitive products

sales and distribution system

projected increase in consumption

barriers to the entry of new units

economic, social and demographic trends favourable to increased consumption

patent protection

It should be noted that the demand and consumption patterns for a project/service/goods may be steady but may get
influenced by recessionary trends.
1.10.5 Reasonableness of Cost
The cost structure of the proposed project must be reasonable with an acceptable profit with a price. The following
should be examined in this regard:

cost of material inputs

labour costs

factory overheads

general administrative expenses

selling and distribution costs

service costs

economies of scale

1.10.6 Acceptability of Risk Level

The desirability of the project is critically dependent on the risk characterising it. In the assessment of risk the
following factors may be considered:

vulnerability to business cycle

technological changes

competition from substitutes

competition from imports

government control over price and distribution

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Summary

The search for promising project idea is the first step towards establishing a successful venture.

A typical project has to go through three distinct phases of project development cycle viz., pre-investment,
investment and operation.

Identification of a promising investment opportunity requires imagination, sensitivity to environmental changes

and a realistic assessment of what an organisation can do.

The business environment which needs to be monitored regularly to identify investment opportunities may
be divided into six broad sectors; economic, government, technological, socio-demographic, competition and
supplier.

SWOT is the acronym for Strengths, Weaknesses, Opportunities and Threats. It represents a deliberate and
systematic effort by an organisation to identify opportunities that can be profitably exploited. Periodic SWOT
analysis facilitates the generation of ideas.

A realistic appraisal of corporate strengths and weaknesses is essential for identifying investment opportunities
which can be profitably exploited. The broad areas of corporate appraisal are: market and distribution, production
and operations, research and development, corporate resources and personnel and finance and accounting.

Good project ideas are a key to successful execution of the project, are often elusive. There are number of
sources that can be tapped to identify them.

Screening of project ideas is an essential component in project idea development as it helps to eliminate non
promising concepts. It depends on compatibility with the promoter, consistency with government priorities,
availability of inputs, adequacy of markets, reasonableness of cost and acceptability of risk levels.

References

Nagarajan, K., 2004. Project Management. New Age International Publishers. New Delhi.

Chandra, P., 2006. Projects: Planning, Analysis, Selection, Financing, Implementation and Review. Tata McGraw
Hill Publication, New Delhi, 6th Edition.

Recommended Reading

Strategic Management. SWOT Analysis. Available at: <http://www.quickmba.com/strategy/swot> [Accessed

11th December 2010].

Goodman, A.S., Hastak, M.,2006. Infrastructure Planning Handbook: Planning, Engineering, and Economics.
McGraw-Hill Professional.

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Chapter II
Green Field and Brown Field Projects
Aim
The aim of this chapter is to:

define various types of infrastructure projects

explain pros and cons of green field project and brown field project

clarify about areas to be considered regarding environment and scarce resource reusability

Objectives
The objectives of this chapter are to:

explain about infrastructure projects namely green field project and brown field project

explain the project opportunity studies of green field project

analyse the issues related to brown field project

list some of the major entities of resource management

Learning outcome
At the end of this chapter, the students will be able to:

understand about implementation of infrastructure projects

learn about considering environment and reusability of land in projects

identify pros and cons of green field project and brown field project

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2.1 Introduction
The word project conjures up a picture of something which is different from routine and regular activities. Most
of the projects are one time job as opposed to repetitive, regular jobs undertaken in a normal production situation.
A project is a temporary endeavour having definite start and end that creates a unique product or service. A project
is a set of unique and non routine activities.
According to Harrison, A project is a non routine, non repetitive, one off undertaking normally discrete with
time, financial and technical performance goals. According to Project Management Institute project is a system
involving the coordination of a number of separate department entities through out the organisation and which must
be completed within prescribed schedules and time limit. According to Encyclopaedia of Management project is
an organised unit dedicated to the attainment of goal successful completion of a project on time, within budget, in
conformance with predetermined programme specifications. According to Little and Mirrles, Project is any scheme
or part of a scheme for investing resources which can be reasonably analysed and evaluated as an independent
unit.
2.1.1 Features of a Project

Project is a one time job, employing large amount and diverse type of resources like men, materials, money,
machines and so on. It is an investment for future benefits.

There are some special tasks which are a part of the project which require special resources and skills.

Projects involve large number of specialised agencies whose services are hired for completion of specialised
tasks, and thus projects are multidisciplinary in nature.

2.2 Green Field Projects (GFP)

Green Field Projects are those which do not create any environmental pollution and follows Environmental
Management System and are usually of big magnitude.

In construction sector, a GFP means project executed on a land that requires no remodelling or demolition of
existing structures.

In India, it is not easy to implement Green field projects. As per ArcelorMittal, around 12 million tonne steel
projects in Orissa and Jharkhand has been pretty slow in terms of infrastructure and government approval.

Green field investments occur when multinational corporations enter into developing countries to build new
factories and/or establish stores and services.

2.2.1 Project Opportunity Studies

In any green field project, essentially the organisation or entrepreneur intending to invest large sum of money,
should undertake Project Opportunity Studies to check the suitability of investment decisions.

The Project Opportunity Studies are indicative in nature and are based on macro parameters and rough estimates.
These studies are undertaken to identify opportunities in following directions:
Area studies: based on a given geographical area
Sub-sector studies: a specific sub sector or economy or industry
Resource based studies: exploitation of renewable and non-renewable, natural, agricultural or industrial
resource

2.2.1.1 Outline of Area Studies

Following factors/issues should be considered in the area studies wills:

basic characteristics of area such as:

geographical location
size
important physical features - forest, agricultural, sandy, hilly, undulating, riverine, rocky, water logged area
and so on
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contour maps
environmental sensitivity

population size and socio-economic data, including background, employment and educational pattern and per
capita income, in the context of country and/or state

major exports from and imports to the area

exploited and potentially exploitable factors of production (land, labour, natural resources and so forth)

structure of any existing manufacturing or service industry utilising local resources

infrastructural facilities like transportation, power and telecommunications necessary for developing a new
business or industry

a comprehensive check list of industries or businesses that can be developed exploiting the resources and
facilities available in the area

revision in the above check list of industries or businesses by excluding those:

for which present or anticipated local demand is too small and cost of transportation to the markets (including
export market) are too high to yield acceptable profit levels
facing rather insurmountable competition (local or from nearby areas)
which should and can be more favourably locate in other areas
for which the vital feeder organisations or industry are located too far away
for which the areas characteristics are not suitable
which do not meet the investors priorities and resource allocations

estimates of present and expected demand-supply gaps based on other studies or published data

identification of approximate economic sizes of new or expanded business or industrial units after considering
estimates of both costs and revenue

estimated lump-sum capital costs of selected industries/businesses considering:

land including site development
essential civil works (buildings and outdoor works)
technologies used
plant and equipment (main, auxiliary, standby and service)
project implementation
preliminary expenses including for feasibility studies
working capital requirements

approximate operational requirements of major inputs for each project, classified according to the source of
supply (local, national, imported), covering:
material inputs - raw materials, processed materials, manufactured goods, auxiliary materials, spares and
other materials for plant and machinery
utilities like water, electricity, steam, gas, telecommunications and so on
manpower - managerial, technical, supervisory
information

estimates of annual sales revenues and impact on market share/product mix

organisational and management aspects of project sponsors or potential enterprise

an indicative time schedule for implementation

total investment contemplated in projects and peripheral activities like development of infrastructure, promotional
activities, stock yards and so on

source of finance for the total estimated cost

estimated requirements/savings/earnings of foreign exchange

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financial appraisal giving approximate pay back period and rate of return on investment

indicative estimates of overall economic benefits (balanced regional growth, generation of employment, reduction
in social disparities)

2.2.1.2 Outline of Sub-sector Studies

Sub-sector studies include following points:

place and role of the sub-sector in the economy

size, structure and growth rate of the sub-sector

present size and rate of growth of demand of items in the sub-sector which are:
not imported
partially or wholly imported

rough projections of future demand for each item

identification of the items in short supply that have good growth and/or export potential

a broad survey of the raw materials available indigenously

identification of opportunities considering the factors like infrastructure, transport costs and so forth

identification of approximate economic sizes of new or expanded business or industrial units taking into
consideration economies of scale in production and sales

2.2.1.3 Outline of Resource based Studies

The aspects considered in resource based studies include:

nature of the resource, its prospective and proven reserves, past and expected future growth rates of its extraction/
utilisation and future potential

role of the resource in national economy, pattern of its utilisation and demand in the country and exports

industries presently based on the resource, their status (e.g., small scale, private, public) and growth pattern,
capital employed and manpower engaged, productivity, future plans and growth prospects

major constraints and conditions in the growth of industries/businesses based on the resource

estimated growth in demand and prospects of export of items that could utilize the resource

identification of investment opportunities and costs availability and requirements of factors like transportation,
power and water

2.3 Brown Field Projects (BFP)

A project implemented in the precincts of a working plant or working facility is a Brown Field Project (BFP).
In simpler terms, brown field sites are abandoned or un-used industrial and commercial facilities available for
reuse.

Land previously used for industrial purpose or for any commercial use, which may not be contaminated by low
concentration or hazardous waste has a potential to be reused once it is cleaned up.

Revamping, retrofitting, replacement, rehabilitation, reconstruction, renovation, modernisation, technology up

gradation etc., are included under BFPs.

In India, most of the BFPs are focused on modernisation projects of large scale industrial units (primarily steel
plants, power plants etc.) Some instances of BFPs in India are modernisation of Durgapur Steel Plant (estimated
cost Rs. 2,668 crores), Rourkela Steel Plant (estimated cost Rs. 3,954 crores).

The most common BFP is the modernisation or partial renovation of a running plant. The most important success
criteria of a BFP are:
minimum obstruction to production operations caused by plant shutdowns and supply disruptions
successful new construction
minimum damage to the existing installations
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perfect tie-in and matching of the new facilities with the existing ones

In any BFPs, the engineering department has an additional responsibility of supplying information on the existing
underground installations and service lines to facilitate diversion and digging for civil works.

2.3.1 Important Issues in Brown Field Projects

Following are some of the issues to be considered in a brown field project:
2.3.1.1 Organising

The project team undertaking BFP includes predominantly the Operation and Maintenance (O&M) personnel
representing various sections of the production unit that are affected by the BFP.

The project organisation for BFP should ensure continuation of production operations in the midst of activities
like construction, relocation, renovation and handling of additional services involved in the BFP.

2.3.1.2 Coordination

In any BFP project, conflicts are bound to happen between the O&M and production personnel. The success of
the BFP depends on a great deal on the project managers capability to handle the conflicts.

An integrated project management team can reduce conflicts. BFP demands tremendous amount of coordination
amongst production, maintenance, services and utilities, engineering and project construction departments.

2.3.1.3 Resource Management

Resources which are used in any construction projects are divided into following parts:

Equipment and material management: It is one of the important aspects of BFP. Cost effectiveness of BFP
depends on the extent of reuse of old equipments and materials, which depends on technology employed for
modernisation. Newly added facilities will determine the use of existing critical equipments and materials. The
procurement process depends upon:
suitability of the existing equipment with the new technology
usability of the materials and equipments and the technological development in those materials

Logistics management: It is also critical in BFP as large number and variety of resources are required in such
a project leading to transport bottlenecks and confusion in on-site distribution activity.

Capital repair management: When the plant is scheduled to shut down for some period of time for the
modernisation purpose, then it is usual to operate with only the routine running maintenance without any
expensive capital repair.

Management of a brown field project in the precincts of an operating plant calls for much more imagination, detailed
planning, meticulous schedule control and integrated team work, involving the operation, maintenance, engineering
and construction departments of the organisation. Slippage in any one activity can lead to serious ripple effects on
many activities, with adverse results.
At the same time, construction activity/project inside an operating plant complex has to face several constraints,
dependencies and hazards. Hence the engineering, planning and execution of a BFP should be done with involvement
of executives from various functional departments having experience in similar projects. Foreseeing the problems and
the requirements of operation and the project construction side with clarity of vision will ensure BFPs success.
Important objectives of any BFP will be least production loss, fast work completion, minimum damage to existing
plant and service lines and perfect matching of the old and new facilities.

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Summary

A project is a non routine, non repetitive, one off undertaking normally discrete with time, financial and technical
performance goals.

Green Field Project (GFP) is the one which do not create any environmental pollution and follows Environmental
Management System and are usually of big magnitude. A project implemented in the precincts of a working
plant or working facility is a Brown Field Project (BFP). In simpler terms, brown field sites are abandoned or
un-used industrial and commercial facilities available for reuse.

In case of GFP, a number of studies need to be undertaken like area studies, sub sector studies as well as
resource based studies to determine the project opportunities. Area based study includes geographical area and
demographic structure, whereas resource based study includes exploitation of renewable and non-renewable,
natural, agricultural or industrial resource.

Brown field project essentially involves revamping, retrofitting, replacement, rehabilitation, reconstruction,
renovation, modernisation, technology up gradation types of projects.

Various issues in BFP are like organising, coordination and resource management. There are various sections
of resource management like material and equipment management, logistic management and capital repair
management.

References

Harvard Business School, 1997. Project Management Manual. IPS Associates. Inc. California, U.S.

Joy, P.K., 2007. Total Project Management. Macmillan India Publications. New Delhi. 1st Edition Reprinted.

Recommended Reading

Brown Field Project. Available at: <http://www.scribd.com/doc/19009620/Brown-Field-Project> [Accessed

14th December 2010].

Mustang, 2009. Brownfield Project Engineering. Available at: <http://www.mustangeng.com/AboutMustang/

Publications/Publications/BROWNFIELDBR.pdf> [Accessed 14th December 2010].

Berkun, S., 2010. The Art of Project Management. ORelly Publication.

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