In our interventions, we encounter too often Owner organizations that do not grasp the economic importance of some Capital Expenditure (Capex) projects that they execute, and the risks associated for the business. In this new White Paper ‘How most Owner organizations underestimate the importance of Capital (Capex) Projects: PVD rule of thumb of Capex project criticality’ we share in particular some orders of magnitude of the thresholds for Capex projects that should get the attention of CXO level executive teams.

Capex projects that create the means of production of the company might be rare and far in-between, in most industries they will decide the economics of production for years, be there factories, mining plants, power plants, oil or gas production facilities. Therefore, their success in terms of cost and delay is of utmost importance for the sustainability of the organization – and probably more so than most executive realize.
The failure of a single large Capex project may jeopardize the survival of the organization or make it so weak financially it cannot resist being taken over. Often one failed project will require substantial re-financing. This is valid for Contractors and Owners alike, with the emphasis being on either side depending on the split of risk agreed contractually. There are many examples of this effect in many industries and it is sometimes amazing that Board do not learn sufficiently from these failures.

It is our opinion in terms of rule of thumb that:

• any total Capex higher than 5% of the annual organization revenue should report at the CXO level
• those Capex projects higher than 15-20% of the annual revenue should have a direct line to the CEO, because issues in these projects might jeopardize the business

Read our new White Paper ‘How most Owner organizations underestimate the importance of Capital (Capex) Projects: PVD rule of thumb of Capex project criticality’ to understand our rationale behind this rule of thumb and why it is so important.

If you can’t access the link to the white paper, copy and paste the following link in your browser: http://www.projectvaluedelivery.com/_library/2018-02_Capex_project_criticality_v0.pdf