While every capital project is unique, it encounters several common obstacles, regardless of its size, type, complexity, delivery method, or owner constraints. Inadequate work processes and poor project management tools and procedures can also contribute to these issues, potentially resulting in schedule and budget overruns impeding project goals and objectives.
Let us delve deeper into the common challenges in capital projects and strategies for mitigating risks and increasing the likelihood of success in such endeavors.
Major Common Capital Project Challenges
1. Scope Development and Front-End Planning
Problem
Defining the project scope is a crucial element in capital project planning, as it sets out all project deliverables, tasks, deadlines, and costs. A poorly defined project scope is a result of high pressure to initiate project execution quickly, lack of in-house design or planning capabilities, or financial constraints aimed at reducing costs of planning.
Potential Project Impacts
1. Higher project prices due to additional contingencies and numerous change orders
2. Unreliable project cost estimates and, consequently, lack of certainty around overall project costs and viability
Best Practices
1. Collaborate with contractors who have extensive front-end experience
2. Involve experts early on to assist in identifying issues and developing mitigation strategies
3. Use an organized and systematic approach for gathering project requirements to ensure that all requirements are captured from the beginning to identify any information gaps
4. For better alignment from the beginning, ensure early stakeholder involvement and communication
2. Change Management
A project cannot withstand multiple changes that constitute a significant portion of the original scope without experiencing a substantial decrease in overall cost performance.
Problem
Even with a highly detailed and well-defined scope, projects can still change. Similarly, introducing numerous change orders or poor change management procedures carries risks and can seriously affect project success. Change management entails identifying, planning, evaluating, and implementing changes and should be prioritized as such throughout the project lifecycle, from front-end planning to construction.
Potential Project Impacts
1. Schedule delays
2. Cost overruns
3. Increased facility downtime
Best Practices
During front-end planning:
1. Make precise and detailed agreements outlining the scope, cost, schedule, and Project Execution Plan (PEP)
2. Establish and agree on charge tolerances, change criteria, and approval requirements
During detail engineering and design:
1. Include well-established change management processes in the PEP framework
2. Establish and permanently secure a baseline project scope
3. Identify any potential changes as soon as possible
4. Develop a strong identification and cap culture
During Construction
1. Establish alignment between the contractor and project owner
2. Maintain consistent and regular communication
3. Rigorously maintain a change log
4. Integrate suitable change criteria when evaluating budget and suitable impacts
3. Team Alignment and Collaboration
Alignment is the state in which relevant project participants work within acceptable tolerances to formulate and achieve a set of project objectives that are uniformly defined and understood.
Problem
Inadequate communication and lack of alignment among the contractor, the contractor’s team, and stakeholders can lead to a plethora of problems throughout the capital project’s life cycle. Weak alignment or collaboration, particularly in the early stages of a project, can set off a chain reaction of events that significantly impact project performance and ultimate success.
Potential Project Impact
1. An abundance of change orders
2. Schedule delays
3. Exceeding budget limits
4. Poor contractor performance or trust erosion
Best Practices
1. During the front-end planning phase, establish early stakeholder and team alignment
2. To achieve team alignment, involve all disciplines and functions in the early stages of the project. Including construction personnel from the beginning can ensure that designs support construction feasibility and efficiency
3. Put in place strict project controls. Use an integrated platform like a dashboard to gain real-time access to all project data and information, allowing all parties to make informed decisions quickly
4. Maintain consistent and regular communication to ensure all parties are on the same page
4. Schedule Management
A three-year-old global construction survey found that only 25% of all projects met their original deadlines within a 10% margin.
Problem
Since the timeline is crucial to project owners, schedule management is a common challenge in capital projects. Uncontrollable factors such as weather, climate, and unforeseen site conditions can cause delays that last days or even weeks. However, a significant portion of delays are frequently caused by insufficient initial planning as the project begins.
Potential Project Impacts
1. Schedule Delays
2. Increased labor costs
3. Extended facility downtime
4. Hasty project execution resulting in compromised quality and safety
Best Practices
1. Establish realistic schedule expectations from the beginning of the project
2. Implement stringent project controls
3. Create a comprehensive scope definition and execution plan as soon as possible
4. Make use of advanced scheduling tools such as Primavera P6v18
5. Make use of simplified change management workflows
6. Maintain regular and consistent communication
7. Integrate the schedule as a central tool during project execution and evaluate it on a regular basis
8. Create an early and robust procurement management plan to establish a strategic procurement schedule and ensure timely deliveries in order to meet construction timelines
5. Contractor Performance and Trust
Only 31% of participants reported having a high level of trust in their contractors, while 60% reported a moderate level of trust, and 9% reported a low level of trust.
Problem
Throughout history, strained relationships have existed between project owners and contractors, which has had a significant impact on project performance.
Potential Project Impact
1. Challenges in communication and alignment that can significantly affect project performance
2. Delays in project schedules
Best Practices
1. Collaborate with reputable contractors who are known in the industry for not only achieving project success but also embracing the project owners’ goals as their own
2. Browse for contractors who have experience in the area and the type of work being done
3. Identify contractors who are committed to complete transparency throughout the project’s lifecycle, ensuring consistent and robust reporting, ideally weekly
4. Create a clear and consistent communication channel for all parties involved
5. Create detailed project reporting timetables during the pre-contract and bid stages to determine the best frequency for contractor reports
6. Contractors must regularly communicate with the project owner about project progress, delivering reports including progress assessments, workforce distribution trends, quantity and commodity analyses, performance evaluations, daily staff counts, cost breakdowns, and cash flow updates
7. Establishing early alignment with stakeholders on the key drivers, prerequisites, and project success criteria is equally important for contractors
Understanding the role of PMIS in overcoming these challenges
Each modern PMIS solution available in the market offers customization. Skilled experts can customize it to meet your organization’s needs, project structure, and established reporting protocols among your capital project teams. Furthermore, proper customization enables the project manager to meet specific requirements throughout the project’s lifecycle.
This is how an effective PMIS implementation can help your project in different phases:
1. Initiation Phase
Setting project objectives, developing a preliminary budget, preparing estimates and bids, scheduling and assigning tasks to relevant teams, and then developing a tracking methodology for reporting are all part of its job.
2. Planning Phase
Conducting critical path analysis and scheduling, structuring project controls and KPI metrics, strategizing resource allocation and contingency planning, and defining the project’s baseline and success metrics.
3. Execution Phase
Monitoring and storing important project-associated data and specific files for effortless retrieval, analyzing and contrasting project data with initial estimates, facilitating adoptions related to costs, budgets, and schedules in response to evolving needs, and offering assistance for project completion through performance metrics.
4. Review Phase
Comprehensive project evaluation to determine achievement of predefined project goals, creation of a central repository for all project-associated data for easy access and assessment, creation of archives containing historical data for future projects, and creation of final project reports for key stakeholders.
Let’s understand this through a real-life example.
One of the country’s largest healthcare institutions owns and oversees the operations of three hospitals and manages a network of numerous clinics. They adhere to an integrated delivery system model, diligently catering to county residents’ healthcare needs.
Their dedication to excellence has brought them recognition as the first accredited healthcare institution to receive the prestigious NCQA Medical Home designation. Their team harnesses the cutting-edge capabilities of eBuilder for project and cost management.
Challenges faced by the institution
1. Lack of visibility among various stakeholders, causing difficulties in meeting their diverse requirements
2. Uncertainty regarding project costs
3. Human errors caused by labor-centric processes
4. No Real-time updates due to manual reporting processes
The solution offered by OnIndus
1. Thoroughly evaluated the existing e-Builder implementation, reports, and in-depth requirement workshops with stakeholders to determine the relevant KPIs
2. Designed an analytical solution to aggregate data from two different sources
3. Designed an Automated reporting process to provide real-time updates to the stakeholders
4. Developed Finance dashboards in Tableau to provide information on:
- Capital summary by fiscal year
- Estimated vs. Commitment vs. Spend by capital category
- Capital and cost summary by project type and phase
- Project cost and schedule health
5. Developed Operations Dashboard to:
- Keep track of the project status
- Get updates about upcoming utility shutdowns
Obstacles faced
1. Unavailability of funding data in Data Warehouse
2. Wide range performance indicators required by different stakeholders in reporting structure
3. Aligning different users/departments on common visualization
4. Missing master tasks and baselines in scheduled Custom fields having multiple entries
OnIndus way-out approach
1. Custom solution to consolidate data from the Data Warehouse and funding information from the PMIS system
2. Finance, project health, and operations dashboards developed with summarized as well as detailed drill-down capabilities
3. Custom schedule tracking report
The Impact
1. 100% visibility of schedule, cost, submittals, and processes through the Project Status Dashboard
2. Almost 100% automation of financial performance reporting with a multi-dimensional categorized comparison of budgeted, committed, and actual spends
3. Automated Operational Reporting to track performance, shutdowns, and project statistics
4. One source of truth for the project managers
5. One-view of the project cost
6. Enhanced operational forecasting and planning with regular updates on shutdowns
7. Identification of GAPs in the processes through live dashboards
Conclusion
An effective capital project execution requires a proactive approach to address common challenges. Best practices and effective project management tools can help mitigate these challenges, which include scope development, change management, team alignment, schedule management, and contractor trust. Therefore, implementing a Project Management Information System (PMIS) tailored to the project’s needs and objectives is critical in streamlining the project lifecycle.