INVESTMENT COST CHANGES FOR
AGRICULTURAL PROCESSING PLANT
by
Nguyen
Nam Cuong
Abstract
Vietnam
is a developing country with about 70% of the population works in the fields
related to agriculture and rural. Through a process of development since the
Doi Moi to now, Vietnam has become one of the world’s leading exporters of rice
and many agricultural commodities such as coffee bean, cashew nut, black
pepper… However, almost of agricultural commodities are exported in raw
material types or semi products. On other hand, the procurement and exporting
system has not been paying attention enough to develop correspondingly.
As
the result, the value of exported agricultural products of Vietnam is normally
underestimated in the international markets because of low quality. The low
margin of agriculture products, in turn, contributes to increase income gap
between rural and urban area. Therefore, one of the key objectives of the
Vietnamese Government is to develop systems for storage and processing of
agricultural products, improving production and processing capacities, autonomy
in purchasing and export of agricultural commodities with quality, contributing
to improving Vietnam’s position on world agricultural markets.
Executive summary
Rationale of research
This research has been conducted to find out the way for capital
estimates and analysis of estimates
Through frame work, the focus of evaluation is on financial
problems analyze and change in actual cash flows and why these changes occur.
Objectives of study
To propose a solution through analysis, doing general
feasibility study of project and analysis, evaluation of project cost changes.
Methodology
The qualitative approach has been used to resolve issues during
construction to achieve performance.
The process includes data collection, processing and data
analysis. Considering mutual relationship inside and outside using standards,
normative in accordance and propose solution.
Findings and conclusion
Investment project being important document for owner to assess
investment decision, owner can see big picture of project.
However the important factor in investment project is
construction cost, which always seen with bias. The feasibility study is always
dependant on owner and consultant and project management methods so as to
reduce risk in cost fluctuation. And owner can control cash flows.
List of factors affecting
investment project
- Expertise and experience in project
management of the Owner.
- The financial capability of the Owner.
- The professional ability and knowledge
related to the field of investment consultancy and project design.
- Ability to coordinate the implementation
of tasks between the Owner and contractors design and consulting in the preparation
period of investment.
- Ability to coordinate between the Owners
and construction contractors in the construction process.
- The professionalism of the construction
contractor.
- Mechanisms and incentives to support
investment in the locality.
The
agricultural processing plant from initial stage to implementation is long
process with constant change; thus success of project depends upon owner
control on such movements and ensuring quality and time of investment.
During
the project, the change in cost is often by different reasons, divided into
four stages.
1. The cost of construction in terms of rates of
investment costs for Feasibility Study.
2. The cost determined by the total estimated cost.
3. The value determined by the construction contractor's
proposal is approved.
4.
The actual value of the settlement package.
It is
almost impossible to determine the final cost of each package at construction
stage except package having fix-price, and change in cost can only be observed
in above three steps.
For the
changes in fourth stage that can determine final value,it is necessary to
consider risk in construction process
·
Project
area actually decreased compared to the record.
·
The
detail design is inappropriate to the construction.
·
Price
volatility of construction materials.
·
Difficult
to find workers and construction equipment.
·
The
impact of weather on the construction process.
·
Fluctuation
of currency exchange rates.
The owner
can have actively appropriate countermeasures, to minimize the negative
impacts, including the choice of contractual form, in accordance, and contract
with the consultant of supervisor, design consultants and contractors to
strictly control the changes arising in the construction process. These are
also the mission of Project Management.