Construction Project Management Series 7-9
3 Hours (3 LUs)
Investment in a constructed facility represents a cost in the short term that returns benefits only over the long term use of the facility. Thus, costs occur earlier than the benefits, and owners of facilities must obtain the capital resources to finance the costs of construction. A project cannot proceed without adequate financing, and the cost of providing adequate financing can be quite large. Finance is also a concern to the other organizations involved in a project such as the general contractor and material suppliers.
At a more general level, project finance is only one aspect of the general problem of corporate finance. If numerous projects are considered and financed together, then the net cash flow requirements constitutes the corporate financing problem for capital investment. Whether project finance is performed at the project or at the corporate level does not alter the basic financing problem.
• institutional arrangements for facility financing.
• evaluation of alternative financing plans.
• secured loans with bonds, notes and mortgages.
pricing for constructed facilities.
• contract provisions for risk allocation.
• risks and incentives on construction quality.
• basic concepts in the development of construction plans.
• choice of technology and construction method.
• defining work tasks.