Feasibility Study Usage Amongst Consulting Firms In Lagos State

Project and Seminar Material for Business Administration and Management BAM

Feasibility Study Usage Amongst Consulting Firms In Lagos State


Abstract


The usage of feasibility studies by consultants plays an important role in implementing a consulting project and hence, the success of consulting projects. There are various problems of feasibility study overlooked by the Nigerian consulting industry. The abuse of feasibility study, misinterpretation of research phases, as well as misunderstanding of the intent of feasibility studies, are other factors that have a direct and negative effect on the consulting industry. Another factor is the responsibilities consulting firms have in the consulting industry which is seldom given attention by the developers. This is because consulting firms and management are responsible for errors in the Nigerian consulting documents (Dosumu, O.S., and Iyagba, R.A).

This paper is aimed at assessing the awareness level of the feasibility study in consulting projects and determining the effects of feasibility study in the consulting industry and identifying the causes of feasibility study abuses in the consulting industry.

The paper’s methodology involves a survey and development of the questionnaire to determine the factorsthat cause the feasibility study to fail and then use system dynamics to analyze the impact of these factors. The results show that the practice of feasibility study and viability study is neglected in consulting projects and due to that fact, the abuse in the use of the feasibility study leads to cost and time overruns.


Chapter One


Introduction

1.1 Preface

This chapter is mainly to introduce and describe the overall research. Firstly, the background typically draws a brief picture of the extent of feasibility and viability studies usage by consulting firms for consulting projects. On the other hand, the problem statement is mainly to detail out the reason for carrying out this research. Next, research objectives and research questions are also included in this chapter. The purposes of these two elements are to list out the significance of this research, and both of these two elements are closely related to each other. The next component that makes up this chapter is the scope of the study, which is to determine the respondent involved and the location of the research to be. Besides that, it also needs to describe why this research is important, which is written in part of the significance of the study. Finally, yet importantly, a definition of terms and expected results are also included in this chapter.


1.2 Background of Study

Feasibility studies are preliminary studies that are undertaken to determine and document a project’s viability. The term “feasibility study” is used to denote both the process of the study and the resulting document itself. The results of feasibility studies are used in a variety of fields to make decisions about whether or not to proceed with a project. If a feasibility study leads to a project approval, it is also being used to ascertain the likelihood of the project’s success before the real work of the project begins. A feasibility study is useful for providing alternative solutions to problems and recommendations on the best choice for resolving the issue. This research is focused on the relationship between feasibility study and business project success.

During the feasibility study, you think more on how you will create customers for your products or services in enough numbers and rapidly you can make your business successful and profitable (DAVID H. Bangs 1995). A great feasibility study helps you to know what you can do to have a good products/ services and know your customers better than your competitors do. Once you know your products / services, your customers and what your competitors are up to, you can develop effective strategies to achieve your business project goals.

In the consulting industry, a feasibility study is an essential element that needs to be conducted before each project to be carried out (Huh et al, 2012). Feasibility and viability studies involve identifying and analyzing the strength and weaknesses of the proposed project, and at the same time, also determining the opportunity and threats outside the company within the consulting industry. According to Hyari, K., and Khandil, A. (2009), feasibility studies are conducted mainly to determine and decide the viability of a project. Feasibility studies are normally evaluating the mutual benefits that can be earned and gained from the project (Abou-Zeid et al., 2007). Before starting to work on a project, the project manager needs to consider many things to achieve higher chances of success. Managers often face difficulties in deciding on various consulting projects (Abou-Zeid et al., 2007). Thus, a feasibility study is essential to ensure the project is delivered at the right time and in the correct condition. Feasibility studies play important roles in conducting consulting projects. Additional definition, Corrie, (1991) describe in detail the feasibility study definition that the valuation of assessment for the proposed project in terms of valuation of the economic, valuation of the financial, risk valuation, issue of the social and environmental. The results of the complete valuation must allow the clients to choose with considerable confidence that the project is possible to continue and worth following.

The main reasons for carrying out a feasibility study are to satisfy the customers’ requirements and to ensure project success. This in turn will increase the productivity and profitability of the organization. Feasibility studies provide a detailed report on every aspect of the project. Therefore, the project management team can manage and handle the project more systematically. Feasibility studies also supply some possible solutions or suggestions in which the organization can provide for the customers.

Furthermore, errors of consulting firms are a major factor contributing to the issue of reoccurring poor project performance in the consulting industry. For any consulting project, the three performance parameters of cost, time, and quality are very significant (Hackett et al, 2007; Brandon 1995). Generally, these parameters are attached to each type of contractual arrangement and have been recognized as established norms in the consulting industry.

Clients want to receive completed projects that are of high quality, within budget, and on time. Consulting professionals and consulting firms have no option but to comply with the client’s desires. The ability of the project team to meet these conflicting but basic requirements under the uncertain project environment is always a challenge.

According to Reason (1990), errors are related to those occasions in which a planned sequence of mental or physical activities fail to achieve its intended outcome, and when these failures cannot be attributed to the intervention of some chance agency. Edmonson (2002) also defined error as ‘the execution of a task that is either unnecessary or incorrectly carried out. While Reason (2006) sees design error as an error that relates to those occasions in which a planned activity fails to achieve its intended outcome, and when these failures cannot be attributed to the intervention of some chance agency. Love & Smith (2003) defined design error ‘as unintended deviations from correct and acceptable practice that are avoidable’. The definition of error considered within this research can therefore be summarized as something that causes deviation from correctness or standard, which makes the document not being able to achieve its intended purpose.

Consulting documents on the other hand are the drawings, design specifications, quality control reports, and others (Hajjar & AbouRizk, 2000). Mohammed (2007) asserts that it is during the preparation of consulting documents that most of the parameters that influence consulting works are established. That is if there are costs and time overruns on a project, some of the problems; that is, errors that will lead to these must have been erroneously included in the consulting documents. Some researchers have revealed that most of the consulting costs, to the level of 75%, have been committed during the product design process (Weustink, et al, 2000). However, poor project performance remains an unresolved problem in the consulting industry, and its occurrence has continually led to the frustration of many clients (Love et al. 2011). It has also led to profit marginalization for contractors, disputes, loss of confidence, and reputation of consulting firms.


1.3 Statement of Problem

Some business projects fail because they do not conduct market feasibility before they implement their business projects. Other business peoples who are ignorant of market feasibility study; they invest a lot of money without carrying out market feasibility study. Many times, they didn’t know that they will share market with strong competitors. There are other business peoples who replicate business projects that are working in other country or other places without proper study, then after starting their projects they realize that they brought products or services that are out of client’s needs

In general, a feasibility study can be categorized as economic and accounting science. It is a procedure that includes computing the profit and costs for every project, so that, with the calculations made, managers can make wise investment decisions (Abou-Zeid et al., 2007). However, the general low usage of formal feasibility and viability appraisal techniques by contractors and developers globally often culminate into project failures, incessant claims for variations, huge financial losses. (Allan et al, 2007). Some consulting projects in Lagos Urban have failed due to poor or no feasibility and viability study on the project. This huge expenditure and apparent failure in the primary objectives of the project led to complaints, probe panels, and subsequent abandonment of the project. Research has shown that financial, political, and physical risks are the most significant to Nigerian Contractors (Dada, 2010). However, of the different levels of risk (country, market, or project), there is a shortage of research as to how Contractors approach project planning at the organizational level.

Secondly, the topic of abuses of feasibility studies is less discussed before. However, in reality, there are abuses of feasibility studies occurring in some companies. According to Mackenzie, W., and Cusworth, N. (2007), the issues of abuses of feasibility studies usually resulted from the misunderstanding of study phases and also have the wrong concept of the objective of the feasibility studies. Abuses of feasibility studies contribute to some effects and negative results of the project outcome.

These problems or uncertainties, among others, increase the project risk and make their management crucial if success is desired. Mohammed (2007) in his doctoral research extensively researched the relationship between errors that occur in consulting design documents in Saudi Arabia and their possible causes, which resulted in an exploratory system dynamics model to reduce the occurrence of errors in design documents. The type of design errors (Atkinson, 1998; Love et al, 2011; Chapman, 1991), factors responsible for design errors (Palaneeswaran, et al, 2007; Shelton, 1999; Endsley, 1999, Barkow, 1995), and effects of design errors (Love et al, 2008, Oyewobi, et al, 2011; Mohammed, 2007) on consulting projects have been studied by authors outside the Nigerian consulting industry. The causes and qualitative effects of consulting documentation errors by Dosumu & Adenuga (2013) were carried out in the Lagos state of Nigeria. Dosumu & Iyagba (2013) compared the responses of consultants and contractors on causes of errors in consulting documentation and also in the Lagos state of Nigeria. Ebekozien, Uwadia& Usman (2015) examined the causes and qualitative effects of consulting documentation errors that were carried out in the Lagos state of Nigeria.


1.4 Research Questions

  1. What are the feasibility methodologies used by consulting firms in Lagos?
  2. What are the impacts derived from carrying out feasibility studies by consulting firms in Lagos?
  3. What are the barriers to carrying out feasibility studies by consulting firms?
  4. What are the elements of a good feasibility study?

1.5 Aim and Objectives

This study aims to measure the extent of feasibility and viability studies usage among consulting firms in Lagos State, Nigeria.

The following objectives will guide this study:

  1. To explore the feasibility methodology used by consulting firms in Lagos State.
  2. To assess the impact of feasibility and viability studies conducted by consulting firms in Lagos State.
  3. To investigate the possible barriers to consulting firms in carrying out feasibility studies.

1.6 Scope

The focus of this study is to measure the extent of feasibility and viability studies usage in Lagos state, Nigeria. The findings from this research may be generalized to other cities given the large volume of building consulting work being executed in Lagos. The following are some details about the scope of the study.


1.7 Limitation of Study

The limitation faced by the researcher in the course of carrying out this study was the delay in getting data from the various respondents. Most respondents were reluctant in filling questionnaires administered to them due to their busy schedules and the nature of their work. The researcher found it difficult to collect responses from the various respondents, and this almost hampered the success of this study. This research considers building consulting documents produced by Nigerian professionals; which include architectural drawings, specifications, or schedules; structural drawings, specifications or schedules; electrical drawings, specifications or schedules; mechanical drawings, specifications or schedules, and the bills of quantities or preambles to trades.

This study will cover consulting documentation from inception up to, just before the contract is examined and signed. The documents i.e. proposal outline, design sketch, detailed design, and bill of quantities stages, and also the specifications and preambles to trades.


1.8 Significance of Study

This study evaluates the efficiency of consulting firms in maximizing the usage of feasibility and viability studies in a consulting project in Lagos, Nigeria. This study also gives a clear insight into the various impacts of feasibility and viability studies have on the performance of a consulting project and generally the consulting industry in Nigeria.
Presently, there is no solid evidence that shows that there are misuses of feasibility studies in the consulting industry. In addition, the results of this study are important to help determine the efficiency and abuses that occurred in the feasibility study in the consulting industry. In addition, this study is also important to examine whether the causes and effects of the feasibility studies misuse can be correlated positively. The developers will be more familiar with the competence of consulting firms in Nigeria, Lagos, with the results of this study. In addition, this study may be an indicator in terms of strengths, alternatives, weaknesses, resources, finances, and how realistic a project is to be evaluated in the future.


1.9 Definitions of Terms

Consulting Firms:

A consulting firm or consultancy is a professional service firm that provides expert advice for a fee. Consulting firms may have one employee or thousands; they may consult in a broad range of domains, for example, management, engineering, and so on.

Feasibility Study:

Erikson (2002) defined feasibility as an evaluation and analysis of the potential of the proposed project which is based on extensive investigation and research to give full comfort to the decision makers. It is an analysis that takes all of a project’s relevant factors into account, including economic, technical, legal, and scheduling considerations to ascertain the likelihood of completing the project successfully. It is an analysis used to determine the viability of an idea.

Viability Study:

According to Simmons (2007), Viable or viability is the ability of a thing (a living organism, an artificial system, an idea, etc.) to maintain itself or recover its potentialities. It is an in-depth investigation of the probability of the business idea being converted into a business enterprise.

Consulting Variation:

A variation in consulting (sometimes referred to as a change) is an alteration to the scope of work originally specified in the contract, whether by way of omission, addition, substitution to the works, or through a change to how the works are to be carried out.

Consulting Documents:

Consulting documents are written and graphic documents prepared for communicating the project design and administering the consulting contract. They consist of the drawings, specifications, contracting requirements, procurement requirements, modifications, and resource drawings. These contract binding documents describe precisely how the design shall be built. They are essential information that receives a lot of attention when problems arise during consulting.


Chapter Five


Summary, Conclusions and Recommendations

5.1 Summary of Findings

The research investigated the Feasibility and Viability Study among consulting firms in Lagos state, Nigeria. This research also identifies the feasibility and viability study techniques implemented in the consulting industry in Lagos State, Nigeria and the impact of a feasibility study and the potential challenges and barriers in the executing of a proper feasibility and viability study.


5.2 Conclusion

According to the data gathered and analyzed, the study revealed that the majority of respondents agrees that feasibility and viability study methodologies are of great importance to the success of any consulting project. Estate Surveyors and Valuers are a majority of the consulting firms in Lagos State. They are of the opinion that the NPV, IRR and Payback Period are the most adopted techniques in implementing a feasibility study in the Nigerian consulting industry. The study also revealed that the NPV is the most reliable technique adopted followed by the IRR and Payback Period respectively. Although the NPV, IRR and Payback Period are the most reliable and adopted techniques the consulting firms are well versed of all the feasibility and viability techniques.

However, the study also revealed that there are several issues and challenges to the feasibility and viability study methodologies even in their early stages, and most of these challenges are particular to the Nigerian Consulting Industry, these challenges include: lack of accurate data and information to project, Inaccessibility to up-to date data & information to study of project, Inaccurate quantitative measurement, poor/lack of communication, unpredictability of government regulatory regimes, high cost of preparing a feasibility study, Corruption, lack of professionalism, lack of professional skills, and economic instability.


5.3 Recommendation

The following tips will help professionals in the Nigerian consulting industry understand the need of conducting a thorough feasibility and viability study before starting a project. The following are some of the study’s recommendations:

  1. Nigerian consulting and consulting firms should use a variety of feasibility approaches and become familiar with new methodologies on a regular basis.
  2. To limit the number of unsuccessful building projects, the government should implement regulations requiring consulting firms to conduct a proper feasibility and viability study before commencement of consulting.
  3. To combat corruption and unethical practices in the Nigerian consulting industry, consulting and consulting firms should adopt a culture of high productivity and integrity.
  4. Consulting firms should consider the unstable nature of the economy before carrying out a feasibility study.

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