Economic Aspects of the project

 

Having studied the material of the chapter, the student must:
to know

• key criteria (parameters) for the classification of projects that are significant for the economist and manager;
• the specifics of innovative projects, affecting the process of managing it;
• the specifics of the business organization on the project principle;
• the essence of the economic model of the project;
  can classify projects according to various criteria relevant to a particular situation;
• apply the principle of alternativeness in the construction of the economic model of the project;
  possess skills in determining the economic content of the project;
•  the sequence of actions to build the economic model of the project.

 

Key terms: classification of projects, megaproject, complex project, defect-free project, innovative project, new project, economic model of the project, the principle of alternativeness.

Classification of projects according to the criteria of a manager and an economist
The exceptional variety of economic phenomena determines the multiplicity of types and types of projects.

Classification of projects, i.e. their division into groups, can be carried out according to various criteria: by level, scale of changes, breadth of coverage, requirements for quality and methods of its provision, set of projects, level of participants, nature of the target task, object of investment activity, the main reason for the emergence of the project, etc. But first of all, a specific project differs from any other in its essence, content, the meaning of those actions, processes, works that are planned to be carried out, as well as, of course, the specifics of the circumstances of the implementation of conditions and intra-system factors external to the system implementing the project.

To develop a reasonable and complete classification of projects, it is necessary to use a sufficiently complete set of features covering all the essential parameters that characterize from a variety of angles any possible project. At the same time, you should not create a redundant list of these features, as this reduces the distinctiveness of properties and the identification of the project type for later management.
 

As key criteria for classifying projects identified by economists and managers, consider the following:

• scope of the project;
• the period of its implementation and the amount of necessary investments;
• industry affiliation of the project;
• complexity of the project in certain aspects;
•  the degree of novelty (or repetition) of the project;
•  the importance of the project for the implementing organization and the organization - the consumer of its results;
• features of the conditions for the implementation of the processes that make up the content of the project;
• resource and time constraints;
• requirements for the quality of work and results;
• the degree of coverage of the stages of the innovation process, etc.

 

According to the scale of the project, as a rule, small, medium and large projects. Especially large projects are referred to as megaprojects.

Small projects, in addition to relatively small volumes of work in physical and cost measurement, are characterized by the relative simplicity of technological processes and a small range of necessary resources, which does not exclude in some cases the use of special materials and technical means of high cost. The order of quantitative parameters of small projects, according to various data, is represented by capital investments

in 10-15 million dollars. and labor costs of up to 50 thousand people / h. On the one hand, small projects can be carried out with some simplifications of the procedures for development and execution, the formation of a project team. On the other hand, they require special care in calculating the timing of work and the necessary resources, as well as compliance with the planned schedules for the implementation of technological processes, because any deviations can significantly affect the course of the project, its cost and completion dates. Small projects, as a rule, are carried out under the guidance of one manager who coordinates all the processes of the project: technological, providing, corrective, etc. The project team (production and management team) should be distinguished by flexibility (interchangeability), clear knowledge and ability to perform various tasks, skills not only of the technological plan, but also of the organizational, including the procedures for submitting the results of the project to the customer.

Medium-sized projects differ from small ones both in terms of the volume of work and costs of all types of resources, as well as in the complexity of individual elements (processes) of the project and the scale of capital investments. According to some reports, medium-sized projects can be characterized by the volume of capital investments of several hundred million dollars and the implementation period from two to five years.

Large projects exceed the average in their parameters by several times. Effective implementation of a large project requires the use of modern management tools, such as the method of phased development and implementation of the project (Stage Gate Process), coordination of the actions of the project team, a thorough approach to the structuring of the project, monitoring its implementation. The project team of a large project can be very large in number. So the project team responsible for the construction of one unit at an oil refinery (the project budget is about $ 200 million), can, according to the experience of large companies, consist of 20-30 people, and the whole plant - of more than 100-150 people, not counting contractors.

Megaprojects are targeted programs containing many interrelated projects, united by a common goal, allocated resources and time allocated for their implementation. Such programmes can be international, national, regional, cross-sectoral, sectoral and mixed. They are formed, supported and coordinated at the upper levels of government - state, regional, municipal - and are characterized by extremely high cost (billions of dollars), labor intensity (about 20 million people / h) and long implementation periods (five years or more).

Depending on the duration of the project and the amount of necessary investments, the following projects are traditionally distinguished: short-term, medium-term and long-term projects. Short-term projects have a duration of up to one year, the duration of medium- and long-term projects is determined by industry characteristics, but traditionally a medium-term project can last from one to three years, and a long-term one - more than three years.

On the basis of industry affiliation, the list of possible projects repeats the list of industries and sub-sectors of the economy and social sphere (industry, construction, transport, healthcare, tourism, etc.); there is no such industry or sphere where there would be no need for change, development, growth, i.e. in the implementation of certain projects.

By complexity, the following types of projects can be distinguished: simple, organizationally and technically complex, resource-complex and complex in combination.

Complex projects imply the presence of technical, organizational or resource tasks, the solution of which involves unconventional approaches and increased costs. These tasks, in turn, imply finding, developing original approaches to the solution, which requires increased expenditure of material, human, financial and time resources, as well as, possibly, the variant design of certain elements of the project. In practice, there are variants of complex projects with the predominant influence of any of the listed types of complexity - the use of non-traditional construction technologies, a significant number of project participants, complex financing schemes, etc. Complex projects also involve in the process of preparing their implementation the implementation of decomposition, division into simpler parts, elements that are subprojects of a complex project that are amenable to relatively autonomous implementation.

The degree of novelty as a feature of the project is determined by the presence or absence of analogues in terms of the essence, content of the project and its elements, the conditions and circumstances of implementation, the techniques used and the methods of organization.

According to this criterion, it is possible to distinguish completely new, unique projects: the first flights into space, expeditions to the North and South Poles of the Earth, etc. New projects also include repeated in essence, content, but carried out in much different conditions than those carried out earlier (natural-climatic, socio-economic, transport, demographic). Thus, the construction of any enterprise in the middle latitudes of the European part of America is difficult to compare with a similar project in the north of Yakutia or in Central Africa, and the matter is not only in the natural environment, but also in distances, in the absence of communication routes, infrastructure, etc.

Unique projects are distinguished, first of all, by a high degree of risk and large-scale resource costs.
In other cases, project implementers tend to deal with repeat projects that are relatively technically and organizationally proven.

According to the degree of significance of the project results for the contractor and the consumer, projects are decisive, significantly significant, medium-significant and insignificantly significant. The degree of significance of the project as a classification feature has a twofold meaning - purely quantitative, we can say, power, large-scale and qualitative, comparative, parametric. Naturally, this feature is absolute. In other words, there should be no project with results that are insignificant for interested organizations and individuals. But the degree of significance of different projects, their results for different participants and contractors is ambiguous and uneven. Outside of the context defining a particular project, it is difficult to give an exhaustive description of the significance parameter. The possible approach is as follows.

The highest significance takes place if the results of the project determine the possibilities for the further existence of the system of the project executor and the system of the consumer, the user. The significance rank of the project can be designated as decisive.

If the implementation of the project thoroughly improves the quantitative and qualitative parameters of the user object, then the rank of a significant project takes place.

When a project entails a certain, but not decisive growth, an improvement in the characteristics of the consumer of the results, an assessment of the average importance of the project should be given.
In the absence of a practical impact of the project on the system, but taking into account the fact of the implementation of the project, a criterion of insignificant significance arises.
 

Depending on the specifics of the conditions for the implementation of the processes provided for by the project, the following projects are distinguished:

1. adequate to the basic parameters of environmental conditions;
2. requiring special measures tailored to environmental factors;
3. unenforceable in the existing conditions and (or) requiring a change in these conditions.
4. The classification of projects depending on the resource and time constraints for certain works of the project is established in relation to a number of factors of different nature:
5. climatic conditions (affect, for example, the import of material resources to the regions of the American Far North and the Far East, the possibility of performing many technological and transport processes, the availability of human resources, etc.);
6. ensuring the stable functioning of all service subsystems of the project in essence, time, and quality level;
7. creation, maintenance at the desired level and reservation of the resource complex of the project.
8. Depending on the requirements for the quality of work and the results of projects, defect-free projects, projects with increased quality and standard projects are distinguished.

Defect-free projects are focused on the upper established limits of quality requirements.
Projects of increased quality are carried out with the presentation and observance of excess characteristics of the requirements for the quality of work.

Standard projects are carried out on the basis of compliance with all regulations (general, sectoral, environmental, etc.).

In addition to these types, the scientific literature also distinguishes a class of innovative projects. At the same time, since the vast majority of investment projects contain an innovative component to one degree or another, the division of projects into investment and innovative is rather conditional. Projects that provide for the development of new products or technologies and involve investments in intangible assets, to a greater extent, claim to classify them as innovative. Nevertheless, despite the difficulty of classifying projects as a particular type, an increase in the share of works aimed at creating innovations in them changes the characteristics of projects.

Thus, an innovative project differs from an investment project as follows:

• a higher degree of uncertainty (technical, commercial) of the project parameters (timing of achievement of the intended goals, upcoming costs, future revenues), which reduces the reliability of the preliminary financial and economic assessment and involves the use in practice of additional procedures for evaluating and selecting projects;
• involvement in the implementation of projects of unique resources (highly qualified specialists, persons of creative work, materials, devices, etc.);
• a high probability of obtaining unexpected intermediate or final results within the framework of 

the project, representing independent commercial value, which imposes additional requirements on the flexibility of managing the innovation process, on the ability to quickly enter new business areas, industries, technologies, commodity markets, etc.

Projects according to the degree of coverage of the stages of the innovation process can be classified into complete innovation projects, including R&D, assimilation of innovation and its commercialization; and incomplete innovation projects that include only certain stages of the innovation process.

Detailed classification of projects allows economists and managers to clearly rank promising and implementable projects, and as a result, set feasible goals, set real deadlines for achieving goals and attract optimally necessary resources for their successful implementation.