Feasibility analysis
| Feasibility analysis |
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Feasibility analysis is an analysis of a project which supports process of decision-making by scrutinous examination of its strengths, weaknesses, opportunities and threats, while also providing information about necessary resources and chances to succeed [1].
Feasibility analysis is not a strict methodology and is not normative. Rather, it is a broad term describing actions to evaluate at the early stages of planning, whether project should proceed, be redesign or else abandoned [2].
Vulnerability of a project
To assess feasibility of a project, it is important to find likelihood of its failure.
Vulnerability is "condition experienced by any of the four Ps (Plan, Processes, People, Power) of a project that make it susceptible to failure"[3].
Potentially harmful factors in projects are called Points of Vulnerability (POV): "temporal and physical points along the various stages of a project that impede on the calendar, costs, and/or quality of the project as it faces adverse conditions (negative forces), whether these conditions are under human control or not" [4].
As definitions above imply, projects are subjects to influence of internal and external POVs.
Areas of feasibility
Feasibility analysis of every project is different due to differences between industries, environments, settings, project-scales, constraints and other factors.
TELOS acronym has been created to help to identify key areas of any project's feasibility [5][6]:
- T - Technical (also Technological) - whether or not the project is technically/technologically possible
- E - Economic - affordability, costs and profitability of project
- L - Legal - is the project compliant to laws and regulations
- O - Operational (also Organizational) - is project adhering to organization's needs and whether or not needed resources are available
- S - Scheduling - expectations on deadlines and ability to meet them
Feasibility analysis vs. cost-benefit analysis
Even though feasibility analysis is widely regarded and used tool, it should be used with precaution, especially when project's marginal benefits exceed marginal costs. There are other types of analysis which assess project strength and weaknesses, of which cost-benefit analysis is most popular.
Cost-benefit analysis (CBA) calculates project's value simply by using monetary terms of costs and benefits to provide their net present value. Compared to feasibility analysis, CBA is much more straightforward.
Taking example of feasibility analysis for regulations of increasing workspace safety, feasibility analysis can lead to suboptimal (economically) results. These results can be divided into: underregulation and overregulation.
Underregulation is possible where:
- cheap precaution technology can be developed, but does not yet exits,
- revenues in industry are low and do not scale well with revenue,
- low profits of industry do not allow effective regulations.
Overregulation on the other hand can occur if:
- feasible regulation costs exceed benefits from risk reduction,
- industry has high revenues or high profits, or precaution costs increase heavily with revenue.
In these cases, cost-benefit analysis is better, as it is much cheaper, faster and gives results easier to evaluate[7].
References
- Akkermans H., Speel P. H., Ratcliffe A. (1999), Problem, Opportunity, and Feasibility Analysis for Knowledge Management: An Industrial Case Study, "Proceedings of the Twelfth Workshop on Knowledge Acquisition, Modeling and Management", Springer-Verlag, London
- Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, (2014)
- Hall J. A. (2010), Information Technology Auditing, South-Western Cengage Learning, Mason
- Masur J., Posner E. A. (2010), Against Feasibility Analysis, "77 University of Chicago Law Review", vol. 657
- Mesly O. (2017), Project Feasibility - Tools for Uncovering Points of Vulnerability, CRC Press, Boca Ranton
- Šerman B., et al., (2017), TELOS Feasibility Analysis of Photovoltaic Power Plant, "Applied Engineering Letters", vol. 2
Footnotes
Author: Karolina Próchniak
