By {{Article.AuthorName}} | {{Article.PublicationDate.slice(6, -2) | date:'EEEE, MMMM d, y'}}
{{TotalFavorites}} Favorite{{TotalFavorites>1? 's' : ''}}
It would be nice if every construction project not only got off to an orderly start, but also proceeded in a steady fashion all the way through to completion. Unfortunately, this is not always the case. When it comes to manufacturing facilities or other system-intensive building projects, circumstances can change—and change quickly—because the business case for capital expenditures can shift drastically in a short amount of time. It's not uncommon for work in progress to come to a complete stop.

In the past decade, the U.S. economy has experienced severe boom/bust cycles in housing and building products, automotive, oil and other commodities. Fundamental changes, such as cheap natural gas from hydraulic fracturing, economical and incentivized solar power, stationary electrical energy storage, and environmental awareness, have created opportunities for manufacturers to seize developing marketing segments.

The initial enthusiasm for opportunity may drive a business case for a major investment with an aggressive target for hitting the “window of opportunity” in the marketplace. However, even when an opportunity is compelling, the upstream or downstream channels usually need time to develop, and the result can be a delayed project. Generally, this delay will come in the planning or engineering execution phases of the project, because after this phase has passed, the sunk costs would typically propel a project to completion.

What, then, represents a good business practice when planning and engineering execution are complete but the project is put on hold? The key point to note is that this scenario does not have to be uncontrolled, as one might see in a more extreme situation such as financial insolvency. On the contrary, project shutdown for a temporarily delayed project should be carefully managed.

Success From Project Planning to Completion

When the initial project team is assembled, team members are often tasked with moving rapidly and must make the best decisions possible with the available information. They put together a project delivery plan that balances scope, budget, schedule and quality. Then comes the dreaded call to postpone the work.

This point represents a critical time to preserve existing information by executing an orderly shutdown. Important tasks include archiving the project documents, preparing a summary of the work status, and documenting the basis, unknowns, assumptions and opportunities for improvement. It’s also important to determine next steps, should the project be resumed.

These documents should be compiled with the intent to explain the project to a completely new team, including the naming of files and folder structure for saving. These steps are essential to minimize the downstream risks for future resumption of the work. Following are documents that should be compiled during this step:

  • basis of design (updated to reflect current conditions and organized by design/construction disciplines);
  • project justification statement and economic basis;
  • equipment list with pricing and status (specified, bid, purchased, etc.);
  • documentation of the “philosophies” used for spare parts, future expansion/excess capacity, project staffing, commissioning, turnover, operations staffing, etc.;
  • schedule with status recorded;
  • a thorough summary of the status and commercial arrangements made related to suspension or termination of the work (if purchase orders and contracts were issued);
  • earned value summary;
  • drawings, specifications, vendor submittals, surveys, calculations, piping line lists and more with an accurate statement of the status of each deliverable;
  • summary of environmental regulations considered, status of permitting or other interactions with regulatory agencies.

When the Work Resumes

When a delayed project is resumed, there are countless potential changes that could have occurred during its dormancy. The following items are some considerations for leaders and engineers when the second approval is given.

Are the capacity, cost and revenue structures that justified the project still valid?
Market factors could shift demand projections for the project’s output. There could be an opportunity to seize on incremental output from the same plant and equipment and lower the unit cost of the product. Conversely, competitors could be implementing projects that shift market dynamics.

Is the capital cost estimate still valid?
Recent slowdowns in the Asian economies have depressed raw materials and commodity prices. Steel, copper and petrochemical prices have followed. These factors have decreased costs for structural steel, piping and other components that make up an industrial facility. Wage and labor-availability dynamics also are constantly changing. Equipment manufacturers may price their products based on backlogs in their fabrication facilities, offering the possibility that pricing could vary over time.

Is the same project team available?
If not, there will be a learning curve, as well as new opinions on the design and execution. The human factors involved in such a transition will likely lead to rework of at least some of the design and execution strategies for the project. There almost certainly will be lost calendar time and money related to coming up to speed with the new team.

Have new regulations taken effect or anticipated regulations been promulgated differently than planned?
For example, will a new environmental regulation dictate the need for more or different equipment? This is a detailed consideration that is highly specific to the output of the project and needs to be reviewed with the environmental and/or legal support for the project.

Are better manufacturing technologies available?
Equipment manufacturers are constantly improving their offerings to increase throughput or efficiency. There could be lessons learned from new models installed or new research in the field.

Are the original siting considerations still valid?
Taxes, incentives, labor availability and ownership of an existing site are all factors that can change. For engineers, a different site could change the layout of the plant, design codes (especially for structural design due to wind and earthquake requirements) and a host of other factors. Building code provisions related to accessibility for the disabled, energy efficiency, materials and other variables change regularly. Code officials often become aware of new emerging topics and focus on compliance in those areas.

If land or assets were purchased, have they been maintained?
If shutdown occurred soon after the completion of grading and subgrade work, the new team could face erosion, overgrowth, wind and water damage, and other issues. If work stopped with equipment on order, there could be storage charges or a need to rotate equipment periodically or perform other routine maintenance tasks. Manufacturers’ warranties should be renegotiated or maintained as best as possible given the project constraints.

The resumption of a delayed project is the critical point to maintain a disciplined approach, objectively evaluate the value earned with the prior work, and redefine or restate the scope, budget, schedule and expected outcome of the project. The project charter should be confirmed or revised and formally re-approved with a considered evaluation of the items mentioned above and any other items identified by the project team.

A facilitated risk assessment, Monte Carlo analysis and/or re-execution of a Project Definition Rating Index (PDRI) also would be good tools to evaluate the true status of the project relative to the new or restated objectives. Communication throughout the project team up through the approval level should remain open to propel the project restart toward the desired results.

 Comments ({{Comments.length}})

  • {{comment.Name}}


    {{comment.DateCreated.slice(6, -2) | date: 'MMM d, y h:mm:ss a'}}

Leave a comment

Required! Not valid email!