Project Feasibility Stage : Technical Feasibility

The do-ability of a project must be determined at the early stages of the project and technical feasibility studies enable the Government to justify the do-ability of the project from technology, environment, social and market perspectives. Technical feasibility studies are generally undertaken by the public entity once a project is identified and prior to project structuring stage. It is to be remembered that at this point, the public entity need not make a decision on the mode of implementation of the project. However, the studies need to be undertaken keeping in mind the possibility of implementation under a PPP framework.

Technical feasibility is an important aspect of a PPP (Public-Private Partnership) project feasibility study. It refers to whether the project is technically viable and can be implemented successfully.

During the technical feasibility stage, the following key factors are typically evaluated:

1. Site Assessment: The site where the project is proposed to be built should be assessed to determine whether it is suitable for the proposed project. This includes evaluating factors such as soil conditions, environmental impact, and accessibility.
2. Engineering Design: An engineering design study is conducted to determine whether the proposed project can be constructed, operated and maintained with the available technology and resources. The engineering design should ensure that the project meets the required technical specifications, codes and standards.
3. Procurement Strategy: A procurement strategy is developed to determine the most efficient and cost-effective way to acquire the necessary materials and services for the project. This includes evaluating different procurement methods such as design-build, build-operate-transfer (BOT) or public-private partnership (PPP) models.
4. Technology Evaluation: The technical feasibility study evaluates the available technology to determine the most suitable one for the project. This includes evaluating the technology’s compatibility with existing infrastructure and its ability to meet the required project specifications.
5. Resource Availability: The study assesses the availability of resources, including skilled manpower, equipment, and raw materials, to determine whether they are sufficient to complete the project.
6. Operational Viability: The technical feasibility study also evaluates the operational viability of the project. This includes assessing the project’s ability to operate efficiently, maintain a high level of performance and generate sufficient revenue to cover operating costs.

Outcome & Implications of Technical Feasibility Studies

The outcome and implications of a technical feasibility study for a PPP project are significant and can have far-reaching consequences. Below are some of the outcomes and implications:

1. Identification of technical risks: The study helps to identify potential technical risks and challenges that could affect the successful implementation of the project. This enables the project team to develop appropriate risk management strategies to mitigate those risks.
2. Confirmation of project viability: The study helps to confirm the technical viability of the project. This is important because it ensures that the project can be built and operated efficiently and effectively.
3. Determination of project cost: The technical feasibility study helps to determine the project’s cost, which is critical in the procurement process. It ensures that the project is cost-effective and can be delivered within the allocated budget.
4. Selection of the best procurement strategy: The study helps to identify the most suitable procurement strategy for the project, taking into account the technical requirements, budget, and project timelines. This ensures that the most appropriate procurement strategy is chosen to achieve the project’s objectives.
5. Guidance for future planning: The technical feasibility study provides guidance for future planning, such as maintenance, upgrades, and expansion of the project. This ensures that the project is designed to be flexible and adaptable to changing circumstances.

Development Options

Technical feasibility studies are carried out primarily to analyse the possible design and engineering options that could be applied and the different technologies that could be adopted for project implementation. The various development options generated from the technical feasibility study rest on the premise of delivering quality service that is cost-effective, energy efficient, environment friendly, commercially and economically viable and beneficial to society. At the same time, the development options must be flexible enough to allow for technology improvements that may be required from time to time.

Inputs to Project Feasibility and Structuring

The key inputs from the technical feasibility study are the cost estimates (capital and O&M costs) and revenue estimates which determine the financial and economic viability of the project. The inputs have a significant impact on the implementation structure decided for the project. It is therefore important that the costs and revenues are estimated accurately, to the extent possible.

Estimated Project Cost / Total Project Cost

The costs incurred to build/ renovate/ rehabilitate an asset or provide a service is referred to as the capital cost of the project (also termed as project cost) while recurrent costs during operation and maintenance of the same is termed as the operation and maintenance (O&M) cost.

The project cost is estimated primarily from the base construction cost (sum of costs associated with the construction of all project facilities) for a selected development option, derived from the technical feasibility study. Other costs such as escalation in prices, contingencies, pre-operative costs, financing costs and interest costs during construction (IDC) are added to the base construction cost to arrive at the estimated project cost. 

O&M Costs

The other component of cost is the O&M cost. This normally includes direct costs and overheads. Overheads reflect the expenditure for administration, management, risks and profits. Direct cost is the cost of inputs such as labour or material, which is determined by the cost of construction and the economic and market conditions.

 Inputs to Bidding Documents

The outputs of the technical feasibility study serve as an important input to finalize the bidding documents. Bidding documents typically consist of the Request for Qualification (RFQ), Request for Proposal (RFP), Draft Concession Agreement (DCA) and Project Information Memorandum (PIM). There are a few other variants of bidding documents which are used on the basis of project need.

1. Request for Qualification and Request for Proposal: The value of the bid security and performance security are derived as percentage of the estimated project cost. Estimated project cost also serves as one of the factors in determining other conditions of the bidding document such as eligibility criteria and qualification criteria pertaining to the technical capacity and financial capacity of a bidder.

2. Project Information Memorandum (PIM): PIM provides information about the project and is part of a bidding document. Model RFQ & Model RFP issued by the Ministry of Finance, Government of India (GoI) provides for the public entity to insert either an information memorandum or a project report/feasibility report as part of the documents for bidders‟ information. The contents of the PIM are generated from the technical feasibility study report.

3. Draft Concession Agreement and Schedules: In addition to information provided in the PIM, the technical feasibility study also provides details regarding the project site, development and construction requirements, etc. which is included in the agreement to be executed with the selected bidder

4. Key Performance Indicators: The clauses on minimum service levels or key performance indicators that feature in the agreement are largely determined from the technical studies. For example, the design capacity of the road in a road project and the service level benchmarks pertaining to reduction in non-revenue water, continuous water supply, etc. in a water supply project are derived from the technical studies.

Approvals and Clearances

Project development requires availability of certain core/trunk infrastructure in place, at least up to the battery limits of the project site. Land is the foremost requirement for any project. The project site and acquisition of land that is free of encumbrances is the responsibility of the Government. The technical studies list out all the approvals and clearances that have to be obtained for implementation of the project. It also lists the utilities/ancillary infrastructure that may be required for the project.

Utilities/Ancillary Infrastructure

In projects such as the development of roads, bulk water supply and urban rail development, the alignment options outlined in the technical feasibility study could entail shifting of utilities from the project sites. These are listed in the technical feasibility study report. It is in the interest of the project that the costs incurred on land acquisition and utility shifting from the project site are borne by the public entity.

Types of Technical Studies

Technical feasibility studies include carrying out several activities to determine the technical viability of the project. A project being developed in a particular region will have a set of technical studies that are specific to it. It is critical to carry out such studies to ensure that when the project is bid for, bidders will have all the details needed for informed decision-making.

Indicative Technical Investigation Studies

1. Roads

• Alignment studies
• Topographic studies
• Traffic study including origin-destination surveys, willingness to pay survey, willingness to shift survey, junction traffic assessment etc. The traffic study would generally be carried out for a 7-day period to screen out outlying conditions
• Infrastructure requirement based on the alignment, topography and traffic studies is determined

2. SWM

• Quantum of waste generation
• Source wise waste generation
• Waste characterisation
• Assessment of calorific value
• Mapping of waste management system
• Landfill site assessment

3. Water Supply

• Base network map, setting out the assets (bulk and distribution) and their respective locations, location of any other utility lines
• Quality checks of the water samples
• Soil characteristics
• Hydraulic testing
• UFW assessment
• Inventory and status of assets (sub and super-surface) including source details, length of transmission and distribution networks, type of material, year of construction and installation as applicable, reservoirs and overhead tanks, pumping machinery, bore wells, water treatment plants (capacity, type and current status)

4. Ports

• Equipment Requirement Assessment
• Traffic studies
• Bathymetric & Seismic studies
• Sub-surface investigation surveys
• Geo-technical surveys
• Topographic surveys
• Wave analysis
• Navigational channel, turning circle survey, navigation requirement surveys

Market Study

Market study is conducted at different points in time during the project feasibility study stage (which includes technical feasibility, financial feasibility, value proposition of project and economic analysis) of project development process. It involves assessment of suitability of technology options

assessment of demand, user preferences in terms of tariffs, likely usage of project facilities, willingness to pay etc. The market study estimates the likely revenues that will accrue to the project over the project period. This is an important input for the economic and financial viability analysis and is critical when assessing the bankability and affordability of a project.

Environment Impact and Social Impact Assessment

Along with the technical feasibility study, the legislative and regulatory framework of a project may require the public entity/private partner to undertake Environment Impact Assessment (EIA) and Social Impact Assessment studies prior to according approvals. Approvals may pertain to project development/approvals for sanction of funds. For instance, multi-lateral agencies that lend to infrastructure projects usually review the impact of the project on the environment and society. Hence, it may be required to conduct Environment Impact Assessment (EIA) & Social Impact Assessment (SIA) studies simultaneously with or immediately after the technical feasibility study in accordance with the prevailing statutes. 

हिंदी अनुवाद : परियोजना विश्लेषण चरण: तकनीकी साध्यता

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