FEASIBILITY STUDY

FEASIBILITY STUDIES

 INTRODUCTION

            Starting with the seed of an idea, an awareness of need or a desire for some major development or improvement. Preliminary goals are considered and ideas on costs, potential benefits, feasibility and scope receive initial consideration, possibly with ideas on problem areas, alternative approaches and ways of overcoming difficulty. On this note, A project is a sequence of unique, complex, and connected activities having one goal or purpose and that must be completed by specific time, within budget, and according to specification. To determine what the candidate system is to do by defining its expected performance.  Thus a feasibility study is carried out to select the best system that meets performance requirements thereby leading to a project management. On that hand, Project management is the process of defining, planning, directing, monitoring, and controlling the development of an acceptable system at a minimum cost within a specified time frame.

FEASIBILITY STUDIES

Feasibility Studies could be defined as:

“A tool for transforming the initial project-idea into a specific hypothesis of intervention, through the identification, the specification and the comparison of two or more alternatives directed to achieve the defined objectives, by producing a set of information helping the Public Authority to take the final decision.”

Feasibility study is an evaluation and analysis of the potential of a proposed project. It is based on extensive investigation and research to support the process of decision making. It could be considered as a powerful tool to support decisions, providing a logical framework to help policy makers to identify best possible choices.

 PROJECT LIFE CYCLE

The aim of feasibility studies:

ü The aim of feasibility study is to assist the public authorities in increasing the effectiveness in the use of financial resources for public work

ü Specific aspects will not be tackled by this presentation Guidelines, such as:

            • Threshold of application

            • Fields of application

            • Procedures for the application

Conducting a feasibility studies:

1.     Get as much information as possible before commencing the study

2.     Make a study plan- who to see, what questions to ask, where to go, what  to see- and revise it regularly

3.     Test preconceived ideas and prejudices; listen to opinions but  test their validity

4.     Don’t become wrongly influenced or caught up in someone’s bandwagon

5.     Differentiate between fact and opinion

6.     Be aware of the nature and strength of deeply held opinions and feelings that might result in opposition or delay in completing the project

7.     Obtain and record facts wherever possible

8.     Be aware of possible risks, consider their consequences and how these difficulties might be overcome

9.     Don’t be afraid to consider alternatives; give an honest and unbiased opinion

What should be covered in the feasibility report?

 Identifying Information

• Title

• Place and date of study

• Composition of the study team

• Terms of reference and study objectives

 Executive Summary

• Brief description of study activities

• Summary of conclusions

• Summary of recommendations

• Body of the report Contents

• List of annexes and exhibits

• Terms of reference

Principles and practices of feasibility study:

1.   Technology and system: the assessment is based on an outline design of system requirement, to determine whether the company has the technical expertise to handle completion of the project. When writing a feasibility report, the following should be taken to consideration:

·        A brief description of the business to assess more possible factors which could affect the study

·        The part of the business being examined

·        The human and economic factor

·        The possible solutions to the problem

At this level, the concern is whether the proposal is both technically and legally feasible (assuming moderate cost).

2.   Economical: is the project affordable given the economic resources available? Even if it can be afforded, is the project return on investment (ROI) sufficient? A project that is simply too expensive and which doesn’t offer sufficient economic benefit is not feasible.

The purpose of the economic feasibility assessment is to determine the positive economic benefits to the organization that the proposed system will provide. It includes quantification and identification of all the benefits expected. This assessment typically involves a cost/benefits analysis.

3.   Legal: Determines whether the proposed system conflict with legal requirements, e.g. a data processing system must comply with the local data protection acts.  Is also as the proposed venture in compliance with applicable laws and regulation?

4.   Operation/organizational:  operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development.

The operational feasibility assessment focuses on the degree to which regard to development schedule, delivery date, corporate culture, and existing business processes.

To ensure success, desired operational outcome must be imparted during design and development. These include such design-dependent parameters such as reliability, maintainability, supportability, usability, producibility disposability, sustainability, affordability and others. These parameters are requiring to be considered at the early stages of design if desired operational behaviors are to be realized. A system design and development requires appropriate and timely application of engineering and management efforts to meet the previously mentioned parameters. A system may serve its intended purpose most effectively when its technical and operating characteristic are engineered into the design. Therefore operational feasibility is a critical aspect of systems engineering that needs to be an integral part of the early design phase.

5.   Schedule: A project will fail if it takes too long to be completed before it is useful. Typically this means estimating how long the system will take to develop, and if it can be completed in a give time period using some methods like payback period. Schedule feasibility is a measure of how reasonable the project timetable is. Given our technical expertise, are the project deadlines reasonable? Some projects are initiated with specific deadlines. It is necessary to determine whether the deadlines are mandatory or desirable.

Give the recommended schedule; is the realistic to expect that the project will be completed on time? If the project takes too long to complete, costs can escalate and the overall feasibility can be negatively affected.

6.   Technical feasibility: the assessment is focused on gaining an understanding of the present technical resources of the organization and their applicability to the expected needs of the proposed system. It is an evaluation of the hardware and software and how it meets the need of the proposed system.

7.   Cultural feasibility:  in this stage, the project’s alternatives are evaluated for their impact on the local and general culture. For example, environmental factors need to be considered and these factors are to be well known. Further an enterprise’s own culture can clash with the results of the project. This can include aspect such as environmental impact, compatibility with local more, etc.

8.   Real estate/market feasibility: These are typically involve testing geographic locations for a real estate development project, and usually involve parcels of real estate land. Developers often conduct market studies to determine the best location within a jurisdiction; often require developers to complete feasibility studies before they will approve a permit application for retail, commercial, industrial, manufacturing, housing, office or mixed-use project. Market feasibility takes into account the importance of the business in the select area.  When the project involves a real estate development, market testing must be conducted in the geographical area where the development is proposed. Many jurisdictions require that a feasibility study be conducted before development can begin, especially if a permit is required for retail or other business-related developments.

9.   Resource feasibility: this involve questions such as how much time is available to build the new system, when it can be built, whether it interferes with normal business operations, type and amount of resources required, dependencies, and developmental procedures with company revenue prospectus.

10.     Financial feasibility study: in case of a new project, financial viability can be judge on the following parameters:

• ·        Total estimation cost of the project
• ·        Financing of the project in terms of its capital structure, debt equity ratio and promoter’s share of total cost
• ·        Existing investment by the promoter in any other business
• ·        Projected cash flow and profitability. The financial viability of a project should provide the information.
• ·        Full detail of the assets to be financed and how liquid those assets are.
• ·        Rate of conversion to cash liquidity (how easily can the various assets be converted to cash).
• ·        Project’s funding potential and repayment terms.
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