Pre-Feasibility Study Guideline September 2009

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  • 1. Pre-Feasibility Study Guideline September 2009 CDIA Cities Development Initiative for Asia
  • 2. TABLE OF CONTENTS1 INTRODUCTION 32 DEFINITION OF PFS 33 NECESSITY AND OBJECTIVES OF PFS 33.1 CDIA Guiding Principles 33.2 Bridging the “gap” 34 SCOPE OF PFS 35 KEY STEPS TO UNDERTAKE PFS 45.1 Initial Consultations Prior Departure to the Project Location 45.2 Counterpart Consultations 45.3 Undertaking the Assignment 56 CONTENT OF PFS 5Table 1: PFS Checklist 6 2
  • 3. 1 INTRODUCTION sustainability, ii) Climate change mitigation/adaptation, iii) Urban povertyCDIA’s key operational principle is to provide reduction, and iv) Good urban governance.services up to pre-feasibility level. This guide While it is not possible to make a discernablehas been developed to clarify the term impact across all these dimensions in every“Prefeasibility Study (PFS)” and aims to project, CDIA is committed to addressingfurther elucidate the content of PFS primarily them as much as possible across all aspects offor CDIA stakeholders (local governments of CDIA operations. Thus, a PFS should alwaysmedium-sized cities in Asia), and not at least upfront emphasize the relevance thefor the consultants who are hired to proposed infrastructure has for one or moreundertake and implement CDIA supported of these guiding principles.assignments. 3.2 Bridging the “gap” In many cases cities do have some type of2 DEFINITION OF PFS1 urban development strategies and/or masterplan, but have somehow not been ableA PFS is broadly defined as preparatory to move forward from these plans. CDIA wasstudies required to enable funders to have a created to bridge these urban governancesuccessful feasibility study carried out for a “gaps” and assist cities to translate theirparticular investment opportunity; this infrastructure needs into projects andgenerally will comprise investment programs ready to be financed, includingprogramming and packaging, initial scoping prioritization of investment proposals byand costing of identified investment projects, providing useful pre-feasibility information.and priority-setting among identified CDIA is cooperating closely with bi-lateral andinvestment projects competing for scarce multi-lateral development banks andresources. Typical outputs are descriptions of agencies.priority projects for which broad designchoices have been made, at a level of detail Therefore, the main purpose of PFS is tosufficient for a Terms of Reference for a ensure that there is a solid base forfeasibility study undertaking a feasibility study and to further defining probable following investmentAnother way to define PFS is “a preliminary projects. The PFS can also be used to identitystudy undertaken to determine if it would be and highlight certain development issues andworthwhile to proceed to the feasibility study assist the cities and local government tostage2.” Hence, a PFS can determine the identify prioritized sectors to improve thescope of the probable following feasibility urban situation.study whether; i) Is it worthwhile to proceedwith the feasibility stage? And, ii) What wouldbe the main objective(s) of the feasibility 4 SCOPE OF PFS3study? The specific scope and tasks of a PFS will be determined in the Terms of Reference (TOR).3 NECESSITY AND OBJECTIVES OF PFS Generally a PFS undertaken under CDIA umbrella would include the following:3.1 CDIA Guiding Principles • a review of technical options andThe guiding principles and operational features for the potential project(s);directions for CDIA are addressing four majorprinciples: i) Urban environmental 3 There are usually more than 1 PFS per CDIA study,1 Reference: CDIA Operational Guidelines hence section 4 will need to be repeated for each sector2 BusinessDictionary.com while the other sections apply to the Project as a whole. 3
  • 4. • brief assessment of potential economic 5 KEY STEPS TO UNDERTAKE PFS and social benefits; • preliminary assessment of probable Depending on the nature of the PFS below are development impact objectives of the standard steps the study team should take project(s) in terms of urban into consideration. environmental improvement, urban 5.1 Initial Consultations Prior poverty reduction, urban governance Departure to the Project Location improvement and social and gender impacts; • Consult the CDIA nominated Core • preliminary assessment of possible Management Team member who will adverse environmental and social supervise the Consultants work, i.e. to impacts and how to mitigate by ensure that the scope and expectations safeguards4, flag these issues for the of the assignment has been correctly anticipated Feasibility Study; understood; • preliminary estimates of project costs • Study related programs and activities in and of financial sustainability; the country to establish a sound • recommend likely implementation and understanding of the urban operation arrangements for the development situation being addressed. potential project(s) including possible 5.2 Counterpart Consultations public-private partnership (PPP) potential; Counterpart consultations should be seen as a key priority activity. The following steps are • undertake financial and/or economic recommended: analysis based on available information, providing the basis for negotiation with • Formally validate Steering Committee potential financers; structure and counterpart contribution; • flagging of issues to be considered in • Establish sound working relationship detail in the ensuring Feasibility Study with the city counterpart to strive for including review of the process why the efficient team work and good specific infrastructure has become a cooperation ensuring that key priority. institutions are at all times engaged in the process of the assignment as equalCDIA has developed ToR templates for partners;consultants in specific areas of work. For • Thoroughly explain and inform theexample, i) TOR template to undertake PFS(s), counterpart when and how manyand ii) TOR template for urban infrastructure consultants will be present in the city,investment planning and programming. These especially if intermittent inputs aretemplates will be reviewed and adjusted to being used. Ideally this is done byspecific city circumstances to meet the actual providing a tentative staffing schedulerequirements depending on which sector to and workplan to the counterpart;support. • Undertake field visits to locations of proposed activities to reach a full understanding of the development issues; • Together with the counterpart discuss and identify the key issues of the study and agree on how to address those;4 Safeguarding the environment, Indigenous Peoples • Identify investments with the and resettled people, i.e. to prevent, minimize, or counterpart through participatory mitigate harmful environmental impacts, social costs, and marginalization of vulnerable groups that may processes and in partnership with result from development projects. citizens, civil society and private sector, 4
  • 5. which are pro-poor focus and mitigate • Conduct preliminary assessment of climate change. possible adverse environmental and social impacts and how to mitigate by5.3 Undertaking the Assignment safeguards, flag these issues for the anticipated Feasibility Study;As mentioned under Para 4 the TOR should be • Conduct preliminary estimates ofthe guiding instrument for the assignment, project costs and of financialhowever to ensure a successful study the sustainability;below steps should be taken into account. • Recommend likely implementation and • Jointly with the counterpart define the operation arrangements for the geographical scope of the study area; potential project(s) including possible • Review of previous studies on the potential of public-private partnership referred development issues, if (PPP); available; • Flag issues to be considered in detail in • Study the current development issues the anticipated Feasibility Study (e.g. urban planning, land use, urban including review of the process why the transport, solid waste, sewage water specific urban infrastructure has and drainage etc.) and design within the become a priority; city; • Undertake an initial assessment of • Assess the organizational and major risks including political; institutional issues in the provision of • Throughout the assignment hold basic urban services (e.g. systems, regular meetings (besides steering business processes, stakeholder committee meetings) with relevant analysis, internal/external relationships stakeholders in the counterpart and political economy); institution and the city administration • Identify possible solutions and to update on progress of the study and measures to improve the urban create ownership; management situation, including new • Throughout the assignment discuss with institutional delivery mechanisms for and inform potential funding partners improved service provision; of the progress and likely need for • Identify alternative solutions including future investments; assessment of local financing capacity • If applicable, define issues to be and the likely need for external funding addressed in, and further need for data and support, including the role of the collection and analysis for, a potential private sector; Feasibility Study. • Make use of CDIA developed toolkits and guidelines5, as appropriate; • Recommend environmentally and 6 CONTENT OF PFS socially responsible techniques and strategies for urban infrastructure Depending on the nature of the PFS the investment; content of the report(s) will naturally vary. • Conduct preliminary assessment of CDIA has developed a detailed checklist probable development impact containing the standard requirements and objectives of the project(s) in terms of content of a PFS (refer to Table 1 overleaf). urban environmental improvement, Relevant parts shall apply depending on the urban poverty reduction, urban nature and scope of the PFS. governance improvement and social and gender impacts;5 This PFS Guideline, Project Programming & Prioritisation Toolkit and PPP Manual Quick Start Guide 5
  • 6. Table 1: PFS Checklist1.0 EXECUTIVE SUMMARY Brief information of project objectives and1.1 Objectives ( ) background. Summarize the stages of the PFS, brief description1.2 Summary of analysis of current situation and recommended projects and ( ) strategies including tentative cost estimate.2.0 INTRODUCTION Brief introduction to the PFS, objectives of the2.1 Reporting structure ( ) report and how it is structured.2.2 Schedule Indicate the schedule of the study. ( ) Consultant(s) and2.3 Involved consultants(s) and counterpart staff ( ) Counterpart(s)3.0 ANALYSIS OF DEVELOPMENT ISSUES Indicate Project area, policy and legislation,3.1 Current situation institutional structure and finance, analysis and ( ) overview of the current situation and its impact. Analysis of future requirements and demand3.2 Development need analysis, i.e. typically 5 – 10 years’ projections and ( ) estimates. Stakeholders’ perceptions of the conditions and3.3 Stakeholders’ views ( ) how they were obtained. Indicate considered institutional and financial Institutional and financial3.4 options, public funding versus PPP, point out why ( ) options considered the project appears as it does etc.4.0 PROJECT IDENTIFICATION Study’s recommendations and analysis to improve the urban situation. Alternative broad technical4.1 Recommendations ( ) solutions and preliminary design, social-, environmental- and institutional aspects. Project description to include: - Project title - Sector / Sub-sector - Location (maps, photos as required) - Implementing agency - Technical description and aspects - Project benefits and outcomes4.2 Project Descriptions ( ) - Beneficiaries - Social, poverty, gender impacts - Environmental impacts - Project Costs (US$) - Operation and Maintenance Cost - Recommended implementation schedule - Potential for private investment 6
  • 7. - Potential for community involvement/contributions5.0 DEVELOPMENT IMPACT OBJECTIVES Preliminary assessment of likely development impact objectives of the project(s) in terms of urban5.1 Assessment environmental improvement, urban poverty ( ) reduction, urban governance improvement and social and gender impacts. Preliminary assessment of possible adverse environmental and social impacts and how to mitigate those by safeguards (environment, Adverse Environmental5.2 indigenous peoples and resettled people). Flag ( ) and Social Impacts these issues for the anticipated Feasibility Study. (Refer to ADB’s checklists on social and environmental assessments)6.0 FINANCIAL ANALYSIS Preliminary estimates and summary of project costs6.1 Project Costs ( ) of identified and prioritized projects. Analysis of the current municipal revenues, recurrent internally generated and other revenue6.2 Municipal revenues (funds from irregular sources that can vary ( ) significantly from year to year). In addition, analysis of grants and loans situation. Analysis of recurrent expenditure, other expenditure (operation & maintenance, possibly6.3 Municipal expenditure ( ) electricity etc) and development (capital) expenditure. Preliminary estimates of project costs. Analysis of the current investment situation to derive a financial envelope to finance the identified investment projects. Undertake financial and/or economic analysis of the project. Elaborate various Economic and Financial6.4 funding scenarios considering potential ( ) Analysis loans/grants from development banks, possible private investments and government contribution, producing projections of financial statements as required to evaluate viability. (Refer to ADB guidelines on economic and financial analysis) Conclusion remarks of the current investment6.5 Conclusions situation and the affordability to finance identified ( ) investment projects.7.0 IMPLEMENTATION ARRANGEMENTS Recommend and elaborate likely implementation Implementation and and operation arrangements for the potential7.1 ( ) Operation Arrangements project(s) including possible potential of public- private partnership (PPP). Indicate possible 7
  • 8. institutional weaknesses and suggested measures to rectify the situation.8.0 RISKS Initial assessment of the key risks for each proposed8.1 Assessment ( ) project. Identify the major assumptions which are made for recommended projects. Indicate if there are any circumstances outside the control of the8.2 Assumptions recommended project, if they occurred, would ( ) prevent the achievement of the main objectives. These assumptions would be analyzed further at the feasibility stage. Identify broad risks to both implementation and sustainability. Indicate risk management strategies,8.3 Risks ( ) if relevant. To be further developed at the feasibility stage.9.0 FORTHCOMING FEASIBILITY STUDY (if required) Indicate the need and reasons for further studies, if9.1 Further studies ( ) required. Briefly summarize the requirements to indicate likely data and survey needs, required expertise, Feasibility study9.2 support facilities, locations, and institutions to be ( ) requirements consulted, skills required on the team and time requirements.10.0 CONCLUSIONS AND RECOMMENDATIONS Summarize the conclusions and recommendations Conclusions and10.1 from the study. Highlight key issues and suggested ( ) Recommendations way forward for the local government and/or city.11.0 APPENDICES To be attached as necessary e.g. data and survey11.1 Appendices sheets, detailed technical descriptions and costing, ( ) project fiches, key references etc. 8
  • 9. Cities Development Initiative for AsiaSuite 202-203 Hanston Building, Emerald Ave., Ortigas Center, Pasig City 1600, Metro Manila, PhilippinesPhone: +63-2 631-2342 • Fax: +63-2 631-6158 Website: www.cdia.asia CDIA is supported by: