Feasibility Study

The feasibility study is a process for gathering information and using that information to estimate and forecast the likely results of proceeding with the development proposal.

SCOPE The feasibility study for a chemical process design investigates both the technical and economic feasibility of the proposed project. The technical part of the feasibility study considers the alternative processes, and the equipment that constitutes the chemical plant in each case. This Project Engineering Standard helps to explore the commonly encountered problems during the feasibility studies of an industrial investment projects.

1. A feasibility study should provide all data necessary for an investment decision. The commercial, technical, financial, economic and environmental prerequisites for an investment project should therefore be defined and critically examined on the basis of alternative solutions already re-viewed in pre-feasibility study.

2. A feasibility study should be carried out only if the necessary financing facilities, as determined by the studies, can be identified with a fair degree of accuracy. Possible project financing should be considered as early as the feasibility study stage, because financing conditions have a direct effect on total costs and thus on the financial feasibility of the project.

1. For convenience of preparation, the feasibility should begin with a brief executive summary, outlining the project data (assessed and assumed) and the conclusions and recommendations which would then be covered in detail in the body of the study.

2. The executive summary should concentrate on and cover all critical aspects of the study, such as the following: the degree of reliability of data on the business environment; project input and output; the margin of error (uncertainty, risk) in forecast of market; supply and technological trends; and project design.

3. The executive summary should have the same structure as the body of the feasibility study, and cover but must not be limited to the following areas:
a) Summary of the Project Background and History
- Name and address of project promoter.
- Project background.
- Project (corporate) objective and outline of the proposed basic project strategy, including geographical area and market share (domestic, export), cost leadership, differentiation, market niche.
- Project location: orientation towards the market or towards resources (raw materials).
- Economic and industrial policies supporting the project.
b) Summary of Market Analysis and Marketing Concept
- Summarize results of marketing research: business environment, target market and market segmentation (consumer and product groups), channels of distribution, competition, life cycles (sector, product). - List annual data on demand (quantities, prices) and supplies (past, current and future demand and supplies). - Explain and justify the marketing strategies for achieving the project objectives and outline the marketing concept.
Indicate projected marketing costs,
elements of the projected sales program and revenues (quantities, prices, market share etc.).
- Describe impacts on: raw materials and supplies, location, the environment, the production program, plant capacity and technology etc.

c) Raw Materials and Supplies

- Describe general availability of:
i. Raw materials
ii. Processed industrial materials and components
iii. Factory supplies
iv. Spare parts
v. Supplies for social and external needs - List annual supply requirements of material inputs. - Summarize availability of critical inputs and possible strategies (supply marketing).

d) Location

Site and Environment
- Identify and describe location and plant site selected, including:
i. Ecological and environmental impact
ii. Socio-economic policies, incentives and constraints
iii. Infrastructural conditions and environment - Summarize critical aspects and justify choice of location and site. - Outline significant costs relating to location and site.

e) Engineering and Technology

- Outline of production program and plant capacity - Describe and justify the technology selected, reviewing its availability and possible significant advantages or disadvantages, as well as the life cycle, transfer (absorption) of technology, training, risk control, costs, legal aspects etc. - Describe the layout and scope of the project
- Summarize main plant items (equipment etc.), their availability and costs - Describe required major civil engineering works.

f) Organization and Overhead Costs

Describe basic organizational design and management and measures required.

g) Human Resources

Describe the socio-economic and cultural environment as related to significant project requirements, as well as human resources availability, recruitment and training needs, and the reasons for the employment of foreign experts, to the extent required for the project - Indicate key persons (skills required) and total employment (numbers and costs).

h) Project Implementation Schedule

- Indicate duration of plant erection and installation - Indicate duration of production start-up and running-in period - Identify actions critical for timely implementation