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What problem you may have funding a product line in AIG American International Group, Inc. (AIG) is considered to be one of the major insurance corporations in the world. It was founded in 1919 by Edwin Cornelius Vander Starr in Shanghai, China and became the first western company that sold insurance to the Chinese. Later, the company enlarged the geography of its business and then extended the sphere of its building management and vendor selection. American International Group consists of several companies. Some of them are active in the areas of recycling and energy conservation. Recently AIG has invested in the rebuilding of some constructions that were conformed to the U.
S. Green Building Councils Leadership in Energy and Environmental Design (LEED) standards. At present AIG is engaged in the project that converted contaminated land in the center of Atlanta into a large office-retail-residential complex. Organizations that want to increase their participation in some processes (for example, in environmental projects) are supported with capital projects funding. The procedure of financing depends on the size and duration of the project and is based on the planning and budgeting phases of the project. Thats why the effective management is necessary for more complicated and larger projects; otherwise, there will be a lot of difficulties.
First of all, it is necessary to choose a team of specialists who will fully understand the process of bringing a capital project on stream: owners, sponsors, financiers, bankers, operators, politicians, lawyers, accountants and engineers; because the main feature of all capital projects are risk, complexity and high costs. Very often capital projects are affected by cost and time overruns. These facts will influence negatively the implementation of business strategy and will cause re-financing and even insolvency. The project of building office-retail-residential complex demands great expenses. Its economics should be based on how the project recovers the cost of the initial capital outlay. With this purpose one of three methods such as net present value, internal rate of return or Modified Internal Rate of Return and payback period analysis can be used.
A capital expenditure includes the following costs: costs of capital, property taxes, insurance and constant dollar CRF (if a project is long-term typically over 10 years in duration). Cost of capital can be determined as the initial capital needed for a project. It consists of money borrowed from a bank or other institution in the form of debt or from shareholders in the form of a reduction. Property Taxes are usually imposed by the local government. As usual, they are equal to some fraction depending on value of the property.
Constant Dollar CRF evaluates the effect of inflation. If the project is long-term inflation affects costs significantly. When all calculations and preliminary work were made, the next step is to approve capital project. As usual, it is reviewed and discussed at the monthly meetings of the Capital Projects Committee (Provost, CFO, VP Development, VP&Secretary, VP Governmental Relations, and AVP Finance & Strategy of Health System). The representatives of the group include Architect or Engineers depending on logical relationships to the project.
The first thing is to form the selection committee. The architects Office prepares the draft of a request for proposal (RFP) with additions or corrections. Then the RFP is sent to the company with the permanent date and time where and when to send the material later. The other aspect that helps to control all aspects of a complex project is Public Relations.
Public Relations or PR are measures that improve the environment in which an organization works. It can be reached with the help of visual aids for presentations, up-to-date charts of schedule as well as the project work force. PR can be internal and external including the public interest groups and target areas of the program. It should be pointed that as usual capital projects can become the target of negative information campaigns. There are also several other negative after-effects if the technology is untried, safety is at stake or the environment is adversely impacted.
All of these problems should be foreseen, recognized and dealt with honestly, fairly and promptly. Bibliography: Wideman, Max. (2006). The Public Relations. Concept project management site.
Last updated May 1, 2006. web American International Group, Inc. Last updated April 4, 2006. web
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