Feasibilty Study And Report

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Preparation and importance of Feasibility Study and report

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Feasibilty Study And Report

  1. 1. Lecture 1 Diploma in Project Management Project Management Part Two Professional Diploma in Project Management” By Dr Ali Sajid, PhD, TI October 15, 2009
  2. 2. Lecture 1 Diploma in Project Management PROJECT Conception &PROJECT Conception & FEASIBILITYFEASIBILITY Organizational ImportanceOrganizational Importance && Analysis TechniquesAnalysis Techniques By Dr. Ali Sajid By Dr. Ali Sajid
  3. 3. Lecture 1 Diploma in Project Management 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 Process of Project Analysis
  4. 4. Lecture 1 Diploma in Project Management 1. Viability of Idea 2. Analyzing Feasibility -( Possibility) of Proj- • Possibility of Completion ? • Will it be Successful 3. Reasonable likelihood - constraints Will Not prevent as from meeting key Objective 4. Synonym: Achievability 5. “Plng & Orgzg Procedure” -To Ensure Proj is Effective -It will work”. Feasibility
  5. 5. Lecture 1 Diploma in Project Management What is Feasibility Assessment? Disciplined & documented Process of “Thinking through an idea” from its “Logical beginning to its Logical end”. - This is to determine its “Potential to be a viable business” given realities of the “Economic & social environment” in which it will operate”
  6. 6. Lecture 1 Diploma in Project Management WHAT IS A FEASIBILITY STUDY? • Essentially A Process for: Determining viability of a proposed initiative or Service & Providing a framework & direction for its Development & Delivery.
  7. 7. Lecture 1 Diploma in Project Management WHAT IS A FEASIBILITY STUDY? A Process for making “Sound Decisions & Setting Direction” which is: Driven by “Research & Analysis” • Involves some consultation with S/h, community, users, etc. • Focuses on: “Analyzing, clarifying & resolving key issues” & “areas of concern or uncertainty” • Very often involves: “Basic Testing of Alternative Concepts & Approaches”
  8. 8. Lecture 1 Diploma in Project Management Purpose of a Feasibility Study What is Feasibility? Capable of being done, with “Means at Hand & Circumstances, as they are”. To help assess “Viability of a business idea - Technically, Operationally & Economically”
  9. 9. Lecture 1 Diploma in Project Management What FS Provides to Client: • A) Solid Foundation for Proj- • B) Concept identifications, • C) Estimate of Supportable Mkt • D) Design p/m, • E) Revenue Projections, • F) Net Warranted Investment. • Road map for your Proj
  10. 10. Lecture 1 Diploma in Project Management • Cost of FS Hi Yet, Minor Vs Proj-Cost. • FS Small Expanditure. Yet Protect Huge Capital • FS objective Evaluation of Proj - Chance for success. • Negative Results useful as Positive • Perceived Objectivity of Evaluation – • Credibile document for Investors.
  11. 11. Lecture 1 Diploma in Project Management Feasibility Check List • In feasibility study phase, it is necessary to define P- basic “approaches, boundaries or scope”. A typical feasibility study checklist might include: • Summary level • Evaluate alternatives • Evaluate market potential • Evaluate cost effectiveness • Evaluate producibility • Evaluate technical base
  12. 12. Lecture 1 Diploma in Project Management Feasibility Check List • A more specific determination of the Problem • Analysis of “state-of-the-art technology” • Assessment of in-house technical capabilities • Test validity of alternatives • Quantify weaknesses and unknowns • Conduct trade-off analysis on time, cost, and performance • Prepare initial P- Goals & Objectives • Prepare preliminary cost estimates and development plan
  13. 13. Lecture 1 Diploma in Project Management What a FS is Not • FS -Conducted on “Real-World" Proj. • Not Academic or Research/Papers. • Simulations or Projection Models, Useful on some Proj- but Not Replace F/S. • No "Cookie cutter" Approach to Proj. • No “Generic Source of Info”. • Not a Business Plan.
  14. 14. Lecture 1 Diploma in Project Management • Require “Study of Elements impacted by Proposed Solution”. • Guidelines for FA -Address Regulatory Constraints - Know Industry or Govt Regulations -Cultural Impact of Proposed Change. -Consult –S/Holders - Orgl Changes for Proj- Realistic? -Experts to Ensure - Sys impacted by Proj - Catalogued -Stability of Technology. -Technical Reqt Based Upon Technology – -Operationally stable -Available -Affordable. FS- Determines Likelihood of Proj Success.
  15. 15. Lecture 1 Diploma in Project Management Feasibility Study involves • -Appraisal of Existing Sys • Risk Analysis & Assessment. • Risk Mgt. • C/B Analysis. • Impact Analysis. • Sys Integration (Existing & New). • Resource Requirement, Planning & Timings. • Implementation Strategy. • Infrastructure Assessment & Reqmt. • Dependencies & Req. • Support Requirements & Logistical Analysis
  16. 16. Lecture 1 Diploma in Project Management Types of Feasibility Technical Feasibility Managerial Feasibility Economic Feasibility Financial Feasibility Cultural Feasibility Social Feasibility Safety Feasibility Political Feasibility Environmental Feasibility Market Feasibility Schedule Feasibility
  17. 17. Lecture 1 Diploma in Project Management THE FEASIBILITY ASSESSMENT PROCESS: It is often suggested: feasibility studies should encompass at least two assessments: • Technical feasibility • Economic feasibility • “Technical feasibility” embodies an assessment of : Physical, technical and technological dimensions of the proj • While “Economic feasibility assesses”: Project’s economic viability within its defined domain.
  18. 18. Lecture 1 Diploma in Project Management The Value Chain Approach to Feasibility Assessment
  19. 19. Lecture 1 Diploma in Project Management Value Chain Approach • Allows two assessments to be embedded into a single initiative, which facilitate: An increased “Understanding & appreciation of domain’s effects” on different stages from: Input sourcing & procurement to customer service & support. It also facilitates an appreciation of: “Resources, technology, customer expectations & Infrastructure required for initiative to succeed, Allowing an assessment of their level depth at each subsequent stage in Value Chain.
  20. 20. Lecture 1 Diploma in Project Management • Business Plan -Elaborated Later in Proj- Development Process • F-S leads to BP • BP -Blueprint for Business Operations. BP Respond to Critical issues raised in F-S FS Not for New ideas • Not for New Concept for Proj • Ideas identified before FS -Initiated. • IMP-Not to Support for Success of –Proj .
  21. 21. Lecture 1 Diploma in Project Management Initial Feasibility Report • Prepare feasibility report – Current situation – Future expectations – Favourable plan(s) of action – Underlying rationale for management decision Selected Plan, Prepare System Proposal – Project description – Resource requirements – Development schedule – Acceptance criteria
  22. 22. Lecture 1 Diploma in Project Management Environment Plays -Critical in FS External Factors Influence F-S An initiative feasible in community A with a rail line infeasible in B w/o Rail Line
  23. 23. Lecture 1 Diploma in Project Management Possible Outcomes of FS: 1.Feasible within Defined domain ( assumptions abt technology, location, mkt, financing, industry analysis, etc); 2. Feasible with changes to certain Domain Factors 3. Infeasible within the defined domain.
  24. 24. Lecture 1 Diploma in Project Management … Tech Feasibility- First systematic investigation of Proj Design Viability. Foundation of all other FS . - Assessment of a Prj- Capabilities. -Investigation of Technical & Physical P/mter TF Reviews: -Technical Capability of HR -Capability of Available Technology Foreign consultants Role -LDCs -”Too rigid, & Advanced Tech Spec” - Cannot be met by Country. Question is “Can it be built?”
  25. 25. Lecture 1 Diploma in Project Management Technical Feasibility (TF) Anticipate Broader Problems with Questions: 1. Adequate “Choice of Available Technologies for Alternative Design” & purposes, considering: a. Physical layout b. Engineering design c. Availability of raw materials? 2. Costs of Constructing & Operating Proj-Facilities/Service a) Machinery, b ) Equipment, c) Spare Parts ? 3. Manpower Req: a) From professional to labor b) locally available? c) Responses vary – sector to sector
  26. 26. Lecture 1 Diploma in Project Management Technical Feasibility (TF)Contd.. Primary Task of TF is Blueprinting: a) Manpower Needs b) Resources, & Design c) Provide Design Alternatives d) Choice of: “Available Technologies, & Cost estimates” for each alternative.
  27. 27. Lecture 1 Diploma in Project Management Technical FeasibilityTechnical Feasibility • Does System Stretch “State-of-the-Art Technology”? • Does in-House expertise presently exist for development? • Does an outside vendor need to be involved? • Solutions include Training or hiring more experienced employees Hiring consultants Changing scope and project approach
  28. 28. Lecture 1 Diploma in Project Management Admin/Managerial Study (AM S) Evaluates Strategy of Org in Crying/ Out Proj Activities. Providing info & Guidelines - Used to improve overall Proj. Admn. Project mgr in investigating team. Examines for Components: A. External Linkages, b. Internal org, c. Personnel, and d. Mgt plan
  29. 29. Lecture 1 Diploma in Project Management How Individuals Work, Live, and Achieve Together Project Organizational Culture
  30. 30. Lecture 1 Diploma in Project Management Precursor to Culture • Until recently say, since the 1980s organizationsUntil recently say, since the 1980s organizations were simply thought of as:were simply thought of as: ““Rational means by which to coordinate & control aRational means by which to coordinate & control a group of people”group of people” • In essence they were:In essence they were: ““No more than an organizational chart with verticalNo more than an organizational chart with vertical relationships”relationships” • But organizations are more than thatBut organizations are more than that • They have a personality of their ownThey have a personality of their own • Until recently say, since the 1980s organizationsUntil recently say, since the 1980s organizations were simply thought of as:were simply thought of as: ““Rational means by which to coordinate & control aRational means by which to coordinate & control a group of people”group of people” • In essence they were:In essence they were: ““No more than an organizational chart with verticalNo more than an organizational chart with vertical relationships”relationships” • But organizations are more than thatBut organizations are more than that • They have a personality of their ownThey have a personality of their own
  31. 31. Lecture 1 Diploma in Project Management What is Culture? “ Way we do things around here,” or System of shared meaning held by members of org.
  32. 32. Lecture 1 Diploma in Project Management What is Organizational Culture? –The system of shared actions, values, and beliefs that: –develops within an org & guides –The behavior of its members
  33. 33. Lecture 1 Diploma in Project Management Project Culture • Common behavior & internalized codes of conduct that guide: “People’s daily actions”. People in Projects Quickly learn which actions are “Allowed & Which are not”.
  34. 34. Lecture 1 Diploma in Project Management Cultural Feasibility. Compatibility of “Proposed Proj vs Cultural Setup” of Proj environment Labor-intensive Proj- Integrated with Local Cultural Practices & Beliefs. Religious Beliefs – Influence- individual willingness
  35. 35. Lecture 1 Diploma in Project Management Cultural FeasibilityCultural Feasibility • Each Project has own culture New system must fit into culture • Evaluate related issues for potential risks Low level of computer competency Computer & Field Phobia Perceived loss of control Shift in power Fear of job/Assignment change or employment loss Reversal of established work procedures • Positive steps should be undertaken to reduce the risks • E.g.: additional training can be held to teach new procedures & provide increased computer skills
  36. 36. Lecture 1 Diploma in Project Management Examines a Proposed P-in terms of: Net Contribution to: Industry Economy To society”. Address 3 Related Questions: 1. P-Responsive to “Urgent Present or Anticipated Econ/Social” need? 2. P-Planned Economic o/put Serve Intended Purpose? 3. Service Proposed to be Performed by P- Benefits - Justify P - Cost? (Mono Rail by CDA, Sub Way, Clean Drinking Water, Steel Mill, Suzuki Car Economic Study (Econ S)
  37. 37. Lecture 1 Diploma in Project Management Economic FeasibilityEconomic Feasibility • Cost/Benefit Analysis Estimate Proj Development Costs Estimate operational costs after proj Estimate financial benefits based on: “Annual savings & Increased revenues” Calculate Costs & Benefits • Uses net present value (NPV), payback period, return on investment (ROI) techniques
  38. 38. Lecture 1 Diploma in Project Management Reqs: Study of all of Economic Implications of Proj: a) Demand & Supply of All Proj- O/P. b) P- Ability to Increase employment c) P- “Multiplier" Effects (-Inc Purchase of goods Effect) d) Effect on increase Govt Revenue (income tax, sales tax), e) Use of Locally Available Resources. Assess P- Net Contribution to Econ/social welfare of community. Comparison of Econ & Social Benefits-generated From P-Vs Costs of Construction & Operations. B > C Proj- Economically feasible. Profitability analysis is conducted. Economic Study (Econ S)
  39. 39. Lecture 1 Diploma in Project Management Social Feasibility • Addresses influences –Prj- May hv on ” Social Sys in Proj Environment” • Social Structure- Certain type of HR: In short supply or non-existent. (weekend worker in USA, in Pakistan HR mgr, PhD faculty in Mmgt, Nurses) • You need to Evaluate its Effect on Project and ensure “Social Status of HR to Ensure Compatibility”. Certain Industry- hv Status Symbols within Society
  40. 40. Lecture 1 Diploma in Project Management Financial Feasibility- Capability of Proj Org – To Raise Funds to: implement Proposed Proj (different from economic feasibility)
  41. 41. Lecture 1 Diploma in Project Management Financial Study (Fin S) Questions. • 1. Capital & Operating Costs ? • 2. Sources of Funds & Draw-down schedules- sufficient to Cover costs of activities/implementation?(shoukat Tareen case of IMF) • Any alternative Financing Schemes • 3. Projected Cash flow (CF)? • Extent of necessary borrowings (L of Cr)? • When P- Revenues Paying back /cover Operating Costs? • 4. Formation of Acctg system: – Balance Sheets – CF Statements – Debt Servicing Schedules – Other Financial Reports? • 5. Source pf Proj Investment • 6. Means of Recovery investment –
  42. 42. Lecture 1 Diploma in Project Management • 6. Financial FS: Total- Costs of Project (Implementation & design, Broken down separately). • Chk (a)-Prj-Success with Amount of Money? • (b) Any Profit? • Financial Analysis To Determine R o I • 7. Chk (a) P-Financial Stability (mali Isstakaam) – B) Debt Service Capacity • 8. Assessing Financial Profit • 9. Projection of Revenues & Expenses: a. Revenues. & - Transactions - Generate incom & Receipts Cash Inflows b. Expenses. Transactions Reduce income & Expenditures: Cash Out Flows
  43. 43. Lecture 1 Diploma in Project Management • Revenues/Expenses Affect P- Income, – so determine P- Profit • Receipts/Expenditures affect Cash Position. – So determine Debt-Servicing Capacity • For a/m following Financial Statements made: • 1. PLS Statement (income statement) • 2. Balance Sheet • 3. Cash Flow Statement. • Periods of P-Statements: From Few yrs Life of P-
  44. 44. Lecture 1 Diploma in Project Management Financial CalculationsFinancial Calculations Companies use a combination of methods: First approach, called the net present value (NPV), has two concepts: (1) all benefits and costs are calculated in terms of today’s Rupees (present value) (2) Future streams of benefits /costs is netted together & then discounted by a certain factor for each year in future Payback Period to determine whether investments will be beneficial also breakeven point. Point in time at which “Benefits becomes equal” to “Cost of development & operation” Third Economic Measure “Return on investment (ROI). Shows a “Percentage return needed so that the costs & benefits exactly equal over specified time period”.
  45. 45. Lecture 1 Diploma in Project Management Safety Feasibility. • At Project Planning stage. • NIMBY Syndrome • Analysis of whether: – P- Capable of implementation – Operated safely with minimal adverse effects on environment. Amonia Cylider ;Leakage – Finis Fatory Lahore 1996, kala Shah Kaku Chemical – Union Carbide Bohapal 1984, Kala Bagh – Chernoybal USSR- Nuclear Powr Plant 1986 - Inadequate EIS-in Complex Proj • NAFTA –1993- Due to Legal issue of Potential EIS of P- Under agreement.
  46. 46. Lecture 1 Diploma in Project Management Political Feasibility Referred - “Politically Correct Proj." Political considerations often dictate direction for a proposed proj • More common in LDC
  47. 47. Lecture 1 Diploma in Project Management Political Feasibility. PF • Politically Feasible P -“Politically Correct P." • PF Analysis: • An Evaluation of Compatibility of P-Goals with Prevailing Goals of Political System. • Pol considerations dictate Direction of P-. • Political Necessity -Source of Support, • Regardless of P- Merits. • Pol Opposition Scarp Good P- – Q1.Who Resist Migration to New System? – Q2.Measures To overcome this Inertia? • P- with “National Visibility” Political Implications.–get Significant Govt I/Put • Kala Bagh, Thar, Swat Girls School today •
  48. 48. Lecture 1 Diploma in Project Management Environmental Feasibility. Killer of P- Due to: • A) Long Approval Processes • B) Green /Earth lover/nature Groups. C) Attention - Early stages of P. Concern & action to address all envir concerns. • 1.Environment suitability for P? • 2. P- Impact on Environment? • 3. Whether or not a Given Environment can Support a Disney Theme park in Va, adverse “EI” Issue Aswan Dam, New Murree Proj Tarbella affectees
  49. 49. Lecture 1 Diploma in Project Management Environmental Feasibility Agricultural Project, Question as: a) Soil Quality appropriate for Proposed crops? b) Sufficient water? c) Adequate drainage? d) Adequate sunlight? e) Climate right? -Concern must be shown -Action must be taken to address any & all environmental concerns raised or anticipated
  50. 50. Lecture 1 Diploma in Project Management Resource Feasibility • Project Leaders • Team Members • Team Skill Levels • Equipment • Support staff • Allied Physical Facilities • Communication & Collaboration facilities
  51. 51. Lecture 1 Diploma in Project Management Resource FeasibilityResource Feasibility • Team member availability • Team skill levels • Computers, equipment, and supplies • Support staff time and availability • Physical facilities
  52. 52. Lecture 1 Diploma in Project Management Human-Factors Feasibility • Ease of Use – System friendliness to use within context of Daily Ops of Intended End- user? • Perceived Usefulness System support -Job of End-user needs?s • Overall Satisfaction • End User Like Using System?
  53. 53. Lecture 1 Diploma in Project Management Legal Feasibility Solution Violate: • Contracts, • Licenses, • Copyrights, • Non-disclosures, • Laws or Regulations? Policy & Procedures – Solution violate Corporate Policies or Procedures?
  54. 54. Lecture 1 Diploma in Project Management Schedule FeasibilitySchedule Feasibility • Estimates needed complete info • Management deadlines may not be realistic • Project managers must: Drive realistic assumptions and estimates Recommend completion date flexibility Assign “Interim Milestones to Periodically Reassess” completion dates Involve experienced personnel Manage proper allocation of resources
  55. 55. Lecture 1 Diploma in Project Management Market Feasibility- Market Variability & impact on Proj . Not confused with Econ/ F
  56. 56. Lecture 1 Diploma in Project Management • Market Feasibility. • Concerns Mkt Variability & Impact on P-. Purpose: To view Potential impacts of : - A). Mkt demand, - B) Competitive Activities, etc. Nestle Yogurt - C) “Divertible" mkt share ? - Price War by Competitors, & China Factor - Local, Regional, National or Intl- Analyzed:
  57. 57. Lecture 1 Diploma in Project Management Elements of FA of a Proj Need Analysis Process Work Engineering & Design Cost Estimate Financial Analysis Market for Product & Svc Project Impacts Conclusions & Recommendations
  58. 58. Lecture 1 Diploma in Project Management Final Caveats • Little Experience for Estimates • Bias toward underestimation • No For a Bid, Not a Real Estimate

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