Feasibility Studies: Feasibility Study

Discover How Shorace will ensure that YourFeasibility Study is the best possible response to the Opportunity or Problem that You Have

You have probably arrived at this web page because you need to do a Feasibility Study on a Problem or Opportunity. Or you may have been told to do a feasibility study by your boss – because he hasn’t got a clue how to do one!  

The first thing that you have to do is make sure that you don't waste your time by looking at loads of old studies that were badly done and that will just mislead you. Because many of these – in fact most of them will be a waste of your time because all that you need to do is to understand the simple basic principles that must underly every Feasibility Study.

Then if you can write reasonable English and can understand spreadsheets you can produce a Feasibility Study that will be a highly bankable document. One word of warning though - many studies will need some research or surveys carried out by technical experts. If you cannot avoid this then I can show you how to minimise the cost of these studies.

OK So You have an Opportunity that can make you a lot of money and need a document that shows that your brilliant idea will work

What does the Feasibility Study document need to include?

The most important thing to understand is that every successful project must be carried through a series of steps - This is illustrated in the following graphic.

Every successful project MUST go through these stages of project development if it is to be successful.

In Step 1 You must identify and clarify every Aspect of your Objective

In Steps 1 and 2 You must show that your idea WILL work.

Steps 3 and 4 You must show HOW to make it work

In detail there is a lot more to it - but in principle you now have all that you need to know how to carry out a successfulfeasibility study.

You will find that most Feasibility Studies will need to include the documents for Steps 1, 2 and 3. In Shorace these are:-

Step 1 - Shell

Step 2 - Optionology

Step 3 - Refinement

The Project is then completed through Steps 4 and 5

Step 4 - Accordance

Step 5 - Execution

One important thing to bear in mind is that the idea, problem or opportunity is not actually costing anything at the moment that the project is conceived.

However, the minute that anyone starts to develop the idea, project development costs start to build up.

And – Most importantly – at every project stage – from 1 to 5 – every stage will cost several if not many times the previous stage.

So every stage must be planned and carried out as perfectly as is possible with the resources available so that if the project is a dud – it is cancelled before any more money is wasted on it.

I am going to say that to you again in different words so that you thoroughly understand the principle. The thing is that although you may have had a good idea

IN PRACTICE YOUR GREAT IDEA MAY NOT WORK!!

Because it may not work you owe it to yourself and everyone involved in the project to prove that it won't as quickly and as cheaply as possible

A Feasibility Study is like a 3 Obstacle Race

So your feasibility study is like a 3 obstacle race where the obstacles get much bigger and higher at every stage. And the documents produced at every stage must be that much better and more detailed than the documents from the previous stage to enable the project to move on to the next stage.

This very basic principle is ignored by just about every single educational institution on the planet – probably because most of the people that teach at these places have never really dealt with a live project.

Be warned that there are some projects where it is imposssible to do a Feasibility Study. For instance:-

How would you undertake a Feasibility Study to build and race a Formula 1 racing car for example? In this case the answer is that you can’t because the data required to substantiate the study is not available unless you “do a McLaren” and buy it form a disgruntled Ferrari team member – of course there is a then a little matter of a $100 million fine!

What about a new hotel – Yes this is easy and straightforward because all the required data will be available from local sources and public data that is held on similar projects.

So when you have a brilliant idea and decide to carry out a Feasibility Study the first thing that you need to consider is the availability of the data that will be needed to get your study through the first 3 project stages illustrated in the graphic above

Will Feasibility Study samples or examples help?

The answer to this is that a well researched Feasibility Study Sample or Example may demonstrate some of the processes involved. But so many studies have basic flaws that it is dangerous if you rely on previous studies for guidance.

So this is what Shorace is all about – it is a simple, easy to understand, short-cut to the production of Feasibility Studies of the highest standard.

The Shorace Story

My name is Will Witt and I have been doing feasibility studies for nearly all my working life as a professional civil engineer.

Every working engineer knows that studies must be undertaken before money is spent on a project. The trick is to spend the money wisely. It is also a basic fact that the more knowledge that you have before starting a project the more likely it is that the project will be a success.

On the other hand if you know very little about your project and just launch out into it, it is virtually certain to fail!

Ok let’s carry on with the Shorace story – How did it all come about.

My First Feasibility Studies were in the 1970's

Well I did my first feasibility studies in the 1970’s – mainly on ports, quays and industrial projects.

My very first feasibility study was for a coal merchant that wanted to reorganize his coal storage facilities and the yard for his trucks. I suppose the result was inevitable – I knew nothing about handling coal and the project sponsor did not provide an adequate brief. So the documents that I produced were worthless and my firm at the time had a job getting paid for the work. Even then it was obvious that project Feasibility Study Briefs are a bit like computers – if you input crap – you get crap as output.

I did lots more studies over the next few years and gradually developed enough skill and experience to actually advise clients on how to write their Feasibility Study Briefs.

Feasibility Study is a total misnomer!!!

You may have been told that you must do a feasibility study. But you do not want to know if a particular concept is feasible - You know that already.

What you really want to know is - what do I need to do to answer the question;

"Will this project produce Sufficient Return on the Investment of my Time and Money to make it worth bothering with"

If you look at my biography on the "Meet Will Witt" page you will see that I have spent most of my working life doingFeasibility Studies and Master Plans (A special sort of Feasibility Study).

Throughout my working life I have wondered about the term "Feasibility Study" and the misunderstandings that result from the way it is used. This page tells the story of how an alternative approach can be used that produces a much better ROI - or will tell you at an early stage that the project is not viable.

Very Large Projects working as a Consultant to KBR

I worked for 10 years as a specialist consultant, on very large projects, to one of the biggest and most infamous engineering construction company called KBR (Kellog Brown & Root) between 1995 and 2005. It was then owned by Halliburton the company where the the US vice-president Dick Cheney was CEO.

Frequent discussions on the Scope of Feasibility Studies

Because of the frequency that Requests for Proposals (RFP) for Feasibility Studies passed across my desk I was constantly in discussion with the other "Gurus" in KBR on what should and should not be included in these proposals.

Every RFP was different showing that great uncertainty existed throughout the industry on what should be included or excluded from a feasibility study.

Millenium Project Failures

It was about this time that all the Millenium Projects were being developed.

There was great hilarity around the office when we heard the latest industry horror stories about the Millenium Dome, The Portsmouth Spinnaker and the many other projects funded by the UK lottery that were a disgraceful waste of the publics money.

By the way I exclude the Eden Project and the London Eye as they have both been outstandingly successful - it shows that it can be done by good project managers.

"Missing Link" in the Project Development Process

As this went on I became more and more intrigued by the apparent "Missing Link" from the early stages of project inception and development.

It was strange because the construction industry is studied to death by academics and researchers but there is very little published literature on actually how to get a new project up and running.

One of the leading Oil Companies Project Development System

Then by pure coicidence l was introduced to a highly, focussed systematic project development process that had been developed by one of the major oil companies in the late 1990's.

It was designed to overcome problems that the oil company had been having with the development of its own projects. It was developed and put into operation at great cost - but it worked

We scoffed at it to start with

Very experienced engineers always scoff at all new ideas and I was very sceptical about it to start with. There was a lot of mickey taking about all this weird jargon that the oil industry guys were using and imposing on us.

Simple Concept

It was simple concept that involved;

• Identification of a project framework
• Systematic identification and analysis of alternative ways of achieving the project objectives
• Repeated testing of the project's viability at each Step
• The deployment of a project communication plan

Although the concept is simple, implementation is complex because of the number of issues involved. As I used it more and more over a two year period I realised that it was a very powerful tool that would lead to better projects if properly deployed.

The "Eureka" moment!

This was a "Eureka" moment for me because I quickly realized that the approach could have been used in just about every project that I had ever been involved with.

I could not do much with the idea at the time because of the pressure from the projects that I was working on.

The Core Element of Shorace

The core element of Shorace that sets it apart from the conventional approach to feasibility studies is the systematic identification and analysis of alternative ways of achieving the project objectives.

What is it that makes this so important?

The answer lies in the following ration;

1 : 5 : 200

I know that you could ask hundreds of construction professionals what this ratio represents and they would not know!

It is never 100% accurate but it is a rough relationship between the following;

Capital Cost : Total Operating Cost : Total Salary Costs of the building occupants

In other words, even after discounting is taken into account your ROI will be predominantly determined by the productivity of the people that will work in the project, partially determined by Opex and not affected at all by the Capex.

So the only way to maximise your ROI is to examine every available alternative and tune the better options based on your NPV analysis.

If you are reading this and you are experienced in Feasibility Studies you will know that the study of the alternatives is predominantly carried out in a very ad hoc way during a process that is often called a "Pre-feasibility study"

It is no wonder that so many projects go badly wrong!

The Development of SHORACE

I have now have now developed Shorace into a system that can be used for all types of engineering and construction projects.

I have called it SHORACE an ancronym derived from the names that I have given to the first 4 steps of project development followed by the Execution Stage.

It is not a Panacea

To be frank it is not a panacea that will make a bad project manager a good one.

It is just a framework that will encourage a good project manager to produce the goods - a high ROI - or an early recommendation to close the project before any more money is wasted.

The underlying principle is that you develope your a Stage at a time and test your project against the yardsticks laid down during the 1st Stage.

Your project must past each test or the yardsticks need to be changed - and the senior management must be consulted about such a change.

Readers and Your Problems

If you are reading this I expect that you have a project to develop - many readers will be new to the whole concept of project inititiation. Many more will be brushing up on their techniques because if my experience is anything to go by many will be very uncertain as to how to tackle their problem.

The Problems involved in getting a Project started

You are probably;

• Confused by the massive amount of conflicting advice and information on how to even start and what is this thing called a "Feasibility Study" that everyone keeps on about

• Perplexed by the difficulty of actually getting started

• Concerned by possibility that you might spend a lot of time and money and not get value for it

• Uncertain as to what the Scope of the project should be

• Worried about how much it is going to cost

• Frustrated because you seem to be going round in circles

• Anxious about the risks that might be involved

• Nervous about personal responsibility for the project

• Terrified that it will be disaster project that massively overruns budget and schedule

The SHORACE process can deal with all these issues.

What is SHORACE?

It is a project inception and execution process that concentrates on all the main issues that are germane to the project At the Appropriate Stage During the Project Development Process

In other words you will not be committed to massive spending on all kinds of special surveys and investigations until they are absolutely necessary and more importantly

"You Know What You Need To Know"

and not what some self-interested consultant tells you what you need!

Back to the Shorace Story

Founding partner of Robert West and Partners

I was a founding partner of Robert West and Partners in the 1970’s and undertook the feasibility studies on such projects as the West Bank container terminal at Ipswich Port which is still in operation as well as the infrastructure for the Lakeside shopping centre and the adjacent retail warehouse complex on the old Tunnel Cement works site in Thurrock, alongside the northern M25 approach to the Dartford Crossing.

Robert West Consulting is also still in business today. Have a look at www.robertwest.co.uk

Pentacon Design and Construction

I then set up a new type of UK business called Pentacon that did studies, engineering consultancy as well as construction. This was an entirely new approach in the Uk in the 1980’s and was very successful for a while.

I did the studies on work to a total value of approximately £60.0m between 1985 and 1990 for a variety of major blue chip clients. This included being "The Engineer" for the infrastructure of the suburb of Chafford Hundred at West Thurrock in Essex.

This project was a tough one. It involved feasibility studies and master planning of roads, drains, utility services, railway station, schools and shops, on 5000 hectares of abandoned quarries, for a new suburb of 10,000 people - all undertaken over a 5 year period in close conjunction with Thurrock Borough Council.

All the housing has now been built and occupied and it is now a thriving community. Just search for Chafford Hundred in Google and you will see.

I also did the feasibility studies, and designed and built offices, warehouses and industrial units for a large variety of developer, retailer and manufacturing clients throughout the UK during that time.

I was also the developer of the Palmerston Business Park in Fareham, Hampshire. In Spring 1990 it was valued at $20m and 6 months later $10m - and the bank pulled the plugand then sold it all on at a massive profit - I have never trusted banks since!

Personal Bankrupcy

This was my first setback and it was a big one! I had given personal guarantees to the banks and was eventually forced into personal bankruptcy in 1992. I got divorced at the same time - what a year!

This was during the big construction recession of the 1990's and so I bought myself some tools and started building house extensions and garages etc - and taught myself to do all the building trades. I enjoyed the work - but not working outside in the UK winter!

Working as a consultant to KBR on the Biggest Projects in the world

In the mid 1990's the construction industry started to pick up again and so I abandoned the builder's tools and started to work as a consultant to Kellog Brown and Root (KBR) - back in the oil and gas business that I had worked in during the 1970's.

Working at KBR turned into a fantastic opportunity and for 10 years I was involved with some of the biggest projects in the world including;

• Flood protection projects for London Underground - stopping the threat of the River Thames getting into the Underground Tunnels
• The Darwin to Alice Springs railway in Australia
• The giant Tengiz onshore oil-field in Kazakhstan
• The D154 nuclear refueling facility project at Plymouth dockyard in Devon
• The massive Kashagan offshore oil-field in the Caspian Sea
• Master plans for two $10 billion + gas based industrial estates with their own ports, power plants and aluminium smelters in Sohar, Jordan and in Darwin, Australia
• Various LNG export facility projects of up to 2 $billion each.
• New Dry Docks at Richards Bay in South Africa

Thinking "Outside the Box"

At KBR I was always involved in the master planning and feasibility study stages because of my wide experience, statistical analytical ability, enthusiasm and inclination to think "Outside of the Box"

Where Shorace began

During the 10 years with KBR I started to take a very active interest in the theory and practice of feasibility studies and began to increasingly realise that it was a discipline that “Had No Discipline”

Virtually every study brief that I saw was dreadful:-

• The study objectives were rarely spelt out and never clearly
• The Project Sponsors team were poorly led and gave conflicting advice and instructions
• Budgets were nonsensical
• The necessary pre-study documents were rarely available
• The project documentation was incoherent
• The Project data was inadequate, inconsistent and incoherent
• Surveys had been commissioned that were a total waste of money
• Further surveys were required when the budget had already been spent on useless surveys

Then – one day – I received a request for a proposal to do some feasibility study work from one of the major international oil companies. The request included quite a bit of jargon that I had never heard before and a comprehensive set of back-up documentation that was very coherent and inclusive.

I was quite impressed with the logic and coherence of the documentation - but like all very experienced professionals - my colleagues and I scoffed at all the jargon. But over a period of time I began to realise that the jargon was necessary to describe an entirely new approach to project feasibility studies that actually seemed to work!

Over a period of three years I did a lot of work for this particular oil company and got thoroughly immersed in the method that they were using to manage project development. There were quite a lot of procedures that were unique to the particular oil company and the oil business and to be honest quite bureaucratic – but the system itself was fundamentally very sound.

I have now taken the basic system underlying the oil companies method and have developed it into Shorace. Shorace is based entirely on the principles of the oil companies system but heavily adapted for the current needs of engineering and construction development projects.

The Old Obsolete Methods of Feasibility Study Production

Feasibility Study Jargon

You may need some help in understanding some of the Jargon that is in common use in Project Development at the moment. I have included the following information to help in your study of other Feasibility Studies that you will come across. Just be warned that most of them will be very poor documents but the following notes should help you understand the various terms that are in common use..

Economic Feasibility Analysis and Reports

Most Feasibility Projects require Technical Feasibility, Operational Feasibility, Economic Feasibility and FinancialFeasibility Reports that are brought together for Analysis in one (supposedly) coherent document.

This document and the presentation material that is derived from is often used to present the Feasibility Report to backers and funding organizations such as banks and development agencies like the World Bank or the EBRD (European Bank for Reconstruction and Development).

The Feasibility Report is also used as the key document for persuading both Internal and External Stakeholders to back the Project.

The Project Study or Report Study as they are sometimes known are documents that can vary in size from 10 sheets of paper up to many volumes of detailed drawings, maps and tables. However the purpose of the document is always the same. That is, it is designed to provide all the germane information that any potential project investor might need.

Feasibility Study Terminology in Different Industries

Many industries use different terminology for the various aspects involved in a Feasibility Report or Feasibility Study.

The one common factor in all these approaches is that it is invariably a staged approach. This is always necessary because the cost of a Feasibility Study or Feasibility Report can be quite large even for a comparatively small study. So the staged approach is essential to allow the project to be cancelled or abandoned, as soon as it is apparent that it does not work, to minimize unnecessary costs.

If you examine the following table it will become obvious why so much confusion exists as professionals are always moving between Construction, Investment Planning and the Oil and Gas.

Feasibility Study Terminology in Different Industries

Study Types

Technical Feasibility or Technical Study

As its name suggests this is a study that concentrates on technical feasibility of a project and may be necessary to make sure that a technical innovation works before undertaking a full-blown Feasibility Study.

Market Feasibility or Market Study

A Market Feasibility Study is one that concentrates on the size of the market for the product or service involved and may be necessary to make sure that the prices that can be charged for the product or service are realistic before undertaking a full-blown Feasibility Study.

Pre-Feasibility Study

This term is normally restricted to the construction industry but is also used occasionally in the Oil and Gas Industry. It invariably involves the different Alternatives or Options that can be used to achieve the Project Objectives.

Business Feasibility Study

In this type of study the resources of the sponsoring business may be limited and the Feasibility Study is concentrated on the management capacity of the Sponsor.

Alternatively the Technical and Market Feasibility may have already been confirmed and the Feasibility Study is then restricted to Business Aspects such as the Forecast ROI (Return on Investment) or NPV (Net Present Value)

Feasibility Study Proposal or Proposal Study

Sometimes managers decide whether to proceed with a Feasibility Study by commissioning Proposals from Consultants to see whether the Consultants know more about their Business than they do. Needless to say this is very bad pratice!

Example or Sample Feasibility Studies

Many Project Managers look for these document so that they can use them as crib sheets for their own Feasibility Study orFeasibility Studies. This is really quite unnecessary as if the Easy to Follow Shorace Approach is used then all the various parts of the study and the documentation fall into place quite naturally.

With Shorace You don’t need to worry about all this Jargon

Just follow the simple steps outlined in Shorace and you can create your own FeasibilityStudy without worrying about what all this jargon means.