Conducting a feasibility study
Undertaking a full feasibility assessment of whether a project is feasible or not is a substantial project in its own right, possibly with the potential project manager involved.
Assuming that at this point in time you have one or more proposals to consider, you need to decide whether any of them are worth pursuing further – in other words, we need to assess their feasibility.
It is important for any project manager to understand the processes by which proposals are evaluated and assessed.
The potential project manager will find it beneficial to be able to read proposals with a critical eye and ask key questions such as:
- how complete is the functional specification?
- How sound is the method used to calculate profitability?
- How good is the assessment of the technical and technological factors?
- Have social, political, and ecological factors been adequately considered?
The Feasibility Study itself
Here are the Feasibility Study Steps:
For any proposal that appears to be worth accepting, a team should be assigned to undertake a feasibility study that will attempt to generate scenarios that are potentially acceptable solutions.
Such scenarios which represent different versions of what might be done along with their objectives that are to be addressed by the study should be used to prepare a functional specification.
The functional specification should layout the proposal’s scope, objectives, financial and time constraints, and addressed those questions of technical and economic feasibility.
A functional specification states what has to be done and what constraints apply in doing it.
It must ensure that there is at least one satisfactory way of doing it but does not specify how the objective is to be achieved as that step occurs as part of project planning if the proposal is accepted and authorized by management.
Assessing the feasibility of a proposed scenario requires clarity around the social, technological, ecological, economic, and political (STEEP) factors involved. The financial and technical aspects (the hard quantifiable aspects) are just part of the problem to be analyzed.
There are other soft factors that would use soft systems analysis (SSA), to deal with information beyond the hard information of quantities and facts.
SSA is used early in a study to identify the interactions that need to be considered within the assessment. SSA Is useful for identifying those aspects of any problems or proposals yes that fall outside normal operations research and engineering concerns with function, construction, and operation.
One technique that can be employed by SSA is called rich picture analysis which identifies problem areas, structures, processes, and political, psychological, and social factors. Financial, technical, or regulatory constraints and also be captured within a rich picture analysis.
So how do we assess the technical feasibility of scenarios? From the point of view of minimizing risk, we need to be sure that the chosen technology is sound.
We can determine whether a technology is mature and whether it is still undergoing active development. In addition, we need to assess a variety of technical aspects of any proposal to ensure it is sound and applicable.
This is a method of gathering and organizing information about different products which can be used for the same purpose and comparing them in terms other than those of cost.
Features are those elements of a piece of equipment, system, or some other major constituents of the project which are regarded as important in the context of the project’s requirements. Bear in mind that features may have an impact on other features.
Features analysis of the proposed system components will focus attention on the features of any requirement that are likely to prove important to the achievement of something that works and that satisfies needs.
The importance of these features must be determined so that the competing proposals or products can be judged accordingly.
Carrying out a features analysis includes identifying those features in the requirements likely to be vital, or very important, to the final outcome of the proposal. When important features have been identified they can be given a weighting, and assignment of value indicating the relative importance of one feature to all the others
This is an acronym used to categorize features, requirements, or tasks into one of the four following levels of how they relate to the feasibility study:
- must have
- should have
- could have
- won’t have for now
These are defined as:
Must-have. Must be satisfied because without it, either the feasibility solution will not work, or it is not worth delivering
Should have. Should be satisfied because it is highly desirable or very important, but it is not a must-have
Could have. Could be satisfied because it is still desirable or important, but not as much as they should have
Won’t have for now. Will not be included
There are various tools for prioritizing and ordering elements such as features or scenarios. One such example is to use a decision matrix; a simple example is shown below:
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Ecological and social factors
These must be considered when assessing the feasibility of any plan.
Ecological considerations may be prompted by a feeling that organizations existing, and potential customers would prefer to buy products that are less harmful to the environment than alternatives. They may be raised as a concern amongst shareholders or employees or maybe mandated by health and safety legislation.
When assessing the environmental impact of any project it is important to consider it from the cradle to the grave.
For example, in a manufacturing project, this would mean considering not only the impact of the product itself and any pollution created in the manufacturing process but also the raw materials and energy used for its manufacture and the method of its eventual disposal.
You will also want to assess social factors in determining feasibility, this is particularly true in projects undertaken in the underdeveloped world. These may range from social factors within a single group or office, to broader social concerns about the effects of a project, process, or product on employment, the health of workers and the general public, and safety issues.
Technical factors other than the maturity of technology may include:
- the utility of the technology
- the usability of systems
- the degree of disruption during the construction or installation phase
- use of and improvement to existing infrastructure or the development of new infrastructure
- use of and improvement to existing infrastructure or the development of new infrastructure
- notions of general social utility
In addition to purely technological factors, technical constraints may apply to any plan.
Before investment of resources in selecting and carrying out a potential project can proceed, two sets of questions need to be considered:
- Will the investment of resources in a particular project be worthwhile and how worthwhile will it be?
- Where there are several alternative opportunities for investing resources, which one gives the best rewards?
Investment appraisal techniques
There are many investment appraisal techniques and organizations will often have preferences on which to adopt for specific feasibility projects. Here is a summary of such appraisal techniques:
Whole life costs. Analyzing the total costs of implementation and any incremental transitional, operational and maintenance costs
Net benefits. Analyzing the total value of the benefits less the cost of implementation, transition and ongoing operation, calculated over a defined.
Return on investment (ROI). profits or savings resulting from investments expressed as a percentage investment
Payback period. A calculation of the period of time required for the ROI to repay the sum of the original investment
Discounted cash flow. A means of expressing future benefits based on the current value of money. Sometimes discounted cash flows include risk adjustments as the business may not be confident that all of the benefits will materialize
Net present value. The total value of discounted future cash inflows less the initial investment.
Sensitivity analysis. Feasibility study business cases are based on uncertain forecasts. In order to identify how robust the business case is, it is useful to understand the relationship between input factors (for example project costs, time scale, quality, scope, and project risks), and output (for example operations and maintenance costs, business benefits and business risks)
sensitivity analysis involves adjusting the input factors to model the point at which the outfit factors no longer justify the investment.
The Feasibility Study Report
The feasibility study report evaluates a set of proposed project paths or solutions to determine if they are viable. The person who prepares a feasibility report evaluates the feasibility of different solutions and then chooses their recommendation for the best solution. They then present the feasibility report to their company and make their recommendation.
The feasibility report serves to break down different approaches to a problem or project and help readers understand the feasibility of each approach. Based on the evaluation outlined in the report, readers can decide whether to take the report’s recommendation of the best approach. This thorough analysis of different approaches can help companies make the best possible decisions on projects and problems.
Typical sections to include in a feasibility report are:
Describing an overview and the main points of your report describing how the project or problem relates to the overall mission of your company
Explains what the problem or project is and the proposed approaches.
Background and context
Describes important contextual information. For example historical root causes and environment.
Describes how the different approaches were evaluated and why you arrived at your recommendation.
Your evaluation criteria may include:
- Financial costs
- Tax impacts
- Public perception
- Environmental effects
- Resources needed
Evaluation of solutions
This section helps determine the feasibility of solutions and project paths. Here, you compare potential approaches based on your evaluation criteria. The evaluation process leads you to make your recommendation on the best approach.
You summarize your report and reiterate your main points with a description of the pros and cons of each of the approaches discussed and their evaluation.
This contains your direct recommendation for the best path forward, explain whether the solution is feasible and why you believe it’s the right choice.