Creating a Capital Project Evaluation Roadmap

Geoff Emeigh

The challenges of understanding and getting ahead of capital project risks are familiar to all project teams. For decades,  Independent Project Analysis (IPA), Inc., has partnered with project teams in assessing and mitigating uncertainties threatening capital project effectiveness. In more recent years, IPA has developed robust capabilities rooted in quantitative analysis to address project risk earlier in the project development process. However, client project teams are unfamiliar with how and when IPA’s capital project data and knowledge can be fed into the process. Now there is a way to get everyone on the same page.

Through a new approach, IPA works with clients to create an entire project engagement roadmap for individual projects from the start of the scope development/select phase of the work process (Front-End Loading [FEL] 2) all the way through project closeout. The roadmap sets out a series of workshops during which project leaders, together with a team of IPA analysts, sit down together to review delivery concepts, examine cost metrics and models, and identify gaps known to drive capital effectiveness deterioration. The workshops are held before the end of FEL 2. This gives project teams enough time to resolve issues raised by IPA prior to the project’s pacesetter evaluation. Pacesetters are used by many of IPA’s clients to establish competitive targets on a project before it passes into the more costly FEL 3 define phase. Recent early engagement cost analyses conducted by IPA have identified capital cost reductions of up to 20 percent.

The standard project evaluation roadmap entails the following work sessions, but additional sessions may be appropriate based on a client’s expectations:

Alignment Workshop

A short time after a project enters FEL 2, the project team and IPA analysts meet for a half-day to full-day workshop to discuss the alignment of the project’s business and project team objectives, identify risks (and value adding opportunities if they exist), and develop an IPA engagement schedule. As stated earlier, a complete project engagement roadmap is produced from the outset so project leaders can plan accordingly.

Concept Analysis

The intent of a Concept Analysis workshop is for the IPA analysts and project team leaders to pore over the project data exclusive to IPA (thanks to its proprietary database of 20,000+ capital projects) that can help the team compare and validate their concept and capacity choices for their project against industry norms. Such topics range from the best contracting strategies to the pros and cons of pursuing a new technology and the benefits and risks of design standardization and execution. This workshop is best done in the middle of FEL 2.

Target Alignment

Shortly after the project concept and scope are selected, a Target Alignment Workshop is scheduled to evaluate competitiveness and identify potential gaps, after controlling for the relevant technical, regional, and market characteristics. As part of this effort, the early cost and schedule targets are analyzed and benchmarked relative to similar concepts in Industry.

IPA Engagement Teams

Another important aspect of IPA’s early engagement approach is establishing a standing team of IPA analysts assigned to the project. This IPA engagement team follows the project through its life cycle. Each team comprises a senior lead analyst and select IPA experts in functional areas, such as cost engineering and organizations and teams. The engagement team approach provides continuity in the analysis of projects, which means the IPA engagement team members are already up to speed on any new developments. They also do not have to relearn the client’s project system processes or familiarize themselves with the project business drivers.

Project risks manifest soon after the business hands over an opportunity to a project team. Project teams should be certain they have a strong support structure and dependable partner for following capital project delivery Best Practices. Through early engagement, IPA can be proactive in helping a company’s capital project leadership mitigate risks known to weaken capital project development and execution performance.

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