2.

0 CURRENT SITUATION ANALYSIS

2.1 Introduction

Current situation analysis involves the process of studying the current states of the project and
the decision making process during the various phases of construction.eg. Planning, pre-design,
design and execution.

This analysis helps to baseline the success and failure within a given environmental set up. The
analysis involves rigorous internal and external factors to determine the strengths and
opportunities of the entire project cycle.

This analysis also synethis the project information to identify the weaknesses and risks
associated with the project during the construction cycle including the completion and
commissioning stages. The analyses involve the use of the several techniques including swot
analysis that determines the strengths, weakness, opportunities and threats.

Current situation analysis is an important tool to the client, contractor and the project managers.
The analysis is used to continually evaluate the factors that influence the project goals like the
project time-lines, costs and quality. The strengths and weaknesses are identified and remedial
measures proposed and implemented.

2.2 Construction project and investment

The mixed use commercial building at Mugutha Ruiru used these tools during the various project
cycles to determine the success or failure at any given time. The tool was used to measure the
factors such as labor rates, market prices, machinery and equipment’s and their contribution to
project overall risks verses, corresponding alternative methodologies in relation to project overall
progress and profit margins. The client also used the tool to determine his return to investment
risks associated with the project and the available alternatives during the planning process.

The project managers also employed the tool during the tendering stages to get to the best
evaluated bid, set the project baseline in respect to return to investment and financing options
available to the client.

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2.3 Project progress

During the construction process the contractor performed this analysis on monthly basis to
determine his or her successes on work progress with respect to project schedule and the budget
due to the changing site dynamics. He incorporated the external as well as the internal
environmental factors that affected the project directly or indirectly. The Swot tool was used by
the contractor to determine his strengths in the construction phase and the financial weaknesses
and risks that could be voided. This technique was thus employed to control and make financial
decisions.

2.4 Project investment decision making

The client utilized this tool after analyzing the various drafts prepared by the project manager to
evaluate the best investment option taking into account the project risks return on investment,
project timeliness and associated risks. The project management team used this tool to analyses
the cost control factors using such tools like Evm, S-curve, SWOT and financial risks regrating
tools to evaluate performance at any stage of the project and also when preparing interim
payment certificate and evaluation of work done.

2.5 Tendering stage

This tool was used to evaluate the capacity to undertake and complete the project at the best
optimum cost both to the client and the contractor within a suitable time frame.

2.6 Construction stage

During the construction stages several unforeseen factors both internal and external due to
unpredictable price fluctuations, weather and scope variations were analyzed using this tool. This
helped make informed decisions in order to sustain the project financial cycle and ultimately the
project delivery at a reasonable time frame and cost.

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2.7 Operation / maintenance phase

In the context of post commission the client (investor) need to study the market rates for similar
investments and identify new opportunities and weaknesses in order to remain relevant and
competitive after the project is realized. Thus the situation analysis tool is used from inception to
the project utility stages.

2.8 Conclusion

In a nut shell the current situation analysis tool should be used for all projects or investments to
determine all factors affecting time, costs, risks to investments and overall objectivity of projects
in order to make informed decisions.

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12.3 COST BENEFIT ANALYSIS

12.3.1 Introduction

A cost benefit analysis is the process of comparing the projected or estimated costs and benefits
(or opportunities) associated with a project decision to determine whether it makes sense from a
business perspective.

Generally speaking, cost benefit analysis involves tallying up all costs of a project or decision
and subtracting that amount from the total projected benefits of the project or decision.
[sometimes this value is represented as a ratio] If the projected benefits outweigh the costs, you
could argue that the decision is a good one to make, if on the other hand, the costs outweigh the
benefits then a company may want to rethink the decision of the project.

Cost benefit analysis is a form of data driven decision making most often utilized in business
both at established companies and startups. The basic principles and framework can be applied to
virtually any decision making process whether business related or otherwise.

Advantages of cost benefit analysis are:-

i. Its data driven,

ii. Makes decision simple
iii. Can uncover hidden costs and benefits.

The limitations of the same are its

i. Difficult to predict all variables

ii. Its better suited to short and mid length projects
iii. It removes the human element
Depending on the specific investment or project being evaluated, one may need to
discount the time value of cash flows using the net present value calculations. A
benefit –cost-ratio [BCR] may also be computed to summarize the overall
relationship between the relative costs and benefits of a proposed project. Other tools
may include regression modeling, Valuation and forecasting techniques.

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12.3.2 Design Process

During the design process the team should make appropriate judgment on the project cost. The
consultant’s decision affects project cost during the predesign, design and supervision phases of
the project. The engineers and architects should ensure that they perform cost benefit analysis to
evaluate whether their designs are economical and cost effective. This poses challenges since the
designer will consider shapes; form and functionality. The cost benefit analysis solves these
problems since it equips the designers with cost information to ensure optimum design. The cost
benefit analysis helps to rank and set priorities so that more objectivity is given to the project
with higher returns to investment and comparative lower risk ratio.

12.3.3 Client case study (mixed used commercial building at Mugutha)

During the inception of the mixed-use commercial building project cost benefit analysis was
performed for both residential units and pure unit's apartment project that is shops and business
spaces, one bedroom and two-bedroom units. Both the two separately has several challenges on
the return on the investment and satisfaction of the customer.

PROJECT Investment capital in Period of Return on investment (yrs)

OPPORTUNITIES Ksh. 1 2 3
TO CLIENT
Pure residential 41,814,000 8,000,100 18,000,000 31,657,000
apartments
Commercial units 41,814,000 9,307,000 17,670,000 29,437,000
Mixed use 41,814,000 11,243,673 24,000,000 35,896,514

After performing financial risk associated with the project and time duration to recoup the
investment.

The mixed use compartments were identified in terms of making services available to the
residents who were to rent the upper one and two bedroom units. The shop operators were also
going to benefit from the tenants thus creating a business proximity and interdependence.

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The cost benefit analysis also availed that the mixed-use units are of more benefit to the client
than when considered as residential apartments or commercial utility on its own.

 The cost benefit analysis was important to the client in several ways including but not
limited to;. Making financial decisions.
 Make right investment
 Identifying financial risks

12.4 Conclusion

The client was able to make informed decision based on the analysis and thus mixed use
commercial building units were conceptualized after analyzing the risks and benefits to the
client.

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