Minimizing Risk

capital projects tips Jan 10, 2018

As a project manager, one of the highest responsibilities to your organization is minimizing risk and alerting the organization of risks that jeopardize the project objectives.  In my experience, the areas with the greatest risk are as follows:

1.       Vendor selection – Companies focused on price versus competence struggle with every stage of the capital project.  Having a well thought out selection process is imperative for choosing the right vendor.

2.       Funding approval – If your company’s management lacks a sense of urgency in approving your funding request, the timeline gets compressed because of their delay.  Clearly articulating the consequences of their delayed approval is your responsibility.  I have seen too many project managers bear the cross of train wreck management.  This is avoidable by being proactive in communicating consequences in a non-threatening manner.

3.       Component availability – Piece parts supplied by external vendors or internal vendors pose a significant risk.  This is especially true for manufacturing equipment.  Piece parts are required to properly debug and qualify equipment.  The investment in supplying ample parts pays back tenfold when the equipment goes into production.  The biggest mistake most companies make is skimping on pre-production components.  This is part of the planning process and should be identified as high risk to project success.

4.       Project manager change – The risk involved here has everything to do with expectations and experience.  The original PM set the expectations for the project.  The new PM has their own set of expectations.  Help educate the new PM regarding the original expectations.  Document the expectations from the beginning of the project.  Identify all responsibilities and responsible parties.  Make certain to keep up with the open issues list because it is the easiest way to get the new PM plugged into the project.  Conduct weekly update meetings to review the timeline and open issues at a minimum.  There are two considerations regarding experience: company experience, and PM experience.  The level of experience the new PM has will play a big part in the success of organizing the necessary resources at his company.  If he is new, he will struggle to know who to connect with to deliver parts, approve changes, coordinate installation prep, shipping, etc.  The amount of PM experience will affect their capacity to assist in offering feedback and making decisions.  Inexperienced PMs tend to not make decisions quickly and decisively.  To do so most often comes with years of experience having to make those decisions.  How to mitigate?  Ask questions to the new PM.  How long have you been with XYZ Company?  What other similar projects have you been involved in implementing?  What did you do for those projects?  Bring them up to speed with where you are in the project including as much history as possible.  During the due diligence phase at the beginning of the project, identify who the key contacts are for the intended gate keepers – component level purchasing, program managers, shipping, maintenance management.

5.       Product design change – Design changes to the product often cause project delays.  Project delays are very disruptive for resource-heavy projects.  To maintain efficiency, capital equipment companies must redeploy those resources.  When the customer finalizes the part design and flips the program switch back on, it takes time to redeploy those resources onto the delayed project.  Communication regarding delays is critical for managing expectations.  Both companies will need to be prepared to push back on unreasonable management delivery expectations often a delay.  How to mitigate?  Maintain awareness of the product design from the beginning.  Ask if there are any current risks of design changes that could jeopardize the project timeline.

6.       Long lead customer-specified components – These should be highlighted or flagged at the beginning of the project to keep them top of mind.  Any aspect of the project that requires customization or is long lead should be tracked.  I am highlighting this concern because experience has taught me that there is real reason to be vigilant in specifying and ordering these items ASAP into the project.

7.       Program Debugs – As an equipment supplier, program delays always lead to higher costs.  Custom equipment build and design is largely about managing resources (resources = hours).  When a project is delayed, resources are redeployed to other projects.  This form of task switching is inefficient.  Understandably, customers don’t have much regard for these inefficiencies but they add up.  Then, when it is time to flip the switch to turn the project back on, the resources are not immediately available.  This is often another point of contention between supplier and customer.  Almost without fail, the delivery expectations are not adequately extended when compared to originally agreed upon time lines and the comparable time accounted for the delay.  Discuss potential delays up front and the consequences of delays so everyone is aware of how it will be managed.  Then document.

8.       Controls Resource Availability – The highest demanded resource in the equipment world is always controls related.  This is the most time-consuming aspect of the build process and really can’t be efficiently accelerated.  If the build process is delayed for any reason, it will impact the controls programming for the machine.  Tip: Interview the controls lead for your project.  Request a sample of their work.  Ask for references that have direct experience with the programmer’s work after delivery.  For your sanity, get the right controls person.  Another tip is to consider developing a controls programming template or guide.  This provides them with a general outline for programming so that every programmer and piece of equipment in your facility has a similar programming structure.

Project management is largely risk management and prioritizing activities.  Keep a close eye on these eight common issues and you will be light years ahead of your colleagues and competitors.  In my experience, the successful project managers keep these on their radar screen at all times.  They also have a clear plan for addressing these issues when they arise. 

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