Start With The End in Mind
Successfully planning and executing capital projects is highly complex, often involving numerous stakeholders, significant financial investment, and the need to manage risk throughout the project's lifecycle.
This article offers you a high-level overview of how to optimize your CAPEX project strategic planning and development process by utilizing our winning methodology, refined over 41 years of tried-and-true experience. A successful design-build journey starts with the end in mind and integrates accountability, structured decision-making, and early-stage analysis to ensure successful project outcomes.
The Integrated Project Delivery (IPD) Mindset
Over time, it became clear to us that the business of bringing a high-performing manufacturing and processing facility to completion was too complex for traditional planning and construction models. Advanced technologies, automation, regulatory requirements, employee engagement needs—indeed, every aspect of the modern mission-critical manufacturing facility has become more complicated. Successful organizations we've worked with adapted their approach to align with these evolving requirements, and we proactively adapted with them.
In thriving CAPEX programs, this evolution led to the development of an IPD consultative model. Philosophically, IPD is a collaborative approach guided by subject matter experts (SMEs) who understand each discipline and know how every piece fits into and feeds extraordinary project outcomes. Ideation, planning, design, engineering, construction, and commissioning experts all have a seat at the table from the start – working together toward their common objective of producing a highly optimized and compliant facility while maintaining accountability, saving time, and controlling costs. In short, implementing a project model where the highly complex is artfully managed and data-driven to become as simple and effective as possible.
Addressing stakeholder interdependencies and establishing clear lines of accountability early on is vital. By shifting from a siloed approach to a unified consultative one, Owners gain insight and assurance only possible when the teams managing the critical paths to completion integrate their perspectives and provide early guidance to the other teams producing interrelated work products.
This approach helps mitigate customer risks and enhance the quality of project deliverables, ensuring that projects meet deadlines and adhere to strict quality and cost controls. Ultimately, better outcomes derive from having the party who is accountable for delivering the final facility have a guiding influence over the project, with all the parties at the table.
Collaborate and Adapt
Another critical aspect of HRI’s approach is an emphasis on collaboration among cross-functional teams and adapting project strategies as the project evolves. Early in the project, IPD teams focus on creative solutions and innovative thinking. As the project progresses, the focus shifts towards refining these ideas into executable plans that meet specific project objectives.
Throughout each phase, from Discovery to Execution, teams are guided by SMART (Specific, Measurable, Achievable, Realistic, and Time-Bound) project objectives that connect back to the Owner’s business goals. Defined in this manner ensures that each phase’s deliverables are clearly aligned with the intended outcomes. This systematic approach to setting objectives and aligning stakeholder goals produces more predictable project results.
While predictability is enhanced, you should also expect the unexpected. Your project partner should be experienced, prepared, and nimble enough to adapt as new and more complex data emerges. They should refer back to your documented and comprehensive Owner's Program to align with the defined goals and objectives before recharting the course.
As complex as CAPEX projects are, every plan should include a process for addressing and adapting to change.
Invest the Most When You Have the Greatest Impact
HRI emphasizes the importance of early-stage planning in the Discovery and Conceptual Phases of a project. These early phases focus on comprehensive analysis, feasibility reports, capital project studies, and design concepts that form the foundation for the project's success. By investing additional time and resources upfront, stakeholders can significantly reduce the risk of costly errors later in the project lifecycle.
This principle aligns with the studies by Patrick MacLeamy (the MacLeamy Curve, 2004) and Boyd C. Paulson, Jr. (Stanford, 1976), which show that influence and control over costs (and we would add, schedule) decline significantly as a project progresses. The greatest level of influence and control is determined by the approach you take at the start. HRI’s experience validates this approach, underscoring the importance of thorough preparation to mitigate risks down the line.
Critical Decision Points: Using a Stage-Gate Process
Consider whether your project should incorporate clear "Go/No-Go" decision points throughout the project lifecycle. These stage-gate checkpoints act as structured opportunities for stakeholders to evaluate the project’s progress and make informed decisions about moving forward. They may be required to obtain funding approval at a stated level of design or needed when the scope is uncertain, pending additional data.
Using a well-defined stage-gate process is especially important in CAPEX projects, where complex engineering challenges, budget constraints, and time-sensitive decisions often define the trajectory of success. By setting these decision points, HRI ensures stakeholders have access to the necessary information for timely decision-making, helping avoid costly delays and missteps.
In some cases, you may already be "past the gate" and need speed-to-market. Work with your consulting partner and contractor to see where, when, and whether a stage-gated process is right for you.
Detailed Engineering and Execution
Detailed engineering models and precise scheduling become critical in the later phases of the project lifecycle, particularly during the Functional and Operational Phases that support a FEED Study and Issued For Permit Packages. These models help define the systems, costs, and workflows necessary for executing the project according to plan.
Your process should emphasize rigorous quality control and cost analysis throughout this stage of the project. All contractor and vendor pricing proposals should be analyzed and provided transparently to ensure that the project stays within budget while adhering to its design and quality standards. Confirm in advance with your consulting partner and contractor that you will have visibility into the numbers.
At this stage, effective communication and consistent progress updates are essential. Utilize a prescribed planning process with a structured communication system to ensure that all stakeholders are regularly informed of the project’s status, reducing the potential for misalignment and costly errors.
Flexibility in Project Delivery and Contracting Methodology
Meeting the diverse needs and goals of CAPEX projects also means utilizing the appropriate project delivery and contract methods.
Project Delivery Methods are typically one of the following:
- Design-Build (DB)
- Progressive Design-Build (PDB)
- Design-Bid-Build (DBB)
- Engineer-Procure-Construct (EPC)
Contract Methods may include:
- Cost-Plus
- Lump-Sum, Stipulated Sum, or Fixed Price
- Guaranteed Maximum Price (GMP)
- Cost-Plus GMP
Each of these has a different purpose and fit, determined by your goals and objectives. How much will it cost, and what effort is needed to reach a financial investment decision? What are your speed-to-market needs? What is the risk balance between you (the Owner) and your contractors or partners? Is your spending capped? What are the complexities? Who is responsible for cost overruns, and who benefits from cost savings?
Your contracting partner, who is accountable for the project, should explain your options and what the benefits and downsides are for you with each. Some contractors have their own preferences, with little flexibility, to protect their interests. Yet their preferred method may not be the best fit for your objectives even if it appears so on the surface. Utilize a careful analytical approach to determine which combination of project delivery and contract method is best for you. Obtain advice. It’s a vital service that your contractor partner should provide, and they should have the flexibility to adapt to the methods that meet your specific risk tolerance, budget constraints, and long-term goals. (With HRI, while different delivery and contracting methods are used, our core processes remain consistent. Whether the project follows AIA, DBIA, or Consensus contract documentation, the stage-gate process, early planning, and SME involvement ensure that projects stay structured and efficient – we adapt to any of the above options).
Conclusion: Structured Methodology for Better Outcomes
HRI’s proven methodology for planning and developing capital projects is rooted in structured decision-making, early-stage investment, and a collaborative IPD approach. By integrating these principles from beginning to end, stakeholders can mitigate risks, control costs, and ensure that their projects are delivered on time.
This approach, refined over decades, provides a clear framework for navigating the complexities of CAPEX projects, from initial feasibility analysis to final turnover. If you are seeking to streamline your CAPEX project processes, understanding the importance of early planning, clear decision points, and collaborative execution will significantly impact your success.
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