Making Capital Projects fit for the New World

In the management consulting world of capital projects business, evolution of our services is necessary to survive.

I have spoken in recent past, on differentiating & the need for evolution of capital project services. Every time I see a new perspective, it helps me refine the thought towards right recognition of capital project services.

I bring, today, another perspective on what & how industry think about these project related services and how the firms offering these, differ based on their capabilities and the core skills of the professionals represented by them.

Cost breakup is the baseline for understanding where each of the project consulting service firms fit in,

This 6-8% of the spend is towards, developing and managing the spend of the capex and keeping it within that 90% of budget.

As shown above, a generic breakup of CAPEX spend aligns project consulting services at 6-10%, excluding the design services.

The 6-8% spend is broken up amongst a hierarchal levels of project management & advisory service.

Specific roles and responsibilities of services needed towards project management & advisory, in a project development journey, highlights the four key levels of services.

A. Site Management - Construction Supervision & Management; Quality Management, Labor Management, Bills & Quantity Surveying at Site - To call as Construction Management Consulting or CMC

Project Management - Further bifurcated in two types : -

B. When at site, it overlaps with Site Management, with addition of Time, Cost, Documentation, Risk & Change Management - More appropriately called PMC or Project Management Consulting

C. When not at site fully but with the project & client organization leadership , it covers planning, monitoring & controlling of Time, Cost, Procurement, Risk, Change Management & Interphasing with Designers & Equipment/ Material Suppliers. - More appropriately called PMO or Project Management/ Monitoring Office.

D. Lastly, Capital Project Advisors or simply Project Advisors - Advising & supporting clients, right from new capex ideation, validation with feasibility, strategizing the implementation and lastly overseeing through or with a PMO, ensuring ROI of the capex investment is still there during the journey, or the Owner's leadership needs a course correction at any point in this development - Calling it as Capital Project Services Advisor or CPS Advisor.

This above mentioned classification is also based on,

• How each of these 4 role bring minimum qualification, intellect & experience needed to deliver
• It is important to decide & understand, which role is for execution management // oversight with analysis // planning with analyzing // analyzing to decision supporting service.
• With qualification & experience comes a cost and number of optimal professional needed to deliver the right value. This differs in a execution support role to an advisory role. You don't need 10 advisors and you cannot execute of manage with 1 execution professional.

How Clients and Consultants, try to save cost by overlapping the above classification of consulting services

Managing the 6-8% management spend wisely, helps manage the project efficiently and control the balance 90%. This management effort requires lot of diligence and effort throughout the project journey.

However, our over-smartness prevails many times and rather than an effort throughout the journey, many consider a upfront reduction/ squeezing of budgets, disguised as saving in the 6-8% of management services to 2-4%.

Clients want to make it simpler by removing this differentiation and get the best out of the cheapest, rather making the cheaper one give the best or costliest advise at a lower rate.

This intent is good for a consultant to grow and go beyond their usual roles expected of them. But, the fallacy is you cannot get the right output or quality out of a consultant, who is not built with the right skills and capabilities for a higher level of strategic advise.

Generally, clients try to extract higher level of value from a lower level of a consultant, who would generally come at a lower cost. The construction management consultant is sought for project management advise, or PMC is sought for Strategic CAPEX advise, which sets them up for higher chances of failure.

Otherwise McKinsey, BCG, Bain and Big 4's advisory business would have gone out to the next level of consultants. But some clients recognize the difference in value of each level of capex advisory and management consultants.

What differentiates us as Capital Project Services Advisors or Strategic PMOs from the rest and when or why are we needed

Each service is for a certain expected value & hence an appropriate cost

Any mismatch, wherein an execution person is sought advise on decision making during the course of the CAPEX will not generate the desired outcome for the client and to make it worth, client will have to spend their own effort in achieving the same. Whereas, if you want advisory person to execute, a costly professional for a mundane supervision work, is certainly a costly mistake.

Focusing on the role Capital Project Service Advisors or PMO for evolution

The simplified role expectation should be,

1. Advising on the scale or configuration of the CAPEX aligned to intended growth path, in a strategy which is feasible and viable - Project Feasibility
2. Working with the Client CAPEX team on a implementable and constructible CAPEX plan, which monitors and manages the revenue returns expected from the capex based on various business situation - Constructible Implementation ensuring ROI of the CAPEX
3. Offering an unbiased view on current situation, analyzing for future scenario of the CAPEX journey, based on past experience, knowledge and analytical evaluation for an appropriate course correction - Forecast with Course correction

This strategic role in past, was primarily performed by inhouse CAPEX senior professionals and leaders, when all the strategic and management roles were inhouse, except execution.

Hence, Capital Project Advisor or a PMO is a partner to the Client's CAPEX development journey. Key to evolution is being a partner to the growth

1. Give feasible growth strategy which may involve organic CAPEX
2. Be accountable for the growth feasibility plan by being the one to give an implementable plan of development
3. During development, ensure strategic interest by not being a spectator or executor, by be a part-owner by offering strategic inputs throughout the journey.