As an industry that’s dedicated to finding new solutions, many capital projects still suffer from some of the same mistakes. One mishap I see happen across the industry is not fully risk-assessing schedule-driven projects, even as the proportion of schedule driven projects increases.
Research supports this observation. According to Independent Project Analysis (IPA), schedule-driven projects make up around 25 percent of total capital projects, up from around 15 percent in 2006. When business decisions to execute capital projects are delayed, the time to execute gets compressed, contractors have to perform actions in parallel that are more optimally done in series and undesirable contractual strategies are often taken. When projects do not appear to be achieving their intended completion date, stakeholders tend to do what they can to ensure they meet the schedule. This is when added risks, costs and frustration mount.
At the juncture of a project when schedule is deemed achievable, schedule-driven projects invariably turn into cost-driven projects. When owners and business decision makers see what resources are going into completing a project on time, they start to ask questions. But unfortunately, it is far too late to do anything to mitigate increased costs and the organization’s return on invested capital (ROIC) suffers. In today’s environment where capital effectiveness is king, this is a huge problem that activist investors pounce on.
The irony of this paradox is not lost on the writer. With market factors constantly in flux, delaying the start of a project to get clarity on future conditions and then moving fast to complete it on time may seem like a prudent approach. In a perfect world, this would lead to an ideal result. The thing is, we live in an imperfect world. Negative unforeseen factors such as weather delays or trade tariffs are exacerbated when timelines are compressed. The effects of overreliance on schedule-driven projects can even ripple across our industry’s entire supply chain. When ROIC is repeatedly diminished, investors and key stakeholders may even begin to question management’s ability to invest capital efficiently.
Before jumping into their schedule-driven project, business decision makers must first come to terms with a few key facts:
With modern tools, proper front-end planning and direct conversations, we don’t need to keep making the same mistakes. Business owners and decision makers, along with their contractors, can and should take a more strategic approach to schedule-driven projects.