What’s in a Feasibility Study? Reading between the Lines.

Guest post by Julie Zavon

Thirty years ago when I went to work for a management consulting company I learned feasibility studies can rubber stamp a decision thats already been made. Most of the studies I worked on were honest inquiries set up with the same spirit of discovery as my scientific research had been in graduate school, but I hated the projects that werent, the studies whose outcomes were pre-ordained. Working on them felt like intellectual prostitution and put a spotlight on what goes into a credible economic feasibility study.

A good feasibility study not only determines whether a project is economically viable, it identifies riskrisk that the feasibility studys conclusion might be wrong. Yet in our city that risk is not usually mentioned. Our feasibility studies justify building a stadium or a streetcar or a parking garage, but we dont hear about the assumptions, data, or methodology used. Thats a mistake because thats where problems often occur.

Feasibility studies examine what might happen over 2030 years. To make those projections, assumptions are made about multiple factorseconomic cycles, interest rates, the labor market, the competitive landscape of local businesses, etc. People doing feasibility studies made assumptions about increases in real estate values and the resulting tax revenues that would be generated to pay for the stadium. They made assumptions to estimate the dollar-value increase in local business that would result from a refurbished Music Hall. They made assumptions about how many people would ride the street car daily. Yet no one can reliably predict the future. Everyone knows that. Thats the risk. So what happens if the feasibility studys projections are wrong? How much more money does it cost taxpayers when the scenario that justified publicly subsidized financing doesnt materialize?

Good feasibility studies identify risk factors clearlywhich key assumptions, if incorrect, put the project in the lurch and leave the public holding the bag. How much risk is the City willing to subject taxpayers to? Before giving the nod to a project, the City should do more than refer to a feasibility study for justification; it should examine the study, kick the tires, and look under the hood. Here are a few points that should be considered to make sure our citys feasibility studies are as robust and intellectually honest as possible.

Who supplied the data and assumptions used in the feasibility study? Did they come from an interested party or from an independent source?

Who was permitted to give input and feedback on the quality of the data, assumptions, etc., to ensure they were realistic, not overly optimistic or simplified, and that nothing was overlooked? Did the public have an opportunity to vet or comment on them?

Did the party who outlined the studys parameters or paid for it stand to gain from the outcome?

Who did the feasibility study? Were they selected in a competitive process? What criteria were used to select them?

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2 thoughts on “What’s in a Feasibility Study? Reading between the Lines.

  1. Chip Kussmaul

    You know the old saying, “Lies, damn lies, and statistics.” Every report is biased, because we are all biased. A good study lays its bias on the table, and references the reader to other studies with other perspectives. No scientific study will be taken seriously if it is apparent that it is attempting to “shout down” its opponents.

    And then there’s politics.

    Here;s an interesting perspective http://www.popsci.com/nothing-truth

    Reply
  2. executivedreamer Post author

    I love cincyopolis. Where else would I find the above reference perspective, mushing together ideas about science and commercial real estate development?

    “The much-vaunted “scientific method” and its objective pursuit of truth often cannot be found in the work habits of individual scientists. It’s manifest only in the combined efforts of the scientific community, with researchers constantly testing and criticizing one another’s work.”

    How true, how true – about everything in life. None of us are complete in and of ourselves.

    Thank-you, Chip.

    Reply

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