The Feasibility study: Why is it really important?

Feasibility study

The feasibility study is conducted to determine if a certain project would be profitable, achievable and fundable. The Feasibility study is an important element of the international project management cycle but is more often ignored because of a lack of time, funds, etc. Ironically, it would serve as protection against wasted funds and time on a project which does not hold any benefits. This said, in the following paragraphs, I will examine some reasons why it should not be ignore.

1. Economic and political instability

As part of an international feasibility study, the country’s context and main issues that the project is meant to address are usually examined. Thus, during this examination, key economic and political factors must be considered in order to determine if a project could be viable in the long run. When and where should the project take place? Considering the time the project will take, can long term sustainability be foreseen? Ignoring, the field context, general concerns and sometimes, well based ‘rumors’ may prove costly in time and resources.

2. Project Definition Deficiencies and technical oversight

Considering the project feasibility study is aimed at determining if a project is in fact achievable, the project must be well defined and all technical obstacles that could compromise the project be identified in order to propose solutions. During this study, it is possible to redefine a project in order to help make it achievable. I have personally seen, a project aimed at implementing a too advanced Information Management System in parts of a country that did not even have electricity and internet. Needless to say, this project was a complete failure and undoable as defined. Thus, a feasibility study would have revealed such a deficiency and would have help project planners in preparing other activities necessary for the possible achievement of this project.

3. Insufficient budget and unsustainability of the project

The Feasibility study includes the evaluation of initial and recurring costs. This is very important considering many projects are sometimes successfully completed but are unsustainable. I have personally been made witness too many such projects. In particular, a country where numerous schools were newly built but were unused because of lack of funding. If a project is meant to help build a school, then it is important to estimate how much it would cost to run this school and will the government have sufficient funds to help support that school. If not, than what can be considered for funding that new school. Is the local population able and willing to pay to enrol in this school? If they are not, then building such a school, even if it is absolutely necessary is still pointless.

4. Poor knowledge of the risks and insufficient planning of mitigating options

Risks are inevitably linked to implementing a project. These risks must not only be assessed but mitigation plans must be prepared in order to face them adequately. A feasibility study not only examines these risks but usually can even discover additional risks that were not considered during the project definition phase. Thus, making it quite important to deal with possible bottlenecks that the project might encounter and that it should deal with. When these risks are already planned for, the project will not only gain in time efficiency and successful resources allocation but can actually ensure its actual completion.

This said, some may argue that all these possible problems can be foreseen during the project planning phase and thus, the feasibility study can be skipped all together. But, the field evidence shows that more often than none, key related matters that the feasibility study covers are ignored or overlooked. Why should a project be completely planned on wrong basis or money spent on undoable projects?

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Phase 3 of the international aid development project cycle: the Feasibility study

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In my last blog, I described the second phase of the international aid development project cycle. The third phase is the feasibility study which is aimed at determining if the project is profitable, achievable and fundable. As show in the image above, at this phase, a number of activities must be conducted. In general, this phase is often ignored because of a lack of time, funds, etc. Ironically, it would serve as protection against wasted funds and time on a project which does not hold any benefits. This said, in the following paragraphs, I will examine each activity which are part of the feasibility study.

1. Presentation of the country

First, it should be understood that each phase and documents’ that should be produced at the end of these phases will have different types of readers and new readers. So each document produced in each phase, should summarize key components of previous phases in order for the reader to fully understand the project.

Thus, the presentation of the country should be visited once again. This section is meant to summaries the countries’ context and main issues that the project is meant to address. It usually should also include any meaningful information that will help understand why this is an issue in the country and why it is important for this issue to be addressed. The reader should be able to understand the country’s history and present context which has led to this situation.

2. Project Definition

At this stage, the project planner should summaries the previous phase: the project definition. All key relevant components of the project should be included. Considering that some aspects that were already previously described must be development in more details in this phase, the project planner will not need to include all these aspects in this section.

3. Evaluation of the advantages

Evaluating the advantages of a project can be quite challenging. The project planner must consider financial and economic advantages. Developing projects are more often economically advantageous but difficult to evaluate in monetary terms. The advantages can be identified from the desired situation and effects. The project planner could envisage a survey or a study of the current situation if statistics are not available in order to conduct a comparison after the project is completed. This comparison will help evaluate the actual effects of the project. The evaluation of advantages is essentially a preliminary analysis that is meant to determine if the project is actually essential to the country.

4. Technical verification

To conduct the technical verification of a project, it is important to identify the technical obstacles that could compromise the project and propose solutions. Certain technical obstacles could also be considered as risks. The following table is meant to give an example of the possible technical obstacles that could arise and the ways around these obstacles. For example, if computers are meant to be installed in villages that do not have access to the internet, what can be envisage to address this concern? Are any of the options envisaged viable?

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5. Evaluation of the initial and recurring costs

At this stage, the project planner will go into more details on the budget required and the recurring costs then in the project definition stage. For this, he must elaborate a detail work plan of all required activities in the project. The project must be decomposed into phases, steps, objectives and outputs. This will also be important for the risk evaluation process. The project planner will then determine the cost of implementing each outputs of the project and provide details on the recurring costs that must be budgeted or at least envisage. It is essential to determine the recurring costs in order to ensure that the project is viable after completion of the project. For example, if the project is meant to help build a school, then it is important to estimate how much it would cost to run this school and will the government have sufficient funds to help support that school. If not, than what can be considered for funding that new school. Is the local population able and willing to pay to enrol in this school? Etc. More often, the sustainability of a project is not considered and nice ideas are realized but do not provide any advantage to the country because there is not funding following the completion of the project.

6. Evaluation of the risks

At this stage, the evaluation of the risks is more elaborate than in the project definition phase. It is important to identify the risk of each item and outputs of the project. Then, the risks can be prioritized to identify the most important risks and ways to mitigate them. Each risk for each item and output can be evaluated as low, medium or high probability, impact and rating. The probability of occurrence and the impact will determine the rating that each risk will have. This grading technique is very simple and easy to understand. Other techniques are also available if required. The table below gives an example of this analysis.

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The above analysis is then pushed further and each risk can be described, analysed and mitigation options and strategies envisage for each. The following table gives an example of this analysis.

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7. Determining profitability

Determining profitability can be very difficult especially for projects essentially in the service sector or for humanitarian projects. The main objective is to determine if the means envisage are proportional to the needs identified. Basically, we want to make sure that we are not killing a bee with a canon! For example, if the project’s objective is to build a new stadium, then it would be important to consider how long it would take to have a return on investment, how it will generate income, will it generate more income for the city or is it just taking money away from another activity, etc. This can be easier to determine that the profitability of a training project for teacher for example.

8. Organisational verification

During this activity, the project planner will anticipate who might be able to conduct the project and if they would have the team and the technical resources to do so. The government may hire a consultant (Company or individual) to conduct the feasibility study. Considering that it is in the procurement process that the organisational verification will be completed with accuracy, the project planner might either skip this phase during the feasibility study or conduct a prequalification process to identify potential organisations to conduct the project. The government may also predetermine who will conduct the project.

9. Financial verification

At this stage, the project planner must make sure that the project is financed. To do so, he must attract funders to the project. He will need to search either for public or private funds and see in the frame of which programme, the project could be fundable. Once he is sure that the project is financeable, he will describe all relevant details about the financing (institution, programme, etc.) in the feasibility study document.

This stage completes phase 3: the feasibility study. In my next blog, I will examine the phase 4 of the international project cycle.

Link to my professional website: www.forzaconsultation.com

Phase 2 of the international aid development project cycle: the Project description

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In my last blog, I described the first phase of the international aid development project cycle. The second phase is the project description which is aimed at outlining the project. As show in the image above, at this phase, a number of activities must be conducted before examining the feasibility of a project. In the following paragraphs, I will examine each of them briefly.

1. Country profile: At this stage, the project planner will review specifically what in the context of the country justifies the need for a project. It is key in helping readers to understand the countries’ struggles and why a project was deemed important. Any aspects that will influence the project must also be explained.

2. Definition of the project: At this stage, the project must be defined specifically. What the project aims, where exactly should the project take place and what will the project accomplish. The following is an example of a project definition:

     ‘The project aims the construction, furnishing and technology equipping of a technical secondary school in the province and commune of Kayanza. This school of 40 classes should serve an average of 1 600 students. This school will offer 4 programs: electricity, plumbing, networking and telecommunication’.

 As shown in the example, the information must clearly quantify key aspects of the project.

3. Identification of key players: This section’s goal is to describe who the key players of the projects are. This information is important to any outside reader. The following table gives an overview of key players.

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4. Framework of the project: At this stage, the project manager will limit the project overall goals and outputs. Basically, it is important to describe what the project will and will NOT do. This will be key in determining if the project was successful or not during the evaluation phase of the project.

5. Basic parameters: The project planner must also describe in more details the following:

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6. Existing and desired conditions: The planner must also explain the existing condition before the project is implemented and what the desired condition should be. The desired condition usually is closely linked to the beneficiaries of the project but it also describes the overall benefits of the project to the country. Key specific percentages could be envisaged to follow up on the project’s influence. It is understood that sometimes this is quite difficult to determine. For example, is the 10% increase in school attendance due to the new school the project help built or is it due to the coming of age of the targeted group, etc? Needless to say, this aspect could become quite biased. A specific study could be conducted in order to adequately describe the existing condition and once the project is concluded, another study in one year, two years, etc. could be envisage to verify the projects’ reach.

7. Constraints: The project planner must also analyse and describe the specific constraints that key players will have to consider during the implementation of the project. There are 3 main constraints as follows:

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8. Risks: The project planner can start listing some intrinsic and extrinsic risks that need to be considered during the implementation of the project.  The following table draw some examples of these risks:

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In conclusion, it should be noted that this phase is meant to describe the project in general terms. In the next phase, the project planner describes each of these elements in more details. Some project planner may be very specific in their description and skip the feasibility study.

My next blog will examine phase 3 of the project cycle.

Link to my professional website: www.forzaconsultation.com

Understanding the International project cycle

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Having worked in international aid development for 17 years, I realised that the international project cycle is not necessarily well understood by the majority of people not working in international development. Considering this is a topic that could fill books, I have decided to work on a series of blogs dedicated to this subject. In each of these blogs, I will describe in more details each elements of the cycle that I am about to explain. I will also examine multiple angles.

The international project cycle is as follows:

Project Cycle

1. Country profile: Before beginning to envisage any kind of project, it is very important to understand the country’s basic needs and strategic goals. Since, the need for a project can emerge either from the country itself, from past projects and/or from aid development banks such as the World Bank it is important to identify what are the most urgent problems that should be addressed and which ones will have the best impact to resolve the issue.

2. Project description: Once there is some kind of consensus on the issues that should be addressed, then it becomes important to define in more details what the project will in fact be all about.

3. Feasibility Study: Once, the project is described in more details, it is important to conduct a feasibility study to determine if the issues aimed by this project are in fact feasible and if so, how.

4. Project planning: When the feasibility of a project is assured, it is important to prepare a preliminary detail planning of the project. After it is planned, approved and financed, the project is usually advertised. The company that will be selected to conduct the project will actively participate in the actual planning of the project and the execution.

5. Project execution: The project execution phase correspondence to the actual implementation of the project.

6. Project evaluation: Once the executing company or individual has completed the work, the government or the financing company will decide on an evaluation scheme for the project. Some projects are not the subject of any evaluation. This concept is relatively new in comparison to the other aspects of the project cycle as many institutions started to question the inability of projects in alleviating poverty.

It is important to understand that not all projects follow the project cycle described above and some tasks in each phase could vary, overlap or simply be conducted in other phases. In my following blog, I will examine aspects to consider in the country profile.

Link to my professional website: www.forzaconsultation.com