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EAT340 - Professional Engineering

Management Techniques

Project Feasibility Study

Lecturers: Mrs Helen Scott


Dr Ken Robson
Learning Outcomes

On completion of this lesson you should be able to:

 Understand and outline the importance and main


stages of a project feasibility study.

 Identify project stakeholders, client needs and project


constraints.
Project Lifecycle Phases (Burke)
Project Lifecycle Phases

Idea
 Feasibility Phase
 Design & Development Phase
 Execution or Implementation Phase
 Commissioning & Handover Phase
Operations
Termination
 Why is it important to conduct a feasibility
study?
Discuss
Feasibility Study Lifecycle (Burke)
Key Characteristics of a Feasibility Study

Feasibility Study Stages


 Initiation
 Plan
 Client needs
 Constraints analysis (Inc. stakeholder analysis)
 Alternatives & options
 Information gathering
 Value Management / Cost Benefit Analysis
 What is a Stakeholder?

Definition
PMBOK Definition of a Project Stakeholder

 ‘A stakeholder is an individual, group or


organisation who may affect, be affected by,
or perceive itself to be affected by a decision,
activity, or outcome of a project’.

 ‘Stakeholders may be actively involved in the


project, or may have interests that may be
positively or negatively affected by the
performance or completion of the project’.
Relationship Between Stakeholders and the Project
PMBOK Project Stakeholder Management Process

 Identify Stakeholders
(The process of identifying, analysing & documenting info. On stakeholder interests,
involvement, interdependencies etc.)

 Plan Stakeholder Management (The process of developing


appropriate management strategies to effectively engage with stakeholders
throughout the project lifecycle)

 Manage Stakeholder Engagement (The process of communicating


and working with stakeholders to meet their needs and expectations, addressing
issues as they occur)

 Control Stakeholder Engagement (The process of monitoring the


overall project stakeholder relationships and adjusting strategies and plans for
engaging stakeholders)
PMBOK Project Governance

 The alignment of the project with


stakeholders’ needs or objectives – is critical
to the successful management of stakeholder
engagement and the achievement of
organisational objectives

 Provides a framework for alignment of


stakeholder and organisational
needs/requirements
Stakeholder Analysis

 Stakeholders may be affected either positively or


negatively by the project. Hence some will support
the project and some will oppose it.
 There is a need to identify and prioritise stakeholders
needs and make this the basis for action. A proforma
may be employed for this e.g.:

Stakeholder Needs & Priority


Expectations
The New Wear Crossing Project Revisited

 Three span cable stays bridge, A frame pylon (105 x 330 M)


 $117.6 Million Project (Sunderland City Council & Government [SSTC])
 PM – Farrans Construction & Victor Buyck Steel
Construction.
 Identify the stakeholders

https://www.youtube.com/watch?v=u6-
jBoa3f74
Discuss
The New Wear Crossing Project Stakeholders (1)

 Client – Sunderland City Council (SCC)


 PM- Farrans Construction & Victor Buyck Steel
Construction.
 Sponsor – Government & SCC
 Project Team
 Contractors
 Suppliers
 Road Transport Network
The New Wear Crossing Project Stakeholders (2)

 Commuters (inc. work, school run, visitors)


 Local Business
 Retail (Shop Owners / Shoppers / Delivery etc.)
 Emergency Services
 Sunderland Test Centre
 Residents (Pallion / Castletown)
…………………………………………………………………………………….

 Local Economy
(Access, Jobs Investment etc.)
 What will the needs and expectations of
these stakeholders be?

Discuss
 Prioritise the needs & expectations of the
stakeholders that you have identified

Stakeholder Needs & Priority


Expectations
Project Constraints (1)

 Internal Project Constraints (related directly to scope & product)


 Internal Corporate Constraints Financial Objectives
- Financial Objectives
- Marketing
- Estimating
- Partner
- Industrial Relations
- Training
- Exports
 External Constraints (Laws, Regulations etc.)
Project Constraints (2)

 Technology Projects: When do we start?


Evaluation of Constraints

 The constraints operating on each activity within the


Work Breakdown Structure (WBS) may be listed and
evaluated via a simple proforma of a type suggested
by Burke e.g.
WBS Activity Internal Internal External
Project Corporate Constraint
Constraint Constraint
Evaluation of Options & Alternatives

WBS Activity Alternatives & Options


1 1.1
1.2
1.3
1.4
1.5
Useful Information Sources

Typical sources of relevant information might include:

 Academic/Library Resources – Books, Journals,


Conference proceedings
 Technical reports
 Company Literature
 Internet Market Research
 Stakeholders
 Social Media
Information
Value Management (1)

The process of Value Management involves the whole project team


working in conjunction with stakeholders to:

 Identify appropriate project function, quality & performance


criteria
 Assess how such criteria may best be achieved
 Select the lowest total lifecycle cost option after conducting
relevant research, analysis & evaluation
Value Management (2)

Burke suggests the following should be taken into consideration as


part of the value management process:

 Identify unnecessary expenditure


 Challenge assumptions
 Generate alternative ideas
 Promote innovation
 Optimise resources
 Save time, energy and money
 Simplify wherever possible
 Eliminate redundant resources
 Update standards, criteria and objectives as required
Value Management (3)

Value Management is all about:

 Clarifying and satisfying customers’ needs (and stakeholders in


general)
 Generating ideas and challenging assumptions to optimise project
performance
 Involving clients, end-users and stakeholders in general, in the
running of the project
 Minimising costs while still meeting all of the client’s needs
Financial Feasibility of Projects (1)

A cost-benefit analysis should be conducted to establish the financial


feasibility of the project:
A cost-benefit analysis is generally based on the following economic
principles:
 Pareto improvement criteria
‘The project should make some people better off without making
anyone worse off’.
 Hicks –Kaldor test
‘The aggregate gains should exceed the aggregate losses’.
 Willingness-to-pay test
To determine how much the clients are willing to pay for the
product
(Techniques to model the relationship between supply, demand & prices)
Financial Feasibility of Projects (2)

Benefits to be estimated:

 Direct benefits
e.g. a reduction in staffing levels
 Assessable indirect benefits
e.g. reduction in operator errors
 Intangible benefits
e.g. improved working conditions

 Quantified wherever possible into monetary terms

 Once costs and benefits are established the analysis can be


carried out
Cost Benefit Techniques

The following four techniques will be explored next week:

 Net Profit

 Payback Period

 Return on Investment (ROI)

 Discounted Cash Flow Techniques (DCF) e.g. Net Present Value


(NPV)
Project Feasibility Study

Summary of Key Points

1. Identify all stakeholders – assess, quantify and


priorities their needs and expectations
2. Identify all constraints, both internal and external
3. Consider alternative options to produce a better
product
4. Cost Benefit Analysis
EAT340 – Student Preparation

For session 5 you are required to:

 Secure a copy of Burke , ‘Project Management’ or an


equivalent text.

 Look at Lesson 5 of the study guide and read Chapter 5


of Burke, pages 56- 73.
Next Steps

 If you have not already done so, secure a


copy of Burke , ‘Project Management’ or an
equivalent text.

 Attend the tutorial sessions