Feasibility study (FS) is a document which contains the information that justifies the economic feasibility of a product or service development.. In other words, the FS contains an analysis of necessary resources spent to achieve expected results of a project.
The aim of such a project can be either construction of a new facility or restoration of an existing building, or technical re-equipment of an existing production facility.
As a rule, the FS contains the following information:- initial data - information on a market sector;
- existing opportunities of company's current business;
- sources of raw materials, material factors, business development share;
- capital costs expected to achieve the objective;
- operational costs during the project implementation;
- production schedule;
- financial policy and financial component of the project;
- general information about the future project.
Thus, the FS contains a description of the industry where an enterprise operates, and provides a justification for selecting an areal and geographical location of a current and expected business, and describes the type of products. Description and justification of products prices are also absolutely necessary. The financial part of the FS contains the information on financing sources and receivables maturity date, borrowed assets use conditions.
A feasibility study is always drawn up for the benefit of both an entrepreneur - to understand what he can expect after the project is implemented, and an investor - to understand the payback period.
To some extent, the FS is a shortened version of the business plan.
TECHNICAL AND ECONOMIC ESTIMATE (TEE)
The TEE is developed to justify the economic feasibility of a chosen version of designing and construction of a new facility, restoration of an existing building or a version of technical re-equipment of an existing production facility.
The TEE composition and content will always be reduced in comparison with those of the feasibility study, depending on the design specifics and future enterprises, buildings and structures, processes and production equipment which are proposed for it.
While the FS justifies the economic feasibility of developing a product or service in principle, the TEE justifies the choice of specific tools and methods to implement the design by identifying the most feasible ones in economic terms in this case, taking into account current market conditions.
The TEE is, in fact, a shortened version of the feasibility study (FS), or its detailing continuation.
Development of the TEE should be started approximately 0.5 to 1 year before construction, depending on the scale of a planned facility, designing period and surveys, and on obtaining initial permits, including a construction permit.
