Guide and template for the Preparation of Feasibility Reports

Feasibility Reports Guidelines

The Feasibility Report (FR) presents the project parameters and defines the potential solutions to the defined problem, need or opportunity. It expands on each of these potential solutions, providing sufficient detail and non-financial evaluations to permit the project leader to recommend to the approving authority all viable potential solutions that should be further analyzed in the next phase (Investment Analysis Report [IAR]). Further, for those options which are considered feasible, (based upon the non-financial evaluations), indicative (Class D) cost estimates should be prepared and their estimated duration should be determined as input to the financial analysis of options to be carried out in the Analysis phase. The FR should also justify why any potential solutions were considered to be non-viable or considered to be non-compliant with government policy and/or project objectives and therefore not considered further.

When technical studies (Investigation and Report) have been conducted, they should be used as input to the preparation of the FR.

As defined in the NPMS Directive for Real Property Projects, in some cases, a separate FR is not required as the IAR contains a sufficient feasibility assessment.

1.0 Executive Summary

Purpose:

The purpose of the Executive Summary is to provide a very brief overview of the most essential and decision-relevant information concerning the project.

Suggested Content:

  1. Clearly state the problem/opportunity being assessed.
  2. Identify any special issues that may need to be brought to the attention of Real Property Investment Board (or respective Regional Investment Boards). Mention should be made of any implications on the client(s) or other stakeholders.
  3. List recommended options for analysis.

2.0 Problem/Opportunity Definition

Purpose:

The purpose of this section is to describe the problem or opportunity being addressed as defined in the project's Statement of Requirement. Briefly identify the main problem or key issue that the proposed project is seeking to address. This could be asset related or space related.

3.0 Project Scope

Purpose:

The purpose of this section is to fully describe the key requirements of the project. It should provide pertinent details regarding the context for undertaking the proposed project. If information required to prepare this section of the FR come from the Statement of Requirements (SoR) or Preliminary Project Plan (PPP), it should be referred to, and the key content summarized. Supporting details that are found in the SoR or PPP do not need to be replicated in the FR.

Suggested Content:

Asset Based Projects

This section will describe the major asset requirements of the proposed project.

  1. Provide a description of the asset. It is generally appropriate to provide the details of the asset description in an appendix, with only a general overview and the most significant points included in the text of the FR. Elements of the asset description may include:
    • the age, area and other main characteristics of the asset;
    • the number of occupants affected by the problem;
    • the nature of any recent renovations that have been undertaken (may be presented in an appendix);
    • detailed information regarding the features of the asset relevant to the project being proposed;
    • whether the property has a heritage designation or whether it is subject to other conservation initiatives. A designation by the FHBRO is the most pertinent designation for Public Services and Procurement Canada (PSPC) assets;
    • who the asset is being managed by if this has any implications for the project.
  2. Include a statement as to the overall condition of the asset and its main systems, including any limitations it may have. Identify upcoming project requirements for the asset, other than those associated with the current project.

    This information shall be summarized from the Asset Management Plan (AMP), the Building Management Plan (BMP), the Building Condition Report (BCR), and other relevant documents. Most of the information in this section may be presented in an appendix, with the main points referred to in the text of the FR.

  3. Briefly discuss the operational, financial, and functional performance of the asset, and whether performance targets for the asset are being met. Identify any operational, financial or functional performance issues which may be relevant to the project. This information can be summarized from the AMP.
  4. Identify any future plans pertaining to the use of the asset. This may include information on the remaining useful life of the asset, or how long PSPC may be planning to keep the asset (refer to AMP).
  5. Identify any strategic considerations of relevance to this project. Briefly discuss how the continued utilization of the subject property conforms to regional or local accommodation strategies. These strategies may be identified in a Community-Based Investment Strategy (CBIS), or they may be referred to in the AMP.
  6. Reference any related documents that report the problem, need or opportunity.
  7. Describe health and safety issues and any potential impacts on clients or tenants

Space Based Projects

This section will describe the major clients requirements of the proposed project.

Note: If it is a portfolio acquisition, then the potential client department and requirements should be identified.

  1. Present the client's requirements in terms of:
    • the existing amount of space occupied (where relevant); and
    • number of employees and/or full-time equivalent (FTEs) as validated by the client.
  2. Identify the type of space required; the date by which the space is required; and for how long the space is required, and if known, within the context of the all relevant client demand. for this location. Identify any special considerations that relate to either the client's requirements or the nature of the assets. Examples of this may include a client's requirements for a specific location or type of location, the enhanced security requirements of a highly sensitive department, or the special requirements posed by a heritage building. Summary information should be provided as to why these special requirements exist.
  3. Consistency with Accommodation Plan.
  4. Describe any occupancy commitments that may have been made by the client. The analyst should identify the term of this commitment and discuss what is likely to happen after the commitment expires.
  5. Potential for non-compliance with space fit-up standards.
  6. Project drivers i.e.,
    • New client program;
    • Client space modifications (expansion, reduction, changed use of space, consolidation);
    • Timing - duration of occupancy.
  7. If applicable, identify potential future demand from other federal government departments that is relevant to this project.

Tips on writing this section:

There will likely be much detailed information associated with this section of the FR. The project team should present numeric information in the form of tables and/or appendices, as much as possible.

References:

  • Real Property Investment Guide, Section 4.1, Define Client Needs.
  • Client Department Sustainable Development Strategy (current).

4.0 Identification and Analysis of Options

Purpose:

The purpose of this section is to list and analyze all available options for meeting the identified project requirements, and to document the results of the feasibility assessment of each of the options. Documentation will include the rationale to support viable options (to be analyzed in the next phase, within the IAR) and the justification to screen-out non-viable options.

4.1 Options Considered

Suggested Content:

  1. Identify and describe all reasonable options for satisfying the project requirements. At this stage, it is preferable to identify a greater number of options and then rule them out, rather than focusing too early on only a very limited number of options.

    Asset based projects options could be:

    • Repairs, retrofit, renovation, conservation
    • Demolish and rebuild
    • Dispose and demolish, buy and adapt
    • Sell

    Space based projects options could be:

    • Vacant crown inventory
    • Lease tender call for existing space
    • Renewal in-situ
    • Build-to-lease
    • Lease-purchase
    • Crown-construction
    • Acquisition of an existing building
    • Public-Private-Partnership (a P3 screening tool is being developed for larger project)
    • Space optimization of existing space
  2. Identify those options which are to be carried forward for in-depth analysis, and those options which are clearly not practical and which will be eliminated from further consideration. Briefly state why the eliminated options are not being considered for further analysis.
  3. The FR should include a Base Case (status quo) scenario. The Base Case should form part of the in-depth analysis as it is usually the fallback position if the recommended project is not approved.
  4. In preparing this section, ensure that all reasonable options for providing accommodation have been explored.
  5. The feasible options that will be analyzed need to be developed and their estimated duration must be determined. The feasible options must also include indicative (Class D) cost estimates for construction, leasing, and fit up. This will help establishing life-cycle costs in the next phase (within the IAR). The project duration could include the following NPMS and project milestones:
    • SoR approval date
    • PPP approval date
    • FR approval date
    • Preliminary Project Approval (PPA) or Lease Project Approval (LPA) date
    • Request for Information date
    • Request for Qualification date
    • Request for Proposal date
    • Effective Project Approval (EPA) date
    • Negotiations commencement date
    • Lease Contract Authority (Lease Contract Award date)
    • Base Building construction start date
    • Fit-up design commencement date
    • Fit-up construction commencement date
    • Product Turn-over date
    • Moving commencement date

    Indicative estimates could be provided for:

    • Fit-up cost
    • Base building construction cost
    • Net rental rates
    • Operating & Maintenance cost
    • Taxes
    • Land cost

    The main features of each option should be summarized in text or tabular form with supporting details in an appendix (e.g. Cost Report Template). It is important to identify the key assumptions made and the level of risk associated with the estimates provided. Of note, the indicative cost estimates should only be provided for the feasible options. However, the milestone list is required for all the options assessed in the Feasibility Report as it will be used to determine if each option is responsive to identified timing requirement (please see section 4.2).

  6. Ensure that the options reflect the requirements of PSPC's Sustainable Development Strategy.

4.2 Analysis of Non-Financial Factors

The analysis of non-financial factors is intended to ensure that all qualitative factors that contribute to providing value to the federal government are taken into account in the investment analysis.

Suggested Content:

Provide the following information for each of the possible options:

  1. Identify all non-financial factors which may have a bearing on the selection of the preferred options and focus on decisions that are implicit, leading up to the PPA/LPA.

    Some of the factors which may be considered include:

    • How well each option satisfies the identified client requirements. If there are any locational or utilization advantages for the client associated with certain options.
    • The extent to which each option is responsive to identified timing requirements.
    • Differences between the options with respect to various policy and regulatory requirements such as for health, safety, sustainability, accessibility, contribution to the community, and federal presence.
    • The degree to which the option supports heritage conservation, Section 6.1.9 of the Treasury Board's Policy on the Management of Real Property and the Good Neighbour Policy.
    • A qualitative analysis of positive or negative impact of environmental factors for each option.
    • The extent to which each option supports the goals and objectives of the PSPC Sustainable Development Strategy (SDS). Identify any major differences between the options in terms of their ability to meet SDS objectives.
  2. The use of an evaluation matrix can help to ensure that all feasible options are considered in an organized, consistent and methodical manner, and are evaluated against all relevant non-financial factors. This will help in formulating a justifiable recommendation that reflects all important criteria.

    The evaluation matrix consists of a list of relevant factors, along with weightings that reflect their relative significance. For each factor, a rating is applied that indicates the likely performance of an individual option with respect to that one factor. Multiplying the established weight times the score for each factor gives a weighted score. The sum of these weighted scores gives a non-financial evaluation score for an individual option. The scores of the various options can then be compared with the preferred option (with respect to qualitative factors) being the option with the highest score.

    • Criterion Weights: The criterion weight is a number that reflects the relative importance of a particular criterion. Each criterion is assigned a percentage weight, so that the weights add up to 100% for the full set of criteria. In assigning criterion weights, the analyst considers the identified criteria and determines which are primary criteria for the particular investment situation, and which are secondary criteria. The difference in the weights for the criteria should not be so large as to negate the importance of all but the top weighted criterion.
    • Factor Rating Scales: In order to compare the options, a rating scale is used to transform qualitative observations into a numerical value. In this approach, each criterion has a scale of 0 (lowest) to 5 (highest). A rating of 5 would indicate that the option is highly responsive with respect to the factor, and the option enables objectives associated with the factor to be met. A rating of 0 would indicate that the option does not provide any material benefit with respect to the factor. The analyst uses the highest applicable rating, based on a combination of analysis and professional judgement. Ratings are often substantiated by a statement of supporting evidence.

    The evaluation framework can assist the analyst in making appropriate trade-offs between the benefits provided by different options, and arriving at a recommended approach which provides the greatest overall utility. The following example illustrates the layout of an evaluation matrix.

    Table Summary

    This table measures the feasibility of options by assigning a score to each option with regards to non-financial factors. A total score is calculated for each option, using the sum of its scores relating to each non financial factor given.

    Example of Evaluation Matrix for Qualitative Analysis
    Non-Financial
    Factor
    Weight Option 1 Option 2 Option 3
    Rating Score Rating Score Rating Score
    Factor 1 30 4 120 3 90 4 120
    Factor 2 25 2 50 5 125 4 100
    Factor 3 20 4 80 2 40 3 60
    Factor 4 15 5 75 1 15 4 60
    Factor 5 10 2 20 3 30 3 30
    Total Score 100   345   300   370
  3. Describe the results of the analysis, including the rationale behind the ratings and weighting factors that were applied, and the conclusions that were reached. Details of the analysis may be included as an appendix.

4.3 Risk Assessment of Options

The purpose of this section is to identify the key risk factors associated with each of the options being considered in this Feasibility Report.

NOTE: A more substantive risk assessment will be conducted for the IAR. For the Feasibility Report, identify the results of the preliminary risk assessment of each option in terms of scope, time, cost or other considerations surrounding the problem/opportunity such as environment, infrastructure, technical, political, legal, organizational and / or social factors. The latter considerations may be derived from assumptions and constraints discussed in the Preliminary Project Plan, and will pertain to the project being able to attain the project objectives.

  1. The first step is to identify the risk factors that could be relevant for each of the options being analysed.
  2. While the relevant risk factors will be different for each investment situation, some risk factors that may be considered include:
    • Risk that the project may not fully rectify an identified problem
    • Risk of user needs not being met
    • Risk of changing requirements
    • Risk that forecast demand fails to develop
    • Risk of not meeting timing requirements
    • Risk of cost overruns
    • Risk of future performance being impaired
    • Risk of environmental degradation
  3. Once the risk factors have been identified, it is necessary to evaluate the relative level of risk associated with each of the options. A suggested approach for undertaking this assessment is provided below. However, other methodologies may be employed.

    It may be usefull to take the following actions during this step:

    • Identify all sources of risk associated with each option under consideration.
    • Undertake a risk assessment for each element of risk for each option. The risk assessment is a product of the likelihood times the severity of the impact, as indicated below.

      Very High Risk (10)
      High impact and high likelihood

      High Risk (5)
      High impact and medium likelihood, or
      Medium impact and high likelihood

      Medium-High Risk (3)
      Medium impact and medium likelihood

      Medium Risk (2)
      Low impact and high likelihood, or
      High impact and low likelihood

      Low Risk (1)
      Low impact and medium likelihood, or
      Medium impact and low likelihood

      Very Low Risk (0)
      Low impact and low likelihood

    • Evaluate the overall level of risk associated with each option. This can be done using an evaluation matrix. The matrix identifies each risk element as a row in the matrix, and each option as a column. Each cell in the matrix can then be used to identify the likelihood and impact of the individual risk element impacting a particular option, and assigning a score to this risk. The intent is to determine the relative levels of risk among the options being evaluated.

      Table Summary

      This table lists options against risk factors, and assigns each option a score representing its level of risk relative to each given risk factor. The scores are totalled for each option.

      Example of Evaluation Matrix for Risk Assessment
      Risk
      Factor
      Option 1 Option 2 Option 3
      Risk Score Risk Score Risk Score
      Factor 1 High 5 Medium 2 Medium 2
      Factor 2 Medium 2 Low 1 Medium 2
      Factor 3 Low 1 Very Low 0 Low 1
      Factor 4 Very Low 0 High 5 Low 1
      Factor 5 Medium 2 High 5 Low 1
      Total Score   10   13   7
  4. Describe the results of the risk assessment and the conclusions that were reached. Which option carries the lowest level of risk? Do any of the options carry an unacceptably high level of risk? The risk assessment will be used to develop a Risk Management Plan in the IAR for the recommended options.

Tips on writing this section:

The results of the feasibility assessment should be presented in tables (rather than in text), with observations and conclusions discussed in the text, where possible. It is recommended to obtain guidance on this section from the respective Centers of Expertise. It is important to identify the key assumptions made.

References: The following is not an exhaustive list as there are numerous policies, procedures etc., that can be referenced and all play a part in determining appropriate options to be considered in the IAR.

5.0 Recommended Options for Further Analysis

The intent of this section is to combine the results of all of the analyses that were undertaken. Consider the results of the assessment of non-financial factors and risk assessment together.

Summarize the key findings of the Option Ranking. Identify which options are recommended for further analysis (including financial analysis) during the Analysis phase in preparation of the IAR.

6.0 Approvals/Signatures

Prepared by:
(Signature)

Please print:

Name:

Position:

Date:

Approved by:
(Signature)

Please print:

Name:

Position:

Date: