What is Project Feasibility Study? | Project Management

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What is Project Feasibility Study?

A project feasibility study refers to the process of undertaking an ex­ercise to determine the worth of the proposed IT solution. This worth can be in terms of money, in terms of technical aspects or it can be in terms of operational aspects.

A feasibility study is an analysis of the viability of an idea through a disciplined and documented process of thinking about the idea from its logical beginning to its logical end. It is extensive research, investigation, and evaluation of the potential of the proposed project to support the process of decision-making.

A project Feasibility Study can be also defined as an analysis of the ability to complete a project successfully, taking into account financial, technical, legal and economic, and other factors.

A feasibility study looks at constraints, including the exact details of the product scope, and allows you to explore each of the issues and make a judgment. At the very least, a feasibility study enables you to present the facts to managers so that they can determine what’s feasible.

Let us take an example of a government department that deals in the registration process of vehicles. This department is using a manual system for the registration of vehicles. Thus, to get a vehicle registered, a customer along with the dealer is required to visit this department with all the required documents for the purchased vehicle.

Since this department or office works manually, several ledgers and registers are required to be filled and then sanctioned by vari­ous approving authorities. As a result, it took almost 20 days to register a vehicle. During this time, the vehicle owner cannot drive the vehicle. As the number of customers increased, a need was felt to automate the entire system. Finally, after several discussions and other formalities, it was agreed to conduct a feasibility study.

Types of Feasibility Study

  1. Technical Feasibility
  2. Economic Feasibility
  3. Legal Feasibility
  4. Operational Feasibility
  5. Scheduling Feasibility
  6. Industry Feasibility

Technical Feasibility

Technical feasibility is mainly associated with the technological evolutes of the project. In this subject area generally, a group of engineers or technical experts study the whole project and technical aspects.

This study facilitates said organizations to properly assess. Industrial possessions may assemble capability. Based on the results it decides whether the technical team can convert the idea into real

Economic Feasibility

Economic feasibility study related to price, and all kind of expenditure related to the scheme before the project start. This study also improves project reliability.

It is also helpful for the decision-makers to decide whether the planned scheme processed later or now, depending financial condition of the organization. This evaluation process also studies the price benefits of the proposed scheme.

Legal Feasibility

A legal feasibility study is used to conclude whether the proposed plan or system is conflicting with the national or international legal requirements. Protection Acts simply use to decide any violation the legal requirements. It is also a planned method.

Operational Feasibility

Operational Feasibility may employ the responsibility to examine and also decide whether the proposed methods fulfill all kinds of business requirements. Its actions forecast all possible schemes to recognize and resolve troubles.

This study may also examine and verify how the project planned to guarantee the method development is feasible or not.

Scheduling Feasibility

A very significant part of the feasibility study is scheduling Feasibility. It also plays an important role to complete the project in its scheduled time.

A project sometimes is not unsuccessful if it is not finished in its bounded time frame. Here we may predict the time required to complete various tasks of the entire project

Industry Feasibility

Industry Feasibility means analyzing the working pattern of the different attributes like the size of the industry, location of the industry current trends in the industry, etc. It will give a thorough crux of the industry and whether entering into it would be a wise decision or not.

Importance of Feasibility Study

A feasibility study is very important for any project as it helps the man­ ager to decide whether they should select the project or not. The fea­ sibility study covered the following:

  • Would the proposed IT solution streamline the operations of the working of the department? Is it reasonable to spend a large amount of money on this IT solu­tion?
  • Is the existing infrastructure enough to sustain the proposed IT solution?
  • Will the customers benefit from this proposed IT solution?

These questions were somewhat translated to numeric figures so that it is easy to arrive at a conclusion. This numeric score is known as the feasibility score.

Conduct of Feasibility Study

Conducting a feasibility study is itself a process. It is a well­ structured process. The following are the highlights of conducting the feasibility study for the proposed IT solution:

  • Information collection and analysis is the first step in the conduct of the feasibility study. In this stage, information regarding the requirements of the new system is collected. These are analyzed concerning the organizational and business objectives.

    In this stage, information is collected on whether the new proposals can be integrated with the existing systems or not, and budgetary considerations are also taken into account. The information is col­lected from several sources and from multiple shareholders and stakeholders who would be using the system once it is im­plemented.

  • After the information has been collected, the next step is to write a feasibility report. This report is the analysis of the information collection process on technical, financial, operational, and other as­ aspects of the proposed IT solution. This report includes recommen­ dating about the proposed solution, the schedule considerations, and suggestions if any.

    The report includes other aspects such as the following:
    • General information about the feasibility study describing the scope, overview, and reference to the existing systems
    • The environment of the proposed solution
    • The various functions operating in the organization
    • The functional objective of the proposed solution
    • The performance objective of the proposed solution
    • Assumptions, dependencies,, and constraints of the proposed solution
    • The methodology used in the conduct of feasibility and the method­ ology used to evaluate the proposed IT solution
    • The criteria for the evaluation of the proposed IT solution
    • The description of the proposed IT solution including the soft­ ware and the impact it will have on the organization as a whole and also on each of the functional units
    • Alternative solutions to the proposed IT solution

The last report is the discussion on the feasibility report and the deci­sion to go ahead with the solution or not.

Request for Proposal (RFP)

Once the feasibility study has been conducted and the go-ahead signal has been obtained from the executive management to implement the IT solution. The next stage is the preparation of a document which is known as the Request For Proposal document.

This document forms the base for the selection of the vendor. In other words, this document helps to evaluate the vendors who have submit­ ted their proposals.

An RFP document generally includes the statement of work, that is, the work which the vendor would be required to undertake, the time­ lines of the work, the compliance statement and other details which will form the basis for the selection of the vendor.

The benefits of issuing an RFP are numerous, some of which are as follows:

  • By calling for an RFP, the organization is able to evaluate the best vendor from a number of vendors who have submitted the pro­posal

  • The RFP process brings out an open system for the evaluation of the vendor

  • The RFP acts as a guiding document for both parties as it is through this document that both can understand the roles and re­sponsibilities of the project

Contents of RFP Document

The following are indicative contents of an RFP document:

  • Reason to have a new solution: This section describes the reasons why the organization wants to have a new solution or to have an extension to the already running software. This is the most im­portant aspect of an RFP. This section provides the inputs to the proposed vendor as to why an IT solution is required. By stating the reasons, the organization is able to briefly communicate what is expected from the vendor.

  • Description of the organization: This section describes the organ­ isation and the various business processes that are carried out in the organization.

  • Nature of the project and the contract execution process: This section is related to the nature of the project and the means or methodology of the contract execution process.

  • Statement of work: This is the most important section which de­ scribes the work that is required to be done as a part of the con­tractual process.

  • Evaluation criteria: This section specifies the evaluation criteria for the vendors. On the basis of these evaluation criteria, vendors are shortlisted.

  • Timeframe of the deliverables: This denotes the time frames and the deliverables that are required to be made available to the cus­tomer.

  • Compliance statement: This is the statement that denotes the degree of compliance, generally, in terms of percentage as to which part of the IT solution the vendor is able to comply with.

  • Scope of work: This is the scope of the work as part of the con­ tract.

Selection of Proposal

Once the RFPs have been submitted by the prospective vendors, the next stage is the selection of the vendor based on the RFP document. On the basis of the RFP, vendors are evaluated and ranked. This eval­uation is done on the vendor evaluation sheet. This is the sheet which is in the form of a matrix used to evaluate the vendors on the basis of vendor evaluation criteria as mentioned in the RFP document.

The ranking of the vendors is done in accordance with the evaluation cri­teria and the highest priority is given to the compliance statement prepared by the vendors. The top three vendors as per the vendor evaluation criteria are called for further negotiations with regard to payment and other conditions as mentioned in the RFP document. The lowest bidder gets the con­ tract. This is how the proposal gets selected.

Project Feasibility Analysis Process

The go/ no-go decision is one of the most critical in business development. Once decided to pursue a project, there is usually no turning back. The feasibility study will be a major information source in making this decision. It is a multi-step exercise. As the analysis progresses, the developer will gradually acquire more information that will help in determining whether or not to proceed further. Although every feasibility study is different, here are some of the main parts necessary when officials, business managers, or consultants want to do a feasibility study.

Step 1- Plan a Study

Business leaders or others responsible for a feasibility study will need to plan out various aspects of the study, from identifying goals to considering alternatives for implementation. A preliminary study is conducted to confirm and evaluate the need for the proposed project. A proposal of how the need may be satisfied is then made. Pertinent questions that should be asked include:

  • Is the need significant enough to justify the proposed project?
  • What are the alternative means of satisfying the need?
  • Would the need exist by the time the project is completed?

Step 2- Hire Staff as Needed

Examination of the feasibility may require special skills of which the organization may fall short. Similarly, some feasibility studies rely on skilled engineers to collect and interpret some of the data that will build the study credible. The organization can look for outside firms willing to consult for a specific study or project and make sure the individuals selected have the proper credentials.

It might be tempting to choose the lowest-cost consultant or a personal acquaintance of one of the organizers, but always remember that quality work is the most important factor when choosing a consultant. Besides this, he must provide an independent assessment of the business opportunity.

Step 3- Monitor or Identify Factors

The analyst needs to identify all the relevant factors, both internal and external components (financial, physical issues, etc.) that might affect the venture/ project. For technology-oriented projects, the artist’s conception and scaled-down models may be used for illustrating the general characteristics of the project. Simulation can be carried out to predict the outcome before the actual commencement of the project.

Step 4- Start the Study

When all of the number points of the study have been worked up on paper, the involved individuals must go out and do what has been planned. The feasibility study should have a time frame for all the activities needed to fully implement it. The main goal of a feasibility study is not to solve the problem but to achieve the scope. Collecting relevant information from the selected areas and identifying the variables in such areas are the basics of analysis.

While evaluating various alternatives, the interlinkages among key facets of the project like product or service, demand, plant capacity, location, investment outlay, financial resources, selling price, and profitability must be borne in mind. Environmental, economic, social, cultural, and political impacts may be some of the factors that will determine how a project will be perceived by the public.

Different types of methods, tools, and techniques like SWOT (Strengths, weaknesses, opportunities, and threats) Analysis, SAP (Strategic Advantages Profile) Analysis, ETOP (Environment Threat and Opportunity Profile) Analysis, Business Evaluation scoring Technique (BEST), Porter’s Five Forces Model, Sensitivity Analysis can be used for analyzing these factors.

Step 5- Feasibility Report

The study should end with the overall outcome of the project analysis. Those involved should be able to collect the final results of their activities and compile them into a single report. This is called a project feasibility report. The conclusions of the feasibility analysis should outline in depth the various scenarios examined and the implications, strengths, and weaknesses of each.

This may indicate an endorsement or disapproval of the project. Recommendations on what is to be done should be included in this section of the feasibility report. A feasible project will generate adequate profit and cash flows, withstand the risk it will encounter, remains viable in the long run, meets all the legalities, and fulfill the goals of the founders. When writing a feasibility report, the following should be taken into consideration:

  • A brief description of the business to assess more possible factors which could affect the study
  • The part of the business being examined
  • Details of all the relevant factors
  • The evaluation criteria
  • An endorsement or disapproval of the project The possible solution to the problem
  • Findings and recommendations.

Step 6- Distribute the Feasibility Study Report

The results of a feasibility analysis can provide a much better understanding of the capabilities of the new venture or project but it must be kept in mind that it is not the purpose of the feasibility study or the role of the consultant to decide whether or not to proceed with a business idea. It is the role of the project leaders to make this decision, using information from the feasibility study and inputs received from the consultant. If the results of the feasibility study indicate that the proposed venture is viable then the management can begin to develop a business plan.

Article Source
  • Chandra Prasanna (1996); Projects: Planning, Analysis, Selection, Financing, Implementation and Review, Tata Mcgraw Hill Publishing Company Ltd., New Delhi.
  • Maylor Harvey (1999); Project Management, Macmillan limited.
  • International Project Management Year Book, London, 1985.
  • Guidelines for the preparation of feasibility reports for industrial projects; Planning Commission, Kitab Mahal, New Delhi.
  • Little, I.M.D. and J.A.Mirrlees (1974): Project Appraisal and Planning for Developing Countries, Hienemann Educational Books, London.
  • Agarwal N P and Mishra B K: Project Management, RBD Professional Publications, Jaipur.
  • Massee, P.(1962); Optimal Investment decisions: Rules of Action and Criteria for Choice, Prentice-Hall, Englewood Cliffs, N.J.
  • Saxena H: Project Management, RBD Professional Publications, Jaipur.
  • UNIDO: Guidelines to Practical Project Appraisal, United Nations, New York, 1958.

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