ENVS 361 Module 4 PDF

ENVS 361: Environmental Project Management Module 4 What did we cover in Module 1? https://stock.adobe.com/ca/images/recap-words-from-wooden-blocks-with- letters-a-summary-of-what-has-been-said-a-recapitulation-recap-concept- white-background/325815192?prev_url=detail...

ENVS 361: Environmental Project Management Module 4 What did we cover in Module 1? https://stock.adobe.com/ca/images/recap-words-from-wooden-blocks-with- letters-a-summary-of-what-has-been-said-a-recapitulation-recap-concept- white-background/325815192?prev_url=detail © 2016, Southern Alberta Institute of Technology 2 Outcome of Module 4 Describe the main financial terms related to environmental technology projects. © 2016, Southern Alberta Institute of Technology 3  Objectives of Module 4 4.1 Explain cost-benefit analysis as it relates to environmental projects. 4.2 Describe the payback period as a method of assessing the value of a project. 4.3 Describe the time value of money and discuss its importance to environmental project management. 4.4 Explain the net present value method as a method of evaluating potential projects. 4.5 Calculate the NPV for the project described and compare your answer with the solution provided. © 2016, Southern Alberta Institute of Technology 4 Unit 4: All about how to assess a project (from a financial point of view) to decide if should do it Unit 4: assessing a project before we decide to define it © 2016, Southern Alberta Institute of Technology 5 How do companies ‘find’ projects? Word of Mouth or Project lists online! Example of popular website: merx.com >>Can filter by “Environmental Services” Request for quote (RFQ) Request for Proposal (RFP) It also takes networking! Once you have clients established and showcase good work, they will give you more projects! © 2016, Southern Alberta Institute of Technology 6  Assessing a Project Not all projects should be done by a company! It is always worth assessing a project to check: Does it align with the organization’s strategic goals? Does the organization have the right skills and knowledge to do the project? ◦ If no, is the project an area they wish to grow or develop in? Will the organization earn profit from the project? Can we be competitive with price, quality, and schedule? What else are we committed to and can we meet the deadline with existing resources? © 2016, Southern Alberta Institute of Technology 7  Go/No-go decision making Very common for environmental consulting firms to have a Go/No-go decision- making checklist or meeting to decide if should submit a proposal or not https://stock.adobe.com/ca/images/cross-road-with-sign/60254818?prev_url=detail © 2016, Southern Alberta Institute of Technology 8 The reality: most environmental projects are occurring with or within profit-orientated organizations …so financial assessment of a project is something a project manager may be involved in! 1. Cost Benefit Analysis 2. Payback Period 3. Time Value of Money 4. Net Present Value (NPV) © 2016, Southern Alberta Institute of Technology 9  Cost-Benefit Analysis For each project, quantify: the costs expected to complete the project the benefits that could occur if the project is completed For most project selection purposes, benefits = project revenue Then compare the cost/benefit ratio across multiple projects to decide which one to choose! Note: if you’re taking a ratio, then the cost and benefits need to be in the same units! Most common unit: $ CBA >1 means costs > benefits (bad) CBA