¶ … Funding
Infrastructure Project Funding Questions
When funding any infrastructure project, there are a number of questions that project managers must be able to ask themselves. The answers to these questions help provide a better foundation for the overall success of the infrastructure project and provide reassurance that the project is running smoothly. Thus, it is important to spell out the three primary questions relating to delivery of public services, what funding mechanism will be used, and finally how much the financing will cost.
Will the public receive effective services from the infrastructure project?
Such a question helps provide justification for the project, especially in regards to investment and appraisal activities. Overall, the question helps direct project managers to make effective decisions regarding the project and how it will serve the community that it is located in. The community is the ultimate shareholder in the situation, and thus this question helps ensure that the primary shareholders within that community are properly being served the appropriate services they need. According to Vickman (2009), understanding how the public will benefit from the services of a project addresses issues regarding regulator constraints. There are often issues where regulatory collisions are in conflict, which may have the potential to threaten the benefits of the shareholders and primary users. Understanding how to resolve such conflicts is crucial to increasing overall user benefits. Without properly answering this question, the project could potentially encounter pricing problems when considering net benefits.
What financial mechanism will be used to fund the project?
Understanding how the infrastructure project will be funded is a huge step in delivering the public services desired. This question is incredibly complex, and may require a blended answer of mixed funding mechanisms, depending on the nature of the unique situation and circumstances. Answering this question helps denote key responsibilities to the parties involved in financing the project and determines where resources will be allocated in order to complete the project on time and within the realm of the budget. Project participants must understand their roles, including what resources they will be expected to produce and the overall project ownership structure. Etsy and Sesia (2010) claim that in order to decide the capital investment methodology in any infrastructure project, the financial mechanism must be decided upon early on in the project. This sets the tone of the foundation for the rest of the project's completion. Moreover, it helps structure the organization of the project participants so that each party understands the role they must play throughout the duration of the project. Not determining this early on only leads to financial disaster, where resources may run out before the project can be completed successfully, causing huge delays in completion.
How much will project financing cost?
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