1.1 BACKGROUND OF THE STUDY
Until relatively recently, the
discipline of development appraisal has remained the provenance of surveyors
and developers. It largely been ignored by other participants in the
development process, particularly planners, architects and construction
specialists. This is now changing. Close attention is now paid to the
feasibility and viability (and profitability) of development proposals as
government and other stakeholders seek to extract developer and/or landowner
contributions to affordable housing, public services and infrastructure.
Consequently the theory, application and outputs from development appraisal are
under intense scrutiny from a wide range of users. Since Circular 05/05
proposed the submission of financial information? to provide a basis for negotiations
between developers and local planning authorities about viable levels of
affordable housing, tests of the financial viability of development projects
have become an integral part of the planning process, both at the forward
planning and development control stages. At the large-scale, macro-level
Strategic Housing Land Availability Assessments require proposed plans to be
achievable. However, the timeframe for development can be decades rather than
years and, as a result, generating detailed and reliable cost and revenue
projections can be impractical. At the other end of the scale, viability
appraisals are carried out to inform negotiations about affordable housing
levels for a scheme about which there may be a high level of information on
permitted development and expected costs over a relatively short timeframe.
In terms of critical evaluation from
the real estate academic community, development appraisal has remained
something of a backwater. In contrast, often linked to market traumas, over the
last four decades methods of appraising standing investment properties have
been the subject of widespread academic and professional debate. Whilst the
RICS monitors variance and accuracy of investment valuations, there is no
comparative institutional evaluation of the performance of development
appraisals. Nevertheless, conventional development viability models have been
subject to some criticism, particularly their simplified composition, failure
to mirror reality and theoretical weaknesses.
The general low usage of formal
feasibility and viability appraisal techniques by contractors and developers
globally often culminates into project failures, incessant claims for
variations, huge financial losses and sometimes brings discomfort for people
who came to enjoy themselves at these recreational centres. (Allan et al,
2007). This situation is more prevalent in redevelopment projects due to the
inevitable problems of unexpected additional work, excessive requirements and
scope management issues, project funding not aligned with project plans, delay,
structural failure, cost overrun, etc (Naaranoja and Uden, 2007). These
problems or uncertainties, among others, increase the project risk and make
their management crucial if success is desired.
Some construction projects in Owerri
Urban have been abandoned due to poor or no feasibility and viability appraisal
on them, while some recreational developments Owerri Golf Club, Silver Bird
Cinema etc have stood the test of time, due to proper planning and forecasting.
This huge expenditure and apparent failure in the primary objectives of the
project led to complaints, probe panels and subsequent abandonment of the
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 shortage of research as to how Contractors approach project
planning at organisational level.
1. To explore feasibility and viability
appraisal techniques used by Contractors of capital projects in Owerri Urban.
2. To assess awareness and usage of formal
feasibility and viability appraisal techniques by Contractors in Owerri Urban.
3. To evaluate the impact of feasibility
and viability appraisals on the development of capital projects in Owerri
1.4 RESEARCH QUSTIONS
1. What feasibility and viability appraisal techniques
are used by capital project contractors in Owerri Urban?
2. How do you gather information about newer
feasibility and viability appraisal techniques and strategies to be applied in
your on-going projects?
3. What are the impacts of feasibility and viability
appraisal on the development of capital projects?
1.5 RESEARCH HYPOTHESIS
Ho: There is no significant relationship between feasibility study and the
performance of contractors.
Hi: There is a significant relationship between feasibility study and the
performance of contractors.
Ho: Feasibility study does not enhance quality deliverable in capital
Hi: Feasibility study enhances quality deliverable in capital projects.
1.6 SIGNIFICANCE OF THE STUDY
This study gives a clear insight into
the various ways in which Capital Project developers and owners in Owerri can
maximise efficiency and profits through effective and efficient application of
feasibility and viability appraisal methods and techniques. The study also
gives a clear insight into the various impacts of feasibility and viability
appraisal methods on the development of recreation properties in Owerri. The
findings and recommendations of the researcher will help in building a strong
and better appraisal technique and strategies for Capital Project developers in
Owerri state. The impact of feasibility and viability on Capital Project
development in Owerri Urban are outlined in-order for drastic measures to be
taken to tackle any challenge property owners and developers may face when
developing recreational centres in Owerri state.
SCOPE OF STUDY
This research focuses mainly on the
impact of feasibility and viability appraisal on the development of capital
projects in Owerri urban. Results and recommendations may not be used to
generalise other Cities in Nigeria, as the researcher could not cover a wider
scope due to financial and time constraints.
Based on the findings of this study
other possible researchable areas may include studies on the various effects of
other aspects of recreational development such as property laws in Nigeria and
property management and control.
LIMITATION OF THE STUDY
The only 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 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.
DEFINITION OF TERMS
terms serve as the dictionary of this research.
The terms are defined to enable the reader understand the research more
Appraisal: The term appraisal is
synonymous with valuation. It is an estimate or an opinion fixing the price for
something. An appraisal may be made off
hand and delivered orally or presented in an authoritative and comprehensively
written form to the client who requires the appraisal to make a decision or to
execute a policy. In this work, the
terms appraisal, evaluation and analysis have been used interchangeably.
Feasibility: 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 decisions makers.
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.
refers to long term investment requiring relatively large sums to acquire,
develop, improve, and to maintain.
1. Allan et al, 2007 Techniques for
Effective property management (A
John Wiley & Sons, Inc., Publication Hoboken, New Jersey. Published
simultaneously in Canada.)
O. U., (2002) Urban Planning and
development in a Depressed Economy. Unpublished M.Ed.
Dissertation Submitted to University of Ibadan. Ibadan
J.K and Uden P.I., (2007). Principle
and practice of Feasibility Studies In Nigeria (Owerri: Springfield
publishers, 2006) p.31
P.K. (2007) Understanding Feasibility and Viability Analysis New York: