Feasibility Study

• • Risk
• • Scheduling of project

The objective of the feasibility study is to review technical/financial viability of the project to give sufficient information to enable the client to proceed or abort the project. Feasibility study is undertaken to analyze the ability to complete a project successfully, taking into account various factors such as economical, technological, scheduling, etc. A feasibility study looks into the positive and negative effects of a project before investing the Company resources, viz., time and money.

Feasibility study is defined as an evaluation or analysis of the potential impact of the identified need of the proposed project. The feasibility study assists decisionmakers (investors/owners/clients) in determining whether or not to implement the project. Since the feasibility study stage is a very crucial stage, in which all kinds of professionals and specialists are required to bring many kinds of knowledge and experience into broad-ranging evaluation of feasibility, it is required to engage a firm having expertise in the related fields. The feasibility study establishes the broad objectives for the project and so exerts an influence throughout subsequent stages. The successful completion of the feasibility study marks the first of several transition milestones and is therefore most important to determine whether or not to implement a particular project or program. The feasibility study decides the possible design approaches that can be pursued to meet the need.

Following are the contents of the feasibility study report:

• 1. Purpose of the feasibility study
• 2. Project history (project background information)
• 3. Description of the proposed project.

a. Project location

b. Plot area

c. Interface with adjacent/neighboring area

d. Expected project deliverables

e. Key performance indicators

f. Constraints

g. Assumptions

4. Business case

a. Project need

b. Stakeholders

c. Project benefits

d. Estimated time

e. Financial benefits

f. Estimated cost

g. Justification

5. Feasibility study details

a. Technical

b. Economical

c. Time scale d. Financial

e. Environmental

f. Ecological

g. Sustainability

h. Political, legal

i. Social

• 6. Risk
• 7. Environmental impact (considerations)
• 8. Social impact (considerations)
• 9. Final recommendation

Project Goals and Objectives

The outcome of the feasibility study helps selection of a defined project which meets the stated project objectives, together with a broad plan of implementation. If the feasibility study shows that the objectives of the owner are best met through the ideas generated then the project is moved to further stage to deliver intended objectives of the project passing through different stages of project life cycle.

After completion and approval of feasibility study, it is possible to establish project goals and objectives. Project goals and objectives are prepared taking into consideration final recommendations/outcomes of the feasibility study. Clear goals and objectives provide the project team with appropriate boundaries to make decisions about the project and ensure that the project/facility will satisfy the owner’s/ end user’s requirements fulfilling owner’s needs. Establishing properly defined goals and objectives is the most fundamental elements of project planning. Therefore, the project goals and objectives must be

• • Specific (Is the goal specific?)
• • Measurable (Is the goal measurable?)
• • Agreed upon/achievable (Is the goal achievable?)
• • Realistic (Is the goal realist or result-oriented?)
• • Time (cost) limited (Does the goal have time element?)

The project objective definition usually includes the following information:

• 1. Project scope and project deliverables
• 2. Preliminary project schedule
• 3. Preliminary project budget
• 4. Specific quality criteria the deliverables must meet
• 5. Type of contract to be employed
• 6. Design requirements
• 7. Regulatory requirements
• 8. Potential project risks
• 9. Environmental considerations
• 10. Logistic requirements

Identification of Alternatives/Options

Once the owner/client defines the project objectives, a project team (in-house or outside agency) is selected to start identification of alternatives. Normally, the owner assigns a specialist consultant, in certain cases it may be the designer of the project, to identify conceptual alternatives, evaluation of conceptual alternatives and selection of preferred conceptual alternative in consultation with the owner, project management consultant (PMC) if it is commissioned, and is included in the Terms of Reference (TOR)/Project Charter.

The project goals and objectives serve as a guide for the development of alternatives. The team develops several alternative schemes and solutions. Each alternative is based on the predetermined set of performance measures to meet the owner’s requirements. In case of construction projects, it is mainly the extensive review of development options which are discussed between the owner and the team members. The team provides engineering advice to the owner to enable him asses its feasibility and relative merits of various alternative schemes to meet his requirements.

Quality tools such as Brainstorming, Delphi technique, 5W2H can be used to identify alternatives.

Analyze Alternatives

Qualitative and Quantitative comparison, evaluation and analysis of identified alternatives are carried out by considering the advantages and disadvantages of each item systematically. Social, economical (time and cost), sustainability, performance of equipment, environmental impacts, functional capability, safety, and reliability should be considered while development of alternatives. Each alternative is compared by considering the advantages and disadvantages of each element systematically to meet the predetermined set of performance measures and owner’s requirements. The evaluation of alternatives requires cooperative efforts between the owner and other team members involved in performing evaluation and analysis, regulatory authorities, and other stakeholders who have involvement, interest, or impact on the processes of construction project. The team makes a brief presentation to the owner, and the project is selected based on preferred conceptual alternatives.

The following elements are considered to evaluate and analyze each of the identified alternatives:

• 1. Suitability to the purpose and objectives
• 2. Performance parameters
• 3. Process technology
• 4. Equipment and machinery
• 5. Product output and specifications
• 6. Economy
• 7. Sustainable (environmental, social, economical)
• 8. Cost-efficiency
• 9. Life cycle costing
• 10. Environmental impact
• 11. Environment-preferred material and products

FIGURE 8.3 Evaluation and analysis of alternatives method to select preferred alternative.

• 12. Physical properties, thermal comfort, insulation, fire resistance
• 13. Utilization of space
• 14. Accessibility
• 15. Power consumption and energy-saving measures—use of renewable energy—alternate energy
• 16. Green building concept
• 17. Aesthetic
• 18. Safety and security
• 19. Statutory/regulatory requirements
• 20. Codes and standards
• 21. Any other critical issues

Select Preferred Alternative

Based on the analysis of identified alternatives, the preferred alternative that satisfies the project goals and objectives is selected.

With the approval of Preferred Alternative by the owner, the project proceeds towards the next stage of project development process.

Figure 8.3 illustrates Evaluation and Analysis Method to select Preferred Alternative.

Finalize Project Delivery and Contracting System

During this phase, the owner has to decide the procurement method and contract strategy. The selection of project delivery system mainly depends on the project size, complexity of the project, innovation, uncertainty, urgency, and the degree of involvement of the owner. Oil and gas projects mainly follow Design-Build/Turnkey project delivery system with firm fixed lump sum contracting. In certain cases, the owner may give incentive to the contractor for completing the project ahead of the specified schedule.

Project Charter

Project charter is also known as Terms of Reference (TOR), Design Brief, which is prepared by the owner/client or by PMC on behalf of owner describing the objectives and requirements to develop the project. A client brief (TOR) defines the objectives for the project and agrees a project brief to guide the next stage of the project.

A TOR is a written document stating what will be done by the designer (consultant) to develop the project/facility. It is issued to the designer (consultant) by the owner to develop the project design and construction documents. A well-prepared accurate and comprehensive client brief (TOR) is essential to achieve qualitative and competitive project. In case of oil and gas projects, the TOR generally requires the designer (consultant) to perform the following:

• • Development of concept design
• • Preparation of Front End Engineering Design (FEED) and Contract Documents for tendering purpose.
• • Preparation of project schedule, budget, and obtaining authorities’ approvals.

The TOR gives the project team (designer) a clear understanding of the development of project. Further, TOR is used throughout the project as a reference to ensure that the established objectives are achieved. Client brief or TOR describes information such as:

• • Project objectives which has triggered the project
• • Propose location of the project
• • Project/facility to be developed
• • Project assumptions and constraints
• • Project function and size
• • Performance characteristics of the project
• • Environmental considerations
• • Design approach
• • Estimated timescale
• • Estimated cost
• • Codes, standards, and specifications
• • Project control guidelines
• • Regulatory requirements
• • Initial list of defined risks
• • Description of approval requirements
• • Drawings
• • Report
• • Models (if applicable)
• • Presentation