Intro
A successful sport or recreation facility is the result of thorough planning. Without adequate planning, the facility will probably fail – fail to meet the current and future needs of the community, fail to meet financial goals or fail to be managed effectively.
A feasibility study should critically assess a proposal to build a facility, and enable the client (the owner) to make an informed decision about whether to proceed with the proposed project.
It should consider all the alternatives within the scope of an identified need in order to establish the most effective investment of funds. It should analyse the social and financial impacts of the proposal and identify the risks involved by studying:
This recourse contains comments of a general nature only and is not intended to be relied upon as a substitute for professional advice. No responsibility will be accepted by the department for loss occasioned to any person doing anything as a result of any material in this resource.
This guide was prepared with a view to outlining the department's requirements for a feasibility study. However, any opinions, findings, conclusions, or recommendations expressed herein are guidelines only and should not be expressly relied on by project proponents.
The second phase in the facility planning process is the Feasibility Study. The purpose of a feasibility study is to examine the viability of a proposal so that any decision can be informed by objective analysis. Your decision may be to implement, amend, refine or abandon the proposal. It should thoroughly test the practicability of:
This guide provides practical assistance in undertaking a feasibility study for a proposed sport or recreation facility. It highlights the planning issues that need to be considered, the various ways of gathering information and the outcomes that should be achieved.
The information provided is not definitive. It does not, and cannot, outline the correct process of undertaking a feasibility study for all proposed sport or recreation facilities. The nature of the proposal, together with local circumstances, will determine the content and process of the feasibility study. This is intended to be a guide and should be used as such. Contact your nearest department office if you require assistance with using the guide.
Remember, a sport or recreation facility should be about meeting community needs. It should be designed for and with people, facilitate community interaction, be a "community hub" and be affordable to the community. The outcome of any feasibility study should be tested against this.
This guide is part of a suite of documents that can assist you with planning, testing and managing facilities.
The five key phases in the Facility Planning Process for a sport and recreation facility are illustrated in the following diagram:
In planning a sport or recreation facility, the first step is to undertake a needs assessment to justify its provision. The Department's Needs Assessment and Decision Making Guides can assist.
The second step is to undertake a feasibility study to assess the viability of the proposal. The feasibility study should determine:
Although this planning process may seem lengthy, it is cost-efficient. It is generally accepted that the feasibility phase of the planning process may cost up to 10% of the total cost of the development, but can determine up to 65% of the final cost of building the project.
As planning advances into the design and construction phases, it becomes increasingly more difficult to influence the final cost of the project. Figure 2 demonstrates that the optimum time to reduce life and project costs associated with any project is at a feasibility study stage. The cost and time impact is greatly reduced as the process continues along it's life cycle. An increased emphasis on the feasibility and planning stages of a project can greatly improve the life performance of an asset.
Before embarking on a feasibility study, the client should discern the appropriateness of the proposal to build a facility. Is it the client's core business to provide this facility or would it be more appropriate for another agency to provide it? Is there scope to partner the proposal?
The client should have a recreation and/or sport policy, stating its vision, mission and aims for the provision of facilities and services. This policy may also form part of a broader corporate plan.
Ideally, the provision of sport and recreation facilities should be guided by a Strategic Recreation Plan which establishes a future direction and vision and strategies for achievement, guiding service and facility provision.
The Local Government [Amendment] Act2 introduced in 1995, requires local authorities in Western Australia to develop an overview of the plan for the future for all major sport and recreation facility or service provision investments. This plan normally takes the form of a strategic plan that outlines the aims and objectives of each project, estimated capital and operating costs, funding sources, proposed timeframes and performance indicators . Business plans provide the specific operational details on how a particular service will be delivered.
For further information on facility planning please consult the resource Decision Making Guide.3.
It is essential that a needs assessment be undertaken before embarking on a feasibility study. In short, this involves identifying any lack or over supply of existing facilities and services. The aim of a needs assessment is to justify provision. It is only when the needs assessment is completed that a feasibility study is undertaken to assess the viability of any proposed facility development.
For information on undertaking a needs assessment please consult the resource Needs Assessment Guide and Decision Making Guide: Sport and recreation facilities4.
A number of different approaches can be used to undertake a feasibility study:
For the purpose of this guide, the last option (combined approach) is discussed below, as this will achieve a greater commitment from stakeholders and the community.
A combined approach requires the client to appoint a coordinating committee to manage and control the feasibility study process. This coordinating committee should comprise of:
The make-up of the committee will depend upon the type of facility being proposed. Key stakeholders including Department of Sport and Recreation staff should be involved from the start. The committee should have the power to co-opt other professionals and individuals if and when required.
Ideally the committee should have a diverse range of expertise in:
It may not be necessary for the committee to have knowledge in all of these areas - the specific expertise needed will be determined by the complexity of the proposal. However, it would be beneficial if the committee members had a basic understanding of the various aspects of planning a facility.
The client should provide the committee with the following:
The TOR should be developed by the coordinating committee and should outline the parameters of the study. The TOR is what must be investigated and reported upon. Furthermore it should detail the following:
Once developed, the TOR should be approved by the client before commencing the study. This process will ensure the client retains control over the scope of the study.
Department of Sport and Recreation staff should be invited on the coordinating committee, attend appropriate committee meetings and provide an advisory or consultation role where DSR provides funding assistance. The Department may submit minority reports on the feasibility study if the department does not agree with the findings of the study.
The coordinating committee should decide what investigative methods will be used in undertaking the feasibility study. There are a number of different methods used to identify and gather relevant information. Choose the most appropriate methods for your proposal. Some commonly used methods are:
Be aware of all assumptions and limitations surrounding the methodology you choose. All assumptions should be clearly stated in the feasibility study report. Misleading information can be generated by using inappropriate methods or by asking the wrong people.
In undertaking a feasibility study, community involvement will generally strengthen community ownership and the validity of the findings.
Broad community consultation may identify opportunities to share resources, extend an existing service, enter into a partnership or colocate complementary services. Where appropriate, a co-operative approach can achieve maximum effectiveness and efficiency.
The coordinating committee should decide how much input the community will have into the feasibility study. They should also consider engaging a skilled facilitator to assist with coordinating the consultation process.
It is important to acknowledge the two stages in the Feasibility Study Process. The first stage, Concept Planning, develops the concept of the facility, while the second stage, Feasibility Study, tests the practicability of the concept. Ideally, the two stages should be undertaken separately by independent parties to ensure impartial judgement and transparent processes.
It is important that any relevant background information such as existing reports, studies and plans be identified and reviewed. This background information may include:
You should also review studies and reports relevant to other similar facilities or communities of a similar size and ideally a similar demographic profile.
It is crucial that the organisational philosophy and values are determined at the outset of the study process. Your organisational philosophy should define the social, financial and environmental outcomes that could be expected from the facility. It should clarify your position regarding the following policy issues:
It is important to assess the socio-demographic characteristics of your community, participation trends, and the strengths and weaknesses of potential competitors and partners. It is useful to develop a spatial locality map to illustrate the results of your market analysis.
Socio-demographic characteristics can be identified through statistics obtainable from link: the Australian Bureau of Statistics and local government authorities. Other useful sources can be obtained from the Department of Education and Training, Department of Social Security and Department for Planning and Infrastructure.
Collect the following information to reflect the uniqueness of the community:
Once this information has been gathered, the next step is to:
When used in conjunction with information on participation trends, socio-demographic characteristics can highlight the number of potential users for the proposed facility and identify various target market groups. Information on participation trends is available from the Department of Sport and Recreation's Information Centre.
Review information on participation in sport and recreation to identify current participation trends. What are the general characteristics of those people who are likely to participate in the activities you intend to offer? How does this relate to your community?
Review documentation on trends and issues likely to impact on the future demand for the proposed facility (i.e. growth sports, increased home-based opportunities, ageing population). See Appendix A.
Examine whether existing services are declining, rising, ageing or developing? Look for patterns/trends/cycles/seasons in relation to current consumption of sport and recreation services. Check statistical information from different sports with information provided by the Department of Sport and Recreation Western Australia or state sporting associations.
Identify the size of the catchment area for the proposed facility. How far does this extend and can it be increased? What is the competition within the catchment?
Ensure regular reviews on government planning policies are conducted. Changes to policies can determine or shape the decisions taken within the feasibility study.
It is important to analyse potential competitors and their customers. Assess both direct and indirect/public and private competitors. The analysis should answer the following:
Evaluate each competitor on these factors and look for an unsatisfied demand which offers an opportunity.
Consider what factors will attract people to the proposed facility? What will enable the proposed facility to complement its competitors rather than compete against them? i.e. price, convenience, opportunity to mix with others, range of sport and recreation opportunities, quality of service and facilities, public access, degree of hospitality, opportunity to join a club, public transport etc.
It is impossible to offer all services to all market segments. Decisions need to be made on which specific market segments will be serviced before the facility is developed.
The need for a facility is crucial to the strength of the feasibility study. It is not enough to say "We believe we need this facility" - the need for the proposed development must be investigated, measured, documented and supported, so that the client can be assured that the proposal is justified and sustainable.
Re-visit the basic sport and recreation requirements of the community, as identified in the initial needs assessment, and review the investigative methods and assumptions used to determine those needs.
Examine the different ways of satisfying the basic sport and recreation requirements of the community. The provision of a new facility may be only one of a number of possible solutions.
Consider the following options and select the most reasonable one for further investigation:
Determine how effective each of these alternatives will be in meeting the basic sport and recreation requirements of the community. Decide on a preferred option. It is possible that you will identify several workable solutions.
The examination of alternative solutions may have already been completed as part of either:
Where this is the case, it is important for the committee to review the recommended/preferred option and be assured that the development of the proposed facility is the most appropriate response.
It is important to remember that the provision of a sport or recreation facility is a long-term financial commitment. Meeting the construction cost is only the starting point of funding a facility. It is the ongoing operating and maintenance costs over the life span of a facility that needs to be considered in greater detail.
Where the preferred option is to develop a facility, the next step is to prepare a draft management plan. This should be done utilising the expertise of an experienced facility manager (use an in-house professional or engage an external person/group such as the Facility Management Association of Australia).
It is important that management issues are addressed prior to considering the design of the proposed facility, ensuring that the end result is a facility that is designed for effective and cost efficient management.
Decide on the most appropriate management structure for the proposed facility. Be guided by your organisational philosophy. A description of alternative management structures is provided below:
Determine the most appropriate management structure.
Estimate the amount of usage the proposed facility is likely to attract using the following methods:
This approach records preferences and expressed desires as opposed to real needs.
Existing usage patterns really only reflect existing consumption, not real need. Caution should be exercised when using this method as it usually results in more of the same programs and facilities.
Other factors to consider when you estimate usage include:
When estimating the usage of a proposed facility:
Identify what target groups will be serviced by the proposed facility.
Identify the key target customers along with lower priority customer groups of the proposed facility.
Describe:
The sport and recreational needs of the targeted customer groups will form the basis of the programs and services to be offered at the proposed facility.
Describe the programs and services that will be offered to each target group. A sample program should be included for each season, along with details of any permanent bookings which have to be honoured. Determine the opening hours of the proposed facility.
Consider how future programs will be developed. The sport and recreation industry is vulnerable to trends. It is important to be flexible in your approach to programming to accommodate changing needs and new activities.
Staffing costs comprise the largest operating expense in many sport and recreation facilities. Excessive staffing will significantly increase your operating costs while inadequate staffing may result in loss of potential business, under-utilised facilities, staff stress/turnover or non-compliance with legislation.
A flow chart of the organisational structure could be included.
Develop a marketing strategy for the proposed facility:
In order to develop a preliminary concept of the proposed facility, first identify the various facility components, i.e. the different spaces/functional areas needed within the main structure.
Information on what facility components will be the most appropriate can be ascertained from:
Care should be taken to be guided by real needs as opposed to desires to avoid spiralling capital and operating costs that create excessive/unsustainable financial burdens.
Outline the specific components of the facility:
The above information should provide sufficient details to enable a cost planner/quantity surveyor to estimate the capital cost of the proposal.
Remember, the concept design is flexible and will probably change. Do not spend time and money developing and discussing alternative layouts at this stage. Once the proposal is deemed feasible, and has been approved, it will enter the design phase. It is then that the skills of a consultant design team are utilised to develop a schematic design.
Note: If a design consultant is employed to draw up footprint plans/illustrations of your concept plan, it is important to ensure their engagement will not compromise your choice of consultants later in the design phase, should this proposal proceed.
Consider whether existing facilities could be extended or upgraded for use on a shared basis. If this is not possible and a new facility is required, you should plan in consultation with other facility providers to ensure minimum duplication and maximum use of resources.
Consider the possibility of co-locating the proposed facility with other community or commercial facilities. If properly integrated, this approach can work to create a "hub" within your community, centralising facilities in a village concept. Co-location with other major providers will maximise service and social outcomes and provide opportunities to reduce capital and operating costs.
Discuss your proposal with the Department of Education and Training, local agencies and groups, commercial organisations, neighbouring local governments and other State and Federal government agencies to explore opportunities to colocate and share provision and/or use of facilities.
Usually, location and cost will dictate the choice of site. However, when considering a site for a sport or recreation facility, you should assess site suitability. The following considerations should be addressed:
Note: It is acknowledged that the site for the proposed facility may be predetermined due to the limited availability of land. However, it is still recommended that the above considerations be addressed to ensure the best use is made of the site.
It is important to test the practicability of the technical aspects of the concept design. This will ensure that energy use/consumption, maintenance of all technical systems and utilities (i.e. lighting, airconditioning, heating, sanitation and filtration systems for swimming pools, reticulation, water pumps and bores) and ongoing operational costs are investigated and that the most practical and cost effective options are selected based on Life Cycle Costing guidelines[3].
When undertaking this exercise, engage the expertise of an engineer to provide professional assistance and discuss the proposal with industry peak bodies.
Refer to existing facilities for relevant performance and maintenance records. This process will ensure that you are aware of the financial, management and maintenance implications of the technical design aspects of the proposed facility.
Note: A comprehensive energy audit should not be undertaken until the project enters the design phase.
For further information refer to the Department of Sport and Recreation publications Life Cycle Cost Guidelines and Asset Management Guide.
Detail the estimated capital costs of the proposed options for the facility. A cost planner or quantity surveyor should prepare a cost plan showing the following items:
Identify potential sources of capital funding such as:
For further information refer to the Department of Sport and Recreation publication Life Cycle Cost Guidelines.
Operating income should be estimated based on usage estimates (refer page 10) and anticipated enrolments in programs (refer page 11).
To estimate operating income, include revenue from:
Note: In order to estimate income and operating costs, obtain the above information from other similar sport or recreation facilities. Be conservative in estimating income and liberal in estimating expenses.
Operating expenses should be broken down into fixed costs and variable costs.
Fixed costs: Incurred whether the facility is being used or not, (i.e. permanent operational staff, insurance, taxes, interest and depreciation).
Variable costs: Expenses that are incurred when the facility is being used, ie utilities, program staff, fuel and supplies.
Financial projections should be made for a five to 20 year period (five years for small and medium size projects and 20 years for larger projects). To estimate operating expenditure, include costs relating to:
NOTE: In general, building maintenance costs to meet changes in legislation are difficult to predict and should be included in revised budgets when they become apparent.
Financial forecasts are required to determine whether the proposed facility will be financially viable. For small and medium size projects financial statements for the first five years of operation are required. For large scale projects additional financial statements for years four to 20 are required (see Appendix B).
Prepare the following financial forecasts. Where necessary, engage the expertise of a financial/legal advisor for professional assistance.
Profit and Loss and Cash Flow Statements - Prepare monthly statements for year 1, quarterly for years 2 and 3, and annually thereafter (see Appendix C and D).
Sensitivity Analysis - Prepare annual statements for years 1, 2, 3, 4 and 5.
Break Even Analysis. Prepare annual statements for years 1, 2, 3, 4 and 5.
The availability of funds throughout the planning, design and construction phases are essential. The following key points need to be determined:
A Sensitivity or "What if......" analysis is used to identify financial risks".
This exercise is crucial in assessing the financial viability of the proposal. The worst-case scenario needs to be budgeted for. Computer software is available to undertake sensitivity analysis. Summarise all forecasts and decide if the project is financially viable.
It is cheaper to construct a facility in one stage. However, if the capital and/or operating costs of the proposed facility are beyond the means of your funding sources, consider reducing the scale of the proposal, or staging construction.
By staging the development, priority services can be established first and their performance monitored before committing additional funds. Additional services and facilities can be provided when funds become available. Staging is also a viable option when not all desires/needs have demand at the same time.
Consider developing the proposed facility in stages and assess the cost/benefit implications of this approach. State whether staging the development is an appropriate option and why.
NOTE: DSR grant applications should identify priority elements.
Sustainability is about making sure what you plan to do today has a positive impact on the economic, environment and social aspects of future generations.
Ideally, when all three aspects are weighed up, the net result should be seen as a benefit as opposed to a cost. In other words, it should be expected that the proposed facility would enhance the community in all three sustainability elements.
The economic impact of developing the facility needs to be considered. Is it likely to reduce/increase the financial viability of another facility, club or business?
Are there external forces within the surrounding environment which could inhibit/enhance the facility's financial performance? Consider the following factors:
Consider any proposed industrial and commercial developments which may influence the demand for the proposed facility and the types of opportunities it will offer. Information may be obtained from:
Refrain from using outdated information when making future predictions.
Undertake a risk assessment to evaluate the degree of risk associated with developing the proposed facility in light of predicted economic forces. When undertaking this exercise professional assistance should be sought.
Will the new facility consider the principles of shared use and co-location? Will global sustainability benchmarks be met in the planning and development of facilities? Responding to energy, waste and water conservation issues needs to also be considered, preferably using an ecological footprint or sustainability assessment analysis.
Consider the impact a new facility will have on existing social and leisure patterns (i.e. is it likely to create a new focal point for community activity? Is it likely to create new demands or trends? Will it impact on the culture of the community?) Consider potential areas of competition and complementation.
Re-visit the findings of the needs assessment to confirm that the finished proposal will meet the basic sport and recreation requirements of the community. It is not difficult for a proposal to get "off-track" during the course of its development and stray from its original objective.
Consider the relationship of the proposal to the future development of the municipality, sport or region. Critically examine how the facility will assist the client/s group to achieve its vision.
Check that any other developments that may have occurred since the feasibility commenced will not detract from the success of your proposal.
The information that has been gathered and assessed should be summarised to enable an objective decision regarding the proposal.
The summary should include the following components:
Record the details of the study process in the order in which it was done. Use the headings of the key components to set out your report.
The executive summary is usually found at the beginning of the report or may be presented as a separate document. It should be able to stand alone from the rest of the report. The executive summary should include:
Consider the following practical hints when writing the report:
Include any survey results, interview results, site visit reports, minutes of public meetings, technical reports, professional advice and/or other research, which is referred to, or support claims made within the study.
It is desirable to obtain an independent review/assessment of the feasibility study, especially if considering a large-scale project. The review should be undertaken by an independent (unrelated) person or organisation with relevant expertise and experience and should address the following points:
The feasibility study should provide all the information required to make a decision to support or reject a proposal to develop a sport or recreation facility. This decision will have long-term ramifications for the community and, therefore, it is important that the study is comprehensive and objective.
The feasibility study is a means to an end. That end is the involvement of the community in determining how and when collectively owned funds are going to be spent to provide opportunities for sport and recreation experiences.
Through undertaking a feasibility study the chances of developing an unsuccessful facility are minimised, and the potential for efficiency is increased.
A good feasibility study is the client's best insurance against a poor investment!
Some of the major trends and issues affecting the development of sport and recreation within Western Australia include:
Refer to Decision Making Guide — Sustainability Matrix Assessment Guidelines for further assistance.