In this post, I want to focus on optimizing the delivery of capital projects, especially processes in the Engineering Design stage.
Looking at the bigger picture
Further insights from McKinsey say that global investment in energy, infrastructure, mining, and real estate-related projects could increase to around $13 trillion by 2030. It’s great to see such a positive outlook, but the lion’s share of this investment will fund billion-dollar megaprojects, which often under perform. In fact, according to McKinsey, 98% of them end up with cost overruns of 30% or more, and over three quarters are delivered at least 40% late. This is not just limited to megaprojects, as smaller projects of less than $10 million often present similar challenges.
In my experience, the problems usually come from inadequate scope management, internal communication between owner groups, contractors and subcontractors, while decision-making processes are frequently too slow and lack the scale required to drive momentum.
But there are better ways to run projects and increase ROI.
Looking specifically at the Engineering Design stage, I’ve often seen how a few simple changes can help optimize processes and cut down the likelihood of cost or time overruns.
Managing scope definition
So where can you find efficiencies? The early planning stages provide an opportunity to optimize design around site constraints – something that is often overlooked and can lead to costly errors and rework later on. At the same time, the Construction Industry Institute Project Definition Rating Index (CII PDRI) methodology can help you measure the degree of scope definition, its completeness prior to execution, identify gaps, and take appropriate actions to reduce risk during front-end planning.
My clients use technology to help them optimize design-to-value, so they cut out elements that can drive up cost in the construction phase. They can ensure that projects are designed to deliver only the necessary added value requirements, thereby reducing capital investments to a realistic base level.
In determining accurate investment levels, I’ve often seen project managers deliberately underestimate costs and timescales to gain project approval. And right from the start, these projects are on a fast track to failure. This is when decision-makers need to take a reality check, and where comparisons with similar, completed projects can help.
Improvement in collaboration across both internal and external teams thru all aspects of scope development , document development & control, etc whilst also ensuring that key people are involved in all critical decision making , ensuring the objectives of the project are fully and widely understand by all stakeholders both Internal and External . Taking Stage gate reviews as a prime example where enhanced collaboration leads to totally objective decisions being made when moving thru a methodology like FEL stage 1-3. It’s easier and less expensive to make changes in the earlier design stages, and our own customer data shows that projects with this input are likely to be delivered 5% earlier with 10% fewer changes in the construction phase.
A clear insight into project delivery is required from day one on any projects and a consistent view of all milestones, activities, inter dependencies, etc to deliver the project both from an owner & supply chain perspective helps all stakeholders both internal and external understand the required time aspects of the project . I am also seeing organizations looking to improve their supply chain coordination at this stage of a projects life by enabling the project schedule to become fully integrated and drive synchronization between these two complex processes.
In addition accurate modeling and allocation of risk across schedule, resources, cost and contingency is becoming a priority within all project s and we have seen contingency management improved by over 10% just by undertaking effective periodic reviews.
Planning to improve performance
These are just some of the areas where our solutions and technology can help to improve front-end planning processes. By optimizing Engineering Design processes, organizations are better placed to control cost and timescales during the construction phase – and more likely to see their projects succeed.
This post was authored by Geoff Roberts, director, energy industry strategy, Oracle Construction and Engineering