Project Executive Group - Project Planning & Feasibility Analysis

AllenWeb Site - since 1995

Project Planning & Feasibility Analysis - Aug 1998

Project Management

Project Planning

Guidelines for Project Plans

Use project plans to coordinate rather than to control.
Make use of different personalities within the project environment.
Preschedule frequent revisions to project plans.
Empower workers to estimate their own work.
Describe value-creating tasks rather than activities.
Define specific and tangible milestones.
Use check lists, matrices, and other supplements to project plans.

In the initial stage of project planning, the internal and external factors that influence the project should be
determined and given priority weights. Examples of influences include the following:

Internal Factors

Infrastructure
Project scope
Labor relations
Project location
Project leadership
Organizational goal
Management approach
Technical manpower supply
Resource and capital availability

External Factors

Public needs
Market needs
National goals
Industry stability
State of technology
Industrial competitors
Government regulations

Project Execution Plan Development

Planning is an ongoing process that is conducted throughout the project life cycle. Initial planning may relate to
overall organizational efforts. This is where specific projects to be undertaken are determined. Subsequent
planning may relate to specific objectives of the selected project. In general, a project plan should consist of the
following components:

Components

Summary of Project Plan. This is a brief description of what is planned. Project scope and objectives should be
enumerated. The critical constraints on the project should be outlined. The types of resources required and
available should be specified. The summary should include a statement of how the project complements
organizational and national goals, budget size, and milestones.

Objectives. The objectives should be very detailed in outlining what the project is expected to achieve and how th
expected achievements will contribute to overall goals of the project. The performance measures for evaluating the
achievement of the objectives should be specified.

Approach. The managerial and technical methodologies of implementing the project should be specified. The
managerial approach may relate to project organization, communication network, approval hierarchy, responsibility,
and accountability. The technical approach may relate to company experience on previous projects and currently
available technology.

Policies and Procedures. Development of a project policy involves specifying the general guidelines for carrying out
tasks within the project. Project procedure involves specifying the detailed method for implementing a given policy
relative to the tasks needed to achieve the project goal. (calls for a Project Procedure Manual)

Contractual Requirements. The portion of the project plan should outline reporting requirements, communication
links, customer specifications, performance specifications, deadlines, review process, project deliverables, delivery
schedules, internal and external contacts, data security, policies and procedures. This section should be as detailed
as practically possible. Any item that has the slightest potential of creating problems later should be documented.

Project Schedule. The project schedule signifies the commitment of resource against time in pursuit of project
objectives. A project schedule should specify when the project will be initiated and when it is expected to be
completed. The major phases of the project should be identified. The schedule should include reliable time
estimates for project tasks. The estimates may come from knowledgeable personnel, past records, or forecasting.
Task milestones should be generated on the basis of objective analysis rather than arbitrary stipulations. The
schedule in this planning stage constitutes the master project schedule. Detailed activity schedules should be
generated under specific project functions.

Resource Requirements. Project resources, budget, and costs are to be documented in this section of the project
plan. Capital requirements should be specified by tasks. Resources may include personnel, equipment, and
information. Special personnel skills, hiring, and training should be explained. Personnel requirements should be
aligned with schedule requirements so as to ensure their availability when needed. Budget size and source should
be presented. The basis for estimating budget requirements should be justified, and the cost allocation and
monitoring approach should be shown.

Performance Measures. Measures of evaluating project progress should be developed. The measures may be
based on standard practices or customized needs. The method of monitoring, collecting, and analyzing the measures
should also be specified. Corrective actions for specific undesirable events should be outlined.

Contingency Plans. Courses of actions to be taken in the case of undesirable events should be predetermined.
Many projects have failed simply because no plans have been developed for emergency situations. In the
excitement of getting a project under way, it is often easy to overlook the need for contingency plans.

Tracking, Reporting, and Auditing. These involve keeping track of the project plans, evaluating tasks, and
scrutinizing the records of the project.

Large project planning may include a statement about the feasibility of subcontracting part of the project work.
Subcontracting may be needed for various reasons, including lower cost, higher efficiency, logistical convenience, or
political requirements (e.g., Russian content in projects in Russia.)

Feasibility Analysis

The feasibility of a project can be ascertained in terms of technical factors, economic factors, or both. A feasibility
study is documented with a report showing all the ramifications of the project. In project finance, the pre-finance
work (sometimes referred to as due diligence) is to make sure there is no "dry rot" in the project and to identify
project risks to ensure they can be mitigated and managed in addition to ascertaining "debt service" capability.

Technical Feasibility. Technical feasibility refers to the ability of the process to take advantage of the current state of
the technology in pursuing further improvement. The technical capability of the personnel as well as the capability of
the available technology should be considered. Technology transfer between geographical areas and cultures needs
to be analyzed to understand productivity loss (or gain) due to differences (see Cultural Feasibility).

Managerial Feasibility. Managerial feasibility involves the capability of the infrastructure of a process to achieve and
sustain process improvement. Management support, employee involvement, and commitment are key elements
required to ascertain managerial feasibility.

Economic Feasibility. This involves the feasibility of the proposed project to generate economic benefits. A benefit-
cost analysis and a break-even analysis are important aspects of evaluating the economic feasibility of new
industrial projects. The tangible and intangible aspects of a project should be translated into economic terms to
facilitate a consistent basis for evaluation.

Financial Feasibility. Financial feasibility should be distinguished from economic feasibility. Financial feasibility
involves the capability of the project organization to raise the appropriate funds needed to implement the proposed
project. Project financing can be a major obstacle in large multi-party projects because of the level of capital
required. Loan availability, credit-worthiness, equity, and loan schedule are important aspects of financial feasibility
analysis.

Cultural Feasibility. Cultural feasibility deals with the compatibility of the proposed project with the cultural setup of
the project environment. In labor-intensive projects, planned functions must be integrated with the local cultural
practices and beliefs. For example, religious beliefs may influence what an individual is willing to do or not do.

Social Feasibility. Social feasibility addresses the influences that a proposed project may have on the social system
in the project environment. The ambient social structure may be such that certain categories of workers may be in
short supply or nonexistent. The effect of the project on the social status of the project participants must be
assessed to ensure compatibility. It should be recognized that workers in certain industries may have certain status
symbols within the society.

Safety Feasibility. Safety feasibility is another important aspect that should be considered in project planning.
Safety feasibility refers to an analysis of whether the project is capable of being implemented and operated safely
with minimal adverse effects on the environment. Unfortunately, environmental impact assessment is often not
adequately addressed in complex projects. As an example, the North America Free Trade Agreement (NAFTA)
between the U.S., Canada, and Mexico was temporarily suspended in 1993 because of the legal consideration of the
potential environmental impacts of the projects to be undertaken under the agreement.

Political Feasibility. A politically feasible project may be referred to as a "politically correct project." Political
considerations often dictate direction for a proposed project. This is particularly true for large projects with national
visibility that may have significant government inputs and political implications. For example, political necessity may
be a source of support for a project regardless of the project's merits. On the other hand, worthy projects may face
insurmountable opposition simply because of political factors. Political feasibility analysis requires an evaluation of
the compatibility of project goals with the prevailing goals of the political system.

Environmental Feasibility. Often a killer of projects through long, drawn-out approval processes and outright active
opposition by those claiming environmental concerns. This is an aspect worthy of real attention in the very early
stages of a project. Concern must be shown and action must be taken to address any and all environmental
concerns raised or anticipated. A perfect example was the recent attempt by Disney to build a theme park in
Virginia. After a lot of funds and efforts, Disney could not overcome the local opposition to the environmental impact
that the Disney project would have on the historic Manassas batteground area.

Market Feasibility. Another concern is market variability and impact on the project. This area should not be
confused with the Economic Feasibility. The market needs analysis to view the potential impacts of market demand,
competitive activities, etc. and "divertiable" market share available. Price war activities by competitors, whether
local, regional, national or international, must also be analyzed for early contingency funding and debt service
negotiations during the start-up, ramp-up, and commercial start-up phases of the project.

Scope of Feasibility Analysis

In general terms, the elements of a feasibility analysis for a project should cover the following:

Need Analysis. This indicates a recognition of a need for the project. The need may affect the organization itself,
another organization, the public, or the government. A preliminary study is then conducted to confirm and evaluate
the need. 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?
Will the need still exist by the time the project is completed?
What are the alternate means of satisfying the need?
What are the economic, social, environmental, and political impacts of the need?

Process Work. This is the preliminary analysis done to determine what will be required to satisfy the need. The
work may be performed by a consultant who is an expert in the project field. The preliminary study often involves
system models or prototypes. For technology-oriented projects, artist's conception and scaled-down models may be
used for illustrating the general characteristics of a process. A simulation of the proposed system can be carried out
to predict the outcome before the actual project starts.

Engineering & Design. This involves a detailed technical study of te proposed project. Written quotations are
obtained from suppliers and subcontractors as needed. Technology capabilities are evaluated as needed. Product
design, if needed, should be done at this time.

Cost Estimate. This involves estimating project cost to an acceptable level of accuracy. Levels of around -5% to
+15% are common at this level of a project plan. Both the initial and operating costs are included in the cost
estimation. Estimates of capital investment and of recurring and nonrecurring costs should also be contained in the
cost estimate document. Sensitivity analysis can be carried out on the estimated cost values to see how sensitive the
project plan is to the estimated cost values.

Financial Analysis. This involves an analysis of the cash flow profile of the project. The analysis should consider
rates of return, inflation, sources of capital, payback periods, break-even point, residual values, and sensitivity. This
is a critical analysis since it determines whether or not and when funds will be available to the project. The project
cash flow profile helps to support the economic and financial feasibility of the project.

Project Impacts. This portion of the feasibility study provides an assessment of the impact of the proposed project.
Environmental, social, cultural, political, and economic impacts may be some of the factors that will determine how a
project is perceived by the public. The value added potential of the project should also be assessed. A value added
tax may be assessed based on the price of a product and the cost of the raw material used in making the product.
The tax so collected may be viewed as a contribution to government coffers.

Conclusions and Recommendations. The feasibility study should end with the overall outcome of the project
analysis. This may indicate an endorsement or disapproval of the project. Recommendations on what should be
done should be included in this section of the feasibility report.

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