2.5 Summary

A practising project manager – indeed, anyone who works regularly in a project environment – can benefit from being able to apply his or her critical faculties to proposals. People can also find themselves in the position of participating in drawing up a feasibility study for a proposal. The feasibility study develops a scenario and a functional specification (what the new or revised system should do); it should identify whether the scenario is technically feasible, its likelihood of success in ecological, social and political terms and whether it is financially feasible. Financial feasibility is assessed in a cost–benefit analysis that thoroughly identifies and assesses tangible and intangible costs and benefits. A cash flow statement for the proposal is produced, then analysed by one or more of a number of methods ranging from the simple payback period to the internal rate of return. You have been given some practice in each of these methods in this section. The risks inherent in a proposal also affect its feasibility, so identifying, assessing and managing them is important. At such an early stage as the feasibility study, risks are brought to the attention of more senior managers and may be delegated to someone to explore further. Proposals resulting in projects that are large, or that have many novel elements or that depend upon an immature technology, or that are structurally complex to manage, are identified as very risky ventures.

Having studied this section, you should be able to:

• describe the elements of a feasibility study
• state the general aims of a functional specification
• sketch a rich picture to represent the ‘soft’ (social, political, ecological) elements of a proposal
• describe what a scenario is and generate some simple scenarios in response to a statement of a problem
• assess the maturity of a technology, given that you know something about the area (for example, people working in civil engineering would not be expected to assess the maturity of software development methods, and people working in software engineering would not be expected to assess the maturity of some area of materials science)
• carry out a features analysis and explain how a figure of merit can be derived
• frame some questions to be investigated in an ecological assessment of a proposal
• identify and distinguish between capital and revenue costs, and tangible and intangible costs and benefits
• understand what is meant by financing costs, internal costs and overheads or indirect costs
• describe the effect of time on values
• draw up a simple cash flow statement and justify your choice of the period used
• make a simple evaluation based on payback period, and know the limitations of this method
• calculate net present value and internal rate of return from given cash flows
• list categories of risk
• list the three dimensions of risk in proposals.