Mumbai University > Civil Engineering > SEM 8 > Construction Management

Marks: 4M

An economic study examines a proposed project in terms of its net contribution to the economy and society. The economic study requires a detailed study of all economic implications of the project, such as demand for and supply of all project outputs, the projects ability to increase the employment with multiplier effects on increased purchase of goods and services. Its use of locally available resource.

Upon completion of these studies, it is possible to assess the projects net contribution to the economic and social welfare of community. This is done through a comparison of economic and social benefits expected to be generated from the project with cost of construction and operation. If benefits exceeds the costs, project is considered economically feasible. There are various techniques for assessing economic feasibility, depending on sector (Public or private) and the nature of the project.

In general profitability analysis is conducted. For commercial project it is referred as “Commercial profitability” and for government project or public work it is referred as “Social profitability”

To obtain a comprehensive assessment of social profitability, a benefit cost analysis is normally made. An in-depth benefit cost analysis must include a complete study of all costs and benefits of the project. The study should be made for each technical alternatives.

There are three most commonly used factors which indicates the benefit or profitability analysis:

1. Benefit cost ratio
2. Net present value
3. Internal rate of return