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Financial Report

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Introduction

Generation of a report creates a framework for any project for its stable operation and profitability. Especially in a construction project, the decision making factors becomes the key instigators for all round development of the project. This particular study will provide a group of tools which will help the analysts and decision makers to look over the project through the perspective of various stakeholders, the society involved and the implementing agency. Identifying the negative factors and rectifying them becomes an exigent factor in the first place. It sets up various objectives such as the growth of the project, the contribution of the project to the country, strength, and weakness of the construction project and the key factors influencing the project.

1. Information about Airport Expansion Project and alternatives have taken and their differences

Airport Expansion Project is a huge project in Australia which has been taken up by Laing O’ Rourke, an international giant engineering enterprise whose team had been working since the past century. Now, it has been a new challenge for company to undertake a profitable project of Airport Expansion Project in Australia by holding higher profitability trend. Most importantly, Laing O’ Rourke needs to priorities some of basic points in order to furnish this mighty project. These include the following:

       Fixing the budget and negotiating cost estimates

While starting a construction project, the contractor needs to think of the budget first as a budget is one of the primary and fundamental parameters for transforming a successful project into reality. However, the calculation of cost estimation is a bit challenging task, still, if it can be done properly, then it can become one of the key parameters in getting success (Lopez et al. 2017, p.211).

a)      Project Analysis

The primary action that needs to be handled properly is the clarification of various objectives of the defined project. The limitations need to be drawn and analysed firmly for the prior starting with the project (Kivits and Charles, 2015, p.111). Once these things are done, it will basically help and give a better idea of the materials needed in order to successfully complete that. The goals can be achieved then only if the primary action has been performed in the right way.

b)     Budget Estimation

Once all the analysis is being done, it's high time for the contractor to work on the budget. Since all the priorities are put together to achieve a certain goal, Laing O’ Rourke can organise with the estimation of the budget within a solid timeframe.

c)      Product Delivery

Raw materials need to be delivered from a nearby local manufacturing company instead of getting that from other outside countries (Sun and Schonfeld, 2015, p.9). This needs to be aligned on a priority basis as it will save enough time and will help in completing the project on time.

d)     Accounting

The Accounting Department of Laing O’ Rourke needs to be highly competent regarding this project as they will be subjected if any shortage or misuse of the budget is seen  (McNichol, 2015, p.13). They need to keep the record up to date and should abide by the Accounting Agreements of all the financial agreements which were running as per the plan.

       Working Timetables and prioritisation of activities

Once everything gets settled, the company Laing O’ Rourke needs to sit with the workers for the working schedules, as it should not hamper the productivity of the project (Gillen et al. 2015, p.70). The activities should be prioritized according to the necessity and every worker should be allocated to respective teams with their supervisor.

       Identification of efficient construction strategies and methods

Efficient and effective construction methods need to be taken care as if they work in a wrong direction, it may lead to a huge loss (Love et al. 2017, p.25). Hence proper strategies need to plan and everyone needs to follow that accordingly. An efficient method of utilising the budget needs to be followed; else it may result in a massacre which will lead to the incompletion of the project.

       Cooperation assurance with construction and building specialists

Laing O’ Rourke needs to assure enough cooperation with the building specialists as they are the ones who can frame and guide the path in which the construction needs to be done (Alam, 2016, p.68). Hence, if they do not cooperate, then, it will be quite difficult for the companyto complete the project on time.

       Staying in touch with the investors for any issues pertaining to budget

The investors need to be informed on a regular basis about the progress of the work. According to Morrison and Gillen (2017, p.50), they should be kept updated about every decision taken by the company. Hence, if there arise any issues regarding the budget, then they can be able to help them.

       A proper discussion of contract details with the labors and workers

The workers and labors assigned to the project need to be contracted prior starting their work. All the wages and salary need to be discussed so that no issues arise later in the middle of the project could arise. A document of their contact details should also be maintained by the company.

       Monitoring the personnel working  area assigned to the construction

The supervisors assigned for the project needs to be closely monitored so that any misuse of raw materials and other resources should be tracked early in order to avoid or minimise the loss.

Alternatives to the above-mentioned plan

       Delivery of Materials

The materials need to be taken from a nearby company (local suppliers) or rather it will be much more cost-effective if the raw materials can be manufactured by the company itself only. This will not only reduce the cost of transportation but also will reduce the tax levied for the transportation and buying of raw materials from outside.  Most importantly, during transportation, the materials may get damaged or may get waste which is to be borne by the Laing O’ Rourke company only; as a result, it also suffers losses. Hence delivery of raw materials can be an alternate plan which will make a difference by reducing the cost related to the raw material delivery.

       Manpower

Instead of hiring different people for different roles, it's better to give the responsibility to a particular team or a single builder who will look and take care as a stand-alone builder as well as a designer too. This will enhance the company to furnish the project successfully on time. Hence, it provides an alternate plan as it becomes cost effective. Hence it is suggested for a stand-alone builder who will look after the job, instead of believing with larger mass or manpower that for looking into the project which will make a difference by reducing the HR cost.

2. Assumptions for modeling and analysis of the project

 The construction of expanding Brisbane airport in Australia by Laing O'Rourke will involve labor intensive, interdependent, uncertain and complex processes (Harrison and Lock, 2017). A process model is thus developed systematically to stimulate the effects of various levels of a set of identified variables such as interest rates, inflation, project life and exchange rates (Guo et al. 2014, p.800). The simulation model has been chosen in this case. The model helps the managers in the application of the knowledge on designing and targeting for better performance.

       All the resource rate calculations and escalations will be made in accordance with Project Management Control System Description (PMD). The cost of the salaries will face an escalation in accordance with the rules set by PMD.

       Scheduling of the project cost estimating, inflation rate calculations will be done in accordance with the regulation set by PMD.

       Risk-based contingency assessment will be conducted at the lowest WBS level as set by PMD (internationaljournalssrg.org, 2016).

       It is assumed that all the maintenance and operations of fully functional construction machines will be supported by Linac Operation funds.

       It is assumed that an improvement in the building services will be achieved. This will be achieved through better managerial efforts such as an increase in coordination efforts during the initial stages of planning.

       It is assumed that critical prerequisite conditions will be improved before installation of the construction equipment.

       It is assumed that all the interdependent work will be collaborative in nature and will not be discriminated.

       It is assumed that the construction project is explicitly budgeted so that the schedule impacts and other costs are not as harsh on the project as it was meant to be.

The IRR measurement process depends heavily on few key assumption processes in order to generate effective results. A construction project management should give minimum considerations to non-maturity deposits, price sensitivity and decay rates. The key assumptions that are done

       Asset prepayment involves a change in the cash flow of a project form an assets repayment method. The severity of consequences varies with the interest rates fluctuations. It is assumed that mortgage loans will be avoided thus preventing asset prepayment fluctuations.

       It is assumed that the decay rate and the beta factor are reduced. This will reduce the deposit rate as compared to that of the driver rate. A decrease in the weighted maturity is also assumed to reduce the timeframe for an effective maturity of the deposits.

Inflation

       The intermediate assumptions made by the investors for this project is that the average change in the Consumer Price Index (CPI) will be 2% between the years of 2018 and 2020. The economy of Australia will go towards full employment and it will lead to an increase in the inflation rate to 4.8% for the later years. The cost of benefits living will also increase in gradually with each subsequent year (laingorourke.com, 2017).

       The cost of the prices that will be exported from other countries to Australia will increase. An increase in the taxation on the imported goods will increase due to increase in the GDP of the country. As a result, it is assumed that the price of the materials will be higher and more capital outflow will be there in the coming year. Adaptation of in-situ manufacturers of construction equipment will be maintained.

Project life of the expansion of the Brisbane airport is expected to be intermediate. It is assumed that a minimum WBS model will be followed in accordance to the PMD. A definite critical path for the project will be maintained to ensure an effective structure to complete the project on budget. The life of the project will be expanded accordingly with the various environmental and political contingencies.

The investors assume that the exchange rates of the pricing of imported construction materials laid by the Australian government will be less. It is also assumed that the GDP of the country will not fluctuate abruptly which in turn will affect the amount of tax deployed on the imported goods. 

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