Example Feasibility Study


What is a Feasibility Study?

Regardless of the definition or agency defining the Feasibility Study outline or contents, Feasibility Studies attempt to answer the fundamental question: is the project feasible? Can it be done? Does it make sense?

For this example manual, a Feasibility Study can be considered as an integrated compilation of substudies that demonstrates the workability of a project.

The closest or most appropriate “Feasibility Study” definition would be from the March 2002 European Commission revised Project Cycle Management Handbook (PCM), p 99. It is defined as:

Feasibility: Address the issue whether the project objectives can be really achieved (is the

project doable?)

Feasibility Study: A feasibility study, conducted during the (project’s) Appraisal phase (i.e.

project Ex Ante evaluation), verifies whether the proposed project is well-founded and is

likely to meet the needs of its intended target groups / beneficiaries. The study should design

the project in its operational details taking account of all policy technical economic financial

institutional management environmental socio-cultural gender-related aspects. The study will

provide the EC and partner government with sufficient information to justify acceptance

modification or rejection of the proposed project for further financing.

The above statements may seem to the reader as rather broad, as it must be, considering

that these must be applied to thousands of projects in many different situations. Given that

a more specific, readily understandable methodology and Manual is here provided.

A Feasibility Study comprises of a range of interrelated and often interdependent substudies.

A Feasibility Study links and integrates independent sub-studies into one coherent whole. Consequently, individual sub-studies may need to be updated and revised as information from other studies becomes available. For instance, should capital investment needs overwhelm project financial resources, the projects investment plan may be reduced or delayed. It is not uncommon, over the course of a Feasibility Study that many assumptions are revised, new risks identified and the project’s financial projections changed.


Infrastructure Feasibility Study

The following outline is likely suitable compromising between simplicity, clarity and thoroughness. Users should feel free to expand on some points, if it would bring additional important information into the Feasibility Study and help in its understanding, or shorten parts of it, if it is considered of little interest to an infrastructure project. (For instance, the repair of an existing road may not

need an EIA).

Briefly, an Infrastructure and Investment Feasibility Study most likely would include the following headings and sub-headings.


Infrastructure Feasibility Study Outline:

1)       Executive Summary

2)       Regional Socio-Economic Situation (General Description of the current situation). Most likely including brief on your local economy.

3)       Legal Study

4)       Financial Plan

5)       Project Implementation Schedule

6)       Market Study and Marketing

7)       Detail Description of Activities

8)       Environmental protection

9)       Control

10)   Financial Analysis and Projections

11) Social Economic Effects / Multiplier effects, related studies

12) Options Analysis on different hypothesis and scenarios



Scenario 1 - Expected

Scenario 2 - Optimistic

Scenario 3 – Pessimistic




An Executive Summary should be sharp and precise. It should be no longer than one or two

pages. It is a challenge to summarize all of a project’s salient points into a compact and

easy to understand summary. Its objective is that in a few short minutes the reader can

understand a study’s key issues and findings.


  • Brief Introduction (same as Grant application 1.4)
  • Major Objectives (1.5)
  • Overall Justification (1.6)
  • Why the project is needed (Expected jobs to be created
  • Coherence with the Region’s and Estonia’s development plan and Tourism Development Plan
  • Schedule, timing, cost and financing
  • Expected capital investment
  • Summary results from Financial and Socioeconomic studies, alternatives




The Region’s social and economic situation description provides the introduction to and

reasons for the Feasibility Study. It sets the social and economic framework in which it takes


As most social and economic statistics are widely publish and on the Internet, it is not

necessary to fill these pages with statistics! Rather, the most important number should be

drawn out for official or other documents and their references cited.

More importance should be placed on the analysis of these figures and situation, not

presenting tables of numbers. An analysis should provide what relevance the figures have to

the project. This is the most important area for the study writer to emphasis.


  • General area description (No. of Municipalities, population, major industries, growth rate), government structure
  • Employment situation and trends
  • Education and skills level
  • Salary structure
  • Local infrastructure (current, planned, needing upgrading)
  • Local tourism sectors strengths and weakness, opportunities and threats (SWOT)
  • Regional Trends, social problems, etc. relevant to tourism development, impacts on employment
  • Entry into the European Union




A project evolves under a legal framework. These rules and regulations must be respected.

A final consideration is the inclusion or not of private sector investors or partnerships.


  • Conformity with EU aquis concerning aid to tourism objects and investments in general
  • Legal structure requirements for Municipality (Submit documents
  • Public/Private scheme (BOT)
  • Project Management Group (Who, reporting to whom)
  • Organisational structure
  • Management/Methodology




The project will need proper and sufficient financing. For the projects Financing Plan to be successful, the Applicant should first complete most of the Feasibility Study and forward copies to perspective lenders, most likely those already are potential partners of the project.


Discussions are likely to centre on:

  • amount of equity contributed by the Beneficiary
  • amount and repayment schedule of loans
  • presence of other partners
  • grant levels
  • soundness of the Marketing plan
  • likelihood of loan re-payment vs. default
  • loan guarantees




A project implementation schedule should be completed.


  • Implementation Agency
  • Implementation Schedule and cost
  • CVs of the Implementation team
  • Manpower plan (for the Agency)




It should be remembered that without a good marketing plan and actions, you are:

  • Unlikely to raise funding
  • Unlikely to attract clients


Good first steps could be:

  • visit existing tourism objects in Estonia and in foreign countries
  • talk to their developers


Remember the marketing concepts.

Place (Especially for tourism, some say location, location, location)

Price: How much you charge for rent, management fees, taxes, services, utilities

Product: How attractive is your object

Publicity: Your object brochure and support materials (attractive, well laid out, key

information provided), web site.


  • Market Study
    • Tourism market in Estonia (Location and number of similar objects, number of new companies, size, current price levels)
    • Copy of support materials (pamphlets, booklets, etc.)
    • Value of investment for buildings, equipment etc.
    • Impacts of other tourism objects in other competing regions
  •  Object Marketing Plan and Strategy
    • Marketing function (organisation, office, operating costs, etc.)
    • Sell vs. rent of products/services
    • Expected growth rates
    • Auxiliary Services to be provided




Detailed site description is a technical, engineering, based activity. You will need to provide

drawings, plot plans, do civil and engineering drawings, obtain cost estimates, etc.

You will need to hire a civil engineering firm, electrical engineer firm, perhaps an architect,

land surveyors etc. A hydrology study may be needed for the later Environment Impact

Assessment study if that is the case.

Later, you will need to prepare tender dossiers for procurement of services and works.

These activities are likely to be time consuming and costly, your project should include

sufficient budget for the needed engineering studies.


A brief list of these activities include:

  • Civil engineering studies
  • Electrical Engineering studies
  • Hydrology studies
  • Site mapping, surveying
  • Cost studies
  • Landscape architectural studies


Discussions are likely to centre on:


  • Site Location
  • Infrastructure or investment be built overall
  • Infrastructure to be build from the grant
  • Size, cost, location, drawings, zone or land
  • master plans, access roads, power and utility
  • supply
  • Preparation of Terms of Work
  • Sub-project planning schedule if not previously included




New infrastructure projects may require Environment Impact Assessments. These assessments

may include hydrology studies, nature studies, etc, depending on the project. Therefore, it is

possible that a given site will be inappropriate and that another site is needed.

Results of the study are to be made public through a public hearing where objections to the

project may be heard. Depending on the location it is possible that significant objections will be raised by NGOs, the public in general or the press.

If so, the project may need to be modified and the public educated on the details of the new



  • Environment Impact Assessments (EIA)
  • Provisions for waste collection, treatment, recycling
  • Site monitoring provisions
  • Alternate sites
  • Minutes of Public Hearing




Lenders and donors will require close control on project funds. At present four types of

controls are likely. These include:


  • Cost auditors: works and operating expenses should be controlled to Estonian accounting control standards. Audit reports will need to be signed as for the use of funds.
  • EU standards: Current EU standards (Phare Standard Guide)
  • Estonia regulations




Financial analysis attempts to determine the financial viability of projects in regards to

current legal and accounting system norms while considering probable sales forecasts or

other financially measurable benefits. The results do no necessary reflect project economic

reality. Nonetheless, it is an important tool, particularly for suppliers of capital, of both loans

and equity, as to the financial viability of projects.

Generally, the most common ratios used are Net Present Value (NPV), Internal Rate of

Return (IRR) and Cash Flow. These figures reveal the profitability of projects discounted for

the time value of money and whether or not the project is sustainable, that is a project’s

projected cash flow is projected always as positive.


  • Income from rents or related services
  • Income from other provided services
  • Income from taxes (land tax - if a municipality)
  • Profits, NPV, IRR
  • Sustainability, cash flow analysis
  • Scenario analysis (pessimistic, expected, optimistic)




Socio-economic studies attempt to determine economic impacts on society or on GNP.

These are not easy to measure. In fact, economist may debate the calculating methods and

assumptions of benefits and losses, depend on how they view projects impact, the economy,

etc. To simplify the socio-economic analytical process and avoid so-called ‘shadow’ prices (really

a term for adjusted prices) and micro/macro economic considerations, we have taken a

simpler approach. The user should however feel free to solicit the assistance of an

economist if further analysis of a project’s socio-economic benefits is warranted.


Beginning with Financial results, benefits are modified to further include:

  • land taxes paid,
  • individual income taxes paid by workers,
  • social taxes paid by employers
  • VAT taxes paid by future operators.


The above are readily calculated from the earlier financial analysis. Key for the analysis the number of expected workers to he hired and their expected salaries, granted a not so easy to determine number.


  • Number of jobs created
  • Value added
  • Taxes and benefits not elsewhere accounted for
  • Multiplier effects (co-investment in buildings and other)
  • Economic NPV, IRR
  • Other expected Short and Long Term impacts
  • reduction in unemployment
  • higher regional income
  • regional economic growth