Financial Control in Project Management

1
Financial Control in Project Management
2
Airport Development Projects

• PPP Projects
• Re structuring of Brownfield Airports (Delhi
  Mumbai Airports)
• Greenfield Airports (Hyderabad Bangalore
  Airports)
• AAI Projects
• Kolkata Chennai Airports
• Non Metro Airport Projects
• Greenfield Airports (NER Region Pekyong,
  Itanagar, Chietu Apts)

3
Formulation of proposal

• Projection of requirement
• History of the project
• Preliminary Estimate for in principle approval
• Preparation of detailed project report
• Availability of Budget provision
• Formulating a proposal of AA/ES

4
Financial viability of the Project

• Freezing of capital expenditure
• Forecast of Annual cash flows for computation of
  IRR/ERR
• Financial evaluation of the proposal based on
  IRR/ERR
• Adequacy of IRR

5
Financially unviable Projects

• Projects not meeting the desired IRR
• Requirements for taking up such projects due to
  socio-economic rationale
• Plan outlay funding of such projects through govt
  grants
• Levy of UDF/reimbursement of operating cost to
  cover the viability gap

6
Funding of the Project

• Internal Resources
• Govt. Budgetary Support
• Govt. Grant
• Borrowings (incl. External Commercial Borrowings)

7
Sanction of the Project

• Financial concurrence on the proposal
• Approval of administrative authority as per DOP.
• Project costing upto Rs.30 cr. are approved by
  various authorities upto Chairman.
• The projects costing more than Rs.30 cr but upto
  Rs.500 cr require approval of AAI Board.
• Projects costing more than Rs.500 cr require
  govt. approval.
• Projects involving GBS/Grant require approval of
  the Govt/Planning Commission.

8
Award of Work

• Preparation/approval of NIT
• Publication of NIT
• E-tendering

9
Formulation of NIT

• Pre-qualification criterion is fixed considering
  specific AAI requirements.
• The PQ criterion should ensure not only good
  quality of work but competition in bids.
• It needs to be ensured that PQ criterion is not
  tailor made to suit specific party.
• PQ criterion normally entails the turnover of the
  party in the past, the size of works executed,
  credentials and experience of the executing
  engineers etc.
• Specification for the work proposed to be
  executed should be such that the competition is
  ensured.
• NIT being a public document should be carefully
  drafted to ensure interest of AAI.

10
Tender Processing

• Publication of NIT
• E-tendering in accordance with CVC guidelines
• Freezing of Justified Cost
• Evaluation of Technical Bids strictly in
  accordance with NIT
• In case of delay in finalization of technical
  bids the justified cost to be updated before
  opening of the financial bids
• Evaluation of Financial Bids
• Acceptance of tender and award

11
Execution of Work

• Measurement of work done quantity / quality
• Preparation of bill amounts payable with
  respect to SOQ and recoveries
• Scrutiny of the running bills by Finance officer
  with reference to contract
• Payment of bills in time to avoid interest
  payments

12
Deviations and Extra items

• Only those deviations/extra items which are
  essential for the completion of the works but not
  provided in the SOQ
• In case the deviation/extra items involves
  execution of works which results in increase in
  the AA/ES amount beyond the permissible limits,
  the prior approval of the competent authority
  needs to be obtained.
• The deviation/extra items should not be on
  account of works which are not part of the
  approved AA/ES.
• Time and cost over-run needs to be monitored on
  regular basis to avoid the same.

13
Substitution of Items

• The items/specification in the original NIT
  should not be allowed to be substituted which
  tantamount undue benefits to contractor.
• The substitution should not result in dilution of
  quality of work.

14
Execution of Project in Time

• The availability of site and the required
  drawings needs to be ensured to avoid delay.
• The progress of the work needs to be monitored
  with reference to time line drawn for completion
  of the project
• Any delay foreseen in completion of the project,
  the matter needs to be taken up at higher levels
  for resolution of the issues.
• Payment on account of escalation needs to be
  avoided.

15
Completion of Work

• Certification of completion with respect to SOQ
• Quality of work completed
• Requisite warranties/guarantees to be obtained
  from contractor
• Finalization of bill