Project Analysis: Feasibility Analysis

Feasibility Analysis

Feasibility analysis is the process of determining the implement-ability of the proposed project. It is needed to take to take the final decision whether the proposed project is appropriate to commit (invest) resources or not. It examine the viability of the project through detail investigation. For this purpose, it requires a multi-disciplinary team consisting technician, economist, environmentalist, managerial experts, sociologist, financial analyst who examine the proposed project from different angles like technical, environmental, managerial, marketing, economics, financial etc.

Since feasibility analysis is a series of studies and investigations to examine the project and its capacity to meets the objectives, the project is undertaken to implement if the analysis gives green signal of project success.

Technical Analysis

It is considered as main foundation of feasibility analysis. If technology is sound, project objectives can be achieved within constraint. So in this analysis, technical viability of the proposed project is studied where feasibility of meeting, technical solutions are addressed, availability of alternative technical solution are examined, viability of project design is investigated, legal provision and technical collaboration requirement are analyzed. It covers the following studies:
  • Choice of technology.
  • Design requirement.
  • Human resource requirement.
  • Size, location and geology.
  • Technical risk.
  • Legal provision related to technical collaboration.

Marketing Analysis

It refers to the study of marketing capability of the proposed project in terms of ability to satisfy the customer requirement. Various aspects relating to market and marketing are studied and analyze in this section which focus on:
  • Production capacity of the project.
  • Aggregate demand of customer.
  • Consumption trend.
  • Distribution channel.
  • Level of competition.
  • Sales forecasting and estimated revenue.
  • Availability of required raw materials.
  • Quality standard.
  • Cost and price structure.
  • Marketing policy and strategies.

Environmental Analysis

It is conducted to ascertain the impact of the project on environment and capacity of the environment to support the project. It means it examined both the positive and negative impacts of the project. It focuses on the following area to know the feasibility of the proposed project.

Environmental Suitability:
  • Capacity of environment to support the project.
  • Resource management aspect.
  • Environment impact assessment (guideline issued by government)
Environmental Impacts:
  • It examine the positive and negative impact of the project on the environment.
  • It focuses the impact of the project on flora-fauna, quality of air and water, scenic beauty, society, noise pollution, soil erosion, resource depletion.

Economic and Financial Analysis

Economic Analysis assesses the economic viability of the proposed project. Cost-benefit analysis is used to find out the net contribution of the project to the society and the economy. The assessment of the net contribution of the project is prime analysis in the economic analysis. It is used in private as well as in public project differently.

For a private project, cost-benefit analysis is applied to assess commercial profitability. For a public project, the analysis is use to assess the social profitability in terms of contribution to national economy by achieving the goals of poverty
Financial analysis is conducted to measure the financial sustainability of the project. It studies the adequacy of needed fund and proper settlement of the fund. Generally the technique capital budgeting are used in these analysis. However the areas of focus in this analysis are:
  • Total capital requirement
  • Source of fund
  • Projected cash flow
  • Accounting and reporting system
  • Projected profitability
  • Break Even Point (BEP)

Managerial Analysis

Managerial Analysis is done to examine the managerial or institutional viability of the project. It studies the adequacy of the management system to direct and control the project, political and legal acceptability of the project. The area of the focus in these analysis are as follows:

i) Form of the project Organization:
  • Appropriateness of the organizational structure.
  • Relationship of authority and responsibility.
  • Communication system.
  • Flexibility.
ii) Personnel:
  • Personal availability and their experience, qualification.
  • Job description.
  • Need of training.
iii) External linkage/ Institutional Relationship:
  • Relationship with stakeholders.
  • Relationship with functional department.
  • Relationship with regulatory agencies.
iv) Implementation Plan:
  • Required cost and resources.
  • Estimated time schedules.
  • Quality standard.
  • Use of planning and controlling techniques.

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