Economics and Finance in the Construction Industry and the Built Environment Task 1

Feasibility Study
Task
My task is to produce a feasibility study on a small construction project. My evidence should
include local land values. I must also provide a recommendation on the feasibility of the
project.
Introduction
For the feasibility study, I am going to produce a scenario to work the feasibility study off.
With this scenario I will assess the feasibility of the project for the company in terms of the
TELOS feasibility study technique. This will produce a good idea of whether the project is a
good idea to undertake.
Scenario
I am the managing director of a small construction firm. The main expertise of this company
is extensions of buildings. A respectable client has approached the company because of
their good work and offered me a contract for us to build a 4-bedroom house for 250,000. I
must conduct a feasibility study to assess whether my company can afford to undertake the
project. After a bit of research on the internet, the average local land value is around
100,000

TELOS Question of Answer

Stage Feasibility
Technological
Do we have enough We currently almost have enough for the project.
labour? Some contractors would have to be brought in to
do the carpentry.
Do we have enough We have enough equipment for the current
equipment? workers, however we do not have the equipment
for the contractors. They will be expected to arrive
with their equipment.
Do we have enough The company itself doesnt have any plant
machinery? machinery, however the required machinery can
be hired out from the local Jacksons machine
hire.
Any Partnerships Like mentioned previously, Jacksons could be
available? partnered with for the project for the machinery
and equipment required.
Economical
Are the finances The finances are being provided from a trusted
reliable? and respectable client that is loaning the money
from a trustworthy financial institution. So yes.
Any spare cash in We currently have 400,000 in the reserves.
the bank?
Will the company After all of the cost estimates, the company should
make a good return make a 7% net profit. However this is only a
on the project? forecast.
Is the price of local Local land, on average is 100,000 so this fits
land feasible? within our budget and finances being supplied.
Legal

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 Do any pieces of All pieces of legislation certainly produce
legislation cause constraints for the project in terms of what can be
issues? done however it does not make the project
unfeasible.
Is planning The proposed project is a 4-bedroom house, this
permission easy to is a pretty average construction project. As long as
acquire? the plan is set out correctly and all documentation
is completed to a good standard, the building
should very easily acquire planning permission.
Any other legal If the site is on a brownfield site, it is vital that the
issues? ground is tested for contaminants on the other
hand if the site is a greenfield site, it is important
to ensure that there are no Tree Protection Order
trees on there or else this can have a huge effect
on us as a company.
Operational
Do we have Working on houses for most of their careers, our
knowledge to be staff know their way around the construction
able to build the techniques for houses. Our colleagues know how
house? to produce a house, however the documentation
from the architect will help tremendously.
Do we have the We have a site manager, this is enough for a
correct small project like a house.
management?
How are we going to The company is going to produce advertisements
hire new staff? that will attract work towards us. Specifically
carpenters.
Are any specialists An architect and quantity surveyor will be hired in
being hired? to draw plans and calculate the costs of the
materials for us.
Scheduling
Do we have an The estimated deadline for the house is 4 months.
estimated deadline? This because historically, on average it takes
around 3-4 months to build a house.
Is there a plan that is A critical path analysis and a master programme
going to be put into will be produced to be able to keep track of the
place? project and whether it is meeting the deadlines for
each different step.
Is there a finance There will be a budget for the project that will be
plan for the project? reviewed often to ensure that the company isnt
losing money. If it is, then we will look to ways to
fix the loss of money.

Conclusion
Weighing up the factors that I have mentioned in the table above, I personally believe, as the
managing director of the company, that we should take this contract offer. It will propel us
into the house building market that is much larger than the extensions sector. This will grow
our business whilst we also acquire knowledge and experience whilst also receiving greater
profits than previous projects.

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Economics and Finance in the Construction Industry and the Built Environment Task 2
Factors that affect the Budget and Feasibility
Task
I must analyse factors that will affect both the budget required for, and the final feasibility of a
typical project proposal. These factors should refer to local issues, such as the physical site
and economic issues.
Introduction
The feasibility of a project is dependent on many factors. Feasibility is the ease or
convenience of doing something, in terms of the construction industry, it is the convenience
of being able to complete a project with certain factors taken into account. A widely known
technique used to work out the feasibility of a project is the TELOS technique. This stands
for Technology, Economic, Legal, Operations and Scheduling. For small construction
projects, different things fit into these categories compared to large projects, however in
some areas they share the same feasibility factors.
Technological
The technological part of the TELOS is focussing on the technology required to actually be
able to complete the project. By this I mean computer software, labour, different forms of
machinery and even cash itself. This can be successfully achieved by producing a draft
outline or a model of the building that is being proposed, this will show the processes and
information that are necessary to complete the project. In this part of the TELOS system you
must question whether your company has what it takes to build this building for the client.
This specific area is focusses on the means to build it; the materials, the labour, the
equipment. This is the focus of this section, to ask yourself whether the company has
enough technology to complete the project to a certain standard. For a small construction
project, for example a house, dependant on the type of company you are, you need to weigh
up whether this is the sort of work that you normally do or are you willing to grow and expand
into other projects, for example if it is a company that specialises in extensions, they may not
have the knowledge of how to build a house so they must learn how to or get more workers
in that are skilful in this area. So the project type itself must be analysed in terms of
feasibility.
Economical
The economical part of TELOS focusses on the economics and finance of the project and
whether the company is capable of being able to handle the money involved in the project.
This part will look at the total costs of completing the project and will compare the estimated
returns. This plays a huge role in determining the actual feasibility of the project, because if
the company isnt making much money, or any at all then it isnt feasible. You have to ensure
that the finances are available for the project, if the client is a trusted businessperson then
the money should be reliable, whereas people who havent got a reputation could have poor
finances. This works the same with financial institutions as well. The money coming from the
financial institutions must be reliable. Costs must be analysed and a cash flow established to
ensure that money wouldnt just be going to random places along the project. The small
business must decide whether they have the cash to be able to risk trying to grow out of their
comfort zone, however the risk can either propel the company into new heights or destroy
them.

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Legal
The legal side of the TELOS feasibility study is whether any current legislation produces any
constraints that need to be taken into consideration with the project. The laws must be
analysed whether they will have an effect on the project being proposed by the client.
Government bodies and relevant external regulators must also be taken into consideration
like the local authority. Any commitments to other clients must be taken into consideration
when accepting a project, this is because the larger project will take the workforce of the
company, and this means that the other work that the company is working on must be taken
into consideration. The options are finish off the work that is currently underway which will
delay the current project being proposed or you can push the other clients around this
project while the new larger project is taken care of. One of the main laws that needs to
complied with is the application for planning permission, so when this project is proposed to
your company, you must weigh up whether the project will get planning permission. Another
thing to take into consideration is the environment of the proposed site, whether the site has
contaminants in it, or if there any trees that have Tree Preservation Orders on them. These
are all things that need to be taken into consideration.
Operations
The operations part of the TELOS technique is all about would we be able to build this
building. Not focussing on having the labour or technology, but more of a focus on, do we
have the knowledge to build this building and can we build it. This is incredibly important
because you need to produce a building of a good quality for the client. There is the option
to bring more staff in with the required skills for the project, however this will cost money.
Management must also be taken into consideration and this varies on the size of the project,
if the project is very large then there must be managers spread across the site to manage
different teams working on different areas, however for a small project there can be as little
as one manager. This parts focus is on the different people and teams that will be included
in the completion of the project.
Scheduling
The scheduling aspect of TELOS is the part where the team must consider a realistic time
frame to the project, all the way up to the completion of the building. This assists in the
analysing the viability of the project as well. If the time frame is far too long, it will be
rescheduled and edited until it fits with the projects goals. If this cant happen then a new
idea will be bought into the fray to work a way into making this project feasible. The
scheduling part of the study is vital to the feasibility of the project because if the time frame
of the project isnt stuck too, the loss of reputation wont be the only consequences, delays
cost a lot of money. This will have a huge effect on the original cost estimates.
Conclusion
To conclude my report, I have stated the reasons that companies have to complete a
feasibility study. If an unfeasible project is taken without preparation then the project will
ending up costing a lot more money and the overall budget wont be followed. Assessing the
feasibility of a project is vital for being successful.

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Economics and Finance in the Construction Industry and the Built Environment Task 3
Evaluation of Factors that affect Feasibility
Task
My task is to evaluate the factors that affect the feasibility in terms of the influence of the
government on the economics of the construction industry. I should make a reference to
terms such as base rates (MPC set rates), planning decisions and grants.
Introduction
There are various factors that affect the feasibility of a proposed project. This is what I have
explained in the previous task, that there is a system that is used widely across the world in
different industries to be able to evaluate and review these factors whilst deciding whether
the project is feasible for their company. These factors all have plus points that need to be
analysed during the feasibility study stage of the project.
Technological Factors
The technology involved in the production of the proposed building is a huge factor that
affects whether the project being proposed is feasible for your company to accept. You must
look at whether your company has enough labour for the project, this is because the project
may be larger than your company is used too, you must analyse whether your company has
enough labour, if not, how are they going to be acquired? This is usually through
advertisement about the project. Technological factors also includes thee equipment and
machinery for the project. Does your company have the correct equipment or machinery, f
not how are they going to be acquired? Usually the machinery is lent out from a supplier and
the equipment is supplied by the labour themselves, however this plays a huge role in
whether the project is feasible. Can you produce this building for the client with the
technology you have at this point? Another huge point is partnerships, does your company
have any partnerships with other companies that can bring work in to assist with this newly
acquired project. If so, this can increase the feasibility of the project drastically due to the
ease of acquiring extra labour, materials, machinery and/or equipment.
Economic Factors
Starting off with the way the government influences on the economy of the construction
industry, the government rely on a huge income from the construction industry. This is then
invested back into the industry to keep it going and what is made profit to the government is
supplied to other areas like education, infrastructure and other government controlled areas.
Construction firms or clients take out loans from financial institutions like banks during
projects to supply the money for materials labour and other outgoings. These loans will have
an interest rate advised by the Monetary Policy Committee (MPC), these rates will provide
an income to the government and the financial institutions. The question is, do you have any
spare cash in the bank for reserves for the company. This can keep you in business if
anything goes wrong so it is vital to have a backup to stop anything horrible form occurring. If
there isnt much cash in the bank, where are you going to receive the finances from if
anything awful occurs, this needs to be analysed to ensure that there is a backup. You also
need to question whether the finances being supplied are trustworthy, whether it be received
from the client or a financial institution. For this area of whether the project is feasible, you
really need to look at whether you can afford the project, is there enough money being
placed into the project to ensure that the project will be completed to the correct standard in
the correct timeframe.

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Legal Factors
The legal factors that affect the feasibility of a project are whether the project that has been
proposed by a client complies with all laws, especially relevant laws like the building
regulations, the building act and construction (design and management) regulations. This is
vital, when a building is applied for planning permission, the application must include all
relevant documentation and drawings relevant to the project, and this is when the local
authority will analyse the application in terms of its compliance with the law. If it doesnt
comply then the local council will let the construction firm know what is wrong with the
application and offer advice on rectifying any errors within the project. Ensuring that you
comply with laws is detrimental to the feasibility of a project, laws are made to be stuck to
and if they arent then your reputation as a company will be damaged incredibly, and you will
also experience fines. The legality and compliance of laws must be liaised to the client by
the design team to ensure no legal issues arise during the project.
Operational Factors
The operation of a project is the actual process of producing the building for the client. The
factors that influence the feasibility in terms of the operation of the project are whether your
company can actually produce this building. In some cases construction firms are offered
projects that are out of their comfort zone and they must analyse whether it is wise to take
up the project or reject it. The operation of the project needs to be reviewed before the
contract is accepted, if the construction company is used to building houses and is offered a
job to build a nuclear power station, the employees will be clueless of their roles and how to
actually operate the project itself. This is why it is detrimental to analyse the operation of the
project, if you can acquire labour that has the speciality of constructing a nuclear power
station then it could be feasible, however the increased costs caused by this may mean that
the project overall is not feasible for that house building company.
Scheduling Factors
The scheduling of a project has a huge influence on the feasibility of it due to the fact that
when you are hired, you are expected to complete the project within a set timeframe to a
certain quality. You as a company must analyse the project that has been proposed to
decide whether your company could produce the building to the time frame that the client
would like, if you have decided your company could not do this, then you can liaise with the
client to extend the timeline of the project. This gives you time to finish the project. However,
if the extension is denied, it may be wise to refuse the project due to finishing a project late
will cost lots of money and will also paint a bad image on you as a construction company.
Conclusion
To conclude my report, there are various different ways that the feasibility of a project is
influenced. I have listed five main areas that are present in the TELOS feasibility study
technique. However I have explained exactly how they affect the feasibility of a project. In
terms of technological factors, it depends on whether you have the right amount of workers,
equipment, materials and machinery. In terms of economic factors, it is if you have enough
cash and finances for the project and whether there is a plan B when regarding money. In
terms of the legal factors, this is if the project proposed is compliant with all relevant
legislation. In terms of operation, it is if your company can actually do the project, where you
have what it take to actually build the building. And for scheduling, it is if you can complete
the building within the correct timeframe.

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