Project Evaluation Methods Research Articles

Minimalizacja ryzyka wdrażania nowych technologii w przemyśle koksowniczym przez etapową realizację złożonego projektu badawczo-rozwojowego jako opcji rzeczowej

Streszczenie Spowolnienie gospodarcze w Europie i świecie w szczególny sposób oddziałuje na tradycyjne branże przemysłu. Polskie koksownie od kilku lat systematycznie modernizowały swój potencjał produkcyjny i nadal prowadzą i planują działalność rozwojową. W obecnych warunkach strategia koksowni powinna być ukierunkowana z jednej strony na unikanie zbędnego ryzyka, a więc wdrażanie znanych technologii. Jednocześnie inwestycje w nowe i innowacyjne technologie jako niosące w sobie dużą zmienność powinny być postrzegane jako szansa. W warunkach znacznej niepewności niezbędna jest jednak zmiana podejścia do oceny przedsięwzięć inwestycyjnych. Tradycyjny rachunek dyskontowy ze względu na swój statyczny charakter - nie uwzględniający zmienności i opcji tkwiących w projektach oraz wielości momentów decyzyjnych - może okazać się już niewystarczający. Pomocnym narzędziem dla decydentów jest w takich warunkach rachunek opcji rzeczowych. W artykule przedstawiono dotychczasowe wyniki projektu badawczo-rozwojowego polegającego na wdrożeniu operacji podsuszania wsadu realizowanego przez Koksownię Zdzieszowice i ICHPW w Zabrzu. Omówiono uzyskane wyniki i związane z nimi ryzyka. Przedstawiono dalsze zamierzenia rozwoju tego projektu, zakładające budowę przemysłowej instalacji badawczej do badania wpływu podsuszania na proces koksowania. Scharakteryzowano przesłanki zastosowania rachunku opcji rzeczowych do oceny przedsięwzięć inwestycyjnych charakteryzujących się dużąniepewnościąrezultatów. Przedstawiono genezę i podział opcji rzeczowych oraz warunki ich stosowania w porównaniu do tradycyjnych dyskontowych metod oceny projektów. Omówiono genezę i parametry charakterystyczne opcji rzeczowych. W następnej części dokonano wyceny przedsięwzięcia badawczo-rozwojowego wdrożenia operacji podsuszania wsadu dla zespołu dwóch baterii koksowniczych metodą NPV oraz metodą opcji rzeczowych. Do oceny wartości opcji rzeczowej tego projektu, będącego klasyczną europejską opcją kupna, wykorzystano równanie Blacka-Scholesa. Dokonano porównania uzyskanych wyników i ustalono wartość elastyczności tkwiącą w analizowanym projekcie badawczo-rozwojowym.

Real Options Analysis at a Glance

This paper discusses a project evaluation method which is theoretically superior to conventional methods like NPV or IRR, known as Real Options Analysis.

Еvaluating Performance and Profit Sensitivity to Risk of Agro-Industrial Projects: Case Study of Projects Developed by Israeli Companies for the CIS and Eastern Europe

International companies take part in many tenders for agro-industrial projects in the Commonwealth of Independent States and Eastern Europe countries. The market for these projects is analyzed and found to be favorable for companies and developers. Major projects developed in recent years are presented and evaluated in terms of financial performance. Additionally, a method of project evaluation by profit sensitivity to risk criterion is proposed. In this method, the approximate formula for profit sensitivity to risk (when basic production and market assumptions change simultaneously) is derived using a cost-volume-profit model. This method allows minimal calculations to explain profit sensitivity and elasticity within the usual indicators of business planning: operational profitability and degree of operating leverage. The consistency of project ranking is examined using Cronbach's alpha and correlation coefficients. The ranks obtained by various performance criteria are found to be consistent with each other, but not with those obtained by profit sensitivity to risk. In terms of elasticity, project profitability is a much stronger influence than the degree of operating leverage on profit sensitivity to risk.

Fundamentals of Engineering Economics and Decision Analysis

The authors cover two general topics: basic engineering economics and risk analysis in this text. Within the topic of engineering economics are discussions on the time value of money and interest relationships. These interest relationships are used to define certain project criteria that are used by engineers and project managers to select the best economic choice among several alternatives. Projects examined will include both income- and service-producing investments. The effects of escalation, inflation, and taxes on the economic analysis of alternatives are discussed. Risk analysis incorporates the concepts of probability and statistics in the evaluation of alternatives. This allows management to determine the probability of success or failure of the project. Two types of sensitivity analyses are presented. The first is referred to as the range approach while the second uses probabilistic concepts to determine a measure of the risk involved. The authors have designed the text to assist individuals to prepare to successfully complete the economics portions of the Fundamentals of Engineering Exam. Table of Contents: Introduction / Interest and the Time Value of Money / Project Evaluation Methods / Service Producing Investments / Income Producing Investments / Determination of Project Cash Flow / Financial Leverage / Basic Statistics and Probability / Sensitivity Analysis

A review on the relation between simulation and improvement in hospitals

BackgroundSimulation applications on operations management in hospitals are frequently published and claim to support decision-making on operations management subjects. However, the reported implementation rates of recommendations are low and the actual impact of the changes recommended by the modeler has hardly been examined. This paper examines: 1) the execution rate of simulation study recommendations, 2) the research methods used to evaluate implementation of recommendations, 3) factors contributing to implementation, and 4) the differences regarding implementation between literature and practice.ResultsAltogether 16 hospitals executed the recommendations (at least partially). Implementation results were hardly reported upon; 1 study described a before-and-after design, 2 a partial before and after design. Factors that help implementation were grouped according to 1) technical quality, of which data availability, validation/verification with historic data/expert opinion, and the development of the conceptual model were mentioned most frequently 2) process quality, with client involvement and 3) outcome quality with, presentation of results. The survey response rate of traceable authors was 61%, 18 authors implemented the results at least partially. Among these responses, evaluation methods were relatively better with 3 time series designs and 2 before-and-after designs.ConclusionsAlthough underreported in literature, implementation of recommendations seems limited; this review provides recommendations on project design, implementation conditions and evaluation methods to increase implementation.MethodsA literature review in PubMed and Business Source Elite on stochastic simulation applications on operations management in individual hospitals published between 1997 and 2008. From those reporting implementation, cross references were added. In total, 89 papers were included. A scoring list was used for data extraction. Two reviewers evaluated each paper separately; in case of discrepancies, they jointly determined the scores. The findings were validated with a survey to the original authors.

Building a Better Plan: Costs and Benefits of Transportation Alternatives

The Puget Sound Regional Council (PSRC) in Washington State has developed a set of procedures and methods for project and program evaluation that generally fall into the category of transportation benefit–cost analysis. The purpose of these methods is to be able to produce information about project or program performance relative to performance under a baseline set of conditions in which the project or program has not been implemented. PSRC used these benefit–cost analysis methods to develop and evaluate regional transportation planning alternatives during its most recent planning process. The creation of alternative regional transportation plans for analysis is not entirely unlike the development of investment portfolios. Acceptance of the findings of a comprehensive benefit–cost analysis as the appropriate analytical framework solves many, but not all, of the problems of practical implementation of a framework for evaluation of a scenario. Performance of a truly comprehensive benefit–cost analysis in a complex practical setting, however, introduces some empirical and policy challenges. PSRC has taken practical steps toward a more systematic approach to an alternative method of analysis. Incorporation of user benefit analysis into the process of evaluation of a scenario produces a natural shift toward consideration of development and selection of a scenario as an investment optimization problem. The paper explores additional approaches that might further advance the state of the practice in regional transportation planning.

Application of Value Engineering Based on the Comprehensive Weights in Construction Project Bidding

The bid assessment method is adopted in conducting qualitative indicators in the quantitative process, lack of a scientific and reasonable conversion method.Against these problems of the project evaluation methods, the value of the project will be introduced in the bid assessment mechanism, considering the project features and costs, integrating comprehensive weight method to quantify the weight of sub-functional evaluation of bidders value target.And it make the evaluation method is more scientific, reasonable and conducive to achieve optimal project value.

Discounting and risk adjusting non-marginal investment projects

Standard cost–benefit analyses and asset pricing theories are based on the assumption that investment projects have marginal impacts on the consumption flows of stakeholders, so that social values and prices are not affected. This may not be true for large projects, such as those related to climate change or to the implementation of infrastructure projects in developing countries. In this paper, we explore qualitatively and quantitatively the error that is made when using the standard evaluation methods for non-marginal projects. In particular, we discuss the importance of adapting the discount rate and the risk premium to the size of the investment projects under consideration.

C3 サービス価値主体のプロジェクト評価手法に関する基本的考察(システムズ・アプローチ研究トラック,「P2Mミッション達成型プロジェクト・プログラムマネジメント」-東日本大震災と福島原発事故の検証-)

C3 サービス価値主体のプロジェクト評価手法に関する基本的考察(システムズ・アプローチ研究トラック,「P2Mミッション達成型プロジェクト・プログラムマネジメント」-東日本大震災と福島原発事故の検証-)

The MACBETH approach for multi-criteria evaluation of development projects on cross-cutting issues

The European Union's efforts for poverty reduction are based on the principle of Sustainable Human Development. Meeting the terms of this principle entails the consideration of aspects of general interest, known as "cross-cutting issues", at all levels of intervention. Cross-cutting issues comprise issues like human rights, gender equity, environmental concern, democracy as a social value, or the participation and empowerment of the beneficiaries of development. These issues concern social phenomena that are difficult to isolate in time or capture empirically, causing operational difficulties when projects are subjected to evaluation. Traditional methods of project evaluation, such as Cost Benefit Analysis or the Logic Framework, struggle to incorporate impacts that are difficult to measure or estimate in terms of indicators or monetary value. Therefore, in the field work at a rural development programme located in Bolivia, a need arose spontaneously to find and implement an approach that, complementary to traditional methods of project evaluation, could allow project managers to keep an eye on project performances in terms of cross-cutting issues. This article describes how the MACBETH multicriteria approach was implemented in practice, in order to help an important rural development programme build a project evaluation tool, taking into account cross-cutting issues through a series of interviews and decision conferences attended by specialists and the programme staff.

NVA: A Value Addition Measure For Capital Project Evaluation

<p class="MsoFootnoteText" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-family: Times New Roman; font-size: x-small;">Corporate financial objective of stockholder wealth maximization and use of discounted cash flow methods for evaluation of capital projects are two of the well-accepted tenets of financial management. Present project evaluation methods, including the Net Present Value (NPV) technique, do not fully meet the stockholder wealth maximization criteria. This paper attempts to scrutinize the relevance of the NPV method in achieving the wealth maximization objective and suggests an alternative value addition measure, named Net Value Added (NVA). In the NPV method, all cash flows pertaining to a project are lumped together and discounted with one single rate, the weighted average cost of capital. The NVA method advocates that a project’s residual (net of its debt servicing) cash flows that belong to stockholders should be classified on the basis of their end-use, viz., equity servicing, capital maintenance, and value creating surplus cash flows.<span style="mso-spacerun: yes;">  </span>As the risks associated with each of these three stockholders’ cash flows are not the same, they are separately discounted at appropriate rate depending upon the associated risk. Power of time (n) is assigned only to real risk-free rate of return and inflation premium to discount equity servicing and capital maintenance cash flows that are subject to exponential growth over time but not to the risk premium.</span></p>

Adaptive port planning using real options

The present volatile environment demands new ways of thinking and new tools for project planning, appraisal, and investment decisions for large scale port infrastructures. This paper proposes real options-based adaptive port planning which provides a framework for the planner to first identify critical uncertainties in the system and then, to examine, evaluate, and incorporate flexible options for handling these uncertainties. It includes a method for project evaluation, which enables the planner to make a trade-off between the value of incorporating flexibility and the cost of doing so, commonly termed real options analysis (ROA). The paper applies ROA to two cases in the port sector involving well known uncertainties, and demonstrates that in the face of uncertainty, a flexible option enhances the value of a project.

Participatory Impact Pathways Analysis: a practical method for project planning and evaluation

Participatory Impact Pathways Analysis (PIPA) is a practical approach to planning, monitoring and evaluation, developed for use with complex research-for-development projects. PIPA begins with a participatory workshop where stakeholders make explicit their assumptions about how their project will make an impact, and produce an ‘Outcomes logic model’ and an ‘Impact logic model’. These two logic models provide an ex-ante framework of predictions of impact that can also be used in priority setting and ex-post impact assessment. PIPA engages stakeholders in a structured participatory process, promoting learning and providing a framework for ‘action research’ on processes of change.

Contribuição do fomento do órgão florestal de Minas Gerais na lucratividade e na redução de riscos para produtores rurais

O objetivo deste estudo foi realizar a análise financeira e a simulação de risco de investimento em projetos de reflorestamentos com eucalipto visando à produção de carvão e madeira para celulose, com e sem fomento florestal do Instituto Estadual de Florestas (IEF/MG). A análise financeira foi realizada mediante os métodos de avaliação de projetos florestais, e para a análise de risco utilizou-se a técnica de simulação de Monte Carlo, por meio do programa @RISK. Entre os projetos testados, aquele visando à produção de carvão com fomento do IEF obteve melhor desempenho financeiro. Verificou-se que os custos de colheita, transporte e carvoejamento são, juntos, responsáveis pela maior parcela do custo total dos projetos.A simulação da análise de risco indicou que as variáveis que afetaram o Valor Presente Líquido (VPL), nos projetos cuja produção final era o carvão, na sua ordem de importância (R), foram: preço dos produtos, produtividade da floresta, taxa de juros, custo de colheita e custo de implantação. Já para a produção de madeira a ordem de importância foi alterada quando se analisou o custo de colheita e de implantação, sendo este último mais influente, de forma negativa, sobre o VPL do Projeto sem fomento florestal.

Evaluation Methods for Hospital Projects

The authors report the findings of a survey of hospital managers on the utilization of various project selection and evaluation methodologies. The focus of the analysis was the empirical relationship between a portfolio of project evaluation1 methods actually utilized for a given project and several measures of perceived project success. The analysis revealed that cost–benefit analysis and top management support were the two project evaluation methods used most often by the hospital managers. The authors’ empirical assessment provides evidence that top management support is associated with overall project success.

Economic Feasibility of Vegetable Production under Polyhouse:A Case Study of Capsicum and Tomato

Polyhouse cultivation of vegetables is emerging as a specialized production technology to overcome biotic and abiotic stresses and to break the seasonal barrier to production. It also ensures round the year production of highvalue vegetables, like capsicum, especially, during off-season. Cost is the major issue in sustaining this technology. The present study examined the economic viability of production of capsicum and tomato in a naturally ventilated polyhouse of medium cost category with drip irrigation system. Data were generated by cost accounting method for estimating the feasibility of production and was analyzed by using project evaluation methods, like Pay Back Period (PBP), Benefit Cost Ratio (BCR), Net Present Value (NPV) and Internal Rate of Return (IRR). Cultivation of capsicum in a polyhouse was found to be highly feasible as reflected in higher values of NPV (Rs.3,23,145/500 m2), BCR (1.80) and IRR (53.7%) with payback period of less than two years. Breakeven price for capsicum production in a polyhouse (Rs.11.80/kg) was lesser than average wholesale price. Production of tomato in a polyhouse was found not feasible, as the breakeven price was more than the average market price and all the project appraisal parameters indicated that it was not feasible. Only at about 48% premium price over the prevailing market price or reduction of cost of polyhouse structure by 60% from Rs.400 to Rs.160 /m2, could make the tomato production viable in a poly house.

Extending monetary values to broader performance and impact measures: Transportation applications and lessons for other fields

This article examines recent progress at assigning monetary values to what are normally considered “hard to quantify” benefits of transportation projects. It focuses on three types of impacts – environmental quality, health and wider economic impacts – to examine how transportation project evaluation methods have evolved in recent years and how they compare to methods used for evaluation of non-transportation programs. Examples of recent practice are provided to show how transport agencies are continuing to refine performance measures to include broader impacts in project evaluation. A classification is provided to distinguish direct traveler effects from indirect effects on non-travelers, a step important to maximize coverage and minimize double-counting of impacts. For each type of impact, the paper discusses the range of variation in monetized values and shows that the variation is due less to imprecision in measurement than to fundamental issues about whether to use damage compensation, impact avoidance costs, stated preferences or behavioral valuation perspectives to define those values. Case studies as diverse as Australian roads, Wisconsin energy programs and Appalachian economic development programs are used to show how common methods are evolving among transport and non-transport agencies to improve impact measurement and its use in project evaluation.

Making Investment Decisions in a Chilean Family-Oriented Business: Who is Right the Parents or the Children?

The relevance of traditional methods of project evaluation in the decision-making process for family-oriented businesses is not completely clear, as compared with the importance of other variables such as the project’s coherence with the family’s values and interests, amongst others. This article presents a case study related to a Chilean family business, in its attempt to determine the importance that family members attribute to different variables that should be considered when making investment decisions. The investigation considered three types of data: a) evaluation of the investment from a financial and strategic point of view, b) presentation of results to the member of family, and c) follow-up with respect to the decision made and interviews with all the family members. The results show that the parents feel that stability in the family investment policies and the impact of the investment on the roles that each family member plays in the business are the most relevant variables, whereas the children assign more value to aspects associated with business returns.

Sustainable development indicators: a case study on the city of Flagstaff and Coconino county

The application of capitalist theory and the perception of an autonomous economy have created a range of environmental and social ramifications not addressed via traditional economic reasoning. In order to effectively and efficiently abate sustainability issues, the sustainable development discourse developed evaluation methods such as sustainable development indicators to gauge progress towards sustainability in communities without using traditional cost–benefit methods of analysis. The indicators created in this work are intended to be applied as a method of project evaluation in local community development departments. Using local growth management policy as a basis, these indicators have been designed to show how a development project contributes to policy goals that relate to all three dimensions of sustainability: environmental, economic, and socio-economic.

The multi‐actor, multi‐criteria analysis methodology (MAMCA) for the evaluation of transport projects: Theory and practice

AbstractIn this paper the multi‐actor multi‐criteria analysis (MAMCA) method to evaluate transport projects is presented. This evaluation method specifically focuses on the inclusion of qualitative as well as quantitative criteria with their relative importance, defined by the multiple stakeholders, into one comprehensive evaluation process in order to facilitate the decision making process by the different stakeholders. The MAMCA methodology is introduced by an overview of other evaluation methods for transport projects in the past and is illustrated by means of two practical cases. The introduction will lead us to the theoretical conception of the MAMCA method where we draw the attention to the proven usefulness of the MAMCA for the evaluation of transport projects and the inclusion of different kinds of stakeholders, individuals as well as groups, into the evaluation process.