DO’S & DON’TS OF

SUCCESSFU
L
PROJECTS
Project Appraisal & Finance
Tri 7, MBA IB (Weekend) 2021-24
Prof. Gaurav Gupta

Group - 7
Dipali Das (A)
Manish K Yadav (A)
Prabhat Kumar (A)
Veena Devi (A)
 A successful project is –

• Built in anticipated time

• Completed anticipated cost

• Operates smoothly

• Provide services to end-user at affordable

what the prices

successful • Provides sufficient return for Contractor,

Operator, Supplier, Sponsor and other
project? Project Stakeholders
 Good projects –

• On time, to budget, had no teething troubles

(either technically or revenue generation wise)
during its early years of operation

• Continues to roll on into the sunset with little

or no intervention from any party other than
operator and ultimate customer/ purchaser of
services.

good & bad Bad projects –

projects • During crucial construction and

commencement of operations months or years,
it has faltered in any manner
 • if you won’t take particular risk then the
chances are, nobody else will.

• If you haven’t even thought about a particular

risk and that risk is brought to the table by
others, then it’s a dead cert that nobody else
will take it.

• To argue convincingly that others should share

a risk then you should be able, hand on heart,
to say that you would be prepared to take that
addressing risk yourself

risks
 • Project director uses PF techniques because:

• Politically chosen manner of working

which may change overnight,
• Nothing to gain by making decisions, not
within the handed brief.

NUMBER 1, RULE OF LAW

• Undertaken in a stable and sustainable

environment where contracts and
public governing laws

sector ‘DO WHAT THEY SAY ON THE TIN’

projects
 • Rights and obligations of the parties be set out
unambiguously
• Difficult nettles grasped and not fudged to
reach False deadlines for signing
documentation.

• Supported by robust, stable and equitable laws,

enforced in consistent and non-partisan manner
by courts

• Avoid Sending Shockwaves through the

public market by amending contracts or imposing
later tax regimes, regulatory frameworks to
sector counter over-payments

projects
 • Avoid Sending Shockwaves through entire
market or stifle much-needed investment in
sector by retrospectively amending contracts or
imposing later tax regimes or regulatory
frameworks to try to counter such over-
payment.

• Any ad-hoc attempts to adjust rights of parties

lead to severe market unrest and loss of
confidence by other project providers.

public
sector
projects
 • Public Projects can avoid private sector to earn
super profits, by inserting a ‘re-balancing’
clause to ‘fix’ issues ex-post-facto.

• Most precious resources globally need to retain

confidence of potential investors and to make
business simple

• Take steps to ensure that market view of

stability and rule of law are maintained.

public
sector
projects
 NUMBER 2, GOOD ADVICE

• Get Good Advice, including from financial,

legal and technical firms that are experts of
wider projects and financial market.

• They take a wider view and advise on the

consequences

• Gather knowledge of how similar projects have

been undertaken
public
sector
projects
 NUMBER 3, LISTEN

• Listen to your advisers and be prepared for

push back – prepare in advance

• Good advisers will be able to understand much

of what is being asked for and should be
listened to when reviewing commentaries

• Open understanding and approach will assist in

teasing out the required information early on
public and help in setting of clear parameters around
the level of details required.
sector
projects
 NUMBER 4, TRAIN UP

• People who need to manage the living,

breathing project through to completion and
beyond

• Training public sector employees required for

successful project management

• Contracts ultimately give the parties a right to

sue for breach. Compromises and settlements
are more prevalent outcomes.
public
• PPP and other project contracts should be
sector viewed as driving performance and value
projects
 Operating consortia are groups of people
coming where co-operation and understanding of
the needs of the members is high, and bargaining
position of parties is equal.

NUMBER 1, KNOW YOUR PARTNERS

Issues to resolve in advance include:

• joint, or several liability

• tax positions of the parties
• creditworthiness and way of dealing (upfront
joint equity/bank LCs, etc.)
• desire of the parties to finance on or off the
ventures, balance sheet
• negotiation of/voting on contracts with
consortia associated third parties
 NUMBER 2, KNOW YOUR
FINANCIERS

• Prepare for projects with a clear understanding,

think ahead

• Undertake KYC procedures diligently

• Ensure relevant documents are always

accessible

joint • Utilize funds from international development

banks and ensure that environmental surveys
ventures, and monitoring procedures are compliant with
consortia World Bank
 • validate credit ratings of the equity provider if
it is to be injected into the project pro rata with
commercial lenders

• Set up accounting systems and reporting

systems in a manner that should satisfy the
lenders

• take the time to read the information sections

of the credit documentation carefully

joint
ventures,
consortia
 NUMBER 3, MAKE TOUGH DECISIONS

• Contracting parties are associated companies,

don’t try to make construction or operating
contracts too onerous on the project company.

• A construction contract or operating contract

that has not been properly negotiated and
prepared will not pass with financiers

• Clear explanation of the adopted approach will

joint be more likely to gain acceptance and speedy
resolution
ventures,
consortia
 • Sponsors should also clarify up-front the type
and amount of completion support required.

• Issues such as amount, principal or interest

only, default payment versus on-going
payments, required completion tests should be
worked out in detail up-front

joint
ventures,
consortia
 NUMBER 4, THINK ABOUT FUTURE

• Have one eye on future and on how project

itself and economics can be improved.

• Whether or not differential margin or credit

facility is easily re-financeable once the riskier
part of project has passed.

• Hedging arrangements put in on place day one,

large impact on overall planning and execution
joint of the projects

ventures,
consortia
 BECAUSE –

• Too many parties argue for position in

negotiations

• Such documents are drafted with limited

understanding of current project needs

• Tough stance in documentation need to be

taken and maintained

don’t • Party’s aims and goals can often be achieved in

a manner which is far more palatable to other
say NO side

• Understanding ‘why’ always helps

 PPP Model –

BOT (Toll) Mode:

• Concessionaire required to meet construction

cost and expenditure on annual maintenance.

• Recovers the entire cost with interest and

return on investment out of Toll.

• Greatly depends on traffic. To support capital

NHAI grant is provided up to a maximum of 40%
under NHDP.
way
 BOT (Annuity) Model:

• In addition to above, gets annuities payable by

client every year

Hybrid Annuity Model:

• 40% the Project Cost provided by Government

as Construction Support

• Balance 60% as annuity payments over the

operations period along with interest thereon to
NHAI concessionaire

way Advantages

• Private sector provides greater efficiency

 • Flexible procurement and decision-making
procedures, thus, speeds up implementation
efforts

• Better quality with maintenance by contractor

• Early completion of the project, to save

interest and earn early toll/annuity

• No cost overrun.
• No burden on client for maintaining
NHAI highways.

way
 CONCLUSION –

• It is difficult to predict at the outset which

projects will be successful – or even what
success will look like.

• successful project remains a project that is

built in the time anticipated, that is completed
at the cost which was anticipated, that operates
smoothly to provide services to the end-user at
an affordable price and which provides a
key sufficient return for the contractor, operator,
supplier, sponsor and other project
takeaways stakeholders
THANK
YOU
QUESTION
HOUR
What are the major indispensable criteria to define a project as a successful
project?

a) Built in anticipated time

b) Completed with anticipated cost
c) Provide services to end-user at affordable price
d) Provides sufficient return for Contractor, Operator, Supplier, Sponsor and other
Project Stakeholders

e) i, ii
f) i, ii, iv
g) i, ii, iii
h) All of the above
If a project is completed in stipulated time but if it has faltered in the crucial
initial state, the project is an unsuccessful project. The statement is:

a) True
b) False
Which among the following are not criteria to make a public sector project
successful:

a) Rule of Law
b) Knowing the financers
c) Good Advice
d) Training
Q.4. Which of the following statements are correct? While addressing the risks in
a project

1. if you won’t take particular risk then the chances are, someone else will.
2. If you haven’t even thought about a particular risk and that risk is brought to the table by others,
then it’s a dead cert that nobody else will take it.
3. In order to argue convincingly that others should share a risk then you have to be able, hand on
heart, to say that you would be prepared to take that risk yourself

a) i, ii
b) i, ii, iv
c) i, ii, iii
d) All of the above
What are the primary things to consider when going in for a Joint
Venture/Consortium?

Ans.

a) Know Your Partners

b) Know your financiers
c) Make tough decisions early
d) Think about the future