Prior to spending time or money on a project, it is typical to assess the feasibility of that project. What we’re doing is deciding whether we have the capability, resources and ability to complete the project successfully. In the process, we identify those factors that will improve our probability of success. We also identify the factors that may reduce our probability of delivering the scope on time and within budget. In general, the feasibility study addresses the technical, economic, legal, operational, customer/stakeholder support and time factors. Additional factors may be added to the feasibility depending on its unique needs and requirements.
Lecture on Feasibility
The investigation of those issues will vary widely depending on the scale of the project. For a small project, affecting one department, with a small team, the project manager, sponsor and one stakeholder may complete the entire project feasibility study in the course of a lunch. As the scale of the project increases, more people and more management science are applied to the feasibility study. We may have separate teams studying the technological feasibility while other teams investigate the financial and legal feasibility. It’s also common to bring in outside consultants and experts to contribute their knowledge and experience to the feasibility study.
Lecture on Constraints
The output of a project feasibility study also ranges widely depending on the scale of the effort. For a small project, people involved may discuss each feasibility factor and reach agreement that, “We can do this.” On larger projects, expensive reports may be issued for each factor. When all the feasibility factors have been checked off, we are ready to launch our project initiation and planning effort.
Some organizations address the project feasibility assessment in the project business case. The business case includes all the factors considered in the project feasibility study. But it also includes analysis and documentation of the project’s anticipated financial results. The organization uses the business case to decide whether a project is worth doing. It also uses the data from the business case to decide which projects the organization should fund and staff and which do not provide benefits that justify the cost. A very important issue is how closely each of the proposed projects aligns with the organization’s strategy and goals. The overall benefit to the organization is seriously considered. The business case meets these needs by including forecasts of costs and benefits and the calculation of financial measures such as:
– cost/benefit ratio
– internal rate of return (IRR)
– return on investment (ROI)
– return on assets (ROA)
– payback period.
Decision-makers in the organization evaluate the business case for all potential projects. They authorize those that meet existing organizational criteria for one or more of the above ratios and alignment with the organization’s strategy and goals.