There is an unprecedented demand for the goods and services to manufacture EV batteries as this new market emerges. The supply chain is in its infancy and, for the most part, does not yet exist. There are hundreds or thousands of new production facilities to be built for mining, chemical manufacturing, and assembly facilities to meet this global demand.
However, the current trend of CapEx project delivery shows that 9 out of 10 projects will be late and over-budget. It’s all too common for projects to be 6+ months late and 20% or more over-budget. This is very discouraging, given the large number of CapEx projects to be built over the next decades to establish an entirely new EV supply chain.
Simple numbers show a bleak outlook for this development:
– 100 capex projects to be built over the next decade
– $1B capital budget for each project (each project is likely more)
Total capital expenditure of $100B spread across many companies and industries is likely to be closer to $120B, $130B, or worse, based on current project delivery strategies and trends. $20B or $30B is a staggering number to be wasted because of the poor performance of capital project delivery and disappointing to just shrug off as a necessary expense to get the job done because that’s the way it’s always been done. We need to do better. I can think of a long list of more worthwhile initiatives to spend $30B on than to allow this to be wasted on inefficient project delivery, such as other capital projects to address climate change faster, electrification to more quickly transition off fossil fuel energy, or any other initiative to better address the global challenges we are facing than to allow this excess to “leak” out of capital projects.
In reality, the wasted costs due to capital project delivery inefficiency will be much higher than this. And when there is always limited time and money on projects, it’s heartbreaking that we can’t better apply these resources to address the global challenges we all face together.
The way to contain spending on capital projects is to finish them. Meet dates to get projects in-service, and the capital expenses stop. And this is the reason capital projects are started in the first place, to finish them and get value from new assets. The reason projects exist in the first place is so we can use them to produce the goods and services we need – such as a supply chain to provide EV batteries. The point of the project is to get in, get out, and be able to start operating new assets for the useful purpose they are intended.
What is required then are the most efficient methods to FINISH capital projects. While we, of course, need processes to start projects (securing funding and resources to initiate projects) and processes to execute projects (monitor and control the work), most importantly, we need processes to finish projects, to ensure that all preceding work on the project culminates in completing the new assets so we can start using them for their intended purpose.
Too often project teams leave this to be determined later – the focus is on getting the work started and not on getting the work finished. Steven Covey would say to start with the end in mind. But this is easier said than done, and very few project teams are able to implement this as they get consumed in the busy day-to-day activities on projects.
It is imperative to have rock-solid completion processes on projects right from the start. Without this, there is no path to completion, and project teams stumble along the way or veer off-track without a clear plan of what is required to finish projects.
With this daunting capital expansion plan ahead of us to develop the EV supply chain, it’s easy to see how this can quickly go off-track. Before we get too far down this road, let’s already have a plan for how it will end, so we can look back on this new supply chain a decade from now and say that we tackled this expansion together to the best of our ability and as efficiently as possible. There are lots of places to spend money on other global challenges, so let’s tackle each one as efficiently as we can.
Be sure to get your CapEx Project completion processes in place before embarking down this expansion path.
ATTENTION: Project Managers
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