Wednesday, May 6, 2020

Re-starting costs

Re-starting (aka reopening) a project comes at a cost
Who pays?

It depends ....

There are these major cost elements to consider:
  1. Re-hiring, replacing, and/or retraining staff
  2. Reconstituting the supply chain: termination costs for contracts that are null; solicitation costs to replace terminated or non-operative contracts and source new materials or services
  3. Restructuring the workplace to comply with new safety protocols
  4. Planning for outcomes not normally expected: excessive staff turnover and absence; unscheduled stops and starts; unexpected defaults
  5. Mixing in more redundancy and inefficiency to increase project anti-fragilism
If the original business case didn't have much cost-benefit margin, these costs could swamp the benefits, making the project a business loser .... thus, RIP

A restructured business case
A restructured business case -- with the restart costs factored in -- might be the answer to a project rescue.
Although harsh, a restructured business case might include some housekeeping that is long overdue.

And, a restructured business case might attract new investors with a different risk attitude.
It might be possible to not only improve the balance sheet in the short term, but establish a business cash flow that's eventually favorable when viewed through a different risk-attitude lens.

Bottom line: Good luck!

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