Friday, May 2, 2014

Capital efficiency in large scale construction

Need a checklist of what to consider when evaluating capital requirements for a large scale construction project -- like say replacing the Golden Gate Bridge?

Bob Prieto has just the one for you, and only 21 pages!  Bob writes:
Large capital construction projects in both the industrial and infrastructure sectors are challenged today in three significant ways:
 1. Capital efficiency of the project – this considers both first costs as well as life
cycle costs
 2. Capital certainty – reflecting execution efficiency, predictability and effective risk transfer through appropriate contracting strategies
 3. Time to market – perhaps best thought of as schedule certainty but also accelerated delivery of projects, often an essential ingredient in capital efficiency

This paper focuses on achieving improved capital efficiency in large capital asset projects through the adoption of an expanded basis of design that considers all aspects of a capital asset’s life cycle
In this paper, Bob focuses on Capital Efficiency.

And he discusses the whole life cycle; he makes a distinction between development costs, post-project sustainability, and post-project O&M, though frankly the difference between these last two appear a bit fuzzy to me. Taken together, they represent the life cycle costs, unless you want to throw in salvage at the end. (Would we ever budget salvage end of life for the Golden Gate?)

Even if you're not in construction, this is a handy checklist for the large scale among us.

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