A construction feasibility study, also referred to as a plan and cost review, is a crucial evaluation process conducted before the start of any construction project. It serves as a comprehensive assessment of a project’s financial, technical, regulatory, and logistical aspects, ensuring the proposed development is practical, achievable, and aligned with budget expectations. For lenders, investors, and project owners alike, a feasibility study helps identify risks early, enabling better decision-making and reducing the chances of costly surprises down the line.
What is a Construction Feasibility Study?
At its core, a construction feasibility study determines whether a construction project can be completed successfully based on its design, budget, timeline, and external factors. It provides a detailed review of key project components, including:
- Project Scope: Evaluates whether the architectural plans align with the intended use, zoning regulations, and building codes. This helps ensure the development meets legal and operational requirements from the outset.
- Construction Costs: Reviews the cost estimate for accuracy and completeness. It compares projected costs to market benchmarks and evaluates whether the proposed budget accounts for all major components, minimizing the risk of overruns.
- Contractor Qualifications: Analyzes the experience, licensing, and financial stability of the general contractor and subcontractors. A qualified, well-vetted team is critical to minimizing construction delays and costly mistakes.
- Schedule Feasibility: Assesses whether the proposed construction timeline is realistic given the project scope, labor availability, material lead times, and permitting processes.
- Market Conditions: Considers outside influences like current labor rates, material shortages, inflation, and regional trends that could affect the project’s success.
Benefits of a Construction Feasibility Study
Conducting a feasibility study before breaking ground offers numerous advantages, especially for lenders and investors who want confidence in their financial commitments:
- Reduces Financial Risk: Identifying discrepancies in budgets or timelines early helps prevent unexpected costs and delays later. Lenders are particularly focused on risk mitigation, and a feasibility study serves as a strong tool for identifying red flags before funds are released.
- Ensures Compliance: With ever-changing regulations, zoning laws, and environmental requirements, a feasibility study helps ensure the project is set up to meet all relevant local, state, and federal codes.
- Supports Informed Decisions: Investors and stakeholders gain access to clear, data-driven insights that support informed financing and project decisions. With greater transparency comes greater confidence.
- Improves Project Outcomes: With clearly defined scope, vetted contractors, and a realistic budget and schedule, projects that begin with a feasibility study are far more likely to be completed on time and within budget.
When is a Construction Feasibility Study Necessary?
While not legally required in all cases, feasibility studies are often requested or mandated by lenders and investors before construction financing is approved. A feasibility study is especially valuable:
- Before securing construction financing to give lenders peace of mind
- Prior to making significant project changes, such as scope or design adjustments
- When evaluating a new development or large-scale renovation project
- As part of lender or investor due diligence requirements to protect against loss
Choosing the Right Feasibility Study Partner
Not all reviews are created equal. To ensure an accurate and insightful feasibility study, it’s important to partner with a firm that specializes in construction risk management and understands the unique requirements of lenders and real estate investors. Look for a team with:
- Deep experience in reviewing project budgets and plans
- A proven track record of helping lenders avoid costly delays and overruns
- Knowledge of market trends and construction risk indicators
Final Thoughts
A feasibility study is more than a box to check—it’s a foundational step in setting your project up for success. By identifying risks early and ensuring the plans, budget, and timeline are realistic and sound, this review helps everyone involved make better, more confident decisions. For lenders, investors, and developers, it’s a smart way to protect investments and build a stronger path forward.
Learn more about our Feasibility Study/ Plan and Cost Review services.
We adhere to industry standards by utilizing RSMeans building data for cost feasibility, reviewing AIA contract documents for compliance, and applying CSI MasterFormat divisions for detailed cost breakdowns and specifications.
