4th INTERNATIONAL CONFERENCE
TRANSPORT SYSTEM S TELEMATICS TST’04
Z E SZ Y T Y N A U K O W E P O LITEC H N IK I ŚLĄSKIEJ 2004
T R A N SPO R T z.55, nr kol. 1657
project management, project finance, transport telematics (ITS) Szym on S U P E R N A K 1
P R O JE C T M A N A G E M E N T M E T H O D S A PPL IE D T O T R A N SP O R T T E L E M A T IC S (IT S)
This paper presents systematized knowledge related to Project Managementand Project Finance.
The PF technique is o f the utmost importance from the point o f view o f the realization o f investment projects in the area o f traffic and infrastructure telematics. In connection with the forthcoming moment o f putting into effect in Poland the Act on Public and Private Partnership, I consider the examination o f problems from this field to be both useful and indispensable for the purpose o f realizing telematic projects in cities and regions o f the country o f great economic and logistic importance, and also taking into account structural resources and the cohesion o f the EU.
Z A S T O S O W A N IE M E T O D Z A R Z Ą D Z A N IA PR O JEK T A M I W T E L E M A T Y C E T R A N SP O R T U (ITS)
W artykule przedstawiono usystematyzowaną wiedzę dotyczącą Project Managamenfu oraz Project Finance. Szczególnie istotna jest metoda PF w realizacji projektów inwestycyjnych w telematyce transportu i infrastrukturalnych. W związku z krótką perspektywą wejścia w życie Ustawy o Partnerstwie Publiczno-Prywatnym w Polsce poruszenie zagadnień z tej dziedziny uznałem za celowe i niezbędne do realizacji projektów telematycznych w miastach i regionach kraju o dużym znaczeniu gospodarczym i logistycznym z uwzględnieniem środków strukturalnych i spójności UE.
1. IN T R O D U C T IO N
W ith the econom ic developm ent o f the w orld and an increasing num ber o f undertakings from the area o f transport telem atics, w hich have been m ore and m ore com plex, there occurred the need for system atizing the know ledge related to P roject M anagem ent and P roject F inance, a specific m ethod o f financing infrastructure projects, w hich will be discussed in item 7.
The m ain objectives o f p roject m anagem ent techniques are:
- to m inim ize the p roject-related risk,
to realize the project in such a w ay that the expected results are secured, to enable the investor to fully control the realization o f the project.
1 UITS Consortium, Warsaw, ITS Technology Ltd, Warsaw, Poland.
4 0 0 S z y m o n SU P E R N A K
O n the basis o f em pirical d ata com ing from th e projects in progress and already realized p rojects in v arious countries, w orks related to defining the m ethodology w ere started. The prepared m ethodologies undergo perm anent m odifications in line w ith econom ic and political changes, as w ell as new experience gained by p roject team s. It is especially im portant in case o f urbane telem atic system s, undergoing dynam ic developm ent, because w ithin the last ten years n u m erous revolu tio n ary teleinform atic technologies hav e been im plem ented.
P arallel to w orks on the m ethodology, there has been also research related to the best m ethods o f p o pularizing gathered and aggregated know ledge. In this w ay another discipline o f m an agem ent w as b o m , m ain ly K n o w led g e M anagem ent. O ne o f the strategic carriers of know ledge b ecam e IT technology. It is especially useful at those stages o f th e investment, w h en various com puter applications are used during p roject w orks.
2. D E FIN IT IO N S
“P ro ject M an ag em en t” is a n um ber o f activities leading to the com plete or partial realization o f the pro d u ct o r service subject to sale, in accordance w ith the custom er’s (cu sto m ers’) needs an d w ith the pro fit m argin for the contractor.
The objective o f P roject M anagem ent is to attain th e p roject goals, w h ile using the functional organization resources so th at the cu sto m e r’s (cu sto m ers’) satisfaction is achieved.
P roject M an ag er is a p erso n responsible for:
analysis o f needs, - planning,
allocation o f resources to every activity, - control o f the p ro ject realization,
o rganization o f resources on th e operating level, m otivation o f the team ,
selection o f the team m em bers.
“P roject lead tim e” is the total tim e from the analysis o f the cu sto m e r’s needs to the acceptance o f m odules d elivered by the custom er.
“P ro ject deliverables” are objects th at should be delivered b y th e supplier on the basis o f the cu sto m e r’s specification. T hey could be com plete products or services, as w ell as partial products o r services.
3. W H Y D O W E N E E D P R O JE C T M A N A G E M E N T ?
- It allow s to clearly id entify the perso n and team responsible for subsequent aspects o f the undertaking.
It is th e best w ay to increase prod u ctiv ity and shorten the tim e o f realization o f the undertaking.
It is p erfect training for the general m anagem ent, b ecause it involves key aspects o f m anagem ent.
It m akes the “M an ag em en t b y O bjectives” m ore realistic and m easurable.
It focuses the attention o f the team on costs and quality control.
It develops team w ork.
It encourages the team to constantly learn and thin k about all the team members.
P ro je c t m a n a g e m e n t m e th o d s a p p lie d to tra n s p o rt te le m a tic s (IT S ) 401
It shortens the p ro ject lead tim e through com petition, the increase o f the cu sto m er’s requirem ents and m ore effective/ focused m anagem ent.
C om plex technical solutions result in a big num ber o f single tasks and require b etter p lanning and co-ordination o f subsequent activities.
- A higher quality results in a low er level o f w aste and tim e savings.
A big num ber o f changes requires q uicker reactions and a suitable decision support system .
- F requent changes o f the cu sto m er’s requirem ents are the reason for respective frequent changes o f com m unication channels and re-directing to prim ary inform ation resources.
- The shortening o f the pro d u ct lifecycle requires a quick realization o f the project in order to m axim ize the tim e o f exploitation.
4. STA G ES O F TH E P R O JE C T
S tage 1 - Preparation
- P re-project definitions p rep ared b y the m anagem ent team (specifying objectives, the tim e o f realization).
- C orresponding conditions for the P roject M anager and his team . S tage 2 - D esign w orks
- A nalysis o f actions and setting the cornerstones.
A llocation o f resources.
- S election o f the critical path.
- O ptim ization o f the use o f resources.
S tage 3 - C ontrol o f the plan
- F requent control m eetings, putting dow n problem s, defining repair activities.
R egular control o f “co m er stones” , m eetings w ith function managers, authorization o f changes.
- F orm al review o f the final engineering project and the exact estimate o f finances, im plem entation plans.
Inform ation for the custom er.
S tage 4 - Im plem entation
- R eview o f the team m em bership and scope o f assigned responsibilities.
- Supplem entary training for the team .
- C ontrol o f com pletion o f “co m e r stones” in course o f realization o f the undertaking.
- R em inding o f objectives in relation to introduced changes.
- P ost-project “review ” , aim ing at gathering inform ation serving the purpose o f a b etter realization o f future projects.
S tage 5 - R eview o f the p roject d elivery
V erification o f the fulfillm ent o f the custom er requirem ents.
- A cceptance o f rep air activities and costs.
- Inform ation on the review results for the higher-level m anagem ent.
402 S zym on SUPERNAK
The above p ro ced u re is quite rigid and that is w hy it is d ifficult to realize a p roject according to those assum ptions in such a w ay th at it is successful and profitable. F or that reason it is im portant that:
T he h igher-level m an ag em en t allocate p ro p e r resources.
R ealization dates given to the P roject M anager are clearly and explicitly fixed.
5. O B JE C T IV E S A B D SC O PE O F R E S PO N SIB IL IT Y
- O b jectives o f P roject M an agem en t - to d eliver a pro d u ct/ service on tim e and in accordance w ith the budget assum ptions so that th e cu sto m er’s requirem ents are fulfilled (custom er satisfaction).
- S cop e o f resp onsibility
- P roject M anager - is responsible for attaining th e above goals.
- C h ie f E xecutive O fficer, C .E.O . - grants a suitable quantity o f resources, p rop o rtio n ally to the p ro ject requirem ents, delegates authority to the Project M anager, so that he can attain set objectives.
F unctional M anagers - allocate resources for w hich they are responsible, adequately to the P roject M a n ag e r’s needs in order to support him in course of realization o f the project.
T eam M em bers - support the activities o f the P roject M anager, realize tasks in accordance w ith his orders, so that he is satisfied.
6. P R O JE C T M A N A G E M E N T C O N T R O L
T he effectiveness o f changes and P roject M anagem ent requires control on tw o levels:
G eneral strategy o f th e p ro ject control (strategic level), D etailed operational control (tactical level),
The success o f a p ro ject because o f effective control activities is m easured by:
- m eeting o f plan n ed realization dates, m eeting o f the budget assum ptions,
- fulfillm ent o f the assum ed com m ercial objectives, attaining o f assum ed technical param eters, suitable adm inistration o f p roject changes,
- successful d elivery o f the com plete undertaking to th e custom er.
Im portant p ractical elem ents supplem entary in relatio n to controls are:
selection o f a strong leader organizing the team , - m onitoring and rew arding the team w ork,
agreeing to the w ay o f review ing the progress o f w orks (progress review s) and control m echanism .
suitable training, the use o f skills and know ledge o f th e team m em bers, en couraging innovation and rew arding inventiveness,
- d eveloping co m m unication channels, procedures and m ethodology,
- id entifying m easures o f q uality control in course o f m aturation o f the undertaking, - selection and im plem entation o f p rocesses aim ing at the constant cost reduction
and progress.
P ro je c t m a n a g e m e n t m e th o d s a p p lie d to tr a n s p o rt te le m a tic s (IT S ) 403
A ppropriate understanding o f relations taking p lace betw een the functional organization and Project M anagem ent (process approach) is the basic condition for achieving success in Project M anagem ent, e.g. in course o f realization o f U ITS projects (see picture).
System Transportu Publicznego
Trankingowa
Łączność
Radiowa
System Informacji Mobilnej
Znaki Zmwnrej Parkingi
D escription o f the pictu re:
- M iejski System K o n tro li R uchu = C ity System f o r the Traffic C ontrol System Transportu P ublicznego = P ublic T ransport System
T rankingow a Ł ączność R a d io w a = T ranking R adio C om m unication System Inform acji na P rzystankach = Inform ation System a t the B us-Stops System Info rm a cji M obilnej = M obile Inform ation System
- Z n a ki Z m ien n ej Info rm a cji = Signs o f C hangeable Inform ation P a rkin g i = C ar P arks
- K o m p u ter P okładow y = O n -B o a rd C om puter C zujniki M echaniczne = M echanical Sensors
A nother m ethod im portant for the realization o f telem atic projects is P roject F inance (PF).
7. W H A T IS P R O JE C T FIN A N C E ?
P roject Finance is a specific m ethod o f financing, according to the m ethod draw n from the initiato r’s structures, infrastructural projects and projects for the public services sector, w here the source o f the repaym ent o f debt and returns from ow n capital used to finance the p roject are cash flow s generated by the project.
The below schem e presents a typical structure o f P roject Finance. In the center there is a licensed com pany, called S pecial P urpose V ehicle - SPV , the shareholders o f which are investors o r o ther parties for som e reasons interested in the project (e.g. the contractor or o perator o f the investm ent). S PV is established as an independent entity subject to the com m ercial law th at can enter into contracts necessary to realize the project.
4 0 4 S z y m o n S U P E R N A K
W ład ze Koncesjonujące
Prefero w an i Preferow ani
D ostaw cy Odbiorcy
D escrip tio n o f the p ic tu re : Sponsorzy = Sponsors
U m ow a Sp ó łki = D e e d o f A sso cia tio n K a p ita ły = C apital
S półka C elow a = S p ec ia l P u rp o se Vehicle (SPV) W ładze K on cesjo n u ją ce = L ice n sin g A uth o rities K on cesja = L ice n se
B a n k i/ P ożyczko d a w cy = B a n k s / L enders P o życ zk i = L oans
U m ow a o F ina n so w a n iu = F in a n c in g A g ree m en t O perator = O perator
U m ow a Z a rzą d za n ia = M an a g em en t C ontract P refero w a n i O dbiorcy = P referre d R eceivers
D ług o term in o w e K o n tra kty Sp rzed a ży = L ong-T erm Sales C ontracts P refero w a n i D o sta w cy = P re fe rre d Suppliers
D ług o term in o w e K o n tra kty Z aopatrzeniow e = L ong-T erm D elivery C ontracts G eneralny W ykonaw ca = G eneral C ontractor
K o n tra kt B u d o w la n y = B u ild in g C ontract
G overnm ental institutions, self-governing institutions o r o ther public bodies (called licensing authorities) grant to SPV a license (a tool allow ing to carry the project into effect) called also the "project contract". T he license is th e basis for other contracts p resented in the picture. The license grants to SPV th e exclusive right to realize th e specified services w ith the use o f infrastructure serving this p urpose and created w ithin the p roject infrastructure in a specified perio d o f tim e. A fter the lapse o f tim e specified in the license the infrastructure created b y S P V in the license p erio d and b elonging to S PV in this period becom es the p ro p erty o f the licensing authority according to conditions specified in the license.
The big g est advantage related to P roject F inance is the p ossibility o f realizing the p roject w ithout o r w ith a lim ited recourse in relation to its sponsors. The m ain source o f repaym ent o f th e debt draw n are cash flow s generated b y th e project, and they are usually the
P ro je c t m a n a g e m e n t m e th o d s a p p lie d to tr a n s p o rt te le m a tic s (IT S ) 405 focus-point o f potential lenders. I f the p roject fails, the principal source o f satisfying claims o f the indebted part o f financing becom e the assets o f SPV, i.e. the infrastructure provided for in the project.
A special role in the P roject Finance m ethod is played by contracts engaging all the parties involved in the project. T hey define in detail roles o f various parties, their tasks within the fram ew ork o f the project and th eir com m itm ents related to risk sharing. E lem ents of the legal architecture o f transactions are also contracts specifying the course o f proceeding, m ethod o f realization and supervision o f th e investm ent stage o f the project, financing structure and procedures o f introducing changes, debt structure and procedures for the repaym ent and servicing, operational procedures o f the project, w ay o f proceeding in the event o f the lack o f com pletion o f the investm ent, exceeding its estim ated costs, discrepancies betw een estim ated and achieved cash flow s, and som etim es also m easures for unpredictable actions (e.g. natural catastrophes).
Irrespective o f the character o f investm ent planned w ithin the fram ew ork o f the project, SPV usually signs a contract w ith the G eneral C ontractor, w ho w ill be responsible for the realization o f investm ent in th e "turnkey" form ula for an agreed rem uneration. This contract specifies also the m ethod and paym ent conditions related to the G eneral Contractor’s rem uneration (e.g. the am ount o f installm ents and w orks preceding the paym ent out). Such a contract can also transfer to the G eneral C ontractor responsibility for potential delays in w orks (e.g. agreed penalties) and specify procedures im plem ented at the occurrence of the risk o f exceeding agreed costs. The G eneral C ontractor can also be a shareholder o f SPV, w hich m eans that he is one o f the project sponsors and can keep his shares after the project has been initiated or sell those shares to o ther sponsors o r third parties, m ost often according to th e m ethod p rovided for in the D eed o f A ssociation o f S PV o r in the Statutes.
A fter the com pletion o f one o f the investm ent stages and the start o f exploitation of the created infrastructure o ther contracts, characteristic for projects realized according to the P roject F inance m ethod, are entered into - O perator (specifying the entity responsible for the operational functioning o f the project, his rights and duties), P referred S upplier and Preferred R eceiver. The latter are som etim es a prelim inary condition o f starting the project, especially w hen its object is, e.g. an elem ent o f energetic infrastructure like a pow er plant, in which case agreeing to th e issues o f deliveries o f required resources and sales conditions o f the generated energy is o f the utm ost im portance fo r the success o f the project.
8. W H EN D O W E U SE P R O JE C T F IN A N C E?
The P roject F inance m ethod is practically used all over the w orld, in numerous econom ic sectors and branches. It becom es m ore and m ore popular, especially in the situation, w hen governm ents try to engage the private sector in the financing o f public infrastructure elem ents and exploiting them .
The P roject Finance m ethod is frequently used in the follow ing sectors:
• T elecom m unications and IT - w ith the rapid progress o f the telecom m unications technology in the last ten years, the P roject Finance m ethod is reported to be used m ore frequently, especially for the purpose o f financing infrastructure necessary to launch new services.
4 0 6 S z y m o n SUPERN AK
• R oad sector - the increase in the traffic intensity exceeding the possibilities o f governm ents to develop and enlarge the road system is the global problem , which resulted in attem pts to engage private funds to construct throughw ays that have to be paid for.
• R ail and road transport - the p o p u larity o f P roject F inance as the m ethod o f assuring resources for the m odernization o f the existing railw ay connections, as w ell as for the d evelopm ent o f new connections, including the developm ent o f rapid city narrow- gauge railw ays and the S ubw ay system s has been constantly increasing. In the same w ay the necessary funds can be obtained in places, w here the local authorities decide to create the licensing system for the tow n bus o r tram w ay com m unication systems.
• Public services - up to this tim e regarded as an alm ost exclusive p roblem o f the authorities. E specially in E urope, m ore and m ore often Public and P rivate Partnerships are created, w hich on the basis o f the obtained licenses design, finance, construct and operate the infrastructure for the p ublic services.
9. R E C A P IT U L A T IO N
The P roject F inance m eth o d has b egun to dom inate in the field o f financing and initiating infrastructural projects all over the w orld. F urther popularization o f this m ethod, the increase in the n u m b er o f thus available financing sources and the increasing role o f the private sector in rendering public services is also forecasted b y the W orld Bank.
The private sector entails efficiency, effectiveness and m anagerial skills m astered for a long tim e, supporting th e im provem ent o f the quality o f services and availability o f public services, such as transport, w ater supply, telecom m unications, environm ental protection.
To sum up, the follow ing applications o f P M in the m anagem ent o f project can be distinguished:
1. P roper ev aluation o f the situation and m aking optim al choices 2. Q uick o rganization o f ow n thoughts and thoughts o f project team s 3. Individual and group creativity
4. D efining, an alyzing and solving problem s occurring in telem atic projects 5. R edefining objectives in relation to tim e, resources, changeable requirem ents 6. S upport fo r the m em o ry and learning process and o f PM team s
7. A ssurance o f effective co m m unication in the project team 8. A ppropriate audit o f the risk m anagem ent.
T he im plem entation o f the above m ethods in the realization o f projects from the area of transport telem atics w ill result in the dynam ic developm ent o f IT S system s in ou r country.
A lso for these reasons, governm ents should facilitate the engagem ent in financing infrastructure and d elivering p ublic services to enterprises o f the public sector. To this aim, effective legislative p rocesses related to the Public and P rivate E nterprises are needed; they should be efficient enough to enable a quick use o f structural funds and the cohesion o f the EU.
Project m a n a g e m e n t m e th o d s a p p lie d to tra n s p o rt te le m a tic s (IT S ) 407
B IB L IO G R A PH Y
[1] A R N D T H. R ., (1998): R isk A llo catio n in the M elb o u rn e C ity L in k Project. „Journal o f Project Finance”
nr 3.
[2] F IN N E R T Y J. D ., (1996): P ro je ct F inancing. A sset B ased F in an cial E ngineering. Jo h n W ile y & Sons,. Inc.
[3] M U S T A F A A ., (1999): P ublic- P riv a te Partnership: an A lternative Institutional M odel for Im plementing the P riv a te F in an ce In itiativ e in the P ro v isio n o f T ran sp o rt Infrastructure. „Journal o f P ro je ct F inance” nr 5.
[4] S T A C H A K S., (1997): W stęp do m etodologii n a u k ekonom icznych. W arszaw a K siążk a i W iedza.
Review er: Prof. M arek Pałys
