Case Study: How Early Project Review Prevented Cost Overruns and Schedule Delays

 

Cost overruns are one of the most common challenges in capital-intensive projects. Across energy, industrial, and infrastructure sectors, many projects exceed their original budgets not because of poor execution alone, but due to weaknesses embedded in early-stage decisions. This case study illustrates how an early independent project review helped prevent cost overruns and schedule delays by identifying risks before construction began.

The case presented here is a representative example based on real project review experience. Specific details have been generalized to preserve confidentiality while maintaining technical and commercial relevance.

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Project Background

The project involved the development of a mid-scale industrial energy facility intended to supply power and utilities to an industrial estate. The project was promoted by a private investor group and was approaching Final Investment Decision (FID). At this stage, the project had:

• A completed Feasibility Study
• Preliminary Front-End Engineering Design (FEED)
• An indicative EPC cost proposal

Despite apparent readiness, the investors requested an independent project review to validate assumptions, assess risks, and confirm investment readiness.

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Initial Project Assumptions

The original project plan was based on several key assumptions:

• EPC execution under a lump-sum turnkey contract
• An aggressive construction schedule aligned with early revenue targets
• Capital cost estimates derived from limited FEED documentation
• Technology selection based on vendor recommendations

While these assumptions appeared reasonable on the surface, they had not been independently challenged.

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Scope of the Early Project Review

The independent project review focused on four main areas:

1. Technical maturity and FEED completeness
2. Cost and schedule assumptions
3. EPC contract structure and risk allocation
4. Key execution and operational risks

The objective was not to redesign the project, but to assess whether the project was truly ready to proceed to EPC award and construction.

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Key Issues Identified During the Review

1. Incomplete FEED Definition

The review revealed that several critical FEED deliverables were either incomplete or missing, including:

• Preliminary P&IDs for auxiliary systems
• Utility balance calculations
• Plot plan optimization

These gaps increased the likelihood of scope growth during detailed engineering and construction.

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2. Underestimated Capital Costs

The EPC cost estimate was found to be optimistic. Key cost drivers that were underestimated included:

• Electrical and instrumentation scope
• Civil works related to site conditions
• Commissioning and start-up activities

Benchmarking against similar projects indicated a potential cost overrun risk of 15–25%.

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3. Schedule Risks

The proposed schedule did not adequately account for:

• Long-lead equipment procurement
• Permitting and regulatory approval timelines
• Interface coordination between contractors

The review concluded that the schedule was aggressive and carried a high risk of delay.

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4. EPC Contract Risk Allocation

The draft EPC contract contained several clauses that shifted excessive risk back to the project owner, including:

• Broad exclusions hidden in appendices
• Limited remedies for underperformance
• Ambiguous change management provisions

These issues would likely have led to disputes during execution.

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Recommended Corrective Actions

Based on the findings, the independent reviewers recommended:

• Extending the FEED phase to close identified technical gaps
• Revising capital cost estimates using a transparent, bottom-up approach
• Adjusting the project schedule to reflect realistic execution logic
• Rebalancing EPC contract risk allocation and clarifying scope

Although these recommendations required additional upfront effort, they significantly reduced downstream risk.

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Impact on Project Outcome

Following implementation of the recommendations:

• The project budget was revised upward before FID, avoiding surprise overruns later
• EPC tendering was based on a clearer and more complete scope
• Contractor bids were more consistent and comparable
• The final EPC contract contained fewer exclusions and clearer performance guarantees

As a result, the project proceeded to construction with improved predictability and significantly reduced claim exposure.

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Lessons Learned for Investors and Project Owners

This case highlights several critical lessons:

• Early-stage optimism must be balanced with objective review
• FEED completeness is directly linked to cost and schedule certainty
• EPC contracts do not eliminate risk unless properly structured
• Early independent reviews are far more cost-effective than fixing problems during construction

The cost of the early project review represented a fraction of the potential cost overruns it helped prevent.

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Why Early Project Reviews Add Value

Independent project reviews provide:

• Objective assessment of technical and commercial assumptions
• Early identification of hidden risks
• Decision support before irreversible commitments are made

For investors, this approach protects capital and improves long-term project performance.

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Conclusion

This case study demonstrates that cost overruns are not inevitable. Many can be prevented by identifying and addressing risks early in the project lifecycle. Early independent project reviews enable informed decision-making, reduce uncertainty, and significantly improve the likelihood of project success.

For capital-intensive projects, the question is not whether a project review is affordable—but whether proceeding without one is acceptable.

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How Our Consulting Services Support Early Project Reviews

At Engineering Projects & Industry Review Hub, we support investors and project owners through:

• Independent project and investment readiness reviews
• FEED and EPC validation
• Cost, schedule, and risk assessment
• Technical and commercial due diligence

Our role is to help clients make confident, well-informed decisions before capital is committed.

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How We Support Investors and Project Owners

We provide independent feasibility preparation & reviews, FEED advisory, and EPC risk assessments to support informed investment decisions.

📩 Contact us: afakar@gmail.com

WhatsApp: +62 813-6864-3249

EPC Contracts Explained: What Project Owners and Investors Must Review

Engineering, Procurement, and Construction (EPC) contracts are widely used in industrial, energy, and infrastructure projects because they promise simplicity: a single contractor responsible for delivering a complete facility at an agreed price and schedule. For project owners and investors, EPC contracts are often perceived as a way to transfer risk and achieve cost certainty.

However, many projects experience cost overruns, delays, and disputes despite being executed under EPC arrangements. The reason is simple: an EPC contract only works as intended when it is properly structured, clearly defined, and thoroughly reviewed before approval.

This article explains the key elements that project owners and investors must review before signing an EPC contract—and why independent EPC reviews are critical to protecting capital.

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What Is an EPC Contract?

An EPC contract is a project delivery model where a single contractor is responsible for:

• Engineering and design
• Procurement of equipment and materials
• Construction, installation, and commissioning

In theory, the EPC contractor delivers a “turnkey” facility that meets agreed performance requirements at a fixed price and schedule. In practice, the effectiveness of an EPC contract depends heavily on how risks, scope, and responsibilities are defined.

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Why EPC Contracts Often Fail to Deliver Expected Outcomes

EPC contracts fail not because the model is flawed, but because they are often:

• Based on incomplete FEED or poorly defined scope
• Negotiated under time pressure
• Structured with unbalanced risk allocation

When uncertainties are pushed into the contract rather than resolved upfront, disputes become inevitable during execution.

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Key EPC Contract Elements Investors Must Review

1. Scope of Work Definition

The most critical part of any EPC contract is the scope of work. Investors should verify:

• That the scope aligns with FEED deliverables
• Clear definition of battery limits and interfaces
• Explicit inclusions, exclusions, and assumptions

Ambiguous scope leads directly to change orders and claims.

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2. Contract Price Structure

While EPC contracts are often labeled as “lump sum,” investors should understand:

• What assumptions underpin the pricing
• Whether escalation, taxes, and duties are included
• How contingencies are handled

An unrealistically low EPC price is often a warning sign rather than a benefit.

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3. Risk Allocation

One of the most misunderstood aspects of EPC contracts is risk transfer. Investors should carefully review:

• Who bears design risk
• Who is responsible for regulatory changes
• Force majeure and change-in-law provisions

Risk should be allocated to the party best able to manage it. Unbalanced risk allocation often results in disputes rather than risk elimination.

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4. Schedule and Liquidated Damages

Schedule commitments are critical to project economics. EPC contracts typically include:

• Key milestones
• Guaranteed completion dates
• Delay liquidated damages (LDs)

Investors should assess whether the proposed schedule is realistic and whether LDs are sufficient to compensate for delays without incentivizing claims-driven behavior.

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5. Performance Guarantees

Performance guarantees define whether the completed facility meets agreed output, efficiency, or quality targets. Investors should review:

• Clear and measurable performance criteria
• Testing procedures and acceptance standards
• Remedies if performance is not achieved

Weak or poorly defined guarantees expose investors to long-term operational underperformance.

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6. Change Management and Variations

Even well-prepared projects experience changes. EPC contracts must clearly define:

• How variations are initiated and approved
• Pricing mechanisms for changes
• Impact on schedule and guarantees

Poorly defined change management processes are a major source of cost escalation.

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The Link Between FEED Quality and EPC Success

Strong FEED significantly improves EPC outcomes by:

• Reducing uncertainty in scope and pricing
• Allowing fair comparison of EPC bids
• Minimizing post-award changes

Projects that move into EPC without adequate FEED often pay for that decision through claims, delays, and strained relationships.

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Common EPC Contract Red Flags

Investors and project owners should be cautious if they encounter:

• EPC contracts based on incomplete or conceptual FEED
• Excessive exclusions hidden in appendices
• Performance guarantees without meaningful remedies
• Aggressive schedules unsupported by execution logic
• Limited transparency in cost assumptions

These red flags often signal future disputes and budget overruns.

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Why Independent EPC Contract Reviews Matter

EPC contracts are typically drafted by contractors or project sponsors with commercial objectives. Independent EPC reviews provide:

• Objective assessment of technical and commercial risks
• Verification of alignment with FEED assumptions
• Benchmarking against industry best practices

For investors, lenders, and joint venture partners, independent EPC reviews are a critical part of technical due diligence.

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Conclusion

EPC contracts can be effective tools for delivering complex projects—but only when they are properly structured and reviewed. For project owners and investors, the key is not to assume that an EPC contract automatically transfers risk, but to understand where risks truly reside.

Thorough EPC contract reviews, supported by strong FEED and independent expertise, are essential to protecting capital and achieving predictable project outcomes.

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How Our Consulting Services Support EPC Reviews

At Engineering Projects & Industry Review Hub, we support investors and project owners through:

• Independent EPC contract reviews
• Technical and commercial due diligence
• Risk allocation and scope validation
• EPC readiness and bid evaluation support

Our focus is to help decision-makers enter EPC contracts with clarity, balance, and confidence.

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How We Support Investors and Project Owners

We provide independent feasibility preparation & reviews, FEED advisory, and EPC risk assessments to support informed investment decisions.

📩 Contact us: afakar@gmail.com

WhatsApp: +62 813-6864-3249

How Front-End Engineering Design (FEED) Reduces Cost Overruns and Project Risk

 

Cost overruns and schedule delays remain two of the most persistent challenges in industrial, energy, and infrastructure projects. While many factors contribute to these issues, one root cause appears repeatedly across failed or underperforming projects: insufficient Front-End Engineering Design (FEED).

FEED is often viewed as an optional step—something that can be shortened or skipped to accelerate project timelines. In reality, FEED is one of the most effective tools available to investors and project owners to reduce uncertainty, improve cost accuracy, and control project risk before committing to major capital expenditure.

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What Is Front-End Engineering Design (FEED)?

Front-End Engineering Design is the engineering phase that follows a Feasibility Study and precedes detailed engineering and construction. Its primary purpose is to define the project with enough technical detail to:

• Establish a clear and complete project scope
• Improve capital and schedule accuracy
• Support EPC tendering and contract negotiations
• Reduce execution and commercial risk

A properly executed FEED transforms a project concept into a “decision-ready” investment.

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Why Projects Without Proper FEED Often Fail

Many projects proceed directly from feasibility-level concepts into EPC contracts. This approach creates several predictable problems:

• Ambiguous scope definitions
• Unrealistic cost estimates
• Excessive change orders
• Claims and disputes during construction

Without FEED, EPC contractors are forced to price uncertainty. This either results in inflated bids—or low bids followed by aggressive claims once construction begins. In both cases, investors ultimately bear the risk.

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How FEED Reduces Cost Overruns

1. Improved Cost Accuracy

FEED typically increases cost estimate accuracy from ±30–40% at feasibility level to ±10–15%. This is achieved through:

• Defined equipment lists and specifications
• Preliminary layouts and plot plans
• Identified utility and infrastructure requirements

Better definition leads to fewer surprises during execution.

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2. Clear Scope Definition

FEED documents clearly define what is included—and excluded—from the project scope. This reduces:

• Scope gaps between owner and EPC contractor
• Misinterpretation of responsibilities
• Claims related to “out-of-scope” work

Clear scope is one of the strongest defenses against cost escalation.

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3. Early Identification of Technical Risks

FEED allows technical challenges to be identified when solutions are still flexible and cost-effective. Examples include:

• Equipment sizing issues
• Process integration constraints
• Constructability challenges

Resolving these issues during FEED is far less expensive than addressing them during construction.

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How FEED Reduces Project Risk

1. Better EPC Contracting Strategy

With a solid FEED, project owners can:

• Prepare clear EPC tender documents
• Compare bids on a like-for-like basis
• Negotiate contracts with balanced risk allocation

This significantly reduces commercial disputes during execution.

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2. Schedule Realism

FEED supports the development of realistic project schedules by:

• Identifying critical path activities
• Highlighting long-lead equipment
• Aligning engineering, procurement, and construction logic

Unrealistic schedules are a major contributor to project failure—and FEED helps prevent them.

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3. Enhanced Bankability

Lenders and institutional investors typically require FEED-level documentation before financing approval. FEED improves bankability by:

• Reducing uncertainty
• Demonstrating technical maturity
• Supporting independent due diligence

Projects without FEED often struggle to secure financing on acceptable terms.

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FEED Deliverables Investors Should Review

Key FEED outputs that investors should pay attention to include:

• Process Flow Diagrams (PFDs)
• Preliminary Piping & Instrumentation Diagrams (P&IDs)
• Equipment specifications and datasheets
• Plot plans and layout drawings
• CAPEX and OPEX estimates with clear basis
• Project execution and contracting strategy

Weak or incomplete deliverables are warning signs of future problems.

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The Link Between Feasibility Study, FEED, and EPC

A Feasibility Study answers whether a project should proceed.

FEED defines how it will be executed.

EPC determines who will deliver it and at what cost.

When these stages are not properly aligned, project risk increases exponentially. Strong FEED acts as the bridge that converts feasibility assumptions into executable reality.

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Common FEED Red Flags Investors Should Watch For

• FEED schedules that are unrealistically short
• CAPEX estimates without transparent assumptions
• Limited constructability input
• Technology choices not validated against operating conditions
• Lack of risk register or mitigation plan

These red flags often indicate that FEED is being rushed to meet commercial deadlines rather than project readiness.

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Why Independent FEED Reviews Matter

FEED developed by licensors, EPC contractors, or vendors may unintentionally favor specific technologies or commercial outcomes. Independent FEED reviews provide:

• Objective validation of assumptions
• Benchmarking against industry norms
• Identification of hidden risks

Independent reviewers act in the investor’s interest, not the project promoter’s.

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Conclusion

Front-End Engineering Design is not an added cost—it is an investment in predictability. Projects that allocate sufficient time and resources to FEED consistently demonstrate better cost control, fewer disputes, and stronger overall performance.

For investors and project owners, FEED represents one of the most effective tools available to reduce risk before capital is committed and construction begins.

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How Our Consulting Services Support FEED

At Engineering Projects & Industry Review Hub, we support clients through:

• Independent FEED reviews and validation
• Scope definition and EPC readiness assessments
• Cost and schedule risk evaluation
• Technical and commercial due diligence

Our objective is to help investors and project owners move forward with confidence and clarity.

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How We Support Investors and Project Owners

We provide independent feasibility preparation & reviews, FEED advisory, and EPC risk assessments to support informed investment decisions.

📩 Contact us: afakar@gmail.com

WhatsApp: +62 813-6864-3249

Why a Proper Feasibility Study Is Critical Before Committing to a Project Investment

 

In project development, enthusiasm and capital alone are never sufficient to guarantee success. Across industries such as energy, infrastructure, manufacturing, and industrial processing, many projects fail or significantly underperform due to weak preparation during the early decision-making phase. One of the most critical steps often underestimated by investors and project owners is the Feasibility Study (FS).

A properly executed Feasibility Study is not a formality—it is a decision-making tool designed to protect capital, reduce uncertainty, and provide a realistic picture of a project’s viability before major commitments are made.

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What Is a Feasibility Study?

A Feasibility Study is a structured evaluation of a proposed project from multiple perspectives, including:

• Technical feasibility
• Commercial and market feasibility
• Financial viability
• Regulatory and environmental constraints
• Risk identification and mitigation

The objective of an FS is not to justify a project at all costs, but to answer a fundamental question: Should this project proceed, be modified, or be stopped?

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Why Feasibility Studies Are Often Misunderstood

In practice, many feasibility studies are treated as promotional documents rather than objective analyses. Common issues include:

• Overly optimistic assumptions on demand or pricing
• Underestimated capital and operating costs
• Incomplete risk assessment
• Technology choices driven by preference rather than suitability

Such studies may help secure early approvals, but they often lead to serious problems later during financing, EPC execution, or operation.

A proper feasibility study should challenge assumptions—not reinforce them.

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Key Elements of a Robust Feasibility Study

1. Technical Feasibility

This evaluates whether the project can be built and operated reliably under real-world conditions. It includes:

• Technology selection and maturity assessment
• Capacity definition and process configuration
• Utility requirements and infrastructure availability
• Constructability considerations

Investors should ensure that the proposed technology has appropriate references or that the risks of new or first-of-a-kind solutions are clearly identified and allocated.

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2. Market and Commercial Feasibility

A technically sound project can still fail if market assumptions are weak. Market analysis should address:

• Demand size and growth trends
• Competitive landscape
• Revenue mechanisms and price volatility
• Contractual structures such as offtake agreements

Independent validation of market assumptions is essential, particularly in sectors exposed to commodity price fluctuations or regulatory changes.

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3. Financial Feasibility

Financial modeling translates technical and commercial assumptions into investment metrics such as IRR, NPV, and payback period. A reliable FS should include:

• Transparent CAPEX and OPEX estimates
• Sensitivity and scenario analysis
• Impact of delays, cost overruns, and price changes

Investors should be cautious of studies that present a single “base case” without stress testing the project under adverse conditions.

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4. Regulatory and Environmental Assessment

Permitting, environmental approvals, and regulatory compliance often determine project timelines and feasibility. Early identification of:

• Environmental impact requirements
• Licensing and permitting processes
• Local regulatory constraints

can prevent delays and cost escalation later in the project lifecycle.

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5. Risk Identification and Mitigation

Perhaps the most critical function of a feasibility study is risk identification. These risks may include:

• Technology performance risk
• Feedstock or supply risk
• Market and pricing risk
• Construction and schedule risk
• Regulatory and political risk

A good FS does not eliminate risk, but it makes risk visible and manageable.

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Why Investors Should Demand Independent Feasibility Reviews

Feasibility studies prepared by project sponsors, vendors, or EPC contractors may unintentionally reflect inherent biases. Independent feasibility reviews provide:

• Objective assessment of assumptions
• Benchmarking against industry norms
• Identification of hidden or underestimated risks

For lenders and institutional investors, independent FS reviews are often a prerequisite for financing approval.

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The Link Between Feasibility Study and FEED

A feasibility study defines whether a project makes sense. The next stage—Front-End Engineering Design (FEED)—defines how the project will be executed.

Weak feasibility studies lead to:

• Poorly defined FEED scopes
• Inaccurate EPC pricing
• Increased change orders and claims

Conversely, a robust FS provides a solid foundation for FEED, improving cost accuracy, schedule reliability, and overall project bankability.

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Common Red Flags Investors Should Watch For

• CAPEX estimates with insufficient basis
• No sensitivity or downside scenarios
• Vague technology descriptions
• Unrealistic construction schedules
• Limited discussion of risks

These red flags often indicate that a feasibility study is being used as a sales tool rather than a decision tool.

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Conclusion

A proper Feasibility Study is one of the most cost-effective investments an investor can make during project development. It enables informed decision-making, protects capital, and significantly improves the probability of project success.

Skipping or weakening this stage may save time in the short term—but it often results in far greater costs, delays, and disputes during execution and operation.

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How Our Consulting Services Support Feasibility Studies

At Engineering Projects & Industry Review Hub, we support investors and project owners through:

• Independent feasibility study reviews
• Technical and commercial validation
• Risk assessment and mitigation planning
• Investment readiness advisory

Our role is to help decision-makers move forward with clarity, realism, and confidence.

 

By Ahmad Fakar – Engineering expert / Consultant

📩 Email: afakar@gmail.com

📱 WhatsApp: +62 813-6864-3249