Validity of Feasibility Studies for Infrastructure Construction Projects

Abstract

Feasibility studies are normally conducted to justify investments in infrastructure projects. Despite the vital importance of feasibility studies in supporting decisions related to public spending on infrastructure projects, there are no attempts to evaluate such studies after construction of facilities. An analysis of a previous feasibility study for a highway construction project is presented in this paper with an emphasis on the estimates and forecasts presented in that study in order to weigh expected benefits from the project against expected costs. The forecasted numbers are compared with actual data collected during the operation phase about the usage of the facility. The comparison reveals a huge difference between estimated numbers and actual numbers. Feasibility study calculations are also repeated using the actual data to examine the impact of forecasting errors on the outcome of the feasibility study. Based on the lessons learned from the analyzed case study, recommendations are presented to improve feasibility studies for infrastructure projects including peer review of feasibility studies, before-and-after feasibility studies, multistage feasibility studies and unified scope and methodology for feasibility studies. Decision makers are advised to take outcomes of feasibility studies for infrastructure projects with extreme caution as some studies may provide erroneous and misleading input to their decisions regarding investment in infrastructure projects.