Elements of a Project Feasibility

Study

1. Management Feasibility
2. Market Feasibility
3. Socio-Economic Feasibility
4. Financial Feasibility
5. Technical, Engineering and Environmental
Feasibility
 Management Feasibility
A project’s organizational structure depends on
the financing mode, agreements and
arrangements(the project’s business model).
The context of a project:
1. Wholly government-financed(common to
public schools). In this modality, project
managers should use transparent robust for
money methodologies to ward of attacks from
the media or public.
 - strictly follow provisions of the government
procurement reform act.(cf; sample
arrangements)
2. Private financing – investors compare the
3. risk-return profile with alternative investments. If
comparison is unfavorable, capital will not flow.
4. Private-public partnership(PPP modality)
Note: No single business model fits all requirements
– private sector involvement can come st different
levels and within different contractual structures.
 Sample Financial Arrangements
1. Project wholly owned and in full control of
the public sector. Own or borrowed funds
used. Total control resides with the LGU.
2. Project owned by the LGU but managed by a
private company through a management
contract.
3. An operational lease - project built by the
public sector and leased to (rented) to private
organization/s.
4. A variable year(5,10,15, 20) Build, Operate,
Transfer Scheme. The private sector builds,
operates and wholly transfers operations and
ownership of a project after a mutually
agreed upon period of time. (The San Miguel
Corporation – Bulacan International Airport
unsolicited proposal for US$ 15 billion.
5. Build, Lease, Transfer – the private sector
puts up the project, leases it to the LGU who
operates the project and turns over full
ownership.
6. Joint Venture Agreement – Equity Sharing.
Note that in any arrangement, whoever
controls a bigger share of the equity will
insist on a stronger control over the
management structure of the project.

Note: The organizational/management set-up

will therefore depend on the equity
arrangement. If you are the sole owner of an
enterprise, then you control its overall operation
– lock, stock and barrel.
 Market Feasibility
Involves a determination of the following:
1. The description and price of the product to be
sold.
2. The size, nature, and growth of total demand for a
product.
3. The supply situation and the nature of
competition.
4. The different factors affecting the market of the
product, and
5. The appropriate marketing program for the
product.
The description and price of the product to be sold
involves the determination of the following:
1. Name of the product – popular and scientific(if any)
and the reason/s for choosing it.
2. Properties of the product – physical, chemical, and/or
agronomic.
3. Uses of the product - as finished commodity, as an
input to other production activities;
4. Major users of the product – individuals and/or firms,
and
5. Geographical areas of dispersion – where similar
products are found.
The size, nature and growth of total demand for a
product determined via the answers to the following
questions:
1. Who and where is the market?
 market segment according to type of
users(individuals/households/LGU’s); manner of
use(residential/industrial?); income classifications (low,
medium, high) location, age, etc.
 Manner of segmenting depends on the type of product
being considered (e.g., sports complex – activities wanting
to locate, cultural - concerts, beauty pageants; social –
conferences, meetings, summits, graduation, etc.
Economic – (store locators; sports- tournaments, meets,
etc.
2. What is the total domestic demand from the historical
point of view(if secondary data is available, if not, then
collect primary data).
3. Establish your catchment area(municipal, provincial,
regional, national?)
4. Evaluate demand growth patterns in the past and project
future demand(projection).
The supply situation and the nature of competition.
5. Determine the supply situation by asking the following:
 Who and where are the direct competitors according to
size, product quality, location, performance and market
segment performance? The type of competition would
influence the decisions on production capacity and
marketing strategies.
 Determine historical supply.
 Evaluate supply growth patterns and project future supply
by applying appropriate projection methods.
 Compare the demand and supply trends.
 Determine the proposed project’s market share which will
also dictate scheduled production volume.
 Determine product price best done through:
- benchmarking determination of selling price of all
similar and substitute products
- taking into consideration the market segment
targeted, the projected operating costs and expenses and
the desired profit margin, set the product’s selling price
Factors affecting the market – contingencies mayne
developed in case of abrupt changes caused by the following:
1. Demand as affected by population growth, income
changes, tastes, rural/urban developments, prices of
substitute and complementary products, and such
marketing tools as advertising, promotions, credit
policies, etc.
2. Supply as influenced by the development of substitute
products, the entry or exit of firms, sources and cost of
production factors, government policies, improved
technology, etc.
3. Prices affected by production costs, price controls,
inflation, etc.
Marketing program – end product of a market
study. The marketing program endeavors to
reach the project’s market and price targets.
Important components of a marketing program
summarized by the four P’s – product, price,
place and promotions.
 Product & price- determined in the previous
section of the market study.
 Place – refers to the way the product is
distributed or made available to the end-user.
 Promotions- activities directed to making end-
users aware of, and desire, the product.
 Socio-Economic Feasibility
A project, to be worthy of financing, especially for government
institutions, should be geared not only for profit generation but
also social and economic benefits.
Covers the following areas in a brief narrative:
a. Employment and income – improvement in the standards
of living of families & individuals. Jobs and income directly
and indirectly created by the project.
b. Taxes – increased revenues generated for the development
of communities.
c. Increased supply of commodities and services to the locality
and to overall catchment area.
d. Demand for materials – particularly local materials to aid
local producers.