Construction Project in Blacktown: Value Management and Financial Plan

This project outlines the construction of a commercial building in Blacktown, New South Wales, detailing the project's objectives, target market, and timeline, beginning in October 2018. It emphasizes long-term sustainability and efficiency, targeting commercial hubs and educational institutions in the area. The project employs various value management tools across planning, design, procurement, and construction phases to ensure cost-effectiveness and risk mitigation. Facility performance evaluation is used for future cost management and informed decision-making. The report also covers contract arrangements, financial planning strategies including NPV and ROI calculations, and exit strategies. Key aspects include maintaining client communication and flexibility in project adjustments. References to relevant academic sources are provided.

Construction in
Practice

Introduction of the Group
• We are the best provider of construction service
• Our work includes construction of commercial building, residential building
• Our achievement includes a variety of projects such as Blacktown city the fast-
becoming growth area in Sydney.
• We are intended to build commercial building with a minimum height of 60
meters
• The location of the city is within the area of Blacktown, new South Wales.
• We are dedicated team and provide solution that meets the client’s requirements
• Aimed to achieve greater value for the client’s investment

Objectives of Our Team
• The objectives of our team are
• To be able to provide evidence of a low risk commercial
• To address any issue faced by the client
• To accommodate regulatory authorities so as to attain required approvals
• Anticipate issues related to Land & Environment, if any.
• To assign jobs to builders and consultants along with subcontractors
through the usage of low risk proper procurement methods.
• Investigate the demographics to determine the potential market

Describing the Essentials
• Our primary target market is the commercial hubs in Sydney Australia
• The secondary target market includes the educational institutions
• With appropriate stakeholders, we work towards delivering projects, and confirming
that the above objectives are attained.
• Our projects differ in nature as well as include work as described in the following areas:
• Planning and design
• Construction and capital expenditure
• Facilitation, which also includes the cooperation between Blacktown City and external
parties
• Advocacy as well as issues management

Describing the Project and
Timeline
• The project includes construction of commercial building in Sydney
• The project is aimed to attaining long term sustainability with greater efficiency
• We are intended to begin the project by the end of October 2018
• The target timeline for the project is-
• Recruitment of staff from 25th October 2018 to 5th November 2018
• Engaging the team for site visit by 8th November 2018
• Other works include:
• Communication with local suppliers
• Procurement of materials
• Commencement of the project by 10th November 2018

Target Market
• Target market is the targeted set of customers for whom the organization aims and directs its marketing efforts (Day, 2000)
• Our team is directed towards the population of New South wales
• The primary target market being the commercial hubs of New South wales:
 Commercial plants
 Corporate houses
 Shopping malls
 Banking and financial institutions
• The secondary target market is educational institutions
• Schools
 Coaching centers
 Academic hubs
 Private universities
 Public universities

Criteria for Targets
• The target groups and clients have been selected based on the demographic area and
the population of the city
• The other characteristics which has been considered are:
• Valuation of the area
• Number of buildings and complexes
• Educational institutions
• Standard of living of people
• Average disposable income of the population
• Bearing this in mind, our group has selected construction of commercial building of
60 meters in western region of Blacktown, New South Wales, Sydney.

Value Management Tools
• Value Management Tools
• The proposed value management tools are segmented into diverse phases:
• Planning Phase
 Involves planning of the construction
 Evaluation of the draft proposal
 Evaluation of the Cost-cutting techniques
 Assessment of preliminary estimates
 Cost and budget management
 Schedule impact and management
 Value engineering
 Establish initial budget -with cost and expenses and estimated revenues
• Design Phase
 Monitor the estimated cost
 Employ a series of precise cost estimating methods
 Carrying out market survey plan
 Keep a track of the budgeted cost and actual cost

… Contd
• Procurement Phase
 Keeping track of market rate and market bid
 Adjustment of the estimates and market bid
 Conducting risk assessment process to evaluate the degree of risk involved in
construction process
 Preparation of the bidding documents
 Considering the requirements for notice for any delays
 Using unit price for changes thereof
 Abiding by any other clauses affecting the final cost.
• Construction Phase
 Shifting focus from analytical cost estimation to reactive cost management
 To establish the rules which should be delineated in accordance to the contract
documents
 To agree to a format as advised by the general contractor for review of changes
 For entitlement purpose, the changes will also be re-evaluated by the design team
 Review of price by agency construction manager

Facility Performance Evaluation
• Facility Performance Evaluation
• Facility performance evaluation is a process used for assessing the overall
data for future cost management (Preiser and Schramm, 2006).
 The evaluation is often carried out for the following purposes:
 Formulating a thorough cost analysis of completed project
 Developing the lessons that are learned from the project for informing the future
design decisions
 Informing future estimates and budgets to the database
 To determine whether the data used was accurate by means of evaluating the actual
performance

Importance of Value Management Proposal
• The key advantages of the value management proposals
are associated with the reduction in:
 Costs of Capital
 Life Cycle Costs
 Public impact
 Environmental impact
 Operational impact
 Helping the Client Understand Function/Worth
• With the above advantages, the future clients are sure to
invest in the project.

Recommendations for Contract Arrangements
• A tender is a proposal that is forwarded by a supplier in
adherence to the response of invitation.
• Tender makes an offer to supply of materials and the required
services.
• The main tender process in this construction project will be the
selection of the contractor who will construct the building.
 Advertise for the project
 Approach the local suppliers and contractors
 Select a range of applicants who have enrolled for the tender
 Test their materials and services
 Take feedback from their past clients and re-evaluate the past records
 Select the best available alternatives

Financial Planning Strategy
• Before beginning any project, it is essential to make budgetary plans and evaluation of cost-volume profit so as to
avoid the financial pitfalls (Stevenson, Hojati and Cao, 2007).
• Financial planning strategy will involve:
 Establish a payment schedule
 Offer incentive to client for faster payments
 Minimizing procurement or purchase costs
 Track productivity trends over time
 Establishment and definition of client planner relationship
 Accumulation of client data and goals
 Analysis of the financial status
 Development of financial planning
 Implementation of the financial plan
 Monitoring the financial plan

Financial Analysis
• Net Present Value
• NPV is the associated with the discounting future streams of
income that are used at an expected rate of return thereby to
evaluate the current value of expected earnings.
• The calculation is done in the current rate of dollars
• Determine the current value of the project.
• Net present Value has been computed as represented in table 1.
• The cost of initial investment is around 0.40 million
• Total estimated revenue has been determined at 0.96 million
• Total cost of the materials $ 0.91 million
• Rate of return 8.5% (estimated)
• NPV= $843,317.97
CashFlowProjection
1
Investment Outlays at Time Zero:
Equipment or other investment (400,000)
Year 1
Operating CashFlows over the Project's Life:
Total EstimatedRevenue ($) 960,000
- Variable Costs 360,000
- Fixed Costs 165,000
Operations Sub-Total ($) 795,000
Other expenses 120,000
Net CashFlow 915,000
Calculationof NPV
Particulars Year 1
CashFlow 915,000
Real Rate of Return= 8.5%
NPV $843,317.97

Return on Investment
• Return on investment is the most significant financial aspects which
must be computed so as determine the feasibility of the project.
• Return on investment= (Financial Return Value- Cost of project)/
Cost of Project*100
• Financial Return Value =$960000
• Cost of Project= $ 915000
• ROI= ($(960000-915000)/$915000) *100
• =4.91%

Exit Strategy
• The client may exit from the project at any time if found
infeasible
• The project seems not to follow the planned requirement
• The project is not up to the mark
• The project is constructed using illegal means

Relevant Matters
• The most important aspect of this project is keeping the
client up to date with the progress of the project
• Clients will be provided with weekly report on the
progress
• Any elimination of clauses will be provided for re-
evaluation to the client
• Clients will be set free to reject or add any clause with
mutual understanding

References
• Day, G. S., 2000. Managing market relationships. Journal
of the academy of marketing science, 28(1), 24-30.
• Preiser, W. F., and Schramm, U., 2006. A conceptual
framework for building performance evaluation. 6th ed.
Abingdon: Routledge.
• Stevenson, W. J., Hojati, M., and Cao, J. (2007). Operations
management. 8th ed. Boston: McGraw-Hill/Irwin.

Thank You