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Reasons for delaying in completion construction projects in the city of Diwaniyah View project
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A.D. Albdiri
Civil Engineering Department
College of Engineering, University of Al-Qadisiyah Al-Diwaniyah, Iraq
A.H. Mohsen
Civil Engineering Department
College of Engineering, University of Al-Mustansiriyah, Baghdad, Iraq
ABSTRACT
A feasibility study was conducted to evaluate investment opportunities for
establishing a university hospital of 50 beds capacity. The hospital is intended for
providing healthcare services and teaching purposes. The healthcare services focus
on advanced (specialized) surgeries. The investment opportunity is based on the
concept; Build, Operate, and Transfer (B.O.T). Net present value, recovery period,
and internal rate of return were used for the financial analysis and profitability of the
hospital project. Results show that internal return rate (IRR) of (10.6%) and recovery
period of (6) years are achievable. The project is considered economically feasible.
Key words: feasibility study, B.O.T, Investment, Economic analysis, University
hospital.
Cite this Article: S.A. Hasan, A.D. Albdiri and A.H. Mohsen, Feasibility Study and
Economic Assessment for Al-Qadisiyah University Hospital of Specialized Surgeries.
International Journal of Civil Engineering and Technology, 9(9), 2018, pp. 63-72.
http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=9&IType=9
1. INTRODUCTION
The University of Al-Qadisiyah has realized the ultimate needs of the population of the Al-
Diwaniyah province for healthcare, and its role to meet these needs through establishing a
university hospital to provide both the public healthcare and the teaching purposes. Unmet
health needs of populations has been recognized by the World Health Organization (WHO)
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Feasibility Study and Economic Assessment for Al-Qadisiyah University Hospital of Specialized Surgeries
due to critical funding gap, as only 30.4% of the required funding was received in the year
2017[1]. Al-Diwaniyah province is not far from this poor health situation. Health facilities are
still losing essential health staff due the cumulative and recent spikes in departures to Europe
[2], and the WHO continues to find many hospitals throughout Iraq in a poor state of repair
[3]. This has called for a responsible response from the university of Al-Qadisiyah, and a
proposal to utilize available resources to tackle the enormous health challenges in the
province of Al-Diwaniyah through a new strategy for investing in health [4] was evaluated.
An area of 2500 m2 belongs to the university of Al-Qadisiyah and located in an emerging
commercial and residential area was chosen to construct and operate a 50 beds hospital.
It was suggested to adopt the B.O.T model as an investment approach and a detailed
feasibility study was carried out to demonstrate the profitability of the proposed hospital. The
proposed economic assessment for the B.O.T approach has shown that 10.6% IRR and 6
years recovery period are achievable. This certainly encourages investors to invest in health
sector and the university of Al-Qadisiyah will benefit of the establishment of the proposed
hospital.
2. PROJECT DESCRIPTION
The hospital consists of 11 surgical units (ENT surgery, Chest and blood vessels surgery,
Ophthalmology surgery, Kidney surgery, orthopedic surgery, Face and Jaw surgery,
Neurological surgery, Endoscopy tract surgery, Toxicology unit, Radiology department,
Intensive care unit). The project is a 4-stories building of 1725 m2 each, located in the district
of UM Al-Khail at (4/4175) area number as shown in Figure (1). The total available area for
the project is 2500 m2. Out of the total area, 775 m2 is available for landscaping and service
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S.A. Hasan, A.D. Albdiri and A.H. Mohsen
Table 1 BOT investment successful experiences for the period (1984-1995) [7], [8].
Cost (million
Country Project B.O.T model
dollars)
France -Britain Channel Tunnel B.O.T 55 year 19000
Taiwan Highway Traffic System / Taipei B.O.T 17000
Malaysia Highway Road B.O.T30 year 3400
Mexico Coal power plant B.O.T 3000
Thailand Metro Suspension System B.O.T 30 year 2981
Japan Kansai International Airport B.O.T 15000
Argentina Water and sewage services for the B.O.T 30 year 4000
city of Buenos Aires
Thailand Asia Network Communications B.O.T 25 year 4000
China Nuclear Power Plant B.O.T 3700
4. RESEARCH METHODOLOGY
The methodology of research adopted for this work covers the following stages;
Stage I: conducting a technical feasibility and Marketing Studies.
Stage II: conducting a strategic analysis (SWOT analysis).
Stage III: conducting economic assessment and feasibility studies.
Stage IV: conclusions
5. SWOT ANALYSIS
SWOT analysis was carried out to determine the impact of strength, weakness, opportunity
and threats on the profitability of the project. [9]
Strengths: The following points were considered as the strengths of the project;
Rare competitive projects within the area of the project.
Providing advanced surgery services.
Excellent location.
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Feasibility Study and Economic Assessment for Al-Qadisiyah University Hospital of Specialized Surgeries
http://www.iaeme.com/IJCIET/index.asp 66 editor@iaeme.com
S.A. Hasan, A.D. Albdiri and A.H. Mohsen
Annual variable cost: Table (6) details the annual variable costs.
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Feasibility Study and Economic Assessment for Al-Qadisiyah University Hospital of Specialized Surgeries
Revenues
Admission annual revenue = $ 6,000,000
Outpatient revenues = $ 90,000
Emergency services revenues = $ 60,000
Total annual revenue = $ 6.15 million
Table (8) details the project revenue analysis, assuming 5% inflation rate every five years.
∑ ……… (1)
At a rate of 10%, the net present value of the invested money in this project turned to be
positive as shown in Table (9). As NPV is positive, the project is economically feasible.
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S.A. Hasan, A.D. Albdiri and A.H. Mohsen
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Feasibility Study and Economic Assessment for Al-Qadisiyah University Hospital of Specialized Surgeries
Consideration that the project is sensitive to the increase in variable income by a certain
percentage as the internal rate of return increases in this case, the amount invested in less than
6 years from the start of operation, which is not far from the investor's perspective. Figure (2)
explains the break –even point, in which, costs and revenues are equal and the profits of the
project are taken beyond it.
… (3)
Where:
B: benefits of the project;
I: initial capital investment;
O&M: operating and maintenance costs.
Table 11 shows calculation for B/C ratio.
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S.A. Hasan, A.D. Albdiri and A.H. Mohsen
With the construction cost changing from -10% to +10%, the PWV varies from 8788289.014
to 8597379.923 and B/C ratio varies from 1.33 to1.328, the project stay feasible.
Therefore, when the revenue increase, the project becomes more feasible. It is only when
the total annual revenue reach -10% of their base value (decrease) that the B/C ratio for the
project becomes less than unity. Hence, it can be concluded that the project is feasible as long
as its associated benefits are considerably high. The decision is sensitive to the revenue.
8. CONCLUSIONS
The Build, Operate and Transfer (B.O.T) model has shown a considerable participation in
mitigating the state's financial crises and can be adopted to raise the level of health services.
The results confirm that the use (B.O.T) investment system for the construction of the 50 beds
hospital is feasible. The new hospital can improve the quality of the healthcare in the city of
Al-Diwaniyah.
Considering the project is sensitive to the inflation rate, the revenue is expected to rise 5%
or more per five years. At a 10% discount rate, the net present value of future cash flows will
be positive. This shows that the project is economically feasible. As the expected IRR is 10.6
%, there will be encouragement for the establishment of the project. It was also determined
that from the calculation of the capital recovery period, the payback period is 6 years. The
project is feasible as long as its associated benefits are considerably high. The decision is
sensitive to the revenue.
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