A feasibility study is an analytical document required in many European Funds programmes – particularly for infrastructure projects, higher-value investment projects and projects in regulated sectors (energy, water and wastewater management, healthcare, transport, R&D). Its purpose is to demonstrate that the planned undertaking is technically, economically, financially, legally and environmentally justified, and that the selected implementation option is the optimal one among the alternative solutions.
Below we explain when a feasibility study is required, what elements it consists of and how to prepare it in order to increase the chances of a positive assessment of the application.
What is a feasibility study and what role does it play in the application process?
A feasibility study (Polish: studium wykonalności) is a multidimensional analysis of an investment project, submitted as an attachment to the grant application. Unlike a business plan, which focuses on the commercial and competitive perspective, the study covers a broader range of analyses: an assessment of technological options, an economic analysis including external effects (social and environmental), a sensitivity and risk analysis, and an analysis of project durability.
This document performs three essential functions:
- it provides the assessing institution with evidence that the project is feasible and purposeful,
- it enables the applicant to verify investment assumptions before entering into financial commitments,
- it forms the basis for assessing substantive criteria such as cost-effectiveness, durability of results and consistency with the programme objectives.
When is a feasibility study required?
The obligation to prepare a feasibility study arises directly from the documentation of the given call. In practice, this document is most often required in the following cases:
- infrastructure projects financed from the European Regional Development Fund (ERDF), the Cohesion Fund (CF) and regional programmes – particularly in the areas of transport, water and wastewater management, energy, regeneration and social infrastructure,
- investment projects with a value exceeding the thresholds set out in the call rules,
- revenue-generating projects for which the call rules or State aid rules require the funding gap to be calculated,
- industrial research and experimental development projects, if required by the call rules.
A feasibility study is, however, not required for most soft projects (training, advisory) financed from the European Social Fund Plus (ESF+), for micro-grants or for low-value projects, where a simplified business plan or profitability analysis is sufficient.
In each case, the scope of the required analyses is determined by the managing authority of the programme. Before starting work, you should read the call rules and the instructions for completing the application, which usually include a methodological annex on preparing the feasibility study.
Current calls and the required documentation can be verified in the grant search engine.
Methodological basis – what should the document be based on?
The methodological standard in the European Union for infrastructure projects is the cost-benefit analysis guide for investment projects published by the European Commission (Guide to Cost-Benefit Analysis of Investment Projects). Projects financed under Polish national and regional programmes are additionally subject to the Guidelines on issues related to the preparation of investment projects, including hybrid projects, for 2021-2027, issued by the minister responsible for regional development.
These guidelines specify, among other things, the discount rates for financial and economic analysis, the time horizon of the analysis depending on the sector, how to account for residual value and the method for calculating the funding gap. The EC Guide indicates, for example, reference horizons of around 25–30 years for water supply and sewerage and 15–25 years for energy and research and development projects. Parameters should always be taken from the current version of the guidelines and the call documentation.
The full text of the current guidelines is available on the European Funds Portal.
Structure of a feasibility study – mandatory elements
Although the detailed layout of the document varies depending on the programme, a standard feasibility study includes the following chapters.
Executive summary
A condensed summary of the key findings: the project objective, total cost, sources of financing, performance indicators and the main conclusions of the analysis. The summary should allow the assessor to quickly grasp the essence of the project.
Profile of the applicant and analysis of the environment
A description of the implementing entity, its experience, human and financial resources, organisational structure and capacity to carry out the investment. The section also includes an analysis of the market, legal, demographic and socio-economic environment in which the project will be implemented.
Identification of the problem and justification of the need for the project
A diagnosis of the baseline situation based on statistical data (Statistics Poland (GUS), Eurostat, industry data), identification of the development gap or deficit that the project addresses, and demonstration of consistency with strategic documents (national, regional, sectoral).
Analysis of options and selection of the optimal option
One of the elements of the document most frequently questioned by assessors. It requires presenting at least two realistic implementation options (in addition to the zero option, i.e. the no-investment option), comparing them in technical, financial, environmental and social terms, and justifying the choice of the recommended option. The standard tool used in this chapter is multi-criteria analysis (MCA).
Technical and technological analysis
A description of the technical solutions, technological parameters, physical and financial schedule, scope of works and supplies, and compliance with industry standards and requirements. In construction projects, reference must be made to the functional and utility programme or the design documentation.
Legal analysis
Identification of the legal basis for the project, including legal title to the property, required permits (building, environmental, sectoral), compliance with State aid rules and with public procurement law.
Financial analysis
The most extensive part of the document. It covers the forecast of capital expenditure, operating costs, revenues, changes in working capital and cash flows over the adopted time horizon. The FNPV/C, FRR/C, FNPV/K and FRR/K indicators are calculated as standard and, in revenue-generating projects – if required by the call – also the funding gap, which forms the basis for calculating the maximum amount of funding.
Economic analysis
Required for most infrastructure projects. It involves converting financial flows into economic flows, taking into account fiscal corrections, shadow prices and the monetisation of external effects (environmental and health benefits, time savings). The results are presented as ENPV, ERR and B/C indicators.
Sensitivity and risk analysis
Identification of critical variables (most often: capital expenditure, revenues, operating costs, demand), analysis of the impact of their changes on performance indicators, and a qualitative or quantitative assessment of risks together with a mitigation plan.
Environmental impact analysis
A description of the project's environmental impact, its compliance with the Do No Significant Harm (DNSH) principle and EU climate objectives, and an indication of whether a decision on environmental conditions needs to be obtained.
Project durability
Demonstrating that the applicant is able to maintain the project results throughout the durability period – in accordance with Article 65 of Regulation (EU) 2021/1060 i.e. as a rule 5 years from the final payment, or 3 years in cases involving SMEs – including financing operating and replacement costs.
The most common mistakes in feasibility studies
The most common reasons for a negative assessment of a feasibility study include:
- a sham analysis of options – presenting clearly unreasonable options in order to justify the recommended option,
- inflated revenue forecasts or understated operating costs not based on reliable reference data,
- omitting the funding gap calculation where the call requires it,
- inconsistencies in data between the study, the grant application, the physical and financial schedule and the budget,
- incorrect application of the discount rate or a time horizon inconsistent with the guidelines,
- failure to document the sources of numerical data (cost, demand and demographic assumptions),
- a superficial risk analysis limited to a list of generic threats without quantification,
- no reference to the DNSH principle and EU climate objectives in projects where this is required.
Practical tips for preparing the document
- Start in parallel with the project concept. Involving an analyst early on makes it possible to optimise the physical scope, schedule and financing structure with a view to scoring under the substantive criteria.
- Base your assumptions on verified sources. For capital expenditure – preliminary supplier quotes, investor's cost estimates or data from comparable projects. For demand forecasts – GUS (Statistics Poland) data, industry reports, own research or the applicant's historical data.
- Prepare a transparent financial model in a spreadsheet, with assumptions, calculations and results kept separate. Some institutions provide template financial models whose use is mandatory.
- Ensure consistency both internally and with the rest of the application documentation. Discrepancies between the study and the application, schedule or budget are picked up by assessors and treated as substantive shortcomings.
For projects of considerable value or technical complexity, it is worth seeking the support of specialists. The financial model, funding gap analysis and sensitivity analysis are covered by the financial analysis consultation, and the business rationale for the project – in our business plan and business model consultation.
Feasibility study vs the grant application
A feasibility study does not replace the grant application but is its substantive attachment. The application focuses on describing the project in line with the form fields of the IT system (e.g. WOD2021 in CST2021 or regional LSI systems), while the study provides the in-depth analyses to which the application refers.
Amounts, indicators, schedules, descriptions of options and target values of indicators must be identical in both documents. Discrepancies lead to requests for additional information or a lower score.
Summary
A feasibility study is an analytical document whose quality has a direct impact on the assessment of the grant application. A properly prepared study should be based on the applicable methodological guidelines, verified numerical data and a sound analysis of options, risks and performance indicators. A superficial or inconsistent study is one of the most common reasons for a negative project assessment, regardless of the project's actual substantive merit.
The full scope of support is described in grant advisory services.
Are you planning a project that requires a feasibility study? We will verify the programme's methodological requirements, the eligibility of the investment and the call schedule.Contact an expert
Author: Dariusz Kozakiewicz
EU funding expert