Even at the best of times, delivering on CAPEX projects is a complex undertaking, with 95 percent of construction projects ending up blowing their budgets or running over schedule. Now, with COVID-19 introducing a new layer of complexities to the design, build and delivery process, the risk of budget and schedule overruns – and their consequent negative financial impact on the company, local communities, partners and suppliers – has only increased.
While we predict that 2021 will see a boom in the size and volume of CAPEX projects, we also foresee specific challenges for CAPEX planning that has not been built with scalability in mind. To meet future demand, companies must implement new strategies, management systems, and tools to increase employee capability and improve project delivery.
Here are three things companies must prioritize in 2021 and beyond if they wish to drive more value from their CAPEX projects.
Start with the end in mind
Most project managers won’t realize their CAPEX plan will face budget and schedule overruns until it’s too late. Based on our experience, the key to avoiding overruns and minimizing cashflow and capital risks is to stay on schedule. This means that once you have your engagement plan, your first priority should be planning and scheduling. And the most significant opportunity to effectively manage project risk, costs, and time to revenue is before the project even starts – during the engineering design stage.
Proudfoot employs an agile Integrated Planning Process (IPP) that utilizes a pilot start-up to optimize repetitive tasks, incorporates efficiency gains into future project plans, highlights execution complexity with built-in reviews, and addresses complexity by removing process constraints. By developing a formal plan with a detailed internal review, you can determine what project outcomes must be achieved and which risks must be avoided.
Make OPEX a top priority
Technology alone is insufficient to deliver higher project value – it must be teamed with large-scale management transformation across the board, outstanding fixed assets management, and a simplification of infrastructure programs for better efficiency and operational excellence. The best way to manage project progress is to establish a central Results Hub for transparent measurement, communication, execution, collaboration, and clarity of ownership.
Proudfoot’s Lean Forward™ transformation framework engages your workforce to identify and reduce the eight main drivers of waste – Motion, Transportation, Inventory, Defects, Waiting, Over Production, Over Processing, and Skills – while reinforcing a focus on Quality & Safety. Managers can also use the ‘Perfect Day’ tool to model daily activities and expectations to actively manage their team and proactively address potential problems before they arise.
Always put people first
To keep CAPEX projects on schedule, we need to ensure adequate supervision, communication, and connection between leaders and their staff. This is what we term #HeadsUP, our philosophy of safety first and active management that encompasses:
- Being present and actively engaging and connecting with people and data
- Understanding and aligning with the site vision of what and why we are building
- Using technology to empower better ways of working
- Coaching to ensure that everyone is equipped with the right skills to move the project forward
- Bringing together people, ideas and action to improve performances and outcomes
To drive more value from your infrastructure CAPEX projects, detailed planning, operational excellence, CAPEX management, and building a #HeadsUp team are essential. Done right, you’ll have all the controls in place to bring in your project accident-free, ahead of schedule, and on budget while delivering on the greater good – total stakeholder engagement.
Watch the full recording of Extracting more value from your CAPEX projects by Jon Wylie, Proudfoot Global President of Natural Resources, first presented at IPMA Global Best Practice Week 2020.