Assessing a project

Project Viabiity

A project is not typically considered viable if its value exceeds its costs. Sometimes the cost viability of a project can change over the course of the project’s development or implementation.
For example, if you have a particular amount of money designated for a project, and it appears actual costs will exceed the budget, the project is likely to lose its viability. Many factors can impact costs, such as an increase in the cost of supplies or materials or the scope of the project.

  • Time
  • A project that is not on track from a deadline perspective can lose its viability. For example, if you have a project to design and print invitations for a grand opening event, if time delays result in the invitations going to print the day before the event, the project loses its viability. Invitations issued after an event has taken place are worthless, and continuing to pursue their production wastes time and money. Likewise, delays that result in additional fees -- such as rushed late printing fees -- may also render a project non-viable.
  • Manpower
  • Losing key members of the project staff can cause a project to lose its viability. For example, if you have a graphic designer on staff who is developing your new logo, and that person quits without notice, the project may lose its viability, because the manpower anticipated for the role no longer exists. The project has the potential to regain its viability if someone else can take over the task or it can be effectively outsourced to another party.
  • Quality
  • If the quality of a project is not attainable as anticipated, it can lose its viability. For example, if you own a small construction business and provide an estimate for building a custom home, that estimate is based largely on the current price of home-building materials. If the price goes up suddenly or the same quality of materials is no longer available, the project, as planned, loses its viability. It can regain its viability if materials of equal quality and similar price can be obtained.

    Economic viability & Feasibility

    Assessing Project Feasibility

    Implementing a project as a PPP (Public Private Partnership) only makes sense if the project itself is sound.

    Most governments therefore subject proposed PPP projects to the same technical and economic appraisal as any other major public investment project.

    There are typically two broad elements to this assessment:

    Developing and assessing the feasibility of the project concept.

    Appraising whether the project is a good public investment decision based on an economic viability analysis.

    Defining a project and checking feasibility

    A project must be clearly defined before it can be appraised. Project definition includes the description of the physical facilities that will be constructed, the technology to be used, the outputs to be provided, and the identification of the end-users. Capital, operating, and maintenance costs should be estimated over the life of the project, as well as any revenue expected to be generated. This definition should be sufficiently broad to apply to a project delivered as either a PPP or a traditional publicly financed project. The PPP contract should focus on output and refrain from specifying the technologies, inputs, and processes to be used. This should be the responsibility of the private operator. However, some technological definition is still needed for initial cost assessment.

    Testing Feasibility

    The project can then be tested for feasibility across several dimensions:

    Technical feasibility—can the project be implemented as planned, using proven technologies, and without unreasonable technical risks?

    Legal feasibility—are there any legal barriers to the project? For a PPP, this includes due diligence to identify any legal constraint preventing the government to enter into a PPP contract.

    Environmental and social sustainability

    at a minimum, does the project comply with national environmental and planning standards?

    In some cases, a higher bar may be set, such as compliance with the Equator Principles—a set of standards on managing environmental and social risk from project finance transactions, based on World Bank Group standards.