Meeting the Changing and Growing Needs for Capital Projects: Part 3

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

As the project moves through the project phase gates, risks should be formally assessed to determine the likelihood of achieving the expected return on capital and ultimately shareholder return

The use of appropriate processes and tools to identify and quantify project risks and uncertainties can help decision-makers to decide whether the project is ready to proceed to the next phase

Project cost risk analyses can help to assess the level of accuracy of the cost estimates and make better informed decisions.

An example of this analysis list:

  • Final location of the proposed new facility
  • Local or regional market conditions
  • Availability of qualified E&C contractors
  • Increase of original estimated quantities
  • Availability of skilled workforce
  • Expected productivity of workforce
  • Changes to local content requirements
  • Availability of specialised construction equipment
  • Closure of preferred route for heavy and oversize vehicles
  • Extreme weather conditions
  • Others

Cost risk analysis and benchmarking can improve considerably the quality of the decision-making process by:

  • Framing the capital investment decision (e.g. strategy, project targets, shareholders’ expectations)
  • Identifying the project risks and uncertainties (e.g. market conditions, material prices, etc.)
  • Quantifying the project risks and uncertainties (e.g. project cost ranges, probability distributions)
  • Benchmark and compare the proposed new facility to historical project costs (e.g. $/tonnes/year)
  • Delivering timely and better decision making

Next post will…

Identify Major Project Risks

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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