Feasibility Study

Dr. P. I. Ayantha Gomes

1

First of all check

the feasibility

CONCEPT

End
product

 A feasibility study is being carried out to check

the viability of the proposed project
Why a feasibility study is important?
Narrow the alternatives and scientific comparison of
alternatives
Identifies new opportunities or in general SWOT can
be identified
What is the situation if the project commenced and
not commenced?
Documentation of all ideas, approaches, methods and
results
It will demonstrate the workability of a project

Feasibility study address the issue whether the

project objectives can be really achieved !!!
3

Types of feasibilities that should be

considered in a feasibility study
Three main types that commonly used: Technical,
Social and Economical
However, in some projects a few more additional
feasibilities (that perhaps are sub-areas above
three feasibilities) can be introduced. They
include:

Market feasibility
Organisational feasibility
Environmental feasibility
Legal feasibility
4

Type of Feasibility

Things cover

Technical

Project location and appropriateness

Soil (ground) conditions
Potential construction methods

Economic

Cost benefit analysis

Multi-criteria analysis
Whether the project proponent can find enough
funds?

Market

How to raise funds?

How to attract clients?

Operational

How well the proposed project solve the problem

Legal

Whether the project is allowed by the law?

If the project activities go beyond the political
boundaries, what are the rules and the possibility
of getting the relevant approval

Environmental

Whether the project impacts are tolerable by the

environment
5

Outline of a feasibility report/study

Can be different from project to project!
1) Executive summary
2) Introduction
3) Background-Outline of the
project
4) Methodology
5) Overview of alternatives
6) Conclusion

Simple
version

1)
Executive Summary
2)
Background or Introduction
3)
Socio-Economic Situation of the region/study area
3)
Legal Study
4)
Financial Plan
5)
Market Study and Marketing
6)
Project Implementation Schedule
7)
Detail Description of Activities
8)
Environmental protection
9)
Control
10) Financial Analysis and Projections
11) Social Economic effects
12) Options/analysis on different scenarios

1)
2)
3)
4)
5)
6)
7)
8)

Existing situation
Project scope and objectives
Strategy outline
Assessment of return on
investment
Risk assessment
Project finance
Political analysis
Env. Impact Assessment

Executive summary
One to two pages (should not be long and bulky,
but sharp and precise)
A brief introduction with a summary of key
features of the project such as:

Objectives of the project

Justification of the project
Relation to government policies
Project schedule (time frame), financing , and costs
Summary of results from financial and socio-economic
studies
Comparison of alternatives
7

Background
Project overview- outline of the project
Who commissioned the study and for what purpose
(many cases feasibility study is done by an external
consultancy firm)
How data and information was obtained (some data is
given by the client and some collect by the firm)detailed data can be annexed in the appendices
Constraints within which study has been conducted
All in all need to discuss the problem for which you are
proposing a solution

Study area/Socio economic situation

One of the most important parts of the feasibility
report
Should (can) include: GDP. Investment indicators,
inflation, population and demographics of the area
Area can be the city, state or even the country, and it
depends on the land area (km2) and population
No of municipalities of the area, major industries,
growth rate
Regional trends, social problems- unemployment levels
Exact details of the site (site plan, road network, utility
availability)- can show results of a SWOT analysis

Legal study
It is necessary to adhere rules and regulations
(legal frame work) that the project falls under
Need to show the conformity with rules, and
clearly show/identify who is approving the
project (the final go)

10

Finance

Financial analysis
can be part of this
or can be a
separate chapter

Any project needs proper financing

Estimate equity and credit needs
To finance the project from perspective lenders (e.g. bank, another
company) and/or potential partners it may be necessary to forward
copies of feasibility study
This chapter should focus on
Amount of equity contributed by the beneficiary
Loan amount and repayment plan
Loan guarantees
Likelihood of repayment (repayment vs. default)
Presence of other financial partners
Grant amount
11
Government incentives

Market study
Good marketing needs to raise funds as well
as attract clients
Involves lot of data collection
Current and future supply and demand
Development concept and market analysis
Competitive positioning of the site

12

Detailed descriptions
Drawings
Results of engineering studies (e.g. sewerage)
Project should have sufficient money to do engineering
studies (civil engineering studies, surveying maps)
The above studies needs to be discussed to a decent depth!
(e.g. traffic handling, power, solid waste management)
Some of the content will be useful for the subsequent EIA/IEE
Discussion on method of analysis
SWOT analysis
Alternatives (a major part of EIA)

13

Environment study

All projects are either required to do an IEE or EIA

EIA is approved by CEA or similar, and it is an open document
Things cover: alternatives; impact on environment
Feasibility study report extracts of EIA can be shown
EIA is a lengthy and comprehensive study, some cases
feasibility study reports needs to finish before EIA, therefore
under environment study chapter of the feasibility report only
important extracts can be included

Will explain in detail

later
14

Financial control and financial analysis

Ways to ensure project funds are handled
properly, as lenders, donors are serious about
this
Financial viability of project needs to be assessed
adhering to financial standards of the
country/region
Needed/request by suppliers of capital (loans as well
as equity)
Common tools include NPV, IRR, cash flow, sensitivity
analysis
For these incomes and expenses need to be estimated
15

Economic effect- cost/benefit analysis

Economic impacts on society
Cost/benefit analysis

16

Conclusion
Summary of key findings
Solve any conflicting findings in previous
chapters

17

Thank you

18