Most capital projects end up being schedule-driven as they are decided and awarded at the last possible moment. Various reasons are often mentioned such as delays in decision-making, willingness to keep options open as much as possible, student’s syndrome or other reasons. This phenomenon is actually a natural consequence of the necessary trade-off between project framing and project definition. In our new White Paper 2020-07 ‘Why do most Capital Projects end up being schedule-driven in execution?’ we investigate the reasons for this situation and what can be done to avoid this trap.
Conventional wisdom and best practice for Capital Projects calls for the best possible definition level at Final Investment Decision stage and stability of the project scope during execution. This well-defined project is the result of an often long and comprehensive definition phase. At the same time, the objectives and the opportunity to which the project responds, being often a market-related opportunity or the need expressed by a client, are basically a bet on the future – and for large capital projects, on a future 3 to 5 years ahead. It makes sense to wait for the latest possible moment to have the maximum possible information on what can be expected in the future, and keep options open as long as possible.
This paradox between the need of a best-in-class definition and the intrinsic uncertainty of the bet taken when investing for a capital project results in the execution of most capital projects being de facto schedule-driven. This leads to technical or contractual strategy constraints leaving less flexibility or options, while increasing substantially the probability of disappointment due to delays compared to expectations.
A cost and benefit analysis could be performed to decide to what extent the decision to start the project should be delayed, compared to the benefits of delaying it. This appears to be rarely performed as such.
On one side, this analysis requires a quantification of the cost impact of the project’s schedule drive, and of the additional costs resulting from a lengthening of the definition phase. On the other side, the analysis requires a valuation of the benefits of delaying the decision or of shortening the execution time from the market perspective
The fact that industrial projects are often schedule-driven in execution is due to the expectation of Owners to wait as long as possible to improve their knowledge of market conditions when production will start. If there is no possibility to have long term supply agreements signed, this expected improved knowledge is often illusory. Owners should also be wary of unrealistic expectations in terms of project schedule caused by a pressure for shortening the project lead time. The cost-benefit analysis of shortening the execution phase of the project is often not performed with sufficient care, and we observe that sometimes schedule constraints could actually be relaxed to improve the return on investment, or that alternative approaches could be considered to make the design more modular and adaptable to future market conditions.
In any case Owners should be conscious of this issue and manage it properly so as not to cause project teams to manage unrealistic expectations from the start of project execution. Read our new White Paper 2020-07 ‘Why do most Capital Projects end up being schedule-driven in execution?’ to understand better this issue and how to weight the benefits of schedule-drive against other drawbacks.
If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2020-07_Why_most_capital_projects_schedule_driven_v0.pdf
