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Optimising the capital project portfolio

In environments where multiple capital projects are vying for limited funding, value is often destroyed through an inadequate appreciation of the combined contribution (and risk) of these projects. The challenge is to determine which suite of projects to progress (and which to cull) and in what order, to best achieve the company’s strategic objectives. The first area of our work in enhancing capex efficiency is therefore the selection and scheduling of an optimal portfolio of projects given a desired business outcome and under different macro-economic conditions.

If needed, we help the client to build a capital project portfolio tool, a process which usually involves three stages:

1. Define the desired outputs and functionality
2. Design (inputs, logic, IT system compatibility etc.), construct, calibrate and test
3. Populate the model

We then work with our clients to:

• Quantify the impact of different project portfolios under different business assumptions on key business and operational metrics (e.g. NPV, ROI, capex, volumes, grades, cost, capacity utilisation, risk etc.);
• Determine the optimal scheduling of these projects within specific capital/market constraints and conditions;
• Identify funding gaps and evaluating different funding options; and
• Understand the business impact of changes to input assumptions (e.g. the scope, cost or expected outputs of specific projects; macro-economic factors; or base-line operational performance).

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