This article was written by Bryan Schriiffer M Prof Studs (Transport). Dip Mgmt. NZIM. CIP’s
Over the next two weeks Rowe Advisory will present three posts in total on…
Meeting the Changing and Growing Needs for Capital Projects
Often an organisation will plunge headlong in to a capital project, often failing to understand the true risks associated with the project and its implementation. The initial focus should be on the sector you are operating in and identifying the major challenges facing the sector before focusing on the project.
Critical to a capital project is the identification and the estimating of the potential project risks and any potential cost uncertainties. This will reduce the risk of potential cost overruns at key mile stones throughout the project. Planning for the possibility of these events will allow for the immediate implementation of a recovery plan to manage cost overruns.
This also will assist with understanding the costs and the relationships between accurate cost estimates and quality decision making to reduce potential risk is also critical to the prior planning.
Identifying the opportunities of implementing a cost reduction process during the project lifecycle will assist the project to manage cost escalation so the project comes in on budget. This includes undertaking a project economic feasibility study to identify the major cost risks and opportunities with a project. This information will inform the project of the feasibility and assist with approval of a new capital project.
Each of the pieces of information identified has an inherent risk and uncertainty that can have an impact on the decision outcome, the use of either capital expenditure (Capex) or operational expenditure (Opex) associated with the project.
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These can also impact on the following:
- Estimated production profiles
- Concession terms
- Fiscal (tax) structures
- Estimated commodity / prices
- Project schedule
- Stakeholders’ expectations
Next Post will…
Developing a Project Cost Risk Estimate
Rowe Advisory has in-depth experience in dealing with similar range of capital project issues and risks from companies in your industry. Rowe Advisory are able to provide targeted assistance and add value to your capital project program.
Contact Rowe Advisory for a confidential discussion
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