Detailed Project Reports (DPRs)
Detailed Project Reports (DPRs) are the outputs of planning and design phase of a project. DPR is a very detailed and elaborate plan for a project indicating overall programme, different roles and responsibilities, activities and resources required for the project. To be more precise,
A DPR is a final, detailed appraisal report on the project and a blue print for its execution and eventual operation. It provide details of the basic programme the roles and responsibilities, all the activities to be carried out and the resources required and possible risk with recommended measure to counter them.
The success of project is measured on the basis of:-
- Whether the project was completed on time.
- Whether actual cost of project was within reasonable limits of escalation.
- Whether after completion of the project it was able to deliver the products of desired quality and in adequate quantity to clients satisfaction at profitable costs.
- Whether the project gestation period was within planned duration.
The design stage is a blue print which on paper gives a great length and detail what has to be done to convert the corporate investment in a feasible project idea and ultimately a profit making enterprise. The top management policy guidelines, its impact on the project life, appraisal in terms of financial viability are dealt in great detail. The DPR is the basic of specification, contract drawings, detailed technical feasibility, financial feasibility, execution of project from practical point of view. The DPR should also highlight the nature of inherent risks in the project & potential external risks that will influence the outcome of the project. Also the DPR should give the measures for risk management and risk mitigation.
The main sub-division in a DPR is:-
- General Information of the project.
- Background and the experience of the project promoters.
- Details and working result of industrial concerns already owned and promoted by the project promoters.
- Details of the proposed project:-
- Plant capacity
- Manufacturing procedure adopted
- Technical knowhow/ tie-ups.
- Management teams for the project.
- Details of land, buildings and plant and machinery.
- Details of infrastructural facilities (power, water supply, transport facilities etc.)
- Raw material requirement/ availability.
- Effluents produced by the project & treatment procedures adopted.
- Labour requirement and availability.
- Schedule of implement of the project.
- Project cost.
- Means of financial projects.
- Working capital requirement/arrangements made.
- Marketing and selling arrangement made.
- Profitability and cash flow estimates.
- Mode of repayment of loans.
- Government approvals. Local body consents and statutory permissions.
- Details of collaterals security that can offered to the financial institutions.
Preparation of DPR
The preparation of DPR requires wide variety of expertise. A number of decisions are mutually related. For example: requirement and training plan is dependent on the nature of the technology, availability in the general employment market in the region, need for foreign collaboration and training, extent of specialised plant and equipments supplied from abroad etc.
Financials requirements are dependent on the time schedule for the implementation of the project. The nature of issue to be included in the commercial terms and conditions depend on the extent of the spread of the contractors. If only local and regional parties are in picture, the scope and jurisdiction for disputes gets restricted.
A number of issues largely depend upon managerial perceptions and top management policies. On the whole preparation of DPR is a complete task. Therefore highly specialised agencies have come up in different areas, who undertake such task for the clients.
They are usually known as technical consultancy organisations. They specialise in some particular field. For example: Dastur & co specialises in metallurgical industries, Engineers India Ltd. specialises in oil sectors.
Even for medium sized project, it is necessary that a capable consulting firm is entrusted with the task of formulating the DPR.
Steps of preparation of DPR:
- Client interacts with consultant.
- Consultant takes all required inputs from client & do necessary first phase studies.
- Client evaluates it & makes all necessary changes & requests consultant to do the necessary modifications.
- Consultant submits the revised draft for approval.
- Consultant submits the final DPR after getting approval from client.
Evaluation of DPR:
The final responsibility of the project lies with the owners. Therefore, the owner’s organisation must have an appropriate mechanism for project evaluation of a DPR submitted by the consultant. Apart from care in selecting the most suitable consultant in the first place the owner’s must pose the following questions.
- What are the sources of critical data & information that have form the basic premises of the DPR, like demand, capital cost, input cost etc?
- The extent to which the strategic plan of top management have been reflected in the design and the repair?
- What were the various alternative considered, and the methodology followed for choosing one among them?
- The extent to which the design fulfils all applicable statutory requirements and regulations, both currently in force and those may be foreseen?
- Identification of potential problems, bottlenecks and/or major risks involved in the project.
- Degree of detailing.
- Influence of complementary/ completing projects.
- Scope for future expansion/modification/adaptation to new technologies and so on.
The above list is a simple of the types of question that the owner’s may pose to the consultant during the process of selection, appraisal of the first draft and before giving the approval.
Location of the Project:
One of the important issues related to project decisions and in DPR preparation is the location of the project. The location of project can be:
- Input or supply oriented
- Output or market oriented.
Input or supply oriented: The major consideration governing the location decision concerns with the availability of various inputs for the project & their transportation from respective sources to the project site. Whenever a project entails processing of bulky raw materials and the processing reduces the bulk by refining/processing operation, it makes economic sense to move the project nearer the supplies so as to cut down the transportation costs. The strategy of NTPC to locate major pit head thermal power plants stems from this logic. Instead of transporting coal over long distance, it may be more economical to convert coal into electrical energy at the pit head itself and transmit the electrical energy into high voltage transmission system to consumption centres. With the advent of high voltage direct current transmission technology, such options have become more cost effective.
Output or market oriented: The gas based power plants may be located near the consumption centres, particularly if gas pipelines have already been laid nearby for other projects. This enables saving on the transmission line costs and power losses in transmission.
The location strategy is largely governed by total transportation cost for entire chain, including transportation of all inputs of various sources to the processing site and that of all outputs to the consumption centres. This exercise needs the sources and quantities of all the supplies available , their unit transportation cost to each location and the demands at different consumption centres, coupled with the unit transportation cost to the finished goods to each consumption centre of each location.
The location strategy also depends on:
- The regulatory framework of thr region.
- Availability of skilled/unskilled manpower
- Industrial relations situation.
- Infrastructural support.
Layout of the project:
The layout itself has profound implication on the profitability and efficiency of any enterprises. Even safety considerations can lead to major changes in the layout.
The layout for a project determines the location of various departments, processes; work centres, machines & service function as well as transportation routes for the movement of materials through these facilities.
A good layout should try to reduce material handling cost to the minimum, ensure flow of men and materials between processes without any back tracking, provide adequate safety for men and equipment and enhance labour productivity & efficiency.
Safety must be a very important consideration for deciding locations of potentially hazardous facilities. For instance storage of hazardous & inflammable chemicals & materials must be located far away from the general centre of activities at economical & practically feasible distance.
Facilities which are prone to fire hazards should be located in a fashion that is easy and quick for multiple fire tenders to arrive & extinguish the fire. It may be worthwhile to give a specific safety check to a layout before finalising it.
Equipment & Process Technology (EPT):-
The equipment and process technology (EPT) decisions are related to design of facilities and system that produce and deliver goods, products and services of desired quality and required quantity. EPT are categorised as follows:
Output decisions are related to demand forecast and marketing strategy for achieving planned market share.
The input and process decisions are complementary to each other. The input and process decisions contribute significantly to “Make or Buy” type of decisions. The “Make or Buy” decisions lead to finalisation of various inputs as well as processing and assembly requirements.
Once the production processes are identified then next set of decisions are related to choice of technology. Choice of technology decisions has to be ajudicious mix of capital and labour components which are the major factor of production.
Use of modern state of art technology ensures more automation, requiring less labour but leads to high initial investment. On the contrary use of traditional technology and processes leads to lower automation with requirement of more labour and lower initial investment.
Therefore, the trade off lies between high capital and lower labour cost on one hand and l;ow capital and high labour cost on the other hand.
Apart from cost considerations and relative proportion of mechanisation, other factors that are to be considered are scale of operations: quality and level of skills required also influence the choice of technology decisions.
Depending on the market share & capacity forecasts, a particular level of technology may be the optimum choice. In event of low market demand & lack of availability of skilled work force to operate high end & high volume technology may lead to sub optimal utilisation of the said technology.
Also, there would be substantial increase in the subsequent maintenance costs which may raised affordability issues. Thus, the choice of EPT is a complex task, requiring wide knowledge & information about different options with relative merits and demerits of each option.
In case the procurement of EPT requires high initial investment or decision making process is taking unusually long time then the option of technology collaboration may be explored.
In this option, the organisation may explore possibilities of technical collaboration agreement with some organisation that has had considerable experience in use of the proposed technology and are in position to impart their knowledge to others. Such a collaborating organisation may be found in the country or may be from abroad.
Environmental Impact Assessment (EIA):-
EPT must have a dedicated section of environmental Impact Assessment (EIA). Such an assessment would have the specifications of the environment which is known as the base level specification before setting up a project.
Thereafter, an estimate should be made as to the impact of the project operations on various base level parameters. These could co0ver air, water and soil parameters. The disposal of soil, liquid and gaseous effluents generated by the project would lead to increase in pollution load over the base levels.
After estimating the impact of the project on the base level of the environment the DPR should recommend specific control measures & effluent treatment facilities so that the environment pollution can be controlled within permissible limits.
The DPR should ensure that the provisions are adequate for fulfilling the legal requirements in the locality where the project is scheduled to come up. This calls for the detailed knowledge of all the state level and national level provisions with respect to environmental protection.
Many of the provisions call for obtaining clearances from controlling bodies. The DPR should also include a time schedule for obtaining all the required clearances.
DPR is related to general guidelines and conditions that should govern all types of contractual relationships likely to be entered into during the project.
In particular, general guidelines for any eventual arbitration procedures are indicated, specifying the nature of issue that may be referred for arbitration, choice of arbitrator by both the parties and the place where such proceedings should be held.
DPR should also include guidelines related to supply, erection, and commissioning & guarantee test of various equipments required for the project.
DPR should also lay guidelines for tendering process whether to follow single stage or two stage tendering. It may also contain model document and formats related to invitation to tenders, specifications etc.
DPR will also contain guidelines for vendor short-listing and networking. Some points related to vender detailing that are highlighted in the DPR are as cited below:
- Commitment with respect to delivery period & penalty conditions, in case of failure to fulfil the commitment.
- General terms of payment including progress payment.
- Inspection and testing procedure and customer hold points.
- Network plan for the contract and monitoring and control system.
- Guarantee test, schedule, procedure, criteria for success and accompanying bank guarantee.
- Responsibility for damage in transit or during erection and/ or commissioning.
- Condition of admissibility of any increase in the price of the contract.
- Contract variations and the manner of handling them.
- Mobilisation advance to be paid initially.
- Responsibility to supply the equipments and necessary accessories and spare parts.
The DPR incorporates a much detailed projection of the costs and revenues expected during the projected lifespan of the operation phase. The principal input to this comes from operational costs.
Also the other financing cost like depreciation, interest on long term loans and short term working capital loans, writing off of pre-operative & preliminary expenses, guarantee commission etc. Income tax calculation are also included.
The DPR provides projections for the following statements:
- Profit and loss statement.
- The balance sheet.
- The fund flow statement.
For the project phase, the DPR provides an estimate of the phase requirement of capital. This plan forms the basis of a strategic plan for raising the funds from external sources like terms lending institutions and through public issue of stocks and/or bonds.
The DPR would include a recommendation schedule for ensuring adequate flow of funds for the timely completion of the project with adequate provision for normal contingencies.
The DPR would also include for the project phase a recommended system of monitoring & control of the financial progress of the project, vis-a-vis the physical progress. The system is an essential ingredient for adequate financial control during the execution & the termination phase of the project.
Morden day projects also analyse the socio-economic impacts on their immediate surroundings. The attitude of local residents plays a crucial role in the successful completion of the project in any new locality or region.
Generally, any medium to large type of project will lead to displacement of original residents and tenants of the land & bring about a significant change in the pattern of earning livelihood, brings in wide disparity in the standards of living between those who are employed in the project and those who are left out of it, raises large employment expectations among the local population.
The effect are more glaring based on the size of investments, level of technology used & innovation potential of the project. However not all factors contribute in the socio-economic influence but it is for sure that a combination of factors based on the size & type of project will surely lead to creation of social discontent.
The project is seen as a source of social turmoil & discontent & its progress gets affected severally through different forms of social unrest. It is, therefore, essential to make an effort at the early stage in planning process to reach out the population likely to be affected by the project.
Community based & community participated demographic surveys may be conducted for identifying the optons for direct as well as indirect source of employment. DPR should also highlight planning & execution methods of specific community development programmes which help in developing a symbiotic relationship with the local community.