DEVELOPMENT OF SPECIAL

ECONOMIC ZONE

PG DIPLOMA IN INTERNATIONAL BUSINESS AND FINANCE 2012

Submitted By .

Anirudh Khatri

Roll No.

2886521

Under Guidence.

Dr. R.K.Dave

SPECIAL ECONOMIC ZONE

SPECIAL ECONOMIC ZONE

SPECIAL ECONOMIC ZONE

INTRODUCTION:
A Special Economic Zone (SEZ) is a geographical region that has economic and other laws
that are more free-market-oriented than a country's typical or national laws. "Nationwide"
laws may be suspended inside a special economic zone. The category 'SEZ' covers a
broad range of more specific zone types, including Free Trade Zones (FTZ), Export
Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban
Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct
investment by foreign investors, typically an international business or a multinational
corporation (MNC).
HISTORY:
India was one of the first in Asia to recognize the effectiveness of the Export Processing
Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With
a view to overcome the shortcomings experienced on account of the multiplicity of controls
and clearances; absence of world-class infrastructure, and an unstable fiscal regime and
with a view to attract larger foreign investments in India, the Special Economic Zones
(SEZs) Policy was announced in April 2000.
After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect
on 10th February, 2006, providing for drastic simplification of procedures and for single
window clearance on matters relating to central as well as state governments.
OBJECTIVES:
(a) generation of additional economic activity
(b) promotion of exports of goods and services
(c) promotion of investment from domestic and foreign sources
(d) creation of employment opportunities
(e) development of infrastructure facilities
BENEFITS:
For the units in SEZs

Duty free import/domestic procurement of goods for development, operation and

maintenance of SEZ units
100% Income Tax exemption on export income for SEZ units under Section 10AA of
the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the
ploughed back export profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

External Commercial Borrowing by SEZ units up to US $ 12500 billion in a year

without any maturity restriction through recognized banking channels.

SPECIAL ECONOMIC ZONE

Exemption from Central Sales Tax.

Exemption from Service Tax.

Single window clearance for Central and State level approvals.

Exemption from State sales tax and other levies as extended by the respective State
Governments.

For SEZs developers

Exemption from customs/excise duties for development of SEZs for authorized

operations approved by the BOA.
Income Tax exemption on income derived from the business of development of the
SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.

Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.

Exemption from dividend distribution tax under Section 115O of the Income Tax Act.

Exemption from Central Sales Tax (CST).

Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

Feasibility study:
A) Why the SEZ is needed in the actual business sense?
YEAR

VALUE
(In Crore)
13,854
18,314
22,840
34,615
66,638

2003-04
2004-05
2005-06
2006-07
2007-08

GROWTH RATE
(over previous year)
39%
32%
25%
52%
92%

In 2009 state run SEZs account for 55.8% of export earnings.

Financing project:

Since banks have a ceiling on real estate exposure and SEZs too will be
treated as real estate for lending purposes, both will compete for the limited
resources

A higher provisioning and risk weightage will require banks to allocate more
capital towards advances to SEZs and compel them to increase lending
rates

SEZ developers are looking more at FDI

SPECIAL ECONOMIC ZONE

an overseas partner can help in bring in investment and marketing the

projects to FIIs

B) Risk analyses

Uncertainty over the future tax regime (Direct Taxes Code (DTC) and a
goods & services tax (GST))

Project planning:
A) Objectives:

Surveys / Contouring & Investigation of Site, Economic

Zone and Project influence areas

Prepare Conceptual Plans for development

Master Plan and Project Design

Detailed Engineering

Architectures

Structural

Utilities

Detailed Cost Estimates

Objectives of the Proposed Consultancies Services

B) Scope:

Topographical Survey

Survey of Land Boundary and physical structure at the site

Counter survey of the entire area

Soil Survey, soil testing and resistivity survey

Base Line Data Collection

SWOT Analysis

Assessment of facilities required

Review of current infrastructure

SPECIAL ECONOMIC ZONE

Vision Statement and Concept Plan

Detailed Project Engineering (DPE)

Billing of quantities and detailed cost estimates

Social and Environmental Impact Analysis and Rehabilitation plans

C) Master plan:

Creation of Zone of excellence

Ensure the Quality of SEZ - Internationally

Attract International manufacturers and

Master planning for acquired area

Service Sector

D) Layout

NETWORKING AND PROJECT SCHEDULING

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SPECIAL ECONOMIC ZONE

The Special Economic Zones (SEZs) are coming up all over the country after the big tax
breaks announced for both developers and export units in such zones. The new SEZ Act
2005 has prompted 45 new projects worth over Rs 1.5 lakh crores in investment.
Mahindra World City in its new avatar house three SEZs: Auto, apparel and IT within the
township. Its occupants include Infosys, and BMW which has secured land inside the
township but not in the auto SEZ. The TVS group is actively considering setting up a facility
in the city.
Reliance Industries, ONGC, Mahindra & Mahindra, Reliance Energy, Wipro, Biocon,
Hewlett Packard, Nokia and the Adani group are prominent among the 40 players who have
announced SEZs of their own. If all these projects go as per schedule, new SEZs in India
will attract investments in excess of Rs 1.5 lakh crore, comparing with the situation in 2000
when Indias original Act on SEZs yielded little more than a few crores.
China has over 600 SEZs unlike India which has struggled to figure afew. So far, if the
7,000-acre Special Economic Zone in Visakhapatnam gets functional in the next three to six
months, as planned, it could be the largest in the country. BG Menon, CEO of Mahindra
World City attributes the growth of SEZs to the recently passed SEZ Act by the Centre and
the Tamil Nadu SEZ Act which are trying to make investment options attractive. Companies
within the zone get 15-year income tax holiday besides benefits like zero customs duty on
inputs, self-certification and single window clearances.
The Government of India, State Governments as well as private business houses are
turning SEZ developers. Reliance Industries Ltd has already got an in-principle approval for
a Rs 30,000-crore petrochemical SEZ in Jamnagar - the largest in the country. It expected
to be operational in the next three years. The public sector ONGC too will be setting up
three petrochemical SEZs in the next few years. These include a Rs 25,000 crore project in
Mangalore, a Rs 6,000 crore project in Dahej, Gujarat and a Rs 5,500 crore project in
Kakinada, Karnataka.
Even the Gujarat government set up an SEZ for the petroleum sector to attract
multinationals and large corporates to set up base in the state. In addition, the textiles,
chemicals, gems and jewellery sectors too are in an expansion mode.
SEZs are a means of attracting companies to set up manufacturing or services bases within
the country. This becomes a major revenue earner for the country.
Andhra Pradesh Industrial Infrastructure Development Corporation Ltd (APIIC), the
promoter of SEZs in the state, the time is ripe in the country for SEZs to take off in a big
way. Moreover, in a bid to make SEZs more viable, are adopting a public-private
partnership model, he pointed out, and recently Andhra Pradesh has announced the
Kakinada SEZ.
The 9,000-acre SEZ has multiple stakeholders wherein ONGC and its subsidiary MRPL will
hold 46%, the AP government through APIIC 3% (by way of land) Kakinda Seaport Ltd and
IL&FS 51%. The reason for the development of SEZs in the area, the key elements needed
for setting up and developing SEZs like land, infrastructure, access to roads and more
importantly sea ports are all there. ?
The positioning Vizag SEZ as the Pudong of the Indian east coast, Claimed Mr. Acharya.
While there are large, multi-product SEZ, the state is also looking at product specific SEZs.
For instance, an SEZ exclusively for gems and jewellery in the IT Hardware Park near

SPECIAL ECONOMIC ZONE

Hyderabad is being promoted by Gitanjali, a well-known jewellery brand. Also, there is a
Nanotech park for related industries inside the Hardware Park.
Similarly, Ramky group, developers of the Pharma City near Vizag is mulling a pharma SEZ
inside the Pharma City. But do product or industry specific SEZs work if the economies of
scale are worked out properly, they would. Further, sharing common infrastructure could be
an advantage, Said Mr. Acharya. This is true of successful SEZs around the world.
Government enthusiasm and facilitation often boosts the success of the facility. The AP
government, in a bid to boost the SEZ rush is even contemplating ordinances till the glitches
in the state SEZ Act are ironed out. Infrastructure is a definite must.
Projects like the Mundra Special Economic Zone (Mundra SEZ) which already has the Port,
Container Terminal, its own rail link and airport, and its existing social infrastructure may
have a head-start and make a bigger difference. However, all of them in due course will
have a positive impact. Gas will be a key driver of the Kakinada, Gangavaram and Vizag
SEZs, Mr. Charta pointed out.
The most prominent sector is the manufacturing sector which would gain the maximum from
SEZs - specially light and heavy engineering industries that are oriented towards exports.
Electronics and light engineering get the advantage of the SEZs and reach greater heights.
Auto and auto-components could also avail of the SEZ to create the much talked about
small car manufacturing hub of the world in Indian SEZs making these as the in-gate and
out-gate to the global markets. Besides these, industries which are being impacted by
reducing tax breaks too are now moving towards SEZs.
The gems and jewellery sector will also find it more attractive to move into SEZ as their
income tax advantages will end by 2011. Some software firms are now considering setting
up SEZs since the income tax benefit available to them in a STP will not be available
beyond the 2011-12 assessment year, an STP official in Kolkata said.
According to STP rules, firms enjoy 100% tax holiday for a period of 10 years or till 2009-10,
whichever comes first. In contrast, units under SEZs tax benefits for 15 years irrespective of
the year of their commencement. This apart, SEZ units are also exempted from paying
service tax. The drugs and pharmaceutical sector as well as the agro and food processing
sector too are seriously considering availing the SEZ platforms.
Scale is important in ensuring adequate Return on Investment. This is typically in the range
of 15%. Of the 40 odd SEZs that have received the in-principal approval, many of them tend
to be sector specific and small ranging from 5 acres to about 150-200 acres in size. These
sizes can only avail of the SEZ status to get the fiscal benefits of the governments. To truly
benefit from scale of operations they need to be closer to 20,000 acres that is the
international norm.
The large ones, particularly those of international size of over 20,000 acres can create their
own captive power plant, captive water supply and create industry specific parks with
industry specific common facilities within the Zone. The existing sea port and other multimodal infrastructure make the zone leverage all the existing assets for greater synergies.
Whatever the trigger, SEZs are certainly the flavour of the season.

TENDERING, BIDDING & CONTRACTING

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Process:
A consolidated application seeking permission for setting up of a Unit and other clearances,
including those indicated below, shall be made to the Development Commissioner, in Form
F, in five copies, with a copy to the Developer:(a) Setting up of unit in a Special Economic Zone
(b) Annual permission for sub-contracting
(c) Allotment of Importer-Exporter Code number
(d) Allotment of land/industrial sheds in the Special Economic Zone
(e) Water connection
(f) Registration-cum-Membership Certificate
(g) Small Scale Industries Registration
(h) Registration with Central Pollution Control Board
(i) Power connection
(j) Building welcomeback plan
(k) Sales tax registration
(l) welcomeback from inspectorate of factories
(m) Pollution control clearance, wherever required
(n) Any other welcomeback as may be required from the State Government

4.2 Content of Form F includes:

(i) Nature of industrial undertaking
(ii) Items of manufacture activity/service activity
(iii) Investment in Plant and machinery
(iv) Import and indigenous requirements of material and other inputs
(v) Infrastructure requirements
(vi) Details of Foreign collaboration
(vii) Pattern of shareholding
(viii) Foreign Exchange Balance sheet for the 5 years
(ix) Details of Industrial license or LOI/LOA under SEZ/EOU /STP/EHTP Scheme
(x) Details of sub-contracting in manufacturing operations
The Development Commissioner shall get the proposal scrutinized and get it placed before
the welcomeback Committee for its consideration. The proposals received under following
clauses shall be placed before the Board by the Development Commissioner for its
consideration.
a) Granting of welcomeback to the Developers or Units (other than the Developers or the
Units which are exempt from obtaining welcomeback under any law or by the Central
Government) for foreign collaborations and foreign direct investments, (including
investments by a person resident outside India), in the Special Economic Zone for its
Development,
operation
and
maintenance;
b) Granting, notwithstanding anything contained in the Industries (Development and
Regulation) Act, 1951, a licence to an industrial undertaking referred to in clause (d) of
Section 3 of that Act, if such undertaking is established, as a whole or part thereof, or
proposed to be established, in a Special Economic Zone

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4.3 Consideration of proposals for setting up of Unit in a Special Economic Zone. Rule 18
The welcomeback Committee may approve or approve with modification or reject a
proposal placed before it within fifteen days of its receipt Where the welcomeback is to be
granted by the Board, the Board shall approve or approve with modification or reject such
proposal within forty-five days of its receipt: welcomeback Committee or the Board, shall
record the reasons, in writing, where it approves a proposal with modifications or where it
rejects a proposal and Development Commissioner by order shall communicate such
reasons
to
the
person
making
the
proposal.
4.4 General Requirements for getting welcomeback The welcomeback Committee shall
approve the proposal if it fulfills the following requirements,
(i) Net foreign exchange earning requirement
The proposal meets with the positive net foreign exchange earning requirement
(ii) Availability of infrastructure
- Availability of space and other infrastructure support applied for is confirmed by the
Developer in writing, by way of a provisional offer of space
- Developer shall enter into a lease agreement and give possession of the space in the
Special Economic Zone to the entrepreneur only after the issuance of Letter of
welcomeback by the Development Commissioner:
- A copy of the registered lease deed shall be furnished to the Development Commissioner
concerned within six months from the issuance of the Letter of welcomeback.
(iii) Environmental norms
The applicant undertakes to fulfill the environmental and pollution control norms.
(iv) Proof of residence
The applicant submits proof of residence, namely, passport or ration card or driving license
or voter identity card or any other proof of the proprietor or the partners of partnership firms
or Directors of the Company, as the case may be, to the satisfaction of Development
Commissioner;
(v) Income tax returns,
The applicant submits the Income tax returns, along with annexures, of the Proprietor or
Partners, or in the case of a company, audited balance sheet for the last three years.
(vi) Net Foreign Exchange Earnings.- The Unit shall achieve Positive Net Foreign Exchange
to be calculated cumulatively for a period of five years from the commencement of
production according to the following formula, namely:Positive Net Foreign Exchange = A B >0 (Rule 53)
Where:
A: is Free on Board value of exports, including exports to Nepal and Bhutan against freely
convertible currency, by the Unit and the value of following supplies of their products,
namely: (a) Supply of goods against Advance License or Duty Free Replenishment Certificate under
the Duty Exemption or Remission Scheme or Diamond Imprest License under the Foreign
Trade Policy;
(b) Supply of capital goods to holders of license under the Export Promotion Capital Goods
scheme under the Foreign Trade Policy;
(c) supply of goods to projects financed by multilateral or bilateral agencies or funds as

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SPECIAL ECONOMIC ZONE

notified by the Department of Economic Affairs, Ministry of Finance under International
Competitive Bidding in accordance with the procedures of those agencies or funds, where
the legal agreements provide for tender evaluation without including the customs duty;
(d) Supply of capital goods, including those in unassembled or disassembled condition as
well as plants, machinery, accessories, tools, dies and such goods which are used for
installation purposes till the stage of production and spares to the extent of ten per cent.of
the free on rail value to fertilizer plants;
(e) Supply of goods to any project or purpose in respect of which the Ministry of Finance, by
a notification, permits the import of such goods at zero customs duty;
(f) Supply of goods to the power projects and refineries not covered in (e) above;
(g) Supply to projects funded by United Nations Agencies;
(h) supply of goods to nuclear power projects through competitive bidding as opposed to
International Competitive Bidding;
(i) Supply made to bonded warehouses set up under the Foreign Trade Policy or under
section 65 of the Customs Act and free trade and warehousing zones, where payment is
received in foreign exchange;
(j) Supply against special entitlements of duty free import of goods under the Foreign Trade
Policy;
(k) export of services by services units including services rendered within Special Economic
Zone or services rendered in the Domestic Tariff Area and paid for in free foreign exchange
or such services rendered in Indian Rupees which are otherwise considered as having been
paid for in free foreign exchange by the Reserve Bank of India;
(l) supply of Information Technology Agreement items and notified zero duty telecom or
electronic items, namely, Color Display Tubes for monitors and Deflection components for
colour monitors or any other items as may be notified by the Central Government;
(m) Supply to other units and Developers in the same or other Special Economic Zone or
Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park
Units or Bio-technology Park Unit provided that such goods and services are permissible for
import or procurement by such units and Developers;
(n) Supply of goods to Domestic Tariff Area against payment in foreign exchange from the
Exchange Earners Foreign Currency account of the Domestic Tariff Area buyer or Free
Foreign Exchange received from overseas;
(o) Supply of goods against free foreign exchange by a Free Trade and Warehousing Zone
Unit;
B: consist of sum of the following:(a) sum total of the Cost Insurance and Freight value of all imported inputs used for
authorized operations during the relevant period and the Cost Insurance and Freight value
of all imported capital goods including goods purchased on high seas basis even though
paid for in Indian Rupees and the value of all payments made in foreign exchange by way of
export commission, royalty, fees, dividends, interest on external commercial borrowings
during the first five year period or any other charges;

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SPECIAL ECONOMIC ZONE

(b) Value of goods obtained from other Unit or Export Oriented Unit or Electronic Hardware
Technology Park or Software Technology Park Unit or Bio-technology Park Unit or from
bonded warehouses or procured from international exhibitions held in India or precious
metals procured from nominated agencies;
( c) the Cost Insurance Freight value of the goods and services, including prorata Cost
Insurance Freight of capital goods, imported duty free or leased from a leasing company or
received free of cost and or on loan basis or on transfer for the period they remain with Unit;
(d) For annual calculation of Net Foreign Exchange, value of imported capital goods and
lump sum payment of foreign technical know-how fee shall be amortized at the rate of ten
per cent every year from the first year to tenth year.
4.5 Sector specific requirements-Rule 18(3)
The proposal shall also fulfill the following sector specific requirements, namely:(a) Export of high-grade iron ore that is sixty-four per cent. Fe and above, except iron ore of
Goa origin and Redi origin, which would be subject to welcomeback of Board
(b) No sub-contracting or job work of polyester yarn shall be permitted in Domestic Tariff
Area or in Export Oriented Unit or Units in other Special Economic Zone:
This restriction shall not apply to the Units which intend to send the fabric, made by them
out of polyester or texturised yarn, for subcontracting but the third party exports shall not be
permitted
4.6 Proposals not be considered- Rule 18(4)
(a) Recycling of plastic scrap or waste:
(b) Enhancement of the approved import quantum of plastic waste and scrap beyond the
average annual import quantum of the unit since its commencement of operation to the
existing Units;
(c ) Reprocessing of garments or used clothing or secondary textiles materials and other
recyclable textile materials into clipping or rags or industrial wipers or shoddy wool or yarn
or blankets or shawls:
(d) Import of other used goods for recycling
Reconditioning, repair and reengineering may be permitted subject to the condition that
exports shall have one to one correlation with imports and all the reconditioned or repaired
or re-engineered products and scrap or remnants or waste shall be exported and none of
these goods shall be allowed to be sold in the Domestic Tariff Area or destroyed;
(e) Export of Special Chemicals, Organisms, Materials, Equipment and Technologies unless
it fulfils the conditions indicated in the Import Trade Control (Harmonized System)
Classifications of export and import items;
(f) If there is any instance of violation of law or public policy by the promoters, having a
bearing on the merits of the proposal.
(g) the use of any plant or machinery previously used for any purpose in Domestic Tariff
Area.(Inserted by Special Economic Zones (Amendment) Rules,2006.
MAJOR BIDERS AND SEZ DEVELOPERS OF INDIA:DLF
HDIL

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SPECIAL ECONOMIC ZONE

Parsvnath Developers
Omaxe
BPTP Real Estate
Ansal API
Raheja Developers
Panchshil Realty Group
Adarsh Builders
Reliance India
CIDCO

ORGANISATION OF PROJECT TEAM

The organisation of project team always comprises of planners, directors, managers,
workers etc. These members of a project have a defined role to play starting from the
inception of a project to completion of the project. These are aligned in a tree or in a
hierarchy where usually planners are placed on the top. The information flow is generally
from top to the bottom but can also flow in reverse direction.

The project team for the development of special economic zone comprises of a chief town
planner at the top followed by chief info officer. Under chief info officer, there are usually 4
verticals like Finance & Administrator, Planning & Engineering, Marketing and Regulatory.
These 4 verticals have their respective Heads or Director.

The Finance & Administrator vertical have GM (A/Cs) and GM (Finance and
Planning). This vertical looks after the financial and administrator requirement and
issues of the project.

The Planning and Engineering vertical have GM (Planning), GM (Engineering) and

GM (Quality). The GM (Planning) is responsible for the blueprint of the project. It
also takes care about the plan layout of the project. Some part of cost estimation is
also done by this vertical. The GM (Engineering) looks after the construction of the
site, location of the site, texture of the land, infrastructure etc. The takes care of all
the technical requirements of the project and also resolves some issues which occur
during the development phase of the project. The GM (Quality) is responsible for the
quality checks required like Auditing, safety and security.

The Marketing vertical have two GMs, GM (Domestic) and GM (International). The
GM (Domestic) markets the SEZ to the domestic clients and customers for the
development of their offices on SEZ. The GM (International) looks after the foreign
corporate clients mainly MNCs who either have their offices in India or want to
further develop their offices or those who dont have their offices but wants to open
their offices in India for business development.

The Regulatory vertical mainly audits the every process involved in the development
of SEZ. The other functions of this vertical are that it provides certain facilities such
as Free Trade & Warehousing Zones, International Financial Services Centre may
be approved for establishment within the Processing Area

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SPECIAL ECONOMIC ZONE

These 4 verticals are the backbone for the development of SEZ. These have to work in
synchronisation for the better development and quality of SEZ. The Ministry of Commerce
and Industry lays down the regulations that govern the setting up and administering of the
SEZs. The Central Government is functioning, while the State Governments play a
significant lead role in the development of SEZs in their respective States by stipulating the
conditions to be adhered to by an SEZ and granting the necessary approvals. The policy
framework for SEZs has been enacted in the SEZ Act and the supporting procedures are
laid down in SEZ Rules.

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SPECIAL ECONOMIC ZONE

The organisation of the project team for the development of Special economic zone is
shown below:

These verticals perform set of process which is required for the development of SEZ. Some
of these processes are given below:

Locate Site

Plan Layout

Cost Estimation

Get Approvals

Arrangement of Funds

Organization of Teams

Construction of Site

Auditing

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SPECIAL ECONOMIC ZONE

Check Safety and Security

Project Close Out

Plan Opening

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SPECIAL ECONOMIC ZONE

Minimum Land Requirement

Seri
al
No.

Name of SEZ

1
2
3
4

Multi Product
Sector Specific
SEZ in Port or Airport
SEZ for Free Trade Zone
and Warehousing

Gems and Jewellery,

Bio-technology,
Non-conventional Energy
Electronic Hardware and 10
Software,
Information
Technology

Minimum
Minimum
processing
area
Contiguous
Area required
Required
(Max 5000 ha)
1000
100
50%
100
50
50%
100
100
50%
40
40
50% , 1 lakh sq. m of built up
area,
(not exceed 20% of the
Processing area
in Sector Specific SEZ
10
10
50% (40000 Sq mtr for BT &
50000 Sq mtr for G&J
10

50% (1 lakh sq. m of built up

area required to be centrally airconditioned

Minimum Investment Requirements

Sector Specific SEZs
Investment should be more than Rs. 250 crores or Net worth* of Rs. 50 crores
Multi product SEZs
Investment should be more than Rs. 1000 crores or Net worth* of Rs. 250 crores

Project Finance
The project is will be financed through debt and equity funds. The key financing sources
include:

CIDCO funds

External Equity

External Debt

Project quality management

Quality Control:

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SPECIAL ECONOMIC ZONE

Quality is defined as 'fitness to purpose', i.e. providing a product (a building) which provides
an appropriate quality for the purpose for which it is intended. The price to be paid for a
building is a reflection of the expectations of quality - A cheaper building probably uses
inferior materials and is likely to be less attractive and less durable. The quality is also
related to the timing of when it is delivered.
Quality control in the construction industry can be looked at as having three elements:
To produce a building which satisfies the client
To produce a building where quality is related to the price.

To produce a building in which sufficient time is allowed to obtain the desired quality.

Like most other aspects of construction management quality control has to be planned.
Planning seeks 'order' and a quality control system for a construction project reflects this
sense of order. It may be seen to be in five basic stages:
Setting the quality standard or quality of design required by client.
Planning how to achieve the required quality, construction methods, equipments,
materials and personnel to be employed.

Construct the building right first time.

Correct any quality deficiencies.

Provide for long term quality control through establishing systems and developing a
quality culture.

The costs of quality:

It is obvious that quality is proportional to costs associated with the construction process.
Costs associated with quality need to be identified for management decisions. The costs of
quality can be broken down as follows:
Failure costs: The costs of demolishing and rebuilding, the cost of production time,
delays to other gangs
Appraisal costs: The cost of inspection and testing.

Prevention costs: The costs of providing better designs, more training to reduce
failure costs, more maintenance.

Quality Assurance QA:

Quality assurance is a mechanism for ensuring that the construction process takes place
within the framework of a quality management system. This suggests that quality assurance
defines the organization structure, tasks and duties for implementing quality management.
In 1987, the Building research establishment surveyed the quality problems on Britain's
construction sites. They found that half of the faults were design related, and 40% of the
problems arose from faulty construction. 10% were product failing.
Design faults:
misunderstanding the client's brief to develop the design
using information which is incorrect or out of date

misunderstanding of the client's expectations of quality standards

lack of co-ordination between the designers.

Loose or inappropriate specifications

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SPECIAL ECONOMIC ZONE

Construction faults:
Not building to drawings or specifications
poor supervision leading to bad workmanship

Insufficient management of the quality of construction.

In order to eliminate those potential problems many clients have looked to quality
assurance to reassure them that they will get the right building without undue quality
problems.

Monitoring and Control of a Project

PROJECT CONTEXT: MONITORING AND CONTROL OF A PROJECT
This deals with unplanned events that can occur at any point during the project.
Subjects covered are

Controlling changes

Monitoring the project: anticipating, identifying and controlling risks

Monitoring changes to the organization.

CONTROLLING CHANGES
In order to provide stability to the project, project agreements must be recorded, and any
changes to agreements must be evaluated for their effects upon other agreements. These
agreements should thus be recorded in controlled documentation , and when an agreement
is changed, then all other agreements that are based upon that agreement must be
reevaluated.
In order to control controlled documents in the project, it is proposed that there be a change
control board to review changes. The change control board would include the overall
project manager, phase project managers, representatives of workers, users, the data
processing group and business policy management, and perhaps a change control
administration manager to update schedules and provide unbiased advice on business,
technical and administrative decisions. Problems of interest to upper management, such as
budget issues, would be escalated up to them for resolution.
As the project progresses, the responsibilities of the phase managers might be consolidated
and the change control board might grow smaller, eventually just handling maintenance
changes rather than monitoring the project.
When a phase is completed, resulting automated systems should go into maintenance
mode. Changes to an automated system agreed upon by the change control board would
be sent to a business group for design and to a maintenance group for implementation in
the automated system. The maintenance group is often part or all of the group that did the
development of the automated system.
Once a phase is implemented, a help desk should take telephone calls from users of an
automated system. The help desk would give advice on the use of the system and report on
errors and suggested enhancements to the maintenance group who would go through the
change board for review.
As the automated system matures, a user group might take over the change control board
in reviewing changes.
Controlled Documents
Controlled documents may include the following:

Organizational objectives, priorities of objectives, strategies and goals

Project objectives, priorities of objectives, strategies, goals and constraints

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workflow requirements
system requirements
organizational business policies
interface plans
functional specifications
internal design documents (programming specifications)
vendor customization specifications
programs and program code
databases and data dictionary
test plans
performance and scalability requirements (a Performance and Adaptability Plan)
user documentation, including descriptions of user interfaces.

Once an automated system has been implemented, then the automated system must be
maintained. After an automated system has been completed and goes into maintenance
mode, documents that extend beyond the project and should be maintained and kept upto-date are those with an asterisk next to them.
As indicated documentation that describes an automated system are functional
specifications and internal design specifications. These documents should also be
controlled. Doing so and enforcing that any changes to the automated system also be
recorded in the functional and internal design specifications, provides control over the
automated system.
Technical items from which an automated system can be builtprogram code and
databasesare also controlled. Program code and databases for previous versions of the
automated system are also kept in case a severe problem occurs that requires a changed
automated system to be backed out, returning to a previous version. This process, called
the release process or version control
Other documents than those listed above are less often controlled during the project,
including project plans, risks and contingency plans because they are likely to change and
be updated quite often, but should only be changed with careful consideration and
consultations.
Controlled documents can be used

to control changes that may seriously harm a project

to distinguish an error in the project from a change in the project.

An error is an inconsistency between how an agreement, workflow or automated system is
implemented and how it is documentedthis is either an error in the implementation or in
the documentation. A change is a modification in the way an agreement, workflow or
automated system is implemented when the implementation matches the documentation of
itfor a change, both the agreement, workflow or automated system and the
documentation should be changed.
Change Control Board
Questions the change board might ask are the following:

Is the change necessary? When?

What groups are impacted by the change? How will dependencies and schedules be
impacted?

Is there are more effective and preferred change to the one that is proposed? Can
changes be consolidated?

How and when can the change be best made with the least negative impact?
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Will the change also change the overall project?

After approved: What is the priority of the changes with respect to other approved
changes?
If the change would change the overall project or change other phases in the project, then
the overall design will have to be re-visited to determine the changes effect on other
phases of the project.
MONITORING THE PROJECT AND RESULTING CHANGES
Monitoring the Project
The project manager monitors the overall project. A phase project manager monitors his
phase. The phase project manager reports to the overall project manager of any risks.
Jointly, phase project managers and overall project manager should

identify risks, potential project problems, as early as possible

identify when goals may not be met

identify when constraints may be violated

ensure that contingency plans occur before unrecoverable problems occur

provide and receive project status for the phases and total project.
When there is a significant chance that the goals of the project will not be met, this risk
should be reported to upper management. Also, when the constraints of the project may be
violated, specifically, costs being overrun and schedules significantly slipped, these risks
will be reported.
When there are disagreements between the phase project manager and overall project
manager, then resolution will be escalated to the change control board. Lack of resolution
there could escalate to upper management.
Figure 16.2 from lists types of risks, identified and not identified. Of the identified risks,
these can be separated into those that the project managers consider to be important and
those not considered to be important; of these, the important risks can be built into the
schedule Of these identified important risks, some will be actual problems and contingency
plans in the schedule would be initiated.

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Of the identified risks, some will be considered not important. These later may not becomes
problems, as expected, or may indeed become problems.
The other category of problems, unidentified problems, have a higher likelihood of being
overlooked. Of these, some will become problems and others will not.
Thus, as shown in figure 16.2, there are three paths that result in problems:
1.
Those risks that are identified as important and you do nothing about them
2.
Those risks that are identified as unimportant and later change into a high risk
3.
Those you do not identify and later become problems.
Risks in 1. should never become a problem because the project managers would build them
into the schedules. Risks in 2., although probably not built into the schedule, should be
recorded and remembered and periodically revisited by project managers to determine if
they are now turning into problems. Unidentified risks (3.) require constant monitoring by
project managers to identify and resolve.

Generic Software Project Risks

Project Risk

Importance

Lack of top management commitment to the project

Failure to gain user commitment

Misunderstanding the requirements

Lack of adequate user involvement

7.5

Failure to manage end user expectations

Changing scope/objectives

7
7

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Lack of required knowledge/skills in the project personnel
Lack of frozen requirements

7
6.5

Introduction of new technology

Insufficient/inappropriate staffing

Conflict between user departments

5.5

Monitoring Changes to Workflows

Reengineering workflows is not a one shot deal but should involve ongoing process
management and improvement. Once workflows have been implemented, they should be
monitored for actual improvement in business operations and for compliance with business
policies.
Reengineering is imbedded both within human processes implemented in the organization
and within user interfaces. Both should be considered for further (even radical) change once
the project is complete. As in the project reengineering process, the employee should be
heavily involved, as reengineering is a social process in addition to a business and technical
process.
Monitoring System Performance
A potential problem when automated systems are involved is the potential of the systems
not being able to handle increased volumes of data in the future. To take care of this,
performance monitoring should be a part of all automated systems that are likely to grow in
size, identifying potential future bottlenecks in the system, including lack of disk space, lack
or processing power, approaching transaction limits, long before they become a problem, so
corrective action can be taken.
This process is very complex because automated systems will grow in size due to systems
being installed incrementally (e.g., they may be installed at a pilot location first) and due to
future increases in number of customers over time. It is also complex because new
technology may become available that handles greater capacity but that will incur additional
costs to the organization to implement. In this book, it is proposed that information required
for this planning be kept in a Performance and Adaptability Plan document that identifies
future projections of increases in number of customers handled by automated systems,
bottlenecks identified so far, and contingency plans for resolving anticipated future
performance problems. The Performance and Adaptability Plan document would be used by
business planners who would project increases in numbers of customers, performance
monitors who identify bottlenecks in systems, and capacity planners who would identify
requirements for changes to hardware and system software.
Application of IT
Broad focus on providing secure communication:
When two entities are communicating with each other, and they do not want a third party to
listen to their communication, then they want to pass on their message in such a way that
nobody else could understand their message. This is known as communicating in a secure
manner or secure communication. Secure communication includes means by which people
can share information with varying degrees of certainty that third parties cannot know what
was said. Other than communication spoken face to face out of possibility of listening, it is
probably safe to say that no communication is guaranteed secure in this sense, although
practical limitations such as legislation, resources, technical issues (interception and
encryption), and the sheer volume of communication are limiting factors to surveillance.
Software Automation:

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Automation is the act of scripting or automating a wide variety of tasks that software
developers do in their day-to-day activities including things like:
compiling computer source code into binary code
packaging binary code
running tests
deployment to production systems
creating documentation and/or release notes
VPN/Outsourced Data networks:
A virtual private network (VPN) is a computer network that uses a public telecommunication
infrastructure such as the Internet to provide remote offices or individual users with secure
access to their organization's network. It aims to avoid an expensive system of owned or
leased lines that can be used by only one organization.
It encapsulates data transfers using a secure cryptographic method between two or
more networked devices which are not on the same private network so as to keep the
transferred data private from other devices on one or more intervening local or wide area
networks. There are many different classifications, implementations, and uses for VPNs.

Cloud Computing:
Cloud computing is location-independent computing, whereby shared servers provide
resources, software, and data to computers and other devices on demand, as with
the electricity grid. Cloud computing is a natural evolution of the widespread adoption
of virtualization, service-oriented architecture and utility computing. Details are abstracted
from consumers, who no longer have need for expertise in, or control over, the technology
infrastructure "in the cloud" that supports them.
Cloud computing describes a new supplement, consumption, and delivery model
for IT services based on the Internet, and it typically involves over-the-Internet provision of
dynamically scalable and often virtualized resources. It is a byproduct and consequence of
the ease-of-access to remote computing sites provided by the Internet. This frequently
takes the form of web-based tools or applications that users can access and use through
a web browser as if it was a program installed locally on their own computer.
The National Institute of Standards and Technology (NIST) provide a somewhat more
objective and specific definition here. The term "cloud" is used as a metaphor for the
Internet, based on the cloud drawing used in the past to represent the telephone
network, and later to depict the Internet in computer network diagrams as an abstraction of
the underlying infrastructure it represents. Typical cloud computing providers deliver
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common business applications online that are accessed from another Web service or
software like a Web browser, while the software and data are stored on servers.

Project Close-Out
For many organizations, project closeout involves gathering all of the cost control
documentation and evaluating the cost control procedures, as detailed below.
Documentation. As a part of project closeout, you need to collect all data related to project
cost control. This includes budget reports, performance analyses, trend analyses, Gantt
charts, change requests, budget update reports, and progress updates.
Procedures. Project closeout procedures often include completing all the necessary
company forms and evaluating any new project processes.
The lessons learned during cost control efforts should become a part of a project's historical
database. The information you keep about closed-out projects should be used to save you
time and money on future endeavors.
Things you should include as you document the lessons learned are details about the main
causes of cost control variances, the reasons behind the corrective action chosen, and
actions you'll do differently in future projects.
In addition, when you learn important lessons that will improve the performance of future
projects, you should share the information with other project leaders within the company.
Possible reporting techniques include:
discussing lessons learned during team debriefings
reassigning a team member to another division in order to train personnel there
writing a case study based on the lesson and incorporating it into corporate training material
Distributing lessons learned to employees via e-mail or as written memos.
Update Project Close-Out Plan and Schedule Activities
The outline of the required activities already exists in the Project Close-Out Plan section of
the Software Development Plan. This was prepared early in the project and will probably
need to be updated at this time. The Project Manager should ensure that a formal schedule
for project termination activities is constructed and agreed with the customer and the
projects own organization. This schedule should be captured in the Software Development
Plan.
Schedule Final Configuration Audits
The Project Manager arranges for the final functional and physical configuration audits to be
conducted according to Perform Configuration Audit.
Conduct a Project Post-Mortem Review
A post-mortem review is held to determine whether the project is ready for final, formal
acceptance by the customer, and subsequent close-out. The Iteration Assessment for the
previous iteration and the Issues List are reviewed to make sure any residual issues are
understood and have an owner in the support and maintenance organization. If there was a
formal acceptance test, the status of results and corrective actions should be reviewed, to
ensure there are no showstoppers going into the formal Project Acceptance Review. The
state of deployment should be examined to ensure that installation, training and transition
have completed, or that remaining activities can complete without prejudice to acceptance.
The Project Manager produces a Status Assessment that captures the results of the post-

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mortem review and the configuration audit, in preparation for the Project Acceptance
Review.
Complete Acceptance Action Items
There may be some remaining actions following the Project Acceptance Review and
acceptance may be conditional upon completion of these. The Project Manager initiates
work to resolve these items.
Close Out the Project
The project manager handles the remaining administrative tasks of project termination.
These will include:
Ensuring that the project is formally accepted: the contract and the Product Acceptance
Plan will describe the requirements. In the end, what is needed, in effect, is signed
agreement from the customer that all contracted deliveries have been made, meet the
contracted requirements and are accepted into ownership by the customer; all contracted
activities (including acceptance test, if any) have been successfully completed; and that the
customer takes all further responsibility (warranty and latent defect claims aside), for the
products and any residual issues and actions associated with them.
Settling the project's finances - making sure all payments have been received and all
suppliers and subcontractors paid. Organizational policy or other regulatory requirement
may also require a more formal audit process at project termination, covering the project's
finances, budgeting process, and assets.
Archiving all project documentation and records.
Transferring any remaining (non-deliverable) hardware and environment assets to the
owning organization's pool of assets.
Transfer the project measurements to the corporate historical database.
Reassign remaining project staff: if possible, this should not be done abruptly. Most projects
can accommodate a gradual ramp-down of staff levels, and allow a smoother transition of
staff to other projects. The project manager should ensure that the project knowledge and
responsibilities of departing staff have been transferred to those remaining. Staff
performance reviews should also be conducted as staff is transferred.

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Annexure 4

Annexure 5
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Sector Wise Distribution of SEZs

Annexure 6
State Wise Distribution of SEZs

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29