Preparation and importance of Feasibility Study and report

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. 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. 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

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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

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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”

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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.

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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”

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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”

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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

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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.

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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

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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

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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.

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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.

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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

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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

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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.

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Diploma in Project Management
The Value Chain Approach to Feasibility Assessment

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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.

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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 .

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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

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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

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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.

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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?”

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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

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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.

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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

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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

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Diploma in Project Management
How Individuals Work, Live,
and Achieve Together
Project Organizational Culture

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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

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Diploma in Project Management
What is Culture?
“ Way we do things around
here,” or
System of shared meaning
held by members of org.

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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

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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”.

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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

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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

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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)

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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

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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)

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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. Lecture 1
Diploma in Project Management
Financial Feasibility-
Capability of Proj Org –
To Raise Funds to:
implement Proposed Proj
(different from economic
feasibility)

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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. 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

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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. 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”.

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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. 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. 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. 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. 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

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Diploma in Project Management
Resource Feasibility
• Project Leaders
• Team Members
• Team Skill Levels
• Equipment
• Support staff
• Allied Physical Facilities
• Communication & Collaboration
facilities

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Diploma in Project Management
Resource FeasibilityResource Feasibility
• Team member availability
• Team skill levels
• Computers, equipment, and supplies
• Support staff time and availability
• Physical facilities

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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?

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Diploma in Project Management
Legal Feasibility
Solution Violate:
• Contracts,
• Licenses,
• Copyrights,
• Non-disclosures,
• Laws or Regulations?
Policy & Procedures
– Solution violate Corporate Policies or
Procedures?

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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

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Diploma in Project Management
Market Feasibility-
Market Variability &
impact on Proj
. Not confused with
Econ/ F

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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. 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. Lecture 1
Diploma in Project Management
Final Caveats
• Little Experience for
Estimates
• Bias toward
underestimation
• No For a Bid, Not a Real
Estimate