choice of projects delivery method
TRANSCRIPT
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SASKA CONSTRUCTION
Projects Analysis Report
For Nissan Company
2/5/2014
ANALYSTS
1. EVARIST RUHAZWE2.
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MEMOTO: NISSAN COMPANY
FROM: EVARIST RUHAZWE & .. ,ANALYSTS
DATE: Feb 6, 2014
SUBJECT: CONSTRUCTION PROJECT ANALYSIS REPORT
INTRODUCTIONThe program involves two projects with differences in (among many other differences)size,
complexity, technology involvementand urgency. With that a technical guide to project delivery
system, financial contract type and procurement methods is essential to meet the companys
goals on the projects specified. The projects have to be analyzed separately and for each methoda decision has to be obtained.
Project CharacteristicsThe following are the consideration of the project characteristics (for each project type) which
are expected to affect the choices in the project.
A. The Production facilityThis project includes the following characteristics
a) Time constraint/UrgencyThe project involves the time constraints which will influence on the choice of the Project
delivery method.b) Money constraint
Following the nature of the project, there is no limitation of funding to the project. Hence,
Funding resources has little or no influence to the delivery of the project.
c) Technology involvement.The Project involves high and modern Technology. Improper selection of delivery
process might cause the presence of changes in design and construction during execution
of the project which may lead to late delivery and Compromise of qualityd) Complexity
The project involves many sub-systems and processes which might be dependent or
independent. Lack of proper project management from the design process might lead tothe later completion and excessive increase in costs.
e) Quality controlDuring the execution of the project several tests are expected to be done to ensure quality
B. The Office buildingThis project includes the following characteristics
a) Time constraint/UrgencyThe project involves the time constraints which will influence on the choice of the Projectdelivery method.
b) Money constraintFollowing the nature of the project, there is no limitation of funding to the project. Hence,Funding resources has little or no influence to the delivery of the project.
c) Technology involvement.
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The Project involves high and modern Technology. Improper selection of delivery
process might cause the presence of changes in design and construction during execution
of the project which may lead to late delivery and Compromise of qualityd) Complexity
The project involves many sub-systems and processes which might be dependent or
independent. Lack of proper project management from the design process might lead tothe later completion and excessive increase in costs.e) Quality control
During the execution of the project several tests are expected to be done to ensure quality
The Owner characteristicsThe owner seems to be unfamiliar with such kinds of projects, and therefore needs to involve
some expertise for such project. The president of the company needs to have control even to
smallest matters of the company and hence there is a need to have a systematic way of avoiding
disputes.
Market characteristics
There is an existence of experienced contractors but they are unfamiliar with the location atwhich the project will be located. Only one of them has worked at the area around Nashville.
EXECUTIVE SUMMARYOur team has then used an evaluation matrix as a tool to professionally arrive at a best approach
of the project execution. Each project was analyzed differently and the decision for each part wasarrived at.
For the Production facility, a design build approach, appeared to be the best delivery method,
Cost-Plus as the best financial contract term and Negotiated Typeas the best procurement
approach. The involvement of design build approach will help the owner who doesnt have thein-house experti seto involve a team which
For the Office building, a Pure Construction Managerapproach was chosen as the bestdelivery method, Stipulated Lump Sumas the best financial contract type and the Competitive
bid as the best procurement approach. The involvement of the construction Manager in this will
help the owner to give an account to the funding agency and help to solve any arising conflict.
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Contents
MEMO ............................................................................................................................................ 1
INTRODUCTION ...................................................................................................................... 1
Project Characteristics ................................................................................................................ 1
The Owner characteristics........................................................................................................... 2
Market characteristics ................................................................................................................. 2
EXECUTIVE SUMMARY ........................................................................................................ 2
1 PRODUCTION FACILITY CONSTRUCTION .................................................................... 5
1.1 PROJECT DELIVERY SYSTEMS ................................................................................. 5
1.1.1 Time constraint/Urgency .......................................................................................... 5
1.1.2 Financial Constraint .................................................................................................. 6
1.1.3 High and New technology involvement ................................................................... 6
1.1.4 Complexity of the project ......................................................................................... 6
1.1.5 Summary ................................................................................................................... 7
1.2 FINANCIAL CONTRACT TYPE ................................................................................... 7
1.2.1 Time constraint/Urgency .......................................................................................... 7
1.2.2 Financial Constraint .................................................................................................. 7
1.2.3 High and New technology involvement ................................................................... 8
1.2.4 Complexity of the project ......................................................................................... 8
1.2.5 Summary results of the Analysis .............................................................................. 9
1.3 PROCUREMENT METHODS ........................................................................................ 91.3.1 Time constraint/Urgency .......................................................................................... 9
1.3.2 Financial Constraint .................................................................................................. 9
1.3.3 High and New technology involvement ................................................................. 10
1.3.4 Complexity of the project ....................................................................................... 10
1.3.5 Summary and recommendation .............................................................................. 10
2 OFFICE BUILDING ............................................................................................................ 11
2.1 PROJECT DELIVERY SYSTEMS ............................................................................... 11
2.1.1
Technically-Phased Construction ........................................................................... 12
2.1.2 Financial Constraint ................................................................................................ 12
2.1.3 Disputes possibility ................................................................................................. 12
2.1.4 Public Interest-Government funded ........................................................................ 12
2.1.5 Local minority workers involvement ...................................................................... 13
2.1.6 Summary ................................................................................................................. 13
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2.2 FINANCIAL CONTRACT TYPE ................................................................................. 14
2.2.1 Technically-Phased Construction ........................................................................... 14
2.2.2 Money/Financial Constraint.................................................................................... 14
2.2.3 Disputes Possibility ................................................................................................. 14
2.2.4 Public Interest-Government funded ........................................................................ 15
2.2.5 Local minority workers ........................................................................................... 15
2.2.6 Summary of Analysis .............................................................................................. 15
2.3 PROCUREMENT METHODS ...................................................................................... 16
2.3.1 Technically-Phased Construction ........................................................................... 16
2.3.2 Financial Constraint ................................................................................................ 16
2.3.3 Disputes Possibility ................................................................................................. 16
2.3.4 Public Interest-Government funded ........................................................................ 16
2.3.5 Local minority workers ........................................................................................... 17
2.3.6 Summary ................................................................................................................. 17
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1 PRODUCTION FACILITY CONSTRUCTIONOur team has then used an evaluation matrix as a tool to professionally arrive at a best approachof the project execution. The above characteristics are then used as criteria for use during
selection of the best approach. Different steps were used in this method
Determination of the weighting factors for each cri teri aUsing a range of 1 to 100(percentage), the different criteria were assigned differentweights depending on the importance of each criteria over the other.Below is a table showing the different weights used for each criteria.
Criteria Weight Details
Time
Constraint/urgency 35The project needs to be delivered within six months despite its
complexity and involvement in high technology. In that case it
is urgent and given weight of
Money Constraint10
There is no funding limitation, hence the weight for finances
limitation is low
High& New
Technologyinvolvement
30
The involvement of high and new technology makes it deserve
a weight of 25%. This is because the company gives the newtechnology a priority so as toits competitors
Complexity of
project 25The project involves a lot of different sections and units to be
built as a whole. 20% weight is therefore given to reflect thiscomplexity of project
Determination of the scores of each cr iteri a per each deli very method, f inancial contracttype or procurement method
Using a score range of 1 through 10, each criteria was assigned a score for each
procurement alternative. The analysis was done separately for delivery system, financial
contract type and procurement method as shown in the next section.
1.1 PROJECT DELIVERY SYSTEMSConsidering the present project delivery systems which are Design-Bid-Build (DBB), Design-Build(DB), CM at risk(CM@R) and Pure CM(PCM), the scores were given per each criteria
depending on the strength and weakness of each system. The description of each criterion per
delivery method given is as follows
1.1.1 Time constraint/UrgencyAs far as time serving is concerned, DB and CM@R shows greater time serving than
DBB approach. The following accounts for that
Method Score DetailsDBB 2 Is a slow process so, wont be a good choice for this type ofproject. Given a score of 2
DB 8 It is good for the urgent process as both design and build can go
simultaneously. A little bit faster than CMAR
CM
CM@Risk 7 Faster than DBB due to presence of management team andinvolvement of the contractor from the beginning
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1.1.2 Financial ConstraintAs far as cost serving is concerned, DBB shows greater success than the rest of the
methods. This is because it allows competition between different companies in which thelowest bid is selected. Following is a summary of the Methods and scores assigned.
DBB 8 The process is good is cost saving as the lowest bid wins the
contract: score
DB 4 Lack of competition among different contractors and high
contractor risk can cause high initial costs
CM
CM@Risk 6 More costs is associated here due to reduced competition oncontractor pricing. However, good management by CM can save a
great deal of costs.
1.1.3 High and New technology involvementThis is best done using the method of DB because a contractor input is done from the beginning.DBB 4 Not good for high and new tech project, there can be unforeseen
circumstances which doesnt
DB 9 The Contractor involvement from beginning, consideration of
contractor quality and capability makes it a good fit for this projecttype.
CM
CM@Risk 6 This is good method for project of this type. CM involvement in
the whole process helps in ensuring a successful execution of aproject.
1.1.4 Complexity of the projectCM at risk and PCM are good at projects of this type. There is high need of planning, organizing
and co-ordinating different entities to ensure good end-result
DBB 4 Difficult for complex project since it needs a clearly defined
project from the beginning, proper planning and organizing andrequires involved parties to work together from the beginning.
DB 6 It is better than DBB, since it involves the capable contractors.
CM
CM@Risk 7 Multiple phases and large technical complexity is possible due to
high level of management
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Stipulated
LS
7 Presence of fixed amount tends to reduce the cost growth.
However, variation occurring can affect the overall price
Unit
Price
6 Its good in cost saving since it allows prior knowledge of the costs
Cost-Plus 2 Unlimited growth in cost since it gives no limit for cost
implicationGMP 4 It prevents cost growth by setting a maximum value, hence better
than Cost-Plus. However high initial cost can be set due to high
risk to a contractor or CM
1.2.3 High and New technology involvementSuch projects involve a lot of inputs and are subjected to introduction of new ideas through the
execution of project. Cost plus and GMP are good to be applied here.
Method Score Details
Stipulated
LS
5 Requires everything to be defined prior construction hence not the
best alternativeUnit
Price
6 Not suitable because it is difficult to know all the costs units and
resources to be involved. It can be applied though under situationwhere the resources to be involved are known
Cost-Plus 8 Good for this kind of project, its hard to get all costs to beassociated at the beginning
GMP 8 Good for this project since actual costs cannot be found
1.2.4 Complexity of the projectCost plus and GMP are good at projects of this type. It is very difficult to get the actual cost of
construction from the beginning of the project
Method Score Details
StipulatedLS
3 Very hard to find the total price under lump sum project type.
Unit
Price
5 Involvement of many units
Cost-Plus 7 Its good for this kind of projects as costs need not be determined at
the beginning.
GMP 9 GMP can be applied in complex projects especially when a
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1.2.5 Summary results of the AnalysisPROJECT NO. 1
Goals/Criteria Criteria
WeightProject Deliverly Systems
Stipulated LS Unit Price Cost Plus GMP
Score Weighted
Score=Criteria
Weight x
Score
Score Weighted
Score=Criteria
Weight x
Score
Score Weighted
Score=Criteria
Weight x
Score
Score Weighted
Score=Crite
Weight x
Score
Time
Constraint
35 3 105 4 140 9 315 7 2
Money
Constraint
10 7 70 6 60 2 20 4
High& New
Technology
involvement
30 5 150 6 180 8 240 8 2
Complexityof project 25 3 75 5 125 8 200 9 2
Total 100 400 505 775 7
As far as the financial contract is concerned, Cost-Plus Methodis a best choice
1.3 PROCUREMENT METHODSProcurement can be done through, Competitive bidding, Negotiation, or best value. The use of
each method depends upon the characteristics involved in a particular project. Again a detailed
analysis to determine the appropriate method is done below.
1.3.1 Time constraint/UrgencyAs far as time serving is concerned, negotiated bid
Method Score Details
Competitive
bid
5 Takes time till the execution of the project. Evaluation of
contractors has to be done.
Negotiated 9 Negotiated contracts are faster since they dont involve the
traditional bidding process.
Best value 4 It also takes time in the execution of it since, evaluation ofcontractors has to be done
1.3.2 Financial ConstraintCompetitive bid is always good for obtaining the least cost among alternatives.
Method Score Details
Competitive
bid
8 The method is good to get the lowest bid
Negotiated 5 The costs can go high in negotiated bids since the contractor takesbigger risk
Best value 6 The costs can be higher than Competitive bid since the quality ofthe contractor is involved
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1.3.3 High and New technology involvementInvolvement of new technology serves the best on negotiated type of contract.
Method Score Details
Competitive
bid
3 This type doesnt allow innovations since the contractors dont
participate from the beginning
Negotiated 8 Best for this type of project as it brings both parties together from
the beginning. It also can involve incentives and bonuses
depending on the quality of the product.
Best value 6 Best value also works well since it involves the quality of the
contractor into consideration.
1.3.4 Complexity of the projectNegotiated bid is also good for the complex projects. Both parties work together from the
planning stage to organize the whole project.
Method Score DetailsCompetitivebid
4 For complex projects this approach may not be good.
Negotiated 9 Works good for this type of project. Contractors andsubcontractors all working for the project from the beginning.
Best value 6 It is also good for the complex project.
1.3.5 Summary and recommendationPROJECT NO. 1
Goals/Criteria
Criteri
a
Weight
Project Delivery Systems
Competitive Negotiated Best value
Score
Weighted
Score=Criteria Weight x
Score
Score
Weighted
Score=Criteria Weight x
Score
Score
Weighted
Score=Criteria Weight x
Score
Time Constraint 35 5 175 9 315 4 140
Money Constraint 10 8 80 5 50 6 60
High& New
Technology
involvement
30 3 90 8 240 6 180
Complexity of
project25 4 100 9 225 6 150
Total 100 445 830 530
As far as the Procurement type is concerned, Negotiatedis a best choice
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2 OFFICE BUILDINGUsing the characteristics described in section 2 above, criteria were selected and several steps
used to arrive at the desired decision. The following are the steps followed to arrive at the desired
decision.
Determination of the weighting factors for each cr iteri aUsing a range of 1 to 100(percentage), the different criteria were assigned differentweights depending on the importance of each criteria over the other.
Below is a table showing the different weights used for each criterion.
Criteria Weight Details
Technically-
Phased
Construction 15
The construction has to have good organization as the space
availability is time dependent.
Moneyconstraint 30
The project has limited funding so more weight is given to thiscriteria
Disputes
Possibility10
Involvement of government representative with bad reputationplaces a company in a position of high risk of involvement in
disputes.
Public Interest-
Government
funded 30
The project has a public interest as the government has got a hand
in it. Therefore documenting and proper execution of project isrequired
Local minority
workers15
There should be an involvement of local minority workers in the
project. Hence this criterion can influence the choice of appropriate
method.
Determination of the scores of each cr iteri a per each deli very method, financial contracttype or procurement method
Using a score range of 1 through 10, each criteria was assigned a score for eachprocurement alternative. The analysis was done separately for delivery system, financial
contract type and procurement method as shown in the next section.
2.1 PROJECT DELIVERY SYSTEMSConsidering the present project delivery systems which are Design-Bid-Build (DBB), Design-
Build(DB), CM at risk(CM@R) and Pure CM(PCM), the scores were given per each criteria
depending on the strength and weakness of each system. The description of each criterion perdelivery method given is as follows
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2.1.1 Technically-Phased ConstructionAs far as phased construction is concerned, CM@R shows greater possibility of dealingwith such projects.
Method Score Details
DBB 2 Having a phased construction needs to consider a lot of factors
DB 8 It is not a good approach since there is a limitation of space andPCM 7
CM@Risk 6 It is very good
2.1.2 Financial ConstraintAs far as cost serving is concerned, DBB shows greater success than the rest of the
methods. This is because it allows competition between different companies in which the
lowest bid is selected. Following is a summary of the Methods and scores assigned.
DBB 8 The process is good is cost saving as the lowest bid wins the
contract: score
DB 4 Lack of competition among different contractors and highcontractor risk can cause high initial costs
PCM 7 It is good since the CM is responsible to see the projects, deadline
and budgets are met.
CM@Risk 6 More costs is associated here due to reduced competition on
contractor pricing. However, good management by CM can save agreat deal of costs.
2.1.3 Disputes possibilityThis is best done using the method of PCM a CM working hand in hand with the owner creates
good environment.DBB 4 Not good for handling the disputes since the involved entities
dont work as a team from the beginning.
DB 6 It is good for handling disputes and but still it needs careful
application
PCM 9 It is good as a CM works hand in hand with the Owner to makesure nothing goes wrong
CM@Risk 7 The project needs to involve the
2.1.4 Public Interest-Government fundedFor the government funded project where accountability is important either PCM or the DBB isgood alternative
DBB 8 It is good for this type of project since there is linear execution of the
project and the level of accountability is high
DB 4 It is not a good option for this kind of the project since there is lower
level of accountability of Contractor and risk involvement is high
PCM 8 It is a good option since the CM will work hand in hand with the
owner to ensure that there is enough transparency and accountability
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CM@
Risk
6 It is also good for the public funded project
2.1.5 Local minority workers involvementInvolvement of the local minority workers, is best suited by PCM and DBB methods.DBB 7 It is highly feasible with this type since contractor risk is low
DB 4 Hard to apply here since the contractors tend to minimize risk byemploying the experienced personnel
PCM 6 It is good since the CM will make certain control to ensure properutilization of resources
CM@Risk
8 It is good since CM will be in-charge for the project.
2.1.6 SummaryIn Summary, the scores are as shown in the table below
PROJECT NO. 1
Goals/Criteria Criteri
a
Weigh
t
Project Deliverly Systems
Design-Bid-Build Design Build PCM CM at Risk
Score Weighted
Score=Crit
eria
Weight x
Score
Score Weighted
Score=Crit
eria
Weight x
Score
Score Weighted
Score=Crit
eria
Weight x
Score
Score Weighted
Score=Crit
eria
Weight x
Score
Technically-
Phased
Construction
15 2 30 8 120 7 105 6 90
Money
constraint30 8 240 4 120 7 210 6 180
Disputes
Possibility10 4 40 6 60 9 90 7 70
Public
Interest-
Government
funded
30 8 240 4 120 8 240 6 180
Local
minorityworkers
15 7 105 4 60 6 90 8 120
Total 100 655 480 735 640
According to thi s PCMseems to be the best way for the execution of this proj ect
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2.2 FINANCIAL CONTRACT TYPEFinancial contract types existing are Stipulated Lump Sum (Stipulated LS), Unit Price, Cost-
Plus, and Guaranteed Maximum Price (GMP). Each of the criteria was then analyzed against the
said Financial contract types existing, to achieve
2.2.1
Technically-Phased ConstructionFor phased constructions unit price can be the best alternative. This is because it allows obtainingof the total costs
Method Score Details
Stipulated
LS
5 It is a not a good approach since the whole project costs need to be
determined
Unit
Price
8 Very good for the phased construction, cost at any phase can be
obtained after getting amount of resources used
Cost-Plus 6 Good for this kind of projects. Costs can be determined after theproject phase is completed.
GMP 4 Is not good for this kind of projects, some costs growth cannot be
traced.
2.2.2 Money/Financial ConstraintStipulated Lump sum shows great deal in saving the cost. It tends to reduce the cost growth sincea fixed amount is defined from the beginning
Method Score Details
Stipulated
LS
7 Presence of fixed amount tends to reduce the cost growth.
However, variation occurring can affect the overall price
Unit
Price
6 Its good in cost saving since it allows prior knowledge of the costs
Cost-Plus 2 Unlimited growth in cost since it gives no limit for costimplication
GMP 4 It prevents cost growth by setting a maximum value, hence better
than Cost-Plus. However high initial cost can be set due to highrisk to a contractor or CM
2.2.3 Disputes PossibilityDisputes can arise due to variations leading schedule and cost change. Hence Stipulated LS
seems to be the best.
Method Score Details
StipulatedLS
8 Requires everything to be defined prior construction hence seemsthe best alternative.
Unit
Price
8 It is good for dispute avoidance since the unit cost is defined from
the beginning.
Cost-Plus 4 Not good for this kind since unexpected high costs might be
intolerable.
GMP 6 Not good since it requires still a friendly working environment.
However it is better compared to cost-plus approach
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2.2.4 Public Interest-Government fundedStipulated Lump sum and Unit price serves the best option for this kind. When the anticipated
cost is known, it is easy to appeal to the Public/Government
Method ScoreStipulated LS 8
Unit Price 7
Cost-Plus 4
GMP 6
2.2.5 Local minority workersInvolvement of local minority workers is best suited to go with lump sum or Unit price kind ofproject. Everything is defined the expected costs of local workers involvement is included during
the overall cost estimation.
Method Score
Stipulated LS 8
Unit Price 7
Cost-Plus 5
GMP 5
2.2.6 Summary of AnalysisPROJECT NO. 1
Goals/Criteria Criteria
Weight
Project Deliverly Systems
Stipulated LS Unit Price Cost Plus GMP
Score
WeightedScore=Criteria
Weight x Score
Score
WeightedScore=Criter
ia Weight x
Score
Score WeightedScore=Criteria
Weight x
Score
Score WeightedScore=Cri
Weight x
Score
Technically-
Phased
Construction
15 5 75 8 120 6 90 4
Money
constraint30 7 210 6 180 2 60 4
Disputes
Possibility10 8 80 8 80 4 40 6
Public Interest-
Government
funded
30 8 240 7 210 4 120 6
Local minority
workers15 8 120 7 105 5 75 5
Total 100 725 695 385
As far as the financial contract is concerned, Stipu lated Lump Sumis a best choice
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2.3 PROCUREMENT METHODSProcurement can be done through, Competitive bidding, Negotiation, or best value. The use of
each method depends upon the characteristics involved in a particular project. Again a detailed
analysis to determine the appropriate method is done below.
2.3.1
Technically-Phased ConstructionFor this type of construction, Negotiated Type seems to be the good approach. This helpsbecause, the overall construction process can be discussed by the involved parties at the
beginning and decide on how to sequentially execute the project. This is followed by the Bestvalue while the least is competitive bid
Method Score
Competitive bid 5
Negotiated 8
Best value 6
2.3.2
Financial ConstraintCompetitive bid is always good for obtaining the least cost among alternatives. This isfollowed by best value while the least to be negotiated type
Method Score
Competitive bid 8
Negotiated 4
Best value 6
2.3.3 Disputes PossibilityHaving a competitive bid seems to be the best alternative since each process is defined, largebody of case law. The following can be Best value while negotiated comes the last
Method Score
Competitive bid 8
Negotiated 5
Best value 7
2.3.4 Public Interest-Government fundedCompetitive type also is good for the government funded project as it is act of fairness and
openness whereby each contractor is brought under the same evaluation criteria to whether or nothe can qualify. It is followed by Best value while the last can be negotiated type.
Method Score DetailsCompetitive bid 9 For complex projects this approach may not be good.
Negotiated 5 Works good for this type of project. Contractors and
subcontractors all working for the project from the beginning.
Best value 8 It is also good for the complex project.
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2.3.5 Local minority workersInvolvement of local minority workers is best suited to go with Negotiated or Competitive kind
of project. Everything is defined the expected costs of local workers involvement is includedduring the overall cost estimation.
Method Score
Competitive bid 7Negotiated 6
Best value 5
2.3.6 Summary
PROJECT NO. 2
Goals/CriteriaCriteria
Weight
Project Delivery Systems
Competitive Negotiated Best value
Scor
e
Weighted
Score=Criteri
a Weight xScore
Scor
e
Weighted
Score=Criteri
a Weight xScore
Scor
e
Weighted
Score=Criteri
a Weight xScore
Technically-
Phased
Construction 15 5 75 8 120 6 90
Money constraint 30 8 240 4 120 6 180Disputes
Possibility 10 8 80 5 50 7 70
Public Interest-Government
funded 30 9 270 5 150 8 240
Local minority
workers 15 7 105 6 90 5 75
Total 100 770 530 655