Page 111 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT
P. 111
Fundamentals of Project Management
Notes 1st Problem: Rationale for SCBA
Market Imperfection
We will not analyze social cost benefit; we can not find market imperfections. After study of
market rates following factors come in to our knowledge.
1. Rationing factor : It means some of raw material prices are controlled by Govt. So, it may
increase our project cost but its social benefit will go to poor community.
2. Regulation for providing minimum wage factor: It also affects social cost and benefits of
any project. Because company must have to pay this minimum wages.
3. Foreign Exchange Regulations factor: Sometime, we have to deal at currency rate which is
less than actual market rate due to regulation on FOREX. So, we should analyze this point
also.
Externalities
Externalities are non-cash or benefits which an organization suffer or get if it starts the project.
For example, if govt. makes road near your project plant, you can get this facility without any
payment. On the other side, if any other organization is polluting and spreading diseases, its
cost may suffer due to absence of your employee for going to hospitals.
Tax and Subsidies
Tax is payment on the earning of the project and it will reduce our overall benefits. On the other
hand, if govt. gives us subsidy for operating any project, it will count for our cost benefit
analysis.
2nd Problem: What is Net Benefit to Society from a Project?
With UNIDO approach, we can evaluate net benefit from any project. Formula is given below
3rd Problem: To Know the Effect of using one more Unit of Resources
With shadow price, we know the effect of using one more unit of resources on the social cost and
benefits. Shadow pricing is relating to decision of project manager. Before accepting the project,
we have to find the price if we have to use extra unit of resources. Suppose, we have to use one
more hour of labor, what will we pay and what will its effect on social benefits.
106 LOVELY PROFESSIONAL UNIVERSITY
