When it comes to building, updating or expanding manufacturing facilities, circumstances can change — and change quickly. The business case for capital expenditures can shift drastically in a short amount of time, potentially halting plans for a new plant or plant upgrade. Changes in the supply chain can shift plant priorities. The economic climate, which has allowed the domestic manufacturing industry to stabilize significantly since 2009, could take a sharp turn. And, as is typical of presidential election years, construction projects may be placed on hold until it becomes clear how new government policies will impact various market sectors. All of which is to say, when it comes to construction projects, it is not uncommon for work in progress to come to a complete stop.
Project delays typically occur early in the building process, during planning or engineering execution.
Since many of these delays are also temporary, project teams must take steps to ensure work can resume with minimal pain points. What, then, represents a good business practice when a project is put on hold after planning and engineering execution are complete? The following is a helpful guide to ensure delayed projects are positioned for success when work resumes.
1. Treat The Shutdown As A Phase In And Of Itself
It is critical for the project team and all stakeholders to treat the shutdown as a phase of the project. This means applying the same orderly, systematic treatment that would be used for any other project phase. The “shutdown phase,” therefore, becomes a critical point to catalogue information, preserve project documents and prepare a complete summary of the work status.
2. Prepare Documents With A New Project Team In Mind
During the shutdown phase, documents should be prepared and compiled with the intent to explain the project to a completely new team, including the naming of files and the folder structure used for saving and sharing project information. These steps are essential, as they will minimize the potential for losing vital project data. Some documents that should be compiled during this step are:
- 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.
- If purchase orders and contracts were issued, a thorough summary of the status and commercial arrangements made related to suspension or termination of the work.
- Earned value summary.
- Drawings, specifications, vendor submittals, surveys, calculations, piping line lists, etc., with an accurate statement of the status of each deliverable.
- Summary of environmental regulations considered, status of permitting and other interactions with regulatory agencies.
3. Re-evaluate All Project Details When Work Resumes
Even with the above steps taken, moving forward on a delayed construction project first requires a fresh, new assessment of the circumstances surrounding the project. After all, countless potential changes could have occurred during the project’s dormancy. Plus, if a new project team is in place, there will be a learning curve to address as well as new team dynamics and opinions to take into consideration. The following are items to review when the approval to resume work is given:
Capital Cost Estimate
The capital cost estimate must be re-evaluated, since raw materials and commodity prices could have changed as well as wage and labor availability.
Project team. Ideally, the same project team would be available to complete what was started. If not, there will be a learning curve to address, which will most likely require investing additional time and money to bring the new team up to speed. (The good news is, the team has access to complete project details, thanks to work completed during the project shutdown phase.) New opinions on the design and execution also may lead to rework of at least some of the design and execution strategies for the project.
Codes And Regulations
Changes in the regulatory environment must be carefully examined. This is a detailed consideration that is highly specific to the output of the project and needs to be reviewed with the team's environmental and/or legal support. Additionally, new codes or pending regulation could impact plant processes and equipment used.
Capacity, Cost, Revenue Factors
Market factors may have shifted the demand projections for the project’s output. For example, 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 or processes that shift market dynamics.
Manufacturing Technologies
The project team should also assess whether better technologies have become available; equipment manufacturers are constantly improving their offerings to increase throughput or efficiency.
Project Site
A re-evaluation of the site is also in order. Taxes, incentives, labor availability, ownership of an existing site, etc. are all factors that can change. Furthermore, if shutdown occurred soon after the completion of grading and subgrade work, the project team could now face erosion, overgrowth, wind and water damage and other issues.
Assets/Equipment
If work stopped with equipment on order, there could be storage charges and/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.
Recap: Tie up lose ends
The delay and resumption of a construction project benefits from a controlled, collaborative approach. The original project team’s communication channels should remain open throughout the shutdown phase to ensure the eventual restart leads to the desired results. This includes thoroughly completing documentation at the time of the shutdown and organizing and filing project information in such a manner that it is readily accessible to a new project team.
When the project is resumed, the team must revisit the scope, budget and schedule of the project. The project charter should be confirmed or revised and formally reapproved. A facilitated risk assessment, Monte Carlo analysis and/or re-execution of a Project Definition Rating Index (PDRI) would also be good tools to evaluate the true status of the project relative to new or restated objectives.
Following these guidelines will help streamline the process of resuming delayed projects, which should ultimately lead to fewer design- or construction-related issues and less headaches.
James Guffey, P.E., is Process Department Head for O’Neal, Inc., an integrated design and construction firm specializing in complex capital projects based in Greenville, SC.