Capital Project Challenges

Project scope is a critical aspect of capital project planning, as it establishes all project deliverables, tasks, deadlines, and costs. A poorly defined scope is often the result of pressure to begin project execution quickly, lack of in-house design or planning abilities, or financial pressure to minimize the cost of planning.

• Higher prices paid due to added contingencies and numerous change orders
• Unreliable project cost estimates and, consequently, lack of certainty surrounding overall project costs and viability

• Work with contractors with strong front-end planning experience.
• Involve constructability and supply chain management experts early on to help identify issues and develop mitigation plans.
• Utilize a methodical and systematic approach for collecting project requirements to ensure all requirements are captured up front or identify any information gaps.
• Ensure early stakeholder involvement and communication to ensure alignment from the beginning.
• Quantitatively assess scope readiness via a scope readiness tool to ensure projects are ready to enter the execution phase.

Even with a highly detailed, well-defined scope, project changes are always possible. Numerous change orders or poor change management procedures introduce risk and can have serious consequences regarding project success. 

Change management involves identification, planning, evaluation, and implementation, and thus, should be emphasized throughout the entire project life cycle, from front-end planning to construction.

• Schedule delays
• Cost overruns
• Increased facility downtime

During front-end planning:

• Establish clear, detailed agreements defining scope, cost, schedule, and Project Execution Plan (PEP).
• Establish and agree upon change tolerances, change criteria, and approval requirements.

During detail engineering and design:

• Incorporate highly established change management work processes as part of the PEP.
• Establish and freeze a baseline project scope.
• Identify any potential changes as early as possible.
• Implement a strong identification and capture culture.

During construction:

• Ensure contractor-project owner alignment.
• Communicate consistently and regularly.
• Diligently use a change log.
• Incorporate appropriate change criteria while assessing budget and schedule impacts.

Cost overruns on capital projects are an ongoing and challenging issue for businesses and negatively affect the return shareholders see on capital investments. 

Cost overruns can originate from several sources, such as late or poor scope definition, poor communication, design errors, unexpected site conditions, issues with supply chain alignment, and scope creep.

• Cost overruns

• Develop a clear and strong scope definition to reduce the likelihood of change orders during project execution
• Maintain frequent and consistent communication between all stakeholders and team members.
• Utilize strong project controls during the pre-contract and bid phase as well as the project execution phase. 

By nature, the construction industry is faced with higher injury rates than many other industry sectors. Safety is one of the most potentially harmful and damaging capital project challenges. Safety extends beyond the protection of the construction workforce to all operational personnel and the surrounding community. 

• Injuries, illnesses, and fatalities
• Cost and schedule delays
• Facility downtime

• Incorporate a detailed, systematic Behavior-Based Safety program that places focus on continuous improvement and education.
• Incorporate an Extra Hazardous Work program that addresses risk factors such as commissioning, confined spaces, demolition, electrical, energy isolation, environment, excavation, falls, flammables, and lifting.
• Identify crucial and high-risk activities early on to allow time to develop highly effective mitigation plans.
• Ensure senior management is strongly committed to safety to ensure risks are taken seriously and mitigated effectively.

Insufficient communication and a lack of alignment between the contractor, the contractor’s team, and stakeholders can cause a myriad of problems throughout a capital project’s life cycle. Poor alignment or collaboration, especially during early project phases, can have a domino effect and can greatly impact project performance and success.

• Excessive change orders
• Schedule delays
• Cost overruns
• Poor contractor performance or trust

• Ensure early stakeholder and team alignment during the front-end planning phase.
• Involve all disciplines and functions in early project stages to gain team alignment. Early involvement of construction personnel can ensure designs promote construction feasibility and efficiency.
• Incorporate strong project controls. Utilizing an integrated location, such as a dashboard, to view all project data and information provides all parties with the real-time data necessary to make quick and informed decisions.
• Communicate consistently and regularly to continue ensuring alignment between all parties.

Schedule management is one of the most common capital project challenges, as the schedule is often a significant driving factor for project owners. Delays can happen for reasons beyond an owner’s control—weather, climate, and unexpected site conditions can set a project back by days or weeks. However, delays often occur due to poor front-end planning at the beginning of a project. 

• Schedule delays
• Increased labor costs
• Increased facility downtime
• Rushed project execution causing quality and safety risks

• Set realistic schedule expectations from the beginning.
• Incorporate strong project controls.
• Develop a robust definition of scope and execution plan as early as possible.
• Use advanced scheduling tools such as Primavera P6v18.
• Utilize effective and efficient change management work processes.
• Communicate consistently and regularly.
• Use the schedule as an integrated tool during project execution and review the schedule regularly.
• Create an early and robust procurement management plan to establish a strategic procurement schedule to ensure timely deliveries to help maintain construction timelines.

Historically, there has been a pattern of tense relationships and a lack of trust between project owners and contractors that ultimately impact project performance. 

• Communication and alignment challenges that can greatly impact project performance
• Schedule delays

• Work with well-established contractors that are known within the industry to not only deliver project success but to treat the goals of project owners as their own.
• Look for contractors familiar with the area and type of work being performed.
• Find contractors that provide full transparency throughout the project life cycle and consistent and strong reporting, ideally weekly. 
• Establish a clear and consistent line of communication that works for all parties on day one. 
• Develop clear project reporting schedules during the pre-contract and bid phase to establish the ideal frequency of contractor reports.
• Contractors should communicate regularly with the project owner about the progress of their project and should routinely provide reports, including progress measurements, manpower histograms, quantity/commodity curves, performance reports, daily headcounts, cost reports/breakdowns, and cash flow reports. 
• Contractors should align early on with stakeholders regarding driving factors, requirements, and criteria for project success.