- Capital project management (CPM) success requires astute planning, structured controls, and effective delivery.
- With the right planning and tools, capital projects are manageable
- View some of the critical success factors.
Capital projects, whether for new construction or capital improvements, are unique not only in investment size and consequence, but also in complexity. Capital project management (CPM) success requires astute planning, structured controls, and effective delivery. Software tools and best practice strategies increase the likelihood of positive outcomes.
Kuehne Chemical (www.kuehnecompany.com), based in South Kearny, New Jersey, manages its capital projects internally. Outside expertise is typically used for engineering design, according to Richard Wilkes, director of corporate engineering for Kuehne. The manufacturer of sodium hypochlorite (bleach), sodium hydroxide (caustic soda), and chlorine is currently developing a new brine-to-bleach facility.
Figure 1. Kuehne Chemical’s 350 ft steel pipe bridge project was a $260,000 capital investment. (Source: Kuehne Chemical)
“We recently completed the fabrication and installation of a new pipe bridge section to connect a new process to an existing one,” says Wilkes. “The steel structure is approximately 350 ft long. It is a four-tier bridge, 17 ft clear to grade, approximately 6 ft wide on the pipe bearing area, and has a 3 ft wide catwalk along one side. It was a $260,000 investment.” (Figure 1)
Capital projects in some sectors are particularly complex. In the global oil and gas industry, sizable investments are being made in unconventional resources like shale oil, oil sands, and deepwater projects. Owner/operators in this industry are dealing with multiple joint venture partners; engineering, procurement and construction (EPC) firms; contractors; and suppliers, making collaboration among the stakeholders crucial, according to Rick Nicholson, group vice president of IDC Energy Insights (www.idc-ei.com).
“The industry has continued to increase its capital spending over the past two to three years, creating an even greater need for improved processes and technologies to manage large capital projects,” says Nicholson. “These projects are so large and require so much capital that they can directly create or destroy shareholder value.”
Capital project success factors
With the right planning, structure, execution, and change management, capital projects are more likely to meet or even exceed expectations. “I hate to throw out a cliché, but being on time, on budget, of quality, and getting the ‘customer’ to invite you back are the most important factors for successful capital project management,” says Kuehne’s Wilkes. “Doing it right the first time is essential.” Following are some of the critical success factors.
Pre-planning: Effective pre-project planning is a primary factor in CPM success. It’s where the vision is transformed into realizable goals, taking numerous and wide-ranging considerations into account.
“The most important success factor would be the front-end loading. This should be consistent and aligned with business goals,” says Glenn Kmecz, global practice leader for capital effectiveness and contractor safety management at DuPont Sustainable Solutions (www.dupont.com). “Each capital project has unique attributes and numerous challenges. There are many factors that need to be considered in order to deliver an effective project, such as technology selection, contractor selection, government permits, materials sourcing, operations readiness, and environmental impacts, to name a few. Therefore, we advocate for owner organizations to perform a thorough assessment of each project and then ensure that processes and specific actions are considered from the very beginning to account for these specificities,” adds Kmecz.
Risk planning: Risks are best mitigated by recognizing them upfront and managing them throughout the entire project life cycle. “Companies should put in place processes and analytics that identify risks earlier in the project life cycle, provide visibility into risks by executive management as well as project teams, enable continuous risk analysis and reporting throughout the project life cycle, and syndicate certain risks across the project portfolio,” says IDC’s Nicholson.
Resource planning: Kmecz recommends staffing project teams for success. This includes the establishment of cross-functional management teams. “By having a diverse team, it is more likely that business goals will be met and the project will run smoothly. Contractors must also be thoroughly vetted in order to ensure that they will be compliant with the expectations of the owner organization, especially as it pertains to safety, health and the environment,” he explains.
Asset integrity planning: Capital projects deliver greater savings down the line when operational and asset integrity is addressed at the front end. “Organizations that operate chemical companies, refineries, utilities or other industrial plants consider the operational integrity of the facility to be a high priority,” says Paul Marconi, senior project manager for asset integrity management (AIM) at Intertek (www.intertek.com). “We encourage companies to incorporate AIM into their capital projects, beginning at design phase.”
The failure to implement effective AIM has consequences ranging from the extreme (death or injury to personnel or the community) to production losses, work stoppage, plant outages, environmental cleanup costs, fines and legal fees, and damage to the brand and corporate identity, says Marconi.