Should You Stay or Should You Go?
The success of any capital project leans heavily on its foundation. Before diving into your project’s design and execution phases, a thorough Discovery process is vital for determining feasibility. A structured approach to CAPEX (or OPEX) planning and development, like Hansen-Rice, Inc.’s Project Development Plan, gives your team insights and influence over project outcomes while the costs of change are still relatively low. Not to be overlooked, the investment in your Discovery process pays significant dividends throughout the project lifecycle and acts as a foundational benchmark for your decision-making.
The Discovery Phase: An Overview
Start with the end in mind…
A CAPEX project’s Discovery Phase (usually four to six weeks in duration) focuses on gathering essential data to determine whether the project is viable. The primary goal is collecting enough reliable information to make informed multi-million-dollar decisions.
During this phase, choose a partner with subject matter experts who clearly understand every aspect of planning, designing, building, and delivering your mission-critical facility. It is essential that they know where the hidden risks are. They know what to ask and see what others miss. Most of all, they are driven to protect your interests and ask all the tough questions. Collaborate with them to develop a comprehensive Owner’s Program, which outlines the project charter, defines objectives, identifies issues, risks, strengths, and potential solutions, and establishes baseline criteria and parameters. By the end of Discovery, stakeholders should clearly understand whether to move forward with the project, adjust its scope, or abandon it altogether.
Establish Stage-Gate Support for Structured Decision-Making
To protect your ROI, employ a stage-gate model featuring multiple "Go/No-Go" decision points throughout the project lifecycle. Ask your early partners, advisors and contractors how your agreements with them allow you to find your “off-ramps” or enable you to change course as new data emerges. Ask what project delivery method they will use and how that will favor your ability to adapt. These gates ensure all stakeholders are aligned and the project’s progress is evaluated at critical junctures. The stage-gate process provides structure to the planning and decision-making processes, reducing the risk of costly changes later. The Discovery Phase gate is particularly important as project feasibility is assessed and stakeholders decide whether to proceed to more detailed development stages.
Front-End Engineering and Design: Laying the Groundwork
Front-End Engineering Design (FEED) and Front-End Loading (FEL) are essential methodologies HRI uses during the Discovery Phase. These approaches help identify the project's scope of work and establish the baseline technical requirements. The Discovery Phase involves creating preliminary designs, Block Flow Diagrams, and defining key process components. It also involves identifying potential risks, determining infrastructure needs, and considering future growth capabilities. By developing these initial design concepts early, the project is better positioned for success as it moves through later phases.
Regulatory Due Diligence and Risk Assessment
An often overlooked but critical part of the Discovery Phase is conducting due diligence on regulatory and zoning requirements. Your consulting partner should have an established and proven Due Diligence Checklist (DDC) that ensures nothing is missed, i.e., land use requirements, necessary permits, and other regulatory entitlements. This checklist protects you and your project by confirming that all potential legal and compliance issues are addressed early in the project’s lifecycle.
Risk identification and mitigation are essential before they compound. Ask your planning partner to show you how they collaborate with you to develop a comprehensive SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess risks and project viability. This analysis provides critical insights that help determine if the project is feasible or if adjustments are needed to mitigate risks. By aligning the project’s scope with regulatory and risk parameters, your team can avoid costly surprises.
Cost Estimation and Timeline Considerations
During the Discovery Phase, stakeholders must establish their rough order of magnitude (ROM) estimate of costs to assess the project's financial and operational feasibility. Ask your planning partner about the source and methodology for their cost data and how they know it’s accurate. (HRI uses its extensive experience and historical data to generate an educated Opinion of Probable Cost, accounting for typical project parameters and potential "outliers" that could impact costs or timelines).
Timeline considerations are equally important. Your Discovery Phase data should provide stakeholders with a detailed roadmap of the major project phases, including engineering, permitting, construction, and equipment start-up. This roadmap ensures that the project’s timeline aligns with your business case parameters and that key milestones are met.
Conclusion: The How and Why of Informed Decision-Making
Investing time and resources in the Discovery Phase yields significant benefits later in the project. First presented by Boyd Paulson, Jr. (Stanford, 1976) and expanded on by Patrick MacLeamy with the MacLeamy Curve (2004), this key principle (which aligns with HRI’s methodology) emphasizes that early investments in planning and design result in fewer changes and lower costs during the later stages of the project. In other words, a thorough Discovery Phase can reduce risk, improve decision-making, and increase the project’s overall return on investment (ROI).
By gathering essential data, assessing risks, and aligning project goals with business objectives, you can make informed decisions about whether to proceed with your CAPEX or OPEX projects. Integrating a prescriptive planning process, a well-defined Owner’s Program, structured methodologies like FEED and FEL, and stage-gate decision points all help ensure that all critical factors are considered before proceeding.
For organizations planning a project, investing in a thorough Discovery process is key to minimizing risk and maximizing success.
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