CHAPTE R 4

Project Context (Project Environment)

Chapter Outline
Political 15
Economic 17
Social (or Sociological) 17
Technical 18
Legal 19
Environmental 19

Projects are influenced by a multitude of factors which can be external or internal to the
organization responsible for its management and execution. The important thing for the
project manager is to recognize what these factors are and how they impact on the project
during the various phases from inception to final handover, or even disposal.
These external or internal influences are known as the project context or project environment.
The external factors making up this environment are the client or customer, various external
consultants, contractors, suppliers, competitors, politicians, national and local government
agencies, public utilities, pressure groups, the end users, and even the general public. Internal
influences include the organization’s management, the project team, internal departments,
(technical and financial), and possibly the shareholders.
Figure 4.1 illustrates the project surrounded by its external environment.
All these influences are neatly encapsulated by the acronym PESTLE, which stands for
•  olitical
P
• Economic
• Social
• Technical
• Legal
• Environmental
A detailed discussion of these areas of influence is given below.

Political
Here, two types of politics have to be considered.
Project Management, Planning, and Control. [Link]
15
Copyright © 2014 Albert Lester. Published by Elsevier Ltd. All rights reserved.
16 Chapter 4

Figure 4.1
The project environment

First, there are the internal politics that inevitably occur in all organizations whether govern-
mental, commercial, industrial, or academic and which manifest themselves in the opinions
and attitudes of the different stakeholders in these organizations. The relationships to the
project by these stakeholders can vary from the very supportive to the downright antagonistic,
but depending on their field of influence, they must be considered and managed. Even within
an apparently cohesive project, team jealousies and personal vested interests can have a
disruptive influence the project manager has to recognize and diffuse.
The fact that a project relies on clients, consultants, contractors (with their numerous subcon-
tractors), material and service suppliers, statutory authorities, and, of course, the end user, all
of which may have their own agenda and preferences, gives some idea of the potential
political problems that may occur.
Second, there are the external politics, over which neither the sponsor nor the project
manager may have much, if any, control. Any project that has international ramifications is
potentially subject to disruption due to the national or international political situation. In
the middle of a project, the government may change and impose additional import, export,
or exchange restrictions, impose penal working conditions, or even cancel contracts
altogether. For overseas construction contracts in countries with inherently unstable
economies or governments, sudden coups or revolutions may require the whole construc-
tion team to be evacuated at short notice. Such a situation should have been envisaged,
 Project Context (Project Environment) 17

evaluated, and planned for as part of the political risk assessment when the project was
first considered.
Even on a less dramatic level, the political interplay between national and local government,
lobbyists, and pressure groups has to be taken into consideration as can be appreciated when
the project consists of a road by-pass, reservoir, power station, or airport extension.

Economic
Here again there are two levels of influence: internal or micro-economic, and external or
macro-economic.
The internal economics relate to the viability of the project and the soundness of the business
case. Unless there is a net gain, whether financial or non-financial, such as required by prestige,
environmental, social service, or national security considerations, there is no point in even
considering embarking on a project. It is vital therefore that financial models and proven accoun-
tancy techniques are applied during the evaluation phase to ensure the economic viability of the
project. These tests must be applied at regular intervals throughout the life of a project to check
that with the inevitable changes that may be required, it is still worthwhile to proceed. The
decision to abort the whole project at any stage after the design stage is clearly not taken lightly,
but once the economic argument has been lost, it may in the end be the better option. A typical
example is the case of an oil-fired power station that had to be mothballed over halfway through
construction, when the price of fuel oil rose above the level at which power generation was no
longer economic. It is not uncommon for projects to be shelved when the cost of financing the
work has to be increased and the resulting interest payments exceed the foreseeable revenues.
The external economics, often related to the political climate, can have a serious influence on
the project. Higher interest rates or exchange rates, and additional taxes on labour, materials,
or the end product, can seriously affect the viability of the project. A manufacturer may
abandon the construction of a factory in its home country and transfer the project abroad if
just one of these factors changes enough to make such a move economically desirable. Again,
changes to fiscal and interest movements must be constantly monitored so that representations
can be made to government or the project curtailed. Other factors that can affect a project are
tariff barriers, interstate taxes, temporary embargoes, shipping restrictions such as only being
permitted to use conference line vessels, and special licenses.

Social (or Sociological)

Many projects and indeed most construction projects inevitably affect the community in whose
area they are carried out. It is vital therefore to inform the residents in the affected areas as early
as possible of the intent, purpose, and benefits to the organization and community of the project.
18 Chapter 4

This may require a public relations campaign to be initiated, which includes meetings,
exploratory discussions, consultations at various levels, and possible trade-offs. This is
particularly important when public funding from central or local government is involved or
when public spaces and access facilities are affected. A typical example of a trade-off is when
a developer wishes to build a shopping centre, the local authority may demand that it include
a recreation area or leisure park for free use by the public.
Some projects cannot even be started without first being subjected to a public enquiry,
environmental impact assessment, route surveys, or lengthy planning procedures. There are
always pressure groups who have a special interest in a particular project, and it is vital that
they are given the opportunity to state their case while at the same time informing them of
the positive and often less desirable implications. The ability to listen to their points of
view and give sympathetic attention to their grievances is essential, but as it is almost
impossible to satisfy all the parties, compromises may be necessary. The last thing a project
manager wants are constant demonstrations and disruptions while the project is being
carried out.
On another level, the whole object of the project may be to enhance the environment and
facilities of the community, in which case the involvement of local organizations can be very
helpful in focusing on areas which give the maximum benefit and avoiding pitfalls which only
people with local knowledge are aware of. A useful method to ensure local involvement is to
set up advisory committees or even invite a local representative to be part of the project
management team.

Technical
It goes without saying that unless the project is technically sound, it will end in failure.
Whether the project involves rolling out a new financial service product or building a power
station, the technology must be in place or be developed as the work proceeds. The mecha-
nisms by which these technical requirements are implemented have to be firmed up at a very
early stage after a rigorous risk assessment of all the realistically available options. Each
option may then be subjected to a separate feasibility study and investment appraisal.
Alternatives to be considered may include:
•  hould in-house or external design, manufacture, or installation be used?
S
• Should existing facilities be used or should new ones be acquired?
• Should one’s own management team be used or should specialist project managers be
appointed?
• Should existing components (or documents) be incorporated?
• What is the anticipated life of the end product (deliverable) and how soon must it be
updated?
 Project Context (Project Environment) 19

•  re materials available on a long-term basis and what alternatives can be substituted?

A
• What is the nature and size of the market and can this market be expanded?
These and many more technical questions have to be asked and assessed before a decision can
be made to proceed with the project. The financial implications of these factors can then be
fed into the overall investment appraisal, which includes the commercial and financing and
environmental considerations.

Legal
One of the fundamental requirements of a contract, and by implication a project, is that it is
legal. In other words, if it is illegal in a certain country to build a brewery, little protection can
be expected from the law.
The relationships between the contracting parties must be confirmed in a legally binding
contract that complies with the laws (and preferably customs) of the participating organiza-
tions. The documents themselves have to be legally acceptable and equitable, and unfair and
unreasonable clauses must be eliminated.
Where suppliers of materials, equipment, or services are based in countries other than the
main contracting parties, the laws of those countries have to be complied with in order to
minimize future problems regarding deliveries and payments.
In the event of disputes, the law under which the contract is administered and adjudicated
must be written into the contract together with the location of the court for litigation.
Generally, project managers are strongly advised always to take legal advice from specialists
in contract law and especially, where applicable, in international law.
The project context includes the established conditions of contract and other standard forms
and documents used by industry, and can also include all the legal, political, and commercial
requirements stipulated by international bodies as well as national and local governments in
their project management procedures and procurement practices.

Environmental
Some of the environmental aspects of a project have already been alluded to under ‘Social’,
from which it became apparent that environmental impact assessments are highly desirable
where they are not already mandatory.
The location of the project clearly has an enormous influence on the cost and completion
time. The same type of plant or factory can be constructed in the UK, in the Sahara desert, in
China, or even on an offshore platform, but the problems, costs, and construction times can be
20 Chapter 4

very different. The following considerations must therefore be taken into account when
deciding to carry out a project in a particular area of the world:
•  emperature (daytime and night time) in different seasons
T
• Rainy seasons (monsoon)
• Tornado or typhoon seasons
• Access by road, rail, water, or air
• Ground conditions and earthquake zones
• Possible ground contamination
• Nearby rivers and lakes
• Is the project onshore or offshore?
• Tides and storm conditions
• Nearby quarries for raw materials
• Does the project involve the use of radioactive materials?
Most countries now have strict legislation to prevent or restrict emissions of polluting sub-
stances whether solids, liquids, or gases. In addition noise restrictions may apply at various
times and cultural or religious laws may prohibit work at specified times or on special days in
the year.
The following list is a very small sample of over 15000 web pages covering European Eco-
nomic Community (EEC) directives and gives some idea of the regulations that may have to
be followed when carrying out a project.

EC Directive 85/337/EEC Environmental impact assessment

97/11/EEC Assessment of effects on certain public & private projects
92/43/EEC Chapter 4 Environment
86/278/EEC Protection of the environment
90/313/EEC Sustainable development
90/679/EEC Substances hazardous to health
79/409/EEC Conservation of natural habitats
96/82/EEC COMAH (Control of major accident hazards)
91/156/EEC Control of pollution
87/217/EEC Air pollution
89/427/EEC Air pollution
80/779/EEC Air quality limit values
75/442/EEC Ozone depleting substances
89/427/EEC Quality limit of sulphur dioxide
80/1268/EEC Fuel & CO2 emissions
91/698/EEC Hazardous waste
78/659/EEC Quality standard of water
80/68/EEC Ground water directive
80/778/EEC Spring waters
89/336/EEC Noise emissions