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Structure Of Feasibility Studies To Develop A Port

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Introduction
Rapid changes in the technological environment of marine transportation and the increasing integration of waterborne traffic systems have fostered a revolution in the design and operation of terminal facilities, cargo handling technology, utilization and storage. This in turn has caused major changes in the functions and uses of Ports. Technological developments in ports have increased cargo handling rates, improved operational methods, facilitated sea channel and landside access, introduced the potential for completely automated navigational guidance and introduced handling of new physical forms of cargo.

In developing a port we need to perform feasibility studies before making any firm investment commitments. Feasibility studies provide reviews and evaluations on technical, economic and commercial aspects of a proposed new port project, which became a basis for an investment decision on the project. Since the amount of investment required in developing port facilities is huge undertaking accurate feasibility studies is ever more demanded to ensure the attainment of predetermined objectives in todays world of uncertain demand and changes.

A major focus of performing a feasibility study has to be on the verification of all the alternatives on the choice of technology, equipment, location, capacity, financing methods and the assumptions on which the decisions have to be based. This is essential for the effective port development objectives at minimum cost.

The structure and topics of analysis that should be addressed in a port development feasibility study are summarized in the following sections including the tasks involved, type of analysis and input and output
requirements.

1. Project Background

a. Project concept and objectives
b. Major project parameters – port capacity, location, expected demand, implementation schedule and others
c. Economic, industrial, financial, social and other related development policies
d. Economic, sectoral and regional impacts
e. Project initiator

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2. Project History

a. Brief project history
b. Studies already performed – pre-investments studies, support studies (model tests), investigations (site surveys)
c. Summary of conclusions and decisions taken from previous studies
d. Costs of previous studies

3. Port Demand and Capacity

The estimation of the future cargo-handling demand for the proposed port development is one of the most important tasks in the whole feasibility study. The estimated future demand becomes the basis for determining the port capacity, the size and the rate of investment for the port development. The revenue from port operations directly proportional to the usage of a port and should be projected by considering the level of service provided such as available technology and efficiency in loading and unloading cargo and marketing strategy.

Port capacity should be set sufficient to accommodate the future demand. A detailed integrated study that considers size and composition of demand, available technology, marketing strategy,investment costs versus capacity and financial resources available should be performed in determining the port capacity. Such study will make an effective port capacity planning possible by obtaining economies of scale in some cases or by preventing an expensive option of expanding the port capacity.

A brief description of items to be covered in the port demand and capacity analysis are as follows:

I. Demand and Market Study
a. List alternative methods of forecasting for determination of present and future demand.
b. Describe methods of forecasting demand to be used.
c. Determine the size and composition of present demand total and by type of cargo,ship and vehicle traffic.
d. Describe the demand projections for the market – total and by type
e. Determine the estimated market share

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II. Marketing Strategy and Revenue Forecast
a. Describe possible alternative marketing strategies
b. Describe the degree of competition
c. Select a marketing strategy including
i. Port Pricing
ii. Promotional efforts
iii. Organizational setup
d. Estimate annual operating revenues based on the estimated demand and the marketing strategy

III. Port Capacity Determination
a. Describe estimated demand-total, by the type of cargo, size of shipments, ship arrival distribution and any uncertainties in demand
b. Determine the level of port service to be provided by considering port productivity estimated
c. Consider the investment cost versus available financing resources
d. Consider the minimum economic equipment size
e. Select a feasible port capacity

4. Location and Site

Choosing a right location and site for a port from several alternatives is important since the total investment cost of site preparation or the attractiveness to potential port users may vary widely among alternate locations and sites. Another important aspect to consider in choosing a port location in the inland transportation requirements for delivery of goods from/to demand centres that the port is designed to serve. The users of port are concerned about not only the port-related charges, but also other inland transportation cost from/to the port and thus port planners should locate a port where the total of port and inland transportation costs from/to various demand centres are at a minimum.

The following items are to be considered in determining port location and site:
Location
1. List possible locations
2. Select a location considering regional development policy,local conditions(infrastructure), labour availability and socioeconomic conditions and natural conditions suitable for port location.
Site

1. List possible site alternatives
2. Select a site based on the following considerations:
a. Cost
• Cost of land and taxes
• Site preparation and development
b. Local conditions
• Wind and wave conditions
• Climate
• Underground conditions
• Access channel and dredging requirements
• Inland traffic connections
• Utility connections
• Socioeconomic conditions
c. Environmental Impacts
• Public policies versus private interests
• Population (increase of employment etc.)
• Infrastructure (development of traffic network, public utilities etc.)
• Ecology (water, air, soil, plants, animals etc.)
• Landscape

5. Layout, civil works and equipment

After port capacity, location and site are determined, the details on designing the port such as the choice of technology and equipment, the layout and the required civil works should be analyzed. One important aspect to be determined here is the degree of automation in technology and equipment, which depends on demand characteristics, required performance rate of the port, available man power and the labor wage rate. It is to be noted that often the new technologies and equipment are substituting capital for labor in port operation and are inappropriate to the economic circumstances of
many developing countries.
The processes of selecting port layout, technology, equipment and civil engineering works are summarized as follows:

i. Port layout
a. Prepare alternative port layouts considering:
• Amount and type of demand to be served
• Flow pattern and amount
• Technology and equipment
• Physical site conditions (area, shape etc.)
• Required civil works
b. Apply available layout design methods, if possible
c. Select an optimum layout design

ii. Technology
a. Describe the alternative technologies – type, source and specification
b. Select the optimum technologies considering:
• The nature of the technologies required(e.g. required performance, labor versus
capital intensity, non-obsolescence)
• Sources
• Means of acquisition: licensing, purchase, joint venture
• Cost of acquisition
• Degree of automation desired
• Changes in shipping and port technologies

iii. Equipment
Equipment should be classified into operation, auxiliary, service equipment, spare parts and tools.
a. List the necessary equipment
b. Select and describe optimum equipment choice – type, specification, capacity and source. The equipment section is based on costs, performance requirements, availability, maintenance capability, port layout and type and amount of cargo designed to be handled.

iv. Civil engineering works
Civil engineering works can be classified into site preparation and development, buildings, storage, harbor and dock civil works and auxiliary and service facilities.
a. List civil engineering works and possible alternatives
b. Select civil engineering works based on:
• Physical port layout design
• Availability and quality of construction material and manpower
• Technical and performance requirements of port operation
• Physical site conditions
• Cost
Investment costs
Site preparation and development costs.
Buildings, storages, harbor and dock civil works.
Annual maintenance and repair cost of civil engineering works.
c. Contract civil works

6. Port Organization and Manpower Planning:

Port organization and manpower planning is closely related to the output of the project engineering. A series of feedback from each other, although jointly performing these two analyses, is necessary. Port organizational structure may be different among ports as to reflect any particular characteristics of a port.
a. Port organization
• List possible alternative port organization structures
• Determine port organization based on
i) Port ownership- private or public
ii) Port functions
iii) Size of port demand and capacity
iv) Size of manpower

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b. Cost centers
• Select the composition of cost centers (operation, services, administrative, etc.)
by considering engineering and organizational layouts
• List cost items and differentiate them into:
i) Operating costs
ii) Administrative overheads
iii) Depreciation
iv) Final costs

c. Labor
• Develop alternative labor manning tables, considering:
i) Organizational structure
ii) Strategies and objectives of port operation
iii) Size of port demand and capacity
iv) Skill requirements and skill level of available labor
v) Availability of labor (local and foreign)
• Select and describe the labor mining table showing:
The structure (organization)
The subdivision into operation labor and non-operation labor(e.g. administration)
• Estimate annual labor cost at nominal feasible demand and capacity and divide
between:
i) Cost of operation labor (variable)
ii) Cost of non-operation labor (fixed)
d. Staff
• Develop alternative staff manning tables considering:
i) Organizational layout
ii) Strategies and objectives of port management
iii) Port functions – operation, administration, marketing and so on
iv) Ability requirements and level of training of staff
v) Availability of staff (local and foreign)
• Select and describe the staff manning table showing:
i) Structure (organization)
ii) Detailed manning table
• Estimate annual cost of state

7. Implementation Scheduling

The implementation phase covers the period from the time the decision is made to invest in port
development to the start of the operation. Careful planning especially on securing financing for the
project, is required to ensure the on-schedule progress of the project.

• Implementation Programme
a. Develop implementation programme and time schedule consisting of:
i) Establishment of project implementation team
ii) Arrangements for technology acquisition
iii) Detailed engineering of equipment, tendering
iv)Tendering, evaluation of bids and awards of contracts
v) Financing arrangements
a) Purchase of land
b) Actual construction
c) Equipment installation
vi) Buildup of administration, recruitment and training of staff and labor
vii) Arrangements for marketing
viii) Contact public authorities for timely approval of licenses contracts and so on
ix) Capital issue

8. Project Evaluation and Investment Decision

After all the aspects of the proposed port project are analyzed, the total investment cost is
calculated, summing up the individual cost components estimated. The total investment costs,
project financing costs, total operating costs and the expected revenue figures are used evaluating
the commercial profitability of the project.

Since the investment projects generally fall under the responsibility of public or semipublic
authorities, it is only proper to use a broader economic definition of costs and benefits to the
national economy in performing cost/benefit analysis. The result of the economic evaluation should
be overriding investment criteria over the result of commercial profitability evaluation that is based
on the measure of direct momentary revenues and costs to the port market prices.

• Total investment costs
Calculate the total investment costs and the annual investment expenditure by summarizing all
investment components (land, site preparation, civil engineering works, technology and
equipment, working capital)

• Project financing
i. Describe possible and confirm sources of finance
ii. Estimate annual financial costs
iii. Prepare cash-flow statements

• Total operation costs
Calculate total operating costs (Operating costs, financial costs, depreciation)

• Financial evaluation
Perform commercial profitability analysis:
i) Net present value
ii) Internal rate of return
iii) Payback period
iv) Simple rate of return
v) Breakeven analysis
vi) Sensitivity analysis

• Economic evaluation
i. Cost-benefit analysis
Direct benefits and costs to the economy
Indirect benefits and costs
Redistribution of income
Shadow prices
ii. Estimate social rate of discount and rate of return

9. Executive Summary

The findings of a feasibility study should be summarized into definitive conclusions on all aspects of
the proposed port project. These findings provide necessary information to the port master
planning and development planning processes.

We are thankful to Er. S  for submitting this report to us.

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Comments
  • Yas July 21, 2011 at 1:55 am

    Can anyone help doing a feasibility study for a certain business relating civil eng’g project? i’m going to have a report in our class

  • Yadav Lal bhattarai March 5, 2012 at 10:04 pm

    I have gone through the “Structure Of Feasibility Studies To Develop A Port” in the project details it was included the ecology control. but as per situation we need to concern more in ecology, as technical profession we always dealing with invent something and develop.The technology is changing very frequently. keeping those in mind our major focus, anything we proceed should be ENVIRONMENT FRIENDLY, we should not disturb the ecology. It is very sure that we cannot maintain or contribute 100% environment safe. Like developing countries have limited resource to utilize in technology, focusing on economy development causing more environment impact. I feel these impact will contribute environment degradation in the nation as well as in the world. So as per my view, now to come up with any project for development the first criteria is to see environment issue, it should be safe or Environment friendly.

    • Er. S September 29, 2012 at 7:08 am

      Thanks Mr.Yadav for your comments. Now a days government is very much concerned about environment issues and Port construction could be commenced after the MoEF clearance.

  • Muhammad Zahirul Bhuiyan December 1, 2019 at 2:31 am

    Hi,

    Thank you so much for designing the structure.
    Recently I have planned to do an ‘Expansion Feasibility Study’ of a container terminal and the terminal is our competitor.

    This structure will help tremendously to prepare the study report.

    Kind regards,

    Muhammad Zahirul Bhuiyan
    Business Development Officer.

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