Project Feasibility [DECEMBER 2006]
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This document discusses project feasibility analysis techniques. It begins by defining feasibility as the capability of being done with the means and circumstances available. For organizations, feasibility analysis is an important planning procedure to ensure a project will be effective and work as intended. The document then outlines the basic steps of feasibility analysis, which include project planning and analyzing the project's possibility of success. It discusses various factors to consider in project planning and different aspects of feasibility analysis, including technical, managerial, economic, financial, cultural and social feasibility. The overall purpose is to determine the likelihood of a project's success through a thorough planning and analysis process.
Project Feasibility [DECEMBER 2006]
- 1. PROJECTPROJECT FEASIBILITYFEASIBILITY Organizational ImportanceOrganizational Importance && Analysis TechniquesAnalysis Techniques By Dr. Ali Sajid
- 2. PreamblePreamble What is feasibility?What is feasibility? Capable of being done withCapable of being done with meansmeans atat hand andhand and circumstancescircumstances as they areas they are Synonym ofSynonym of AchievabilityAchievability
- 3. For an organizationFor an organization Feasibility is an important planning and organizingFeasibility is an important planning and organizing procedure to make sure you project is effective andprocedure to make sure you project is effective and will workwill work
- 4. Concept ofConcept of Feasibility StudyFeasibility Study Feasibility study determines the likelihood of projectFeasibility study determines the likelihood of project successsuccess It requires that all elements impacted by theIt requires that all elements impacted by the proposed solution be studiedproposed solution be studied Many projects fail because of unfeasibility andMany projects fail because of unfeasibility and impossibility in their productive measuresimpossibility in their productive measures
- 5. Graphical AnalysisGraphical Analysis Perceived and Real Needs List of Potential and Ongoing Projects Current Organizational Environment Existing and Available Resources Evaluation Criteria Project Selection Decision Decision Outcome • Accept project • Reject project • Delay project • Refocus project • End-user Development • Proof of concept
- 6. The Basic StepsThe Basic Steps for Processfor Process First youFirst you planplan, then you, then you analyzeanalyze Planning your ProjectPlanning your Project what should be made; the design; inputs and post prospectswhat should be made; the design; inputs and post prospects Analyzing the Feasibility (Possibility) of yourAnalyzing the Feasibility (Possibility) of your ProjectProject the project has possibility for completion; will it be successfulthe project has possibility for completion; will it be successful
- 7. The First StepThe First Step PROJECT PLANNINGPROJECT PLANNING When you decide to go to college, you formulate a planWhen you decide to go to college, you formulate a plan When you want to buy a home, you develop a planWhen you want to buy a home, you develop a plan When you decide to start a family, you establish a planWhen you decide to start a family, you establish a plan Why then would you invest millions of dollars in a project without a plan?Why then would you invest millions of dollars in a project without a plan?
- 8. FOREWORDFOREWORD For any project to take an initiative, Planning is the firstFor any project to take an initiative, Planning is the first and vital stepand vital step Definition:Definition: an act of formulating a program for a definitean act of formulating a program for a definite course of action; also a process of drawing layouts forcourse of action; also a process of drawing layouts for some project or enterprisesome project or enterprise
- 9. Developing Project PlanDeveloping Project Plan • Use project plans to coordinate rather than to control. • Make use of different personalities within the project environment. • Prescheduled frequent revisions to project plans. • Empower workers to estimate their own work. • Describe value-creating tasks rather than activities. • Define specific and tangible milestones. • Use check lists, matrices, and other supplements to project plans
- 10. Factors involving Project PlanFactors involving Project Plan In the initial stage of project planning, the internal andIn the initial stage of project planning, the internal and external factors that influence the project should beexternal factors that influence the project should be determined and given priority weightsdetermined and given priority weights The Influences include:The Influences include: Internal Factors-Internal Factors- factors within the premises of the organizationfactors within the premises of the organization External Factors-External Factors- factors involving the clients and the marketfactors involving the clients and the market
- 11. Internal FactorsInternal Factors InfrastructureInfrastructure Project scopeProject scope Labor relationsLabor relations Project locationProject location Project leadershipProject leadership Organizational goalOrganizational goal Management approachManagement approach Technical manpower supplyTechnical manpower supply Resource and capital availabilityResource and capital availability External FactorsExternal Factors Public needsPublic needs Market needsMarket needs National goalsNational goals Industry stabilityIndustry stability State of technologyState of technology Industrial competitorsIndustrial competitors Government regulationsGovernment regulations
- 12. Project Execution PlanProject Execution Plan Planning is an ongoing process that is conducted throughout thePlanning is an ongoing process that is conducted throughout the project life cycle.project life cycle. The basic components of a project plan are discussed below:-The basic components of a project plan are discussed below:- Outline of Project Plan-Outline of Project Plan- This is a brief description of what is plannedThis is a brief description of what is planned Approach-Approach- The managerial and technical methodologies of implementing the projectThe managerial and technical methodologies of implementing the project should be specifiedshould be specified ObjectivesObjectives-- The objectives should be very detailed in outlining what the project isThe objectives should be very detailed in outlining what the project is expected to achieveexpected to achieve
- 13. Project Execution PlanProject Execution Plan contd…contd… Policies and Procedures-Policies and Procedures- Development of a project policy involving general guidelines for carrying outDevelopment of a project policy involving general guidelines for carrying out projectproject Contractual Requirements-Contractual Requirements- The portion of the project plan should outline reporting requirementsThe portion of the project plan should outline reporting requirements Project Schedule-Project Schedule- The project schedule signifies the commitment of resource against time inThe project schedule signifies the commitment of resource against time in pursuit of project objectivespursuit of project objectives Resource RequirementsResource Requirements Project resources, budget, and costs are to be documented in this section ofProject resources, budget, and costs are to be documented in this section of the project planthe project plan
- 14. Project Execution PlanProject Execution Plan contd…contd… Performance Measures-Performance Measures- Measures of evaluating project progress should be developedMeasures of evaluating project progress should be developed Contingency Plans-Contingency Plans- Courses of actions to be taken in the case of undesirable events should beCourses of actions to be taken in the case of undesirable events should be predeterminedpredetermined Tracking, Reporting, and Auditing-Tracking, Reporting, and Auditing- These involve keeping track of the project plans, evaluating tasks, andThese involve keeping track of the project plans, evaluating tasks, and scrutinizing the records of the projectscrutinizing the records of the project
- 15. The Second StepThe Second Step FEASIBILITY ANALYSISFEASIBILITY ANALYSIS
- 16. PreludePrelude The most important step in any projectThe most important step in any project after a project plan should beafter a project plan should be determining the viability of the ideadetermining the viability of the idea
- 17. Importance of AnalysisImportance of Analysis An effective feasibility analysis will provide theAn effective feasibility analysis will provide the client with a solid foundation upon which aclient with a solid foundation upon which a project is built.project is built. A feasibility study provides conceptA feasibility study provides concept identification, estimates of supportable market,identification, estimates of supportable market, design parameters, attendancedesign parameters, attendance estimates, revenue projections, andestimates, revenue projections, and net warranted investment.net warranted investment. It essentially becomes a road mapIt essentially becomes a road map for your projectfor your project
- 18. An Overview of the StudyAn Overview of the Study The feasibility study involvesThe feasibility study involves Appraisal of existing systems and manual processes.Appraisal of existing systems and manual processes. Troubleshooting.Troubleshooting. Process re-engineering.Process re-engineering. Risk analysis and assessment.Risk analysis and assessment. Risk management.Risk management. Cost-benefit analysis.Cost-benefit analysis. Impact analysis.Impact analysis. Integration of existing and new systems.Integration of existing and new systems. Resource requirements Planning and timings.Resource requirements Planning and timings. Implementation strategy.Implementation strategy. Infrastructure assessment and requirements.Infrastructure assessment and requirements. Dependencies and requirements.Dependencies and requirements. Support requirements and logistical analysisSupport requirements and logistical analysis
- 19. Process of AnalysisProcess of Analysis Identify problem or opportunity Set up feasibility study Define scope and objectives Carry out different aspects of the study Recommend – proceed /shelve Evaluate alternatives – develop/buy
- 20. THE PROCESS OFTHE PROCESS OF FEASIBILITYFEASIBILITY ANALYSISANALYSIS The basic tests for feasibility are as follows:The basic tests for feasibility are as follows: A.A. Technical FeasibilityTechnical Feasibility B.B. Managerial FeasibilityManagerial Feasibility C.C. Economic FeasibilityEconomic Feasibility D.D. Financial FeasibilityFinancial Feasibility E.E. Cultural FeasibilityCultural Feasibility F.F. Social FeasibilitySocial Feasibility G.G. Safety FeasibilitySafety Feasibility H.H. Political FeasibilityPolitical Feasibility I.I. Environmental FeasibilityEnvironmental Feasibility J.J. Market FeasibilityMarket Feasibility
- 21. THE PROCESS OFTHE PROCESS OF FEASIBILITYFEASIBILITY ANALYSISANALYSIS The basic tests for feasibility are as follows:The basic tests for feasibility are as follows: A.A. Technical FeasibilityTechnical Feasibility B.B. Managerial FeasibilityManagerial Feasibility C.C. Economic FeasibilityEconomic Feasibility D.D. Financial FeasibilityFinancial Feasibility E.E. Cultural FeasibilityCultural Feasibility F.F. Social FeasibilitySocial Feasibility G.G. Safety FeasibilitySafety Feasibility H.H. Political FeasibilityPolitical Feasibility I.I. Environmental FeasibilityEnvironmental Feasibility J.J. Market FeasibilityMarket Feasibility
- 22. THE PROCESS DETAILSTHE PROCESS DETAILS started…started… A.A. Technical Feasibility-Technical Feasibility- The technical capability of the personnel as well as the capability of theThe technical capability of the personnel as well as the capability of the available technology should be consideredavailable technology should be considered B.B. Managerial Feasibility-Managerial Feasibility- Managerial feasibility involves the capability of the infrastructure of aManagerial feasibility involves the capability of the infrastructure of a process to achieve and sustain process improvementprocess to achieve and sustain process improvement C.C. Economic Feasibility-Economic Feasibility- This involves the feasibility of the proposed project to generate economicThis involves the feasibility of the proposed project to generate economic benefits. Abenefits. A benefit-cost analysisbenefit-cost analysis and aand a breakeven analysisbreakeven analysis are importantare important aspects of evaluating the economic feasibility of new industrial projectsaspects of evaluating the economic feasibility of new industrial projects
- 23. THE PROCESS DETAILSTHE PROCESS DETAILS goes on…goes on… D.D. Financial Feasibility-Financial Feasibility- Financial feasibility involves the capability of the project organization toFinancial feasibility involves the capability of the project organization to raise the appropriate funds needed to implement the proposed projectraise the appropriate funds needed to implement the proposed project (different from economic feasibility)(different from economic feasibility) E.E. Cultural Feasibility-Cultural Feasibility- Cultural feasibility deals with the compatibility of the proposed project withCultural feasibility deals with the compatibility of the proposed project with cultural setup of the project environmentcultural setup of the project environment F.F. Social Feasibility-Social Feasibility- Social feasibility addresses the influences that a proposed project maySocial feasibility addresses the influences that a proposed project may have on the social system in the project environmenthave on the social system in the project environment
- 24. THE PROCESS DETAILSTHE PROCESS DETAILS on and on…on and on… G.G. Safety Feasibility-Safety Feasibility- Safety feasibility is another important aspect that should be considered in projectSafety feasibility is another important aspect that should be considered in project planning.planning. It also refers to an analysis of whether the project is capable of being implementedIt also refers to an analysis of whether the project is capable of being implemented and operated safely with minimal adverse effects on the environmentand operated safely with minimal adverse effects on the environment H.H. Political Feasibility-Political Feasibility- A politically feasible project may be referred to as a "politically correct project."A politically feasible project may be referred to as a "politically correct project." Political considerations often dictate direction for a proposed projectPolitical considerations often dictate direction for a proposed project I.I. Environmental Feasibility-Environmental Feasibility- Concern must be shown and action must be taken to address any and allConcern must be shown and action must be taken to address any and all environmental concerns raised or anticipatedenvironmental concerns raised or anticipated
- 25. THE PROCESS DETAILSTHE PROCESS DETAILS and on…and on… J.J. Market Feasibility-Market Feasibility- Another concern is market variability and impact on the project.Another concern is market variability and impact on the project. This area should not be confused with the Economic FeasibilityThis area should not be confused with the Economic Feasibility The market needs analysis to view the potential impacts of marketThe market needs analysis to view the potential impacts of market demand, competitive activities, etc. and "divertible" market sharedemand, competitive activities, etc. and "divertible" market share availableavailable
- 26. THE SCOPE OFTHE SCOPE OF FEASIBILITYFEASIBILITY ANALYSISANALYSIS The elements of feasibility analysis for a project should beThe elements of feasibility analysis for a project should be covering the below:covering the below: A.A. Need AnalysisNeed Analysis B.B. Process WorkProcess Work C.C. Engineering & DesignEngineering & Design D.D. Cost EstimateCost Estimate E.E. Financial AnalysisFinancial Analysis F.F. Project ImpactsProject Impacts G.G. Conclusions and RecommendationsConclusions and Recommendations
- 27. THE ELEMENTSTHE ELEMENTS started…started… A.A. Need Analysis-Need Analysis- This indicates recognition of a need for the project:This indicates recognition of a need for the project: --Is the need significant enough to justify the proposed project?Is the need significant enough to justify the proposed project? --Will the need still exist by the time the project is completed?Will the need still exist by the time the project is completed? --What are the alternate means of satisfying the need?What are the alternate means of satisfying the need? --What are the economic, social, environmental, and political impacts of the need?What are the economic, social, environmental, and political impacts of the need? B.B. Process Work-Process Work- This is the preliminary analysis done to find requirements satisfying the need.This is the preliminary analysis done to find requirements satisfying the need. --The work may be performed by a consultant who is an expert in the project field.The work may be performed by a consultant who is an expert in the project field. --The preliminary study often involves system models or prototypesThe preliminary study often involves system models or prototypes
- 28. C.C. Engineering & Design-Engineering & Design- This involves a detailed technical study of the proposed projectThis involves a detailed technical study of the proposed project --Written quotations are obtained from suppliers and subcontractors as needed.Written quotations are obtained from suppliers and subcontractors as needed. --Technology capabilities are evaluated as neededTechnology capabilities are evaluated as needed --Product design, if needed, should be done at this timeProduct design, if needed, should be done at this time D.D. Cost Estimate-Cost Estimate- This involves estimating project cost to a suitable level of accuracy.This involves estimating project cost to a suitable level of accuracy. --Levels of around -5% to +15% are common at this level of a project plan.Levels of around -5% to +15% are common at this level of a project plan. --Estimates of capital investment, recurring and nonrecurring costs must be thereEstimates of capital investment, recurring and nonrecurring costs must be there --Sensitivity analysisSensitivity analysis can be carried out on the estimated cost values to see howcan be carried out on the estimated cost values to see how sensitive the project plan is to the estimated cost valuessensitive the project plan is to the estimated cost values THE ELEMENTSTHE ELEMENTS goes on…goes on…
- 29. E.E. Financial Analysis-Financial Analysis- This involves an analysis of the cash flow profile of the projectThis involves an analysis of the cash flow profile of the project --The analysis should consider rates of return, inflation, sources of capital, paybackThe analysis should consider rates of return, inflation, sources of capital, payback periods, breakeven point, residual values, and sensitivityperiods, breakeven point, residual values, and sensitivity --This is a critical analysis since it determines whether or not and when funds will beThis is a critical analysis since it determines whether or not and when funds will be available to the projectavailable to the project F.F. Project Impacts-Project Impacts- This portion of the feasibility study provides an assessment of the impact of the proposedThis portion of the feasibility study provides an assessment of the impact of the proposed projectproject --Environmental, social, cultural, political, and economic impacts may be some of theEnvironmental, social, cultural, political, and economic impacts may be some of the factors that will determine how a project is perceived by the publicfactors that will determine how a project is perceived by the public THE ELEMENTSTHE ELEMENTS on and on…on and on…
- 30. G.G. Conclusions and Recommendations-Conclusions and Recommendations- The feasibility study should end with the overall outcome of the projectThe feasibility study should end with the overall outcome of the project --This may indicate an endorsement or disapproval of the project.This may indicate an endorsement or disapproval of the project. --Recommendations on what should be done should be included in this section ofRecommendations on what should be done should be included in this section of thethe feasibility report.feasibility report. THE ELEMENTSTHE ELEMENTS and on…and on…
- 31. TheThe AnalysisAnalysis ofof BenefitsBenefits The Benefits can be of two types:The Benefits can be of two types: 1.1. TheThe TangibleTangible BenefitsBenefits casuallycasually A physical matter that can be touchedA physical matter that can be touched isis tangibletangible 2.2. TheThe IntangibleIntangible BenefitsBenefits
- 32. TangibleTangible BenefitsBenefits • Fewer processing errors • Increased throughput (ratio of output to input) • Decreased response time • Elimination of job steps • Increased sales • Reduced credit losses • Reduced expenses
- 33. IntangibleIntangible BenefitsBenefits • Improved customer goodwill • Improved employee morale • Better service to community • Better decision-making
- 34. Potential BarriersPotential Barriers Many reasons can make your project impossible: ‡ Old, poor means of technology ‡ Lacking effective leadership ‡ Lacking communication ‡ Very low on funds ‡ The project is not necessitated in the market
- 35. SummationSummation Feasibility analysis determines the likelihood of projectFeasibility analysis determines the likelihood of project successsuccess Clients most commonly employ your consultants during theClients most commonly employ your consultants during the feasibility stage of a projectfeasibility stage of a project Significant value is in the determination of exactly what isSignificant value is in the determination of exactly what is feasible and what is not, and not just for the moment in hand,feasible and what is not, and not just for the moment in hand, but also for the future as the business grows and technologybut also for the future as the business grows and technology advancesadvances