Example 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
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.
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.
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
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
1. EXECUTIVE SUMMARY
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.
2. SOCIO ECONOMIC SITUATION
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.
3. LEGAL STUDY
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.
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:
5. IMPLEMENTATION SHEDULE
A project implementation schedule should be completed.
6. MARKET STUDY AND MARKETING
It should be remembered that without a good marketing plan and actions, you are:
Good first steps could be:
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.
7. DETAIL DESCRIPTIONS
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:
Discussions are likely to centre on:
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
Lenders and donors will require close control on project funds. At present four types of
controls are likely. These include:
10. FINANCIAL ANALYSIS
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.
11. SOCIAL ECONOMIC EFFECT
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:
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.