Project Economic Evaluation Model (PEEM)

For further information about the Project Economic Evaluation Model, please contact:

David Krumholz
609-799-7715 ext. 310

Frequently asked Questions about PEEM:

How will my organization benefit from implementing PEEM?
What does PEEM include?
What does the customization process consist of?
What is the implementation schedule?
How much does PEEM cost?
What about ease of use and compatibility?

How will my organization benefit from implementing PEEM?

PEEM delivers an easy-to-use project economic evaluation tool for project engineers, project managers, and project sponsors. The tool provides a systematic and consistent methodology for assessing the financial impacts on the corporation of different project alternatives. PEEM presents a variety of output parameters to be used by your company for fact-based decision making in the evaluation and approval of capital projects. PEEM enables each user to:

Evaluate Alternatives
PEEM simultaneously evaluates the economics of different alternatives for solving a problem or meeting a requirement. The identification and selection of the best course of action provides an opportunity (probably the largest that exists in the area of project management) for reducing overall capital expenditures while maximizing the benefits from those expenditures.

Provide Project Justification
The best way to justify the decision to approve a project is to demonstrate that the project provides economic benefits to the corporation that exceed the costs of the project. PEEM systematically evaluates all the life-cycle costs of the project.

Determine Ranking with Other Projects
If availability of funds is limited, then it is important that projects that provide the greatest benefits are selected for funding. PEEM furnishes a series of output parameters such as net present value, payback, break-even capital, internal rate of return, and value per investment dollar that can be used by management to rank projects within departments or within the corporation.

Document Parameters and Assumptions
In any business endeavor, it is important to fully document the bases upon which key business decisions are made. Management audits and post-completion analyses by potential adversaries make thorough documentation essential. PEEM provides the comprehensive documentation of all input, output and assumptions needed to demonstrate the diligence and prudence of management decisions based on all available information.

Assess Probable Corporate Financial Impact
For required projects it is important to determine the probable financial impact on the corporation and its customers. PEEM facilitates a comprehensive evaluation of the financial impact of project life-cycle costs.

Promote Financial Awareness
The process of implementing PEEM cost and benefit formulas and evaluation methods will promote financial awareness at all levels of project management. This increased cost-consciousness can have extremely positive impacts on employees' perceptions and the way they approach the day-to-day decisions of monitoring and managing projects. This heightened financial awareness will be propagated throughout the organization via the continued use of the PEEM system.

To Top

What does PEEM include?

General Features
Analyzes and compares three alternative projects simultaneously
Overall number of projects unlimited
Default formula selection by department
Year by year or grouped year data entry
User specified or default escalations
Unlimited distribution within the organization

Management Features
Standardized calculations and reports
Key assumptions highlighted in reports
Narrative entry and reporting
Default data changes explained

Financial Analysis
Revenue Requirements
Cash Flow
Earnings Impact
Analysis with Probabilistic Outcomes

To Top

Utilities and Tools
Copy alternatives
Delete projects
Export projects
Import projects
Calculation of costs and benefits during variable entry
Calculator
Calendar/Diary
Administrative module
Import/Export of administrative data

Formulas Provided
Benefit Formulas
· ALARA Savings
· Asset Protection
· Backup Unit Availability Improvement
· Capacity: Dependable Operating Improvement
· Capacity: Forced Outage Rate Improvement
· Capacity: Scheduled Outage Reduction
· Customer Satisfaction Improvement
· Data Logging
· Energy Production Availability Improvement
· Energy Production Capacity Improvement
· Environmental. Emission Reduction
· Equipment Protection and Upgrade
· Hard Manpower Savings
· Heat Rate Improvement: Cycling Units
· Heat Rate Improvement: Fuel-Limited Units
· Line Loss Reduction
· Litigation Cost Reduction
· New Capacity Revenue
· Personnel Safety Improvement
· Radwaste Reduction
Reduction to Material and Services Costs
· Regulatory Oversight
· (2) Revenue Loss Reduction
· Soft Manpower Savings
· Transformer Loss Reduction
· User Specified Fuel Benefit
· User Specified Labor Benefit
· User Specified Material Benefit
· (4) User Specified Miscellaneous Benefits

To Top

Cost Formulas
· User Specified Labor Costs
· User Specified Fuel Costs
· User Specified Material Costs
· Delayed O&M Costs
· 3 User Specified Miscellaneous Costs

Reporting
Management Report
· Narrative
· Alternative Comparison
Capital Expenditures
Present Value of Cash Flows
Levelized Annual Cash Flows
Internal Rate of Return (IRR)
Discounted Payback
Break-even Capital
Net Present Value of Revenue Requirements
Level Annual Revenue Requirements
Capital Expenditures by Asset and Year
Present Value of Cashflows
Benefits by Formula
Capital
Capital Related Expenses
Costs by Formula
Taxes
Net Cashflow
Key Parameter Inputs by Formula
20 Year Earnings and Earnings per Share
Explanation of Default Value Changes
17 Section User Selectable Analyst Report
· Asset Information
· Asset Capital
· Asset Revenue Requirements
· Asset Cash Flows
· Asset Earnings Impact
· Earnings Calculation
· Costs and Benefits by Formula
· Costs by Formula by Year
· Benefits by Formula by Year
· Cost Specification
· Benefit Specifications
· Revenue by Year
· Capital Outlays by Year
· Total Costs by Year

· Taxes by Year
· Explanation of Default Value Changes
· Narrative
Report on selected or all alternatives
Report to Screen, Printer, or File

Administrative Data
System Data
· Average Revenue by Class of Service
· Complaint Cost by Class of Service
· Operating Costs
· Capital Costs
· Fault Location and Analysis Costs
· Maintenance Costs
· Load Factor
· Load Growth
· Accident Costs
Manpower Rates

Yearly System Data
· Capacity Values
· Electrical Energy Values
Outage Multipliers

Unit Data
· Capacity
· Fuel
Retirement

Yearly Unit Data
· Capacity Factor
· Heat Rate
· Failed Startup Data
· Value of Availability
· Value of Capacity
Value of Electrical Energy

To Top

To Top

What does the customization process consist of?

System Presentation and Analysis of User Needs
The first step is to present and explain existing PEEM formulas and evaluation methods. Alternate methodologies will also be presented. We will assist you in the identification and definition of data required for PEEM tables by explaining the use of the data and identifying, when possible, the sources used by other companies.

We will work with a wide range of project personnel and solicit their input to ensure broad-based user acceptance. Because this step is so critical, it is up to you to make sure the right people are involved in the process. They need the ability to understand the issues and must be able to develop or determine answers to questions concerning your methods and procedures in their respective areas. The efficiency of this team will materially impact the cost of implementation.

System Modification Specifications
Next, we will discuss your requirements and desires, and critically evaluate them. We will suggest alternate approaches and point out possible pitfalls along the road you have chosen. We will document the resulting decisions so they can serve as PEEM system modification specifications.

Compilation of Reference Data
Next, we will make changes to the PEEM administrative module to permit you to enter your data. We will discuss interface alternatives to make data entry faster and easier.

System Modification Implementation
At this point we will modify PEEM to the proceeding processes.

System Release and Validation
We will release the modified version of PEEM. We will work with your staff to validate the PEEM system and the accuracy of the results.

Additional System Modification, Implementation, and Validation
We anticipate that the specification, modification, and validation process will occur in several iterations as PEEM is sequentially deployed to additional personnel for evaluation and testing. The need for additional modifications may occur because of incomplete evaluation by pilot participants, new needs arising in the organization, or the expected benefit of recommended improvements discovered after detailed use.

System Training
We will provide training for potential PEEM users and management personnel. We will provide initial training for personnel you identify. We will also provide training for employees who will in turn train new personnel after the PEEM implementation.

We will make executive presentations, as you require, helping to ensure that management will understand, accept, and support the undertaking.

We will provide a complete user's manual for PEEM. We will also provide a disk of the manual so that you can update it at any time. We will work with youto modify Help screens and to create additional Help screens as desired.

To Top

What is the implementation schedule?

Strand and DHL will work with you to determine a reasonable schedule. Normally, the full implementation process takes six months, as follows:

To Top

How much does PEEM cost?

The annual license cost for using PEEM is $22,500.

This includes support that permits a single master user unlimited questions regarding the operation, use, installation, and interfacing to other systems of PEEM. The master user may make inquiries on behalf of an unlimited number of users. Additional individual users can be supported directly for $3,000 per year.

The cost to modify PEEM to your specifications and other tasks contained in the work scope will be billed at our standard billing rates.

Although the total cost of implementation cannot be defined before we meet with you, we believe that the following guidelines are reliable:

The cost you can expect depends on several factors, including:

The size of your organization
The nature of your cost-benefit calculations
How closely your financial analysis matches standard practice
Your ability to quickly gather information from within your organization

To Top

What about ease of use and compatibility?

The Project Economic Evaluation Model has a Windows look and feel which makes it easy to learn and use. Intuitive navigation takes the inexperienced user through the project. It is built from Microsoft development tools, and is based on the Microsoft Visual FoxPro database engine. The source code is available.

PEEM is designed to run on Windows 98, 2000, or XP. We suggest pentium and higher class machines.