CHAPTER 3

FEASIBILITY STAGE
PROJECT MANAGEMENT
Feasibility Study

• Feasibility study is an analysis of

the viability of an idea.
• Should we proceed with the
proposed project idea?
 OBJECTIVES OF THE
CLIENT

• Specifying project objectives

• Outlining possible options
• Selecting the most suitable option through value and risk
assessment
• Establishing the project execution plan for the selected
option should be the key output at this stage
 OUTLINE
PROJECT BRIEF
• Client’s objectives:
– Complex – introduction of new
technology
– Simple – obtaining optimum return
on resources available
– Formulated by organisation’s board
– Include constraints related to time,
cost, performance & location
– Must cover function & quality of the
building

• PM provides or assist in preparing

outline project brief
OUTLINE PROJECT
BRIEF
Contents:
1. Project title, reference,
customer, sponsor,
project manager.
2. Goal
3. Objectives
4. Approach
5. Scope
6. Constraints
7. Dependencies
8. Resource requirements
9. Agreement
ALBERT LAW, NAIM CENDERA SDN BHD

CYNTHIA LIM, BORNEO DEVELOPMENT SDN BHD

 Roles of Project Manager

The project manager will discuss the To make sure that feasibility studies
available options and initiate are effective, the information used
feasibility studies to determine the should be as full and accurate as
one to be adopted possible
 Scope of investigation
• Establishing service objectives and
financial objectives.
Studies on requirements and risks
• Requirements by the authority and listings
of risk.
Feasibility
Public consultation
study report
• Consult and inform the public about the
should project.
include: Geotechnical study
• Study on the soil and geology condition on
the site.
Environmental impact assessment
• A study of possible impacts on the
environment.
 Health and safety study

• Health and safety requirements by

the client and authority.
Legal/Statutory/Planning requirements or
constraints
• Applications to the authority before
project commences.

FEASIBILITY Estimates of capital and operating costs

STUDY • Cost plan for the project and

resources scheduling.
REPORT
Assessment of potential funding

• Study of funding by the client for the

project.

Potential site assessments

• Selection of potential sites for site

visit.
Studies on requirements &
risks

Requirements
• Building By-laws
• BOMBA requirements
• Local authority requirements
Risks
• Natural disaster
• Fire, flood, utilities access to site, material shortage
due to disaster
• Need to insure the project
Public Consultation

• Need to consult & inform the public

about the project.
• Whether the project will pollute the
surroundings and effect the
neighboring residents.
• Noise, dust, etc.
Geo-Technical Study
• Also include geological study
• Type of soil
• Contaminated or not?
• Whether the soil needs treatment
• Previous facility on the site used –
does it effect the proposed project?
Environmental Impact
Assessment
• an assessment of the possible impact—
positive or negative—that a proposed
project may have on the natural
environment.
• After an EIA, the precautionary and
polluter pays principles may be applied to
prevent, limit, or require strict liability or
insurance coverage to a project, based on
its likely harms.
Health & Safety study
• What kind of safety system that applies
to the site?
• What safety and health regulations
does the authorities and client require?
• Client will commission feasibility
studies and establish that the
project is both deliverable and
financially viable.
• Appoint project manager – input
will be made alongside the
reports and views of various
consultant.
• Feasibility report – determine the
contractual procurement route.
• Comparative life-cycle costing to
be included for each option.
• During the progress of
feasibility studies, PM will:-
a) Convene and minute meetings
b) Report progress to the client
c) Advise the client if the agreed
budget is likely to be
exceeded.
d) Obtain the client’s decision on
which option to adopt for the
project. – option designated
the outline project brief.
 SITE SELECTION AND
ACQUISITION

• Important stage – if client does not own a site to be

developed.
• Work is to be carried out by a specialist consultant
and monitored by the PM.
• Objectives is to ensure that the requirements for the
site are defined in terms of the facility to be
constructed and meet the client’s requirements.
• In order to achieve these objective, the following
tasks must be carried out:
 TASK TO BE CARRIED OUT

1. Preparing a statement of requirements for the site and

buildings & agreeing this with the client – What are the
objectives of a project?
2. Preparing a specification for the site selection and criteria
for evaluating site based on the requirements – size lot,
utilities, services, drainage, topography, orientation,
vegetation & land cost
3. Establishing the outline funding arrangements &
determining responsibilities within the project team
 TASK TO BE
CARRIED OUT

4. Appointing members of the team

& developing a schedule for site
selection and acquisition
5. Actioning site searches &
collecting data on sites including
local planning requirements –
executed before development of
scheme design
6. Evaluating sites against criteria &
producing a short list of three or
four by agreeing weightings with
the client
 TASK TO BE
CARRIED OUT
7. Establishing initial outline designs,
developing costs & discussing short-listed
sites with planning authorities
8. Obtaining advice on open-market value of
short-listed sites & selecting the site from
the short list
9. Appointing agents for price negotiation and
separate agents for independent valuation
10. Appointing solicitors as appropriate &
determining specific financial
arrangements
11. Exchanging contracts for site acquisition
once terms are agreed, conditional upon
relevant matters
 Development of
scheme design

Starts with: the development of detailed

project brief (client’s requirements)
v The client can modify his thinking
on various aspects of the
proposals.
v Have the opportunity for ‘Scope
for change’ & ‘Cost for change’.
v Many clients are not fully aware of
the benefit of getting the design
right as far as possible at the start
of the project.
 Relationship between scope for change and cost of change

Cost for change

HIGH

Scheme
Defined – Design
Brief freeze
freeze

Scope for change

A B C D
E
LOW
INCEPTION PROJECT COMPLETION

Feasibility Strategy Design (Pre- Construction Commissioning

construction)
 Development of scheme
design
Design consultant is responsible for the detailed
design brief.

PM is to ensure the compliance with the outline project

brief, the project budget & the master schedule

Detailed design brief – the control document for the

design

If finalised : Architect to prepare drawings in detail for

quantity surveyor to prepare preliminary cost plan
DEVELOPMENT OF SCHEME
DESIGN (THE FLOW)

Detailed project brief – client

may modify proposal

Detailed design brief – to over-

designed to allow changes of
design in future

Complete scheme design –

prepare layout and plans
 Balance between cost and value in
development projects must be
established.

Assessment of financial appraisal of the

project:

Funding & • Calculating the total cost and then

assessing the value
investment • Alternatively calculating the value of
the product and working out the
appraisal project cost with an eye to value

Client’s expectation :

• Value to exceed cost,

• Decided on the level of profit required
from the amount of risk.
 Decision to go ahead
v Documents are reviewed from the Client.
v Client has to confirm the decision to proceed
with the project.
v To provide the authorization of financial
management & control throughout the
project.
v To ensure that no commitment is made to
large expenditure on the project BEFORE
verifying that is have been authorized as
required.
v The actual cost most probably be higher than
the original estimate (checking for financial
provision)
 ü Determined by an economic
analysis of the monetary return
on investment.
ü THREE methods to evaluate:
ECONOMIC o Capital Recovery – Net
FEASIBILITY annual income (A)
STUDY o Payback Period – How
many years? (n)
(Private
o Rate of Return – Interest
Project) rate (%)
ü Uses the fundamental equations of
time value of money.
 é i ù
A = Fê ú
ë (1 + i )n
- 1 û

é i(1 + i )n ù
A = Pê ú
ë (1 + i ) - 1û
n

P = Present Worth
Fundamental
F = Future Sum
Equations of
A = Net Annual Income
Time Value
i = Annual Interest Rate
Money
n = Study Period (years)

F
A A
A A A A
0 (n-2) (n-1)
1 2 3 n
ECONOMIC ü The economic feasibility for
government projects is usually
FEASIBILITY determined by:
STUDY
(For benefit / cost ratio
government
project)