Avoiding project overruns: It's about evaluation, not execution
Are your capital projects continually failing to live up to their desired expectations? Are project overruns common?
You’re not alone –when it’s all said and done, more than 60% of capital projects exceed budget, and more than 70% launch later than planned. When added up, these failures can have profoundly negative effects on your capital investment program, even resulting in multimillion dollar losses for larger projects.
When project overruns occur, the first instinct is blame it on poor execution. In truth, however, the root cause of these failures is actually more likely to be the result of challenges to accurately scope out a project’s cost and risk.
One of the best ways to avoid these issues from the start is to institute a process of scrubbing the business case for every potential investment. For instance, does it fit in with the company’s larger corporate strategy? Is the project subject to any potential regulatory, technical or other risks? How will undertaking this project impact other potential investments competing for funding?
To strength this framework, organizations can even create a multidisciplinary advisory team to scrub projects – this allows for different perspectives to enter the conversation and ensures there’s limited bias affecting decision making on projects across the portfolio.
For additional related reading, download our Managing Capital Project Risk executive briefing.
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