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Planning a capital project

Project planning is part of the capital investment cycle as set out in the Capital Project Life-cycle. It is concerned with the establishment of the business need and all pre-planning involved in developing a capital project.

While the achievement of value for money outcomes is fundamental, it’s the project vision that takes in the wider benefits and costs to the public and the users. The initial step is to determine the specific business need in relation to the public requirement and the government’s responsibilities and accountabilities. The vision / business need is built upon and improved in the service strategy and planning and are used to develop the critical success factors (CSFs).

On establishing the business need or vision and the options, the identification of funding sources and / or the mechanisms for funding is to be derived.

The key stakeholders are to be involved in the next step of the capital investment project, including the initiation of the user group(s) and the development of the processes that are required for each specific project. In developing the processes, it is important to be mindful that there are sufficient resources to manage each task of the project.

At this stage of the project the responsibilities and expectations of the stakeholders, governance groups and consultant’s responsibilities should be clearly defined and attainable. It is also important that the appropriate monitoring, controlling and reporting of all activities (either good or bad) are conducted accordingly.

The decisions made during the initial planning stages are the most critical in project costing. Approximately 80 per cent of the cost-related decisions, both capital and operational are made within the first 2 per cent (early design stages) of the capital expenditure of a major project. Additionally, the life-cycle costing is key in planning a project. As a rule, the resultant facility will incur approximately 85 per cent of its lifecycle cost in service delivery leaving 15 per cent as the capital investment.

The capital investment project planners also need to take into account the long lead times involved in capital projects. Typically, even minor projects require at least two years from initial planning to completion, which will have an impact in the project costing.