PROJECT LIFE CYCLE

Most capital projects are generated by either one of the following reasons or a combination of them:

• New product development;
• Market pressure;
• Natural resources exploitation;
• Business expansion;
• Business ventures; and
• Personal initiative for business opportunities.

Whatever the reason, they all follow what may be called a project life cycle.

The project life cycle may be defined as the organized number of activities needed to develop a project from its proposition or inception to its full implementation or completion.

When a project is proposed a very elementary procedure based on personal experience, historical data, project analogy, incipient design or a combination of them is set on the table in the form of a package usually called Conceptual estimate paper.(CEP)

The conceptual estimate paper is a description of the project in question. It is required as part of the initiation review package before a budget item is incorporated into the company's business plan.

The CEP usually contains the following kind of information:

• Purpose of the proposed project;
• Description of the project;
• Milestone schedule for the project main activities(duration estimate); and
• Order of magnitude cost estimate.

It gives management a first rough idea about the size of the project, its financial commitment and timing for the execution. This document is developed in-house by the interested party and it is usually inexpensive but at the same time its accuracy is very limited. It really serves as a basis to proceed to further development when circumstances justify it.

Once the CEP is approved, additional activity is generated by starting an Engineering study which in time will be the base line to develop a project proposal for expenditure approval. This engineering study along with other related information outlines is called the design basis paper (DBP).

The DBP clearly defines the project scope and supports the technical development of the project proposal later on in the project life cycle. It encourages completion of a planning study before a project team is given the responsibility for the item.

The DBP makes emphasis on what has to be done rather than how it will be done.

The design basis paper should incorporate:

• The purpose of the proposed project;
• The relationship of the project to existing plans;
• The description of the proposed project;
• A review of the alternatives studied;
• An order of magnitude estimate (-40, +40 % accuracy); and
• The scheduled dates for major milestones.

If the DBP is approved the cycle continues with a selection of a contractor to proceed with a more elaborated design that will support a better cost and time estimate and seeking of funds for project construction. This more elaborated design is usually called the project proposal and it usually provides the final design basis and scope of work for the proposed project.

The Project Proposal usually contains:

• The project location and layout;
• The process design basis;
• The on-plot and off-plot facilities;
• Major mechanical and electrical needs;
• Instrumentation needs;
• Needed modification to existing facilities;
• Operating variables;
• Corrosion control parameters;
• Project impact on related facilities;
• Environmental impact assessment;
• Fire protection and safety requirements;
• Equipment and material needs;
• Project milestone schedule; and
• Engineering studies if applicable.

Along with the production of the Project proposal the following documents should be developed before asking for project funding:

• Project execution plan;
• Updated cost estimate (-15, +10 % accuracy); and
• Financial feasibility studies.

If project funding is granted a definitive design contractor has to be selected, long lead time procurement has to be started and a slate of construction contractors updated. When definitive design has been completed enough, according with the type of project, the construction contract is awarded and the last phase of the project will be on its way.