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How to Prioritize Projects When Budgets and Resources Are Limited
The oil and gas, renewable energy, maritime, data center, infrastructure and construction industries are among the many types of companies that typically must deal with a large portfolio of capital projects within narrow budgets and limited specialized resources. There is a lack of engineering talent, procurement capability, construction personnel, and capital funds to finance all initiatives that are potentially beneficial on paper.
When conditions are like this, project planning for capital projects is more than simply ranking ideas from the most urgent to the most preferred by the executive. Requires criteria, decision processes to be transparent, and continuous oversight of the portfolio to ensure that finite resources are focused on the work that maximizes strategic and financial objectives. The methods outlined below facilitate the executive team, project manager, and engineer to make those decisions in a more consistent and confidence manner.
Why Project Prioritization Breaks Down When Resources Are Tight
There are no data problems with most prioritization issues. They stem from unclear objectives and invisible constraints. There are three recurring patterns:
A strategy is not followed by the budget. Projects are approved individually, and the value of the portfolio gradually becomes less relevant to the objectives of leadership.
Capacity is not measured but assumed. The first project that appears affordable is the one that is. The first project that looks affordable is the one that is.
Dependencies stay hidden. Permits, utility co-ordination, long lead equipment, and shutdown windows are what determine actual start dates and are not usually included in the ranking.
These three gaps are the basis of the framework that follows and are effective across all industries and project sizes.
A Six-Step Framework for Project Planning for Capital Projects
The steps below work whether you manage ten projects or a hundred.
Define What “Value” Means for Your Organization
The first step to prioritizing is creating a strategy, not a spreadsheet. Pick 3-5 goals, like safety and compliance, production growth, cost reduction, contract commitments, etc. and prioritize them. Leaders need to reach a consensus on these, or no scoring system will resolve their disagreement.
Depending on the circumstances, a data center operator might value speed over power, or a solar developer might prioritize interconnection certainty over speed.
Build One Complete Project Inventory
Enter all current, approved and proposed projects in a single register, along with the scope, proposed costs, sponsor, and skills required. Include a basic ‘ready for action' status to help identify projects that are ready to go and those that require engineering or permits.
Often, it is found that there is duplication of effort or projects that have been languishing and are still being continued due to lack of formal authorization to discontinue.
Score Projects with Weighted Criteria
A scorecard is maintained and is consistent for a fair comparison. Typical criteria include:
Strategic alignment
The ability to realize a profit or to save money
Safety, regulatory or integrity risk reduction
Scope maturity and permits
Resource demand and complexity
Assign weights for each criterion based on each of the objectives from Step 1 and make it easy to use, e.g., 1-5, to have the teams use it.
Test the Ranking Against Real Capacity
A ranked list isn't a plan that can be carried out. Quarter by quarter, assess the need for engineers, project controls personnel, special crews, equipment and budget compared to the availability of each project.
For example, a renewable energy developer might identify five solar sites as being very important, but only one interconnection study team can work on them. If so, then it is based on capacity rather than score. The same reasoning holds true for maritime projects, such as two ship conversions sharing one dry-dock, and the same welding crews.
Stress-Test Risks and Dependencies
Prior to moving, identify the requirements for each project to move including permits, utility power, long-lead equipment, vendor availability, and shutdown/outage windows. A data center that is waiting for transformer delivery should not keep crews that are available for a project that's ready.
After running simple scenarios, try some more complex ones. What if there is a budget cut or one of the key vendors falls behind schedule? Safe projects to invest first are those that are viable in different scenarios.
Decide, Document, and Communicate
Take decisions within an agreed framework with clear authority and document the reasons for the decision. Stakeholders don't lobby around the process later when they understand the reasons for the project's deferral. Communicate the results publicly (what continues, what is stalled and what is halted).
Quick Wins You Can Start This Quarter
It's not a complete overhaul of the system that's required to make prioritization better. There are three actions that can make value fast:
Create single owner/needs to register for the project list
Conduct a two-hour scoring workshop with executives, project managers, and engineers to establish weights
Determine the three biggest resource constraints and work around them first
How Alga Processing Supports Smarter Project Prioritization
Alga Processing LLC is a business focused on assisting companies in the capital-intensive sector with translating competing demands into actionable plans. Relevant support includes:
Portfolio Management: Project portfolio management and resource allocation; work to ensure that the project mix and resource allocation meets the strategic objectives and matches people and equipment priorities.
Governance & Maturity: stage gates and review cadences are clearly defined; priority calls stick to the guns.
Risk & Change Management: Dependency and Risk Analysis, and structured treatment of the changes induced by resequencing.
Quality & Benefit Management: Defined benefits and quality standards – so selected projects provide measurable value.
Stakeholder & Procurement Management: Sponsor, vendor and supplier expectations alignment, long-lead procurement planning.
Performance Tracking & Reporting: Dashboard that displays budget, schedule, utilization, and benefits at the portfolio level.
Training & Development: Skills for project teams & project leaders in prioritization, planning, and portfolio thinking.
Project & Program Management: End-to-end delivery support for projects that make the cut, from inception to completion; Project & Program Management.
These services enable leaders to enhance project performance, mitigate risk, and make the best use of resources.
Conclusion: Prioritize with Purpose, Not Pressure
Capital-intensive businesses are always going to be constrained by budget and resources. There are a few habits that the organizations that deliver consistently have in common:
Make sure that you have a clear definition of value before scoring projects.
Test all of the rankings against actual capacity and dependencies.
Make decisions clearly, explaining why.
Review priorities regularly, as conditions change.
Effective project planning for capital projects transforms conflicting demands into a workable plan for teams to deliver. If you're feeling a little overwhelmed or unsure of your priorities, a quick chat will help you discover where to begin.
Alga Processing LLC is an organization that helps your business in operations and management. Its people come from various backgrounds of knowledge and experience that promote a healthy environment for your personnel. Your organization will benefit from ensuring you and your team members are there every day to give the time and talent to yield productivity to its maximum. Contact us for more information on how to help your business grow.
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