PROJECT PROJECT FEASIBILITYFEASIBILITY

Organizational ImportanceOrganizational Importance&&

Analysis TechniquesAnalysis Techniques

By Dr. Ali Sajid

PreamblePreamble

What is feasibility?What is feasibility?

Capable of being done with Capable of being done with means means atathand and hand and circumstancescircumstances as they are as they are

Synonym of Synonym of AchievabilityAchievability

For an organizationFor an organization

Feasibility is an important planning and organizingFeasibility is an important planning and organizingprocedure to make sure you project is effective and procedure to make sure you project is effective and will workwill work

Concept of Concept of Feasibility StudyFeasibility Study

Feasibility study determines the likelihood of projectFeasibility study determines the likelihood of projectsuccesssuccess

It requires that all elements impacted by theIt requires that all elements impacted by theproposed solution be studiedproposed solution be studied

Many projects fail because of unfeasibility andMany projects fail because of unfeasibility andimpossibility in their productive measuresimpossibility in their productive measures

Graphical AnalysisGraphical Analysis

Perceived andReal Needs

List of Potentialand OngoingProjects

CurrentOrganizationalEnvironment

Existing andAvailableResources

EvaluationCriteria

ProjectSelectionDecision

Decision Outcome• Accept project• Reject project• Delay project• Refocus project• End-user Development• Proof of concept

The Basic Steps The Basic Steps for Processfor Process

First you First you planplan, then you , then you analyzeanalyze

Planning your ProjectPlanning your Projectwhat should be made; the design; inputs and post prospectswhat should be made; the design; inputs and post prospects

Analyzing the Feasibility (Possibility) of your Analyzing the Feasibility (Possibility) of your ProjectProjectthe project has possibility for completion; will it be successful the project has possibility for completion; will it be successful

The First StepThe First Step

PROJECT PLANNINGPROJECT PLANNINGWhen 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?

FOREWORDFOREWORD

For any project to take an initiative, Planning is the firstFor any project to take an initiative, Planning is the firstand 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 forsome project or enterprise some project or enterprise

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

Factors involving Project PlanFactors involving Project PlanIn the initial stage of project planning, the internal andIn the initial stage of project planning, the internal andexternal factors that influence the project should beexternal factors that influence the project should bedetermined 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 market factors involving the clients and the market

Internal FactorsInternal Factors Infrastructure Infrastructure Project scope Project scope Labor relations Labor relations Project location Project location Project leadership Project leadership Organizational goal Organizational goal Management approach Management approach Technical manpower supplyTechnical manpower supplyResource and capital availability Resource and capital availability

External FactorsExternal Factors

Public needs Public needs Market needs Market needs National goals National goals

Industry stability Industry stability State of technology State of technology

Industrial competitors Industrial competitors Government regulationsGovernment regulations

Project Execution PlanProject Execution PlanPlanning is an ongoing process that is conducted throughout the Planning 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 planned This is a brief description of what is planned

Approach-  Approach-  The managerial and technical methodologies of implementing the project The 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 is The objectives should be very detailed in outlining what the project is

expected to achieveexpected to achieve

Project Execution Plan Project Execution Plan contd…contd…

Policies and Procedures-Policies and Procedures-   Development of a project policy involving general guidelines for carrying out Development 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 in The project schedule signifies the commitment of resource against time in

pursuit of project objectivespursuit of project objectives Resource Requirements Resource Requirements

Project resources, budget, and costs are to be documented in this section of Project resources, budget, and costs are to be documented in this section of the project plan the project plan

Project Execution Plan Project 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 be Courses 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, and These involve keeping track of the project plans, evaluating tasks, and

scrutinizing the records of the projectscrutinizing the records of the project

The Second StepThe Second Step

FEASIBILITY ANALYSISFEASIBILITY ANALYSIS

PreludePrelude

The most important step in any The most important step in any projectproject

after a project plan should beafter a project plan should bedetermining the viability of the ideadetermining the viability of the idea

Importance of AnalysisImportance of Analysis     An effective feasibility analysis will provide the An effective feasibility analysis will provide the

client with a solid foundation upon which a client with a solid foundation upon which a project is built.project is built.   

A feasibility study provides concept A feasibility study provides concept identification, estimates of supportable market, identification, estimates of supportable market, design parameters, attendance design parameters, attendance estimates, revenue projections, and estimates, revenue projections, and net warranted investment. net warranted investment.

It essentially becomes a road map It essentially becomes a road map for your projectfor your project

An Overview of the StudyAn Overview of the StudyThe 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

Process of AnalysisProcess of Analysis

Identify problem oropportunity

Set up feasibility

study

Define scope and

objectives

Carry out different aspects

of the study

Recommend –proceed/shelve

Evaluatealternatives –develop/buy

THE PROCESS OFTHE PROCESS OF FEASIBILITY FEASIBILITY ANALYSISANALYSIS

The basic tests for feasibility are as follows:The basic tests for feasibility are as follows: A.A. Technical FeasibilityTechnical FeasibilityB.B. Managerial FeasibilityManagerial FeasibilityC.C. Economic FeasibilityEconomic FeasibilityD.D. Financial FeasibilityFinancial FeasibilityE.E. Cultural FeasibilityCultural FeasibilityF.F. Social FeasibilitySocial FeasibilityG.G. Safety FeasibilitySafety FeasibilityH.H. Political FeasibilityPolitical FeasibilityI.I. Environmental FeasibilityEnvironmental FeasibilityJ.J. Market FeasibilityMarket Feasibility

THE PROCESS OFTHE PROCESS OF FEASIBILITY FEASIBILITY ANALYSISANALYSIS

The basic tests for feasibility are as follows:The basic tests for feasibility are as follows: A.A. Technical FeasibilityTechnical FeasibilityB.B. Managerial FeasibilityManagerial FeasibilityC.C. Economic FeasibilityEconomic FeasibilityD.D. Financial FeasibilityFinancial FeasibilityE.E. Cultural FeasibilityCultural FeasibilityF.F. Social FeasibilitySocial FeasibilityG.G. Safety FeasibilitySafety FeasibilityH.H. Political FeasibilityPolitical FeasibilityI.I. Environmental FeasibilityEnvironmental FeasibilityJ.J. Market FeasibilityMarket Feasibility

THE PROCESS DETAILS THE PROCESS DETAILS started…started…

A.A. Technical Feasibility-Technical Feasibility-The technical capability of the personnel as well as the capability of the The 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 a Managerial 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 economic This 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 important are important aspects of evaluating the economic feasibility of new industrial projects aspects of evaluating the economic feasibility of new industrial projects

THE PROCESS DETAILS THE PROCESS DETAILS goes on…goes on…

D.D. Financial Feasibility- Financial Feasibility- Financial feasibility involves the capability of the project organization to Financial 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 with Cultural 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 may Social 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

THE PROCESS DETAILS THE 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 project Safety 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 implemented It 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 project  Political 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 all Concern must be shown and action must be taken to address any and all environmental concerns raised or anticipatedenvironmental concerns raised or anticipated

THE PROCESS DETAILS THE 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 FeasibilityThe market needs analysis to view the potential impacts of market The market needs analysis to view the potential impacts of market demand, competitive activities, etc. and "divertible" market share demand, competitive activities, etc. and "divertible" market share availableavailable

THE SCOPE OF THE SCOPE OF FEASIBILITY FEASIBILITY ANALYSISANALYSIS

The elements of feasibility analysis for a project should beThe elements of feasibility analysis for a project should becovering the below:covering the below:

A.A. Need AnalysisNeed AnalysisB.B. Process WorkProcess WorkC.C. Engineering & DesignEngineering & DesignD.D. Cost EstimateCost EstimateE.E. Financial AnalysisFinancial AnalysisF.F. Project ImpactsProject ImpactsG.G. Conclusions and RecommendationsConclusions and Recommendations

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 prototypes The preliminary study often involves system models or prototypes

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 time Product 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 analysis Sensitivity 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 values sensitive the project plan is to the estimated cost values

THE ELEMENTS THE ELEMENTS goes on…goes on…

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 sensitivity periods, 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 project available to the project

F.F. Project Impacts-Project Impacts-

This portion of the feasibility study provides an assessment of the impact of the proposed This 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 public factors that will determine how a project is perceived by the public

THE ELEMENTS THE ELEMENTS on and on…on and on…

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 of Recommendations on what should be done should be included in this section of thethe feasibility report. feasibility report.

THE ELEMENTS THE ELEMENTS and on…and on…

The The AnalysisAnalysis of of BenefitsBenefits

The Benefits can be of two types:The Benefits can be of two types:

1.1. The The TangibleTangible Benefits Benefits

casually casually A physical matter that can be touched A physical matter that can be touched is is tangible tangible

2.2. The The IntangibleIntangible Benefits Benefits

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

IntangibleIntangible BenefitsBenefits• Improved customer goodwill

• Improved employee morale

• Better service to community

• Better decision-making

Potential BarriersPotential BarriersMany 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

SummationSummationFeasibility analysis determines the likelihood of project Feasibility analysis determines the likelihood of project successsuccess

Clients most commonly employ your consultants during the Clients most commonly employ your consultants during the feasibility stage of a project feasibility stage of a project

Significant value is in the determination of exactly what is Significant 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 technology but also for the future as the business grows and technology advancesadvances