Feasibility Study

The feasibility study methodology described in the following paragraphs [roughly based on the Front End Loading (FEL) Process] breaks the study down into at least three phases (stand-alone projects with a definite start and end); each with its own set of deliverables and decisions at defined gate reviews allowing for increasing probability of project success and decreasing financial risk. Capital project management methodologies such as the FEL are very complex and the objective here is to provide a mere introduction.

The gate reviews act as a transition between the phases of the project to evaluate the outcome of each phase against the Owners Requirement Specification (ORS) for the particular phase. If the quality and outcome of the phase report fulfils the requirements of the ORS the project will receive further funding to continue to the next phase. Alternatively the project may be returned for better definition, complete change of scope or be terminated in its entirety if benefit cannot be shown or if it is not economically viable or the project is not in line with business objectives.

The purpose is a step by step alignment of the objectives of the railway line with its business needs and strategies, collection and analyses of information, developing basic to final designs, defining execution plans, preparing financial budgets and forecasts, planning the maintenance needs and costs which includes the procurement of mechanised maintenance machinery, etc. The end result leads to a bankable document that may determine whether or not funding can be obtained to execute the project and start the detail design and construction.

There is no standard that formalises the phased feasibility process; therefore, many different variations of the same concept will be seen. The FEL process for example is often used by the mining industry and other large scale, capital intensive project originators where a very long time can pass between the date the need is identified and the date when the project will start to generate income or fulfil its function.

4.3.1. Feasibility Study Phase 1

The objective of the first phase is to convert the abstract idea (the identified need) into a presentational written and graphic description. This phase aims at developing and evaluating the identified need (paragraph 4.2) to establish if it furthers the business objectives of the railway.

In the first phase alternatives for satisfying the need will be defined such as upgrading an existing line or building a new line adjacent to the existing line; it can consider different routes and consider the cost of each route such as relocation of people, the procuring of private land; longer routes versus shorter routes which may pose challenges such as topography, environmental constraints, etc.

The study will consider all aspects of the project from construction to the end of the lifecycle horizon which may be 30 to 50 years and make initial lifecycle cost estimates for each of the alternatives. The study will include an assessment report from each engineering and business discipline covering the following:

 Identification of alternatives together with all considerations for each alternative

 Environmental impact

 Impact on communities (such as relocation of communities) ” Regional Socioeconomic Management Plan

 Legal issues

 Project and Health and safety risks ” Risk Management Plan (RMP)

 Technical assessments

 Key performance indicators for validation

 Economic evaluation for each alternative (cost estimate at this point is typically accurate to 50%) both capital and operational expenditure

 Review against the ORS  Gate review criteria

 Procurement strategy ” Preliminary Supply Plan (PSP)  Preliminary designs and layouts (low level design)

 Development of a Work Breakdown Structure (WBS) with timelines, milestones, process flows, logistic flows, etc.

 Availability of resources and material which will include mechanised maintenance machinery and material

 Recommendations

As part of the above engineering discipline reports, the maintenance requirements of the railway line will already be considered against the objectives of the line with regards to throughput, axle loading, speed, etc. Maintenance machines that will be required during the different life stages of the line will be identified and included in the financial

lifecycle costing estimates. The criteria that are discussed in later chapters of this thesis will be considered to propose suitable machines. It may be necessary to have such a maintenance evaluation and costing for each of the selected alternatives considered.

The phase 1 report will identify those alternatives that should be further analysed in the second feasibility phase. All alternatives should be mentioned in the reports to show that they have been considered.

The ORS and scope will also be updated and submitted.

The project will be evaluated against financial and technical feasibility at the gate review and a decision made whether the project will continue to the second phase or terminated.

4.3.2. Feasibility Study Phase 2

In the phase 2 report the alternatives selected in the first phase for further evaluation will be assessed and refined to greater detail against all the criteria mentioned above, against business objectives and against the ORS.

A single option will be selected for a more detailed evaluation and high level design. It is however possible that more than one alternative can still be evaluated and carried to the third phase. Selecting the most favourable alternative cannot be based on financial costs alone and may require an analysis of defined quantitative and qualitative selection criteria coupled to a weighting value for each criterion (Multi-Criteria Assessment). Alternatives can then be compared (ranked) with one another against a weighted score. Some alternatives may be easy to eliminate based on obvious criteria such as constructability, exceptionally high costs, unacceptable environmental impact etc.

The project’s scope is fixed by the end of this phase and should any major deviations from the original scope be required it may be necessary to start again with the first phase. Cost estimate at this point is typically accurate to 30%.

The following additional activities to those in phase 1 will be carried out by each of the engineering and business disciplines:

 Development of material and maintenance machinery specifications

 Obtaining of quotations for material and machinery

 Development of the Project Execution Plan (PEP)

 Development of simulation models for high throughput lines

 Constructability assessment in terms of, for example, ease of construction, implications for current rail operations and the construction time

 Long lead delivery times for machines and material must be identified and should be included in the project risk register

Several project meetings would be required at regular intervals with all disciplines to ensure integration. The individual disciplines will normally work in teams.

The project will be evaluated against financial and technical feasibility at the gate review and a decision made whether the project will continue to the third phase or terminated. The ORS and scope will be updated and submitted together with the phase 3 report.

4.3.3. Feasibility Study Phase 3

If a final favourable alternative has not yet been selected in the previous phase the final selection is made at the beginning of the third phase. The selected alternative is developed in much greater detail using the same criteria mentioned for the previous phases together with high-level designs, drawings and layouts and detailed investigations such as geology, hydrogeology, geotechnical and other surveys. This phase can be described as the detailed project definition.

Social and environmental impact studies are completed. Social impact may include the procurement of private property, the relocation of communities etc., all of which may have to be negotiated and agreed with all stakeholders before construction can start. This is one aspect that can delay the project substantially. Infrastructure material and construction tender specifications are finalised and potential suppliers and contractors identified. Mechanised maintenance machine tender specifications are also finalised and potential suppliers identified. Some machinery must be specified considering the long term use for the machine during the maintenance phase stretching over several years (unless the construction is outsourced to contractors providing their own machinery). In other words, it may be sensible to order the machine as specified for the operational phase to be used during the construction phase, even if they have features that will not be required yet. Machines that will be required during construction and during the operations phase include tamping machines, grinding machines and ballast regulating machines.

Cost estimates are narrowed down to 10% accuracy. The phase 3 report is prepared and the feasibility confirmed. The owner’s requirement specification (ORS) is finalised as n bankable report for the review by financiers.