PIP’s Capital Work      back

PIP does considerable work improving the economics of capital intensive projects. This covers four areas:

1. optimising project NPV in the design phase
2. ensuring excellence in capital project management
3. ensuring rapid and successful commissioning
4. ensuring rigour in approval and management of ongoing sustaining capital
   

1. Optimising project NPV in the design phase

PIP has a robust ROCX methodology (Rigorous Optimisation of CapeX) for optimising the NPV of a capital project. The methodology identifies drivers of value and then systematically prioritises and assesses ways to increase revenue and reduce capital, risks, operating costs and time-to-first-profit. ROCX can be applied to any or all of the three stages of capital project design:

1. Business Case/ Pre-feasibility: At this stage, the key objective is to develop a better strategy, by scrutinising strategy assumptions, ensuring the asset matches the strategy and minimising the impact of business uncertainty and risks.
2. Feasibility: The key objectives here are to kill “nice-to-haves” and critique trade-offs between capital/cost/revenue/risk as well as reviewing the process flow to identify idle capacity and unnecessary operating costs.
3. iii Detailed Design: The final stage challenges assumptions at a much lower level of detail as well as challenging the contingencies in the design against requirements.

PIP’s ROCX methodology has consistently helped our clients to improve the NPV of their projects by 15-25% through reducing cost and time and adjusting the design to what is really needed to maximize the return on capital and meet market requirements.

Capital Project Management

The financial difference between well and poorly managed capital projects can be dramatic. Fortunately a significant portion of the blowouts in time and budget on capital projects are controllable through improved capital project management.

We have helped organisations tighten their management of capital project by focusing on 3 key elements:

1. Hard wire your projects for success from the outset by setting up projects with the processes and controls necessary for ensuring on-time and on-budget delivery. This includes having a well defined project structure and decision making process, setting clear priorities, ensuring you have the right mix of materials and resources and using effective performance and risk management systems.
2. Generate and implement ideas to speed up delivery and bring variances back in line. This involves understanding the drivers of cost and performance and using structured “Idea Generation Sessions” to identify the most powerful opportunities to reduce costs and bring schedules back on track.
3. Proactively manage execution of the projects through detailed daily planning, clear measurable outputs for each manager and supervisor and use of visual tracking tools. PIP uses two powerful management tools “Short Interval Controls” to focus managers on the key drivers and identify variances early and “Result-Action-Reviews” to coach managers to close the loops effectively.

Commissioning and Ramp Up

Unfortunately PIP is regularly engaged on major projects after tortuously slow ramp-up curves which destroy project NPV. In these cases we find that insufficient money, rigour and attention had been focused on the planning and “wiring” needed for success in commissioning and ongoing operations compared to the vast amounts spend on capital. Rather than blowing the project NPV with poor commissioning, we recommend systematically putting the wiring in place to hard-wire in the conditions for commissioning success.

We bring a proven process to systematically design and implement the wiring within the organisation for start-up and steady state and coach players to manage this wiring themselves. Our approach focuses on combining systems, processes, competencies and disciplines to influence behaviours which in turn drive the performance of the business. To achieve this we use a number of proven and tested tools:

1. Clarifying accountabilities through the organization to ensure No Overlaps (only one person accountable for each KPI) and No Gaps (each KPI has someone accountable for it).
2. Clarifying role clarity associated with these accountabilities to ensure people know what they need to do to improve their KPI performance
3. Establishing the measurement and reporting of these KPIs by person - to ensure that regularly 1-2 weekly reviews are focused on KPIs that only belong to the individual. Also establish regular one-on-one reviews of the KPI performance
4. Driver tree models of the business so variances on KPIs and their drivers can be readily identified
5. Structured Management Operating System (MOS) providing a system of controls, communication, meetings and activities to achieve the desired results by focusing upon the right value drivers and eliminating duplication and non value added activities.

Ongoing Capital Management

In heavy industry, ongoing sustaining capital spend is significant - so managing this process well can yield significant benefits for organisations.

In a typical engagement, PIP is asked to assist in the three areas of sustaining capital as below:

1. One-off review of current sustaining capital (“Are we doing the right projects”) which facilitates a critique of current capital work to determine if it is needed, if lower priority work has been culled or key projects not been approved
2. Review and redesign (as needed) of processes to manage individual projects (project management wiring to ensure projects are completed on time, in budget, safely with risks managed. This work picks up on the capital management work we do for large projects and ensures that simplified processes and tools are embedded in the organization for managing the day-to-day capital work
3. Review and redesign (as needed) the capital management wiring overall - this includes the annual review process, daily, weekly, monthly reviewing, KPIs, audits etc.

Back to top