Pre-Feasibility Study Guidelines

1 Cities Development Initiative for Asia Pre-Feasibility Study Guidelines February 2015 CDIA Pre-Feasibility Study Guidelines i TABLE OF CONTENTS 1 INTRODUCTION .. 1 2 GUIDING PRINCIPLES AND LEVEL OF DETAIL OF THE Pre-Feasibility Study .. 2 3 STRUCTURE AND SCOPE OF THE Pre-Feasibility Study .. 4 4 MANAGING THE Pre-Feasibility Study PROCESS .. 9 Key Milestones in the Assignment .. 9 Preparing for the Post Pre-Feasibility Study Phase .. 11 Counterpart Consultation .. 12 Data Collection and Management .. 12 Capacity Development .. 12 Monitoring and Evaluation Framework .. 13 Quality Standards.

2 13 APPENDIX 1: INITIAL DEVELOPMENT IMPACT ASSESSMENT (IDIA) .. 14 APPENDIX 2: SAMPLE DESIGN AND MONITORING FRAMEWORK .. 24 APPENDIX 3: QUALITY STANDARDS .. 25 APPENDIX 4: Pre-Feasibility , feasibility AND PPTA STUDIES .. 27 Pre-Feasibility Study Guidelines 1 1 INTRODUCTION The Cities Development Initiative for Asia (CDIA) an international partnership initiative, established in 2007 by the Asian Development Bank (ADB) and the Government of Germany, with additional funding support from the governments of Austria, Sweden, Switzerland and the Shanghai Municipal The Initiative provides assistance to medium-sized cities2 to bridge the gap between their development plans and the implementation of their infrastructure investment investments.

3 Figure 1: Cities Development Initiative for Asia Activity Focus These Guidelines set out the objectives, processes, and techniques required for the second focus area shown in Figure 1 the Pre-Feasibility Study (PFS). The overarching objective of a PFS is to determine the merit of a particular investment opportunity. Specifically, the PFS will determine whether the proposed investment provides sufficient value to warrant the use of scarce resources ( money, skills, time) and therefore whether it is worth proceeding to the next stage in the development process and conducting a full feasibility Study . In terms of content, the PFS will contain a review of sector investment options and priorities, initial scoping and costing of the identified investment project, measures for addressing social, and environmental ( climate change) concerns and designing the governance and financing structures for implementation.

4 The outputs from the PFS provide a technical, financial, environmental, and social assessment of a project at a level of detail sufficient to write the terms of reference for a full feasibility Study (FS).3 The PFS development process requires a tripartite partnership between the city government, PFS consultants, and the CDIA core management team (CMT), working together to identify, conceive, and structure prioritized urban development projects needed to improve living conditions in a city. These Guidelines are principally designed to assist PFS consulting teams to deliver quality outputs within the specified time and budget to achieve the objectives outlined above.

5 However, they can also assist city governments in understanding and contributing to the PFS 1 Austria joined the program in 2010 and Shanghai s involvement ended in March 2015. 2 Defined as having a population of between 250,000 and 5,000,000. 3 CDIA Operational Guidelines . See Appendix 4 for a summary of the principal differences between PFS, FS and PPTA reports. 4 City governments undertaking a PFS are advised to review a report available on CDIA s website entitled CDIA Pre feasibility Study User Manual: For Cities and National Partner Organisations to better understand the objectives and outputs of a PFS from their standpoint.

6 Pre-Feasibility Study Guidelines 2 2 GUIDING PRINCIPLES AND LEVEL OF DETAIL OF THE Pre-Feasibility Study Ideally, a PFS should be preceded by a process of prioritizing alternative infrastructure investment projects leading to a clearly defined Investment The PFS process normally includes an assessment of one or two priority projects within an investment program framework. However, where such a framework is not in place and the city master plan and sector plans are insufficiently detailed, it may be necessary to rework investment priorities, including sector reviews, in the early stages of the PFS. The PFS report may therefore include a section on infrastructure investment programming, detailing the outputs of this process and one or more sections assessing priority projects.

7 These Guidelines , however, focus on the development of PFSs for selected projects only. The PFS conceptualizes and structures an investment project at conceptual engineering design, a lower level of engineering design typically expected in a feasibility Study being conducted for ADB and World Bank (preliminary engineering design). The accuracy margin to final costs in conceptual engineering design will generally be about 20%. Similarly, in the PFS, the level of policy, social, environmental, and institutional analysis is less detailed than at the feasibility Study level. Financial and economic analyses in the PFS will contain internal rates of return, but again the expected accuracy margins will be higher (approximately plus or minus 20%, as compared to an FS where a margin of 10% is expected based on preliminary engineering design).

8 The length of the PFS will, of course, vary from project to project depending on the number of sectors covered and the complexity of the proposed investment(s). However, the project team should aim to make the report as concise as possible while simultaneously ensuring that the needs of the client city and future financier(s)/investor(s) are fully met, and the tasks set out in the Terms of Reference (ToR) fully completed. Guiding Principles As an underlying objective of CDIA s work is sustainable urban development, CDIA PFS interventions must address at least two of the following guiding principles: 1. Urban environmental sustainability Projects must aim at improving environmental and health conditions through careful selection and design of infrastructure projects and investments.

9 This means safeguarding the urban environment in a traditional way, and introducing and prioritizing environmental projects and environmental components within a project. For instance, a transport project initially dealing with road improvement and public transport may include components on renewable fuel, traffic management, and other elements that improve the urban environment. 2. Mitigation of and adaptation to the effects of climate change All projects must include an assessment of climate change effects mitigation potential and/or adaptation needs, and describe investments needed to address these issues. This may also have bearing on the financial analysis in terms of potential for accessing carbon credits and partial financing capital investment with such credits.

10 3. Urban poverty reduction and gender equality Infrastructure investments should enhance the access of disadvantaged groups to basic services and contribute to their economic development. PFS teams should work with counterparts in government to identify the poor, their needs, and the types of investments needed to pull them 5 CDIA has an Excel based tool called City Infrastructure Investment Prioritization and Programming (CIIPP) that can be employed to help define such priorities. Pre-Feasibility Study Guidelines 3 out of poverty. Equally, the PFS team should take into account the different needs, opportunities, and conditions of men and women so that better preparation, implementation, and operation of infrastructure systems can be achieved.