Our Planet is Begging for Better CapEx Projects

Capital projects play a large role in addressing the global challenges we are facing:

• The EV battery supply chain is in its infancy, with many more production plants required to meet the EV demand as we electrify vehicles
• Global electrification requires many more HVDC links and transmission substations to move energy to meet the demand
• Fossil fuel power generation is being replaced with new wind and solar farms
• New modern waste treatment facilities are being built to meet more stringent environmental license requirements
• And many more capital projects are required to replace aging facilities and outdated energy sources that are being retired

The global energy transformation requires thousands of CapEx projects to address climate change as the world is electrified.

And to meet this demand, CapEx projects must do better – currently, 9 out of 10 projects are late and over-budget. We as a collective global society are not going to address these transformational changes with this poor project performance. Projects must do better. Projects cannot continue to be 6 months or more late and 20%+ over-budget.

Delivery of capital projects is notoriously inefficient. This has been the case for decades. Despite the technological advancements that are happening, there has been no sign of improvement in the efficiency of capital project delivery. Except for a few leaders in the industry, most projects are still being completed as they were during the electro-mechanical relay days.

With the project over-expenditures that exist, we end up paying for 5 new facilities in order to get 4 operational. This is not acceptable. We all pay for this waste on projects in the fuel we purchase, the electricity we depend on, and the goods and services we consume – a 20%+ burden on society to cover the wasted inefficiencies of capital projects. This is hardly the best use of the scarce resources we have to get closer to the sustainable future we need.

With a 20% improvement in CapEx project delivery, we can essentially build 4 plants and get the 5th one free. In a lot of cases where waste is 40% or 50% on projects, improved performance gives us every second project for free – buy one megaproject and get another megaproject for free – what a deal! An improved efficiency gives us a significant cost and speed advantage to bring new plants online as supply chains are established and electrification occurs if project teams challenge themselves to pursue these efficiency gains.

We cannot continue with the current inefficiencies on projects. We must strive for every efficiency advantage they can achieve for capital projects to be built over the next several decades. We cannot continue with the way it’s always been done.

Every stage of the project benefits from efficiency gains:

• Reviews and approvals to get projects started
• Procurement processes for contract award and equipment purchase
• Design preparations and reviews with the incorporation of lessons learned
• Construction productivity gains and schedule performance
• Completions and commissioning to ensure efficient completion of capital projects with quality systems that deliver on their intended purpose

Efficiencies gained during each stage are compounded for overall project success, and no stage can be overlooked. If only parts of the delivery process are addressed but not others, projects will still struggle to achieve their objectives.

Project leaders must be looking for efficiencies at every stage, and significant efficiencies can be gained during construction, given this is where most of the project expenditures occur. Capex projects are great at starting construction but are terrible at finishing construction. This is not unexpected or anyone’s fault – the last 10% of any task is always the hardest. It’s like running a marathon – the first 10 km are certainly easier than the last 10 km to get across the finish line – it takes strong determination and focus to push through the last 10 km to get to the end.

The tools that project teams are missing to make the last 10% of construction easier and more efficient are the project management frameworks for construction completions and commissioning. These frameworks give project teams structured and organized methods to efficiently complete capital projects. Unfortunately, very few project teams know how to do this, and are stuck with the way it has always been done, with a scramble at the end of projects to get things working. And it’s a shame, because this is a terrible way to start the operation of a new plant that spans 30 years, 50 years, or more, much longer than the duration of the project. Scrambling at the end of projects costs operators even more money after projects are complete.

With advanced project management frameworks for construction completions and commissioning, the last 10% of construction becomes as easy as the first 10% of construction. When project teams establish advanced processes to complete projects, the work becomes much more straightforward to get to the end and helps project teams get through the last 10% to cross the finish line.

The current capital project delivery strategies are not working, with 90% of projects late and over-budget. The status quo is not an option if we are to address the challenges ahead of us. Completing projects more efficiently must be the #1 priority. Groups that are not interested in this and are instead interested in their own personal/corporate gain must be identified and excluded from participating in projects – selfishness is not a quality we need to solve our global issues. We all want to work with groups that want to do the right things for the right reasons, to collaboratively help projects succeed. And I believe everyone working on projects wants to solve these global challenges, if we can give them a better way to complete the hardest parts of projects – the last 10% of projects to get across the finish line.

Focus on making the last 10% of projects as efficient as the first 10% and this enables project teams to accomplish great things. Learn the advanced project management frameworks to improve the efficiency of the last 10% of construction with our free white paper – Capital Projects: Construction & Completions.