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I have known two companies in my career that demonstrated knowing how to do major capital projects correctly--on budget, on schedule and with the results desired. I'll not embarrass everyone else who think they get this right by mentioning only these two, so they shall be anonymous.

Our newsletter, Capital Arguments, has been looking since 2008 for project managers who conduct capital projects of any size in an outstanding way. We have found three, despite searching worldwide--three in the seven years since the award has been available.

The companies that have done major capital projects correctly possess one unique trait--they have used the same key owner's management team over and over. The team members get to know each other very well and, if the projects are similar, they begin to work in close harmony.

Capital projects consist of three elements--money, time, and space. We have also discussed this in various issues of the Capital Arguments newsletter. Money, of course, is the budget. Time is the schedule. Space is physical space (real estate), interferences, and accessibility. Getting two out of three right is not too hard. Getting all three correct is like bowling a perfect game.

There is one key element that generally does not belong to the capital project management team--operations training. You can do everything else right, but miss this one and your project will fail.

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I talked in PaperMoney's first edition this month (5 Jan 16) about the poor job boards of directors do in properly vetting capital projects. They accept unrealistic budgets and schedules because, I think, they do not have the expertise to understand the risks of capital projects.

The legions of people I have seen terminated or self-terminating (in what I call "running screaming from the building") at the conclusion of a major capital project attests to the ignorance and hubris of those involved in capital projects.

So, let's start at the beginning. The beginning is the plan and the budget. I strongly suggest you start with a written plan of what it is you are going to do. Yes, no one wants to write a plan, they want to jump into their favorite details. Yet this should be resisted for a very simple reason--someone in charge will latch on to a favorite detail and try to build a plan that fits that detail. If you write out your plan first, and then go off to verify all the details necessary to make the plan work, you can stay on course.

Invariably many details, when examined, will require the plan to be changed. If you go through this process in a disciplined manner, you will change the plan based on solid scientific and economic facts, not fiction. This is important if you are going to have a successful project.

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You will know you are in trouble from the beginning if the budget and the schedule miss the mark of what others have done in similar circumstances. If you think your newly formed team is going to beat all others that have come before you doing similar projects, either in money, time or space, you are living in a dream world. I am not saying that it cannot happen, but the chances of it happening are very, very slim.

You have to be careful about the plans, too. Some of them, even done in a broad-brush way to be verified later, can be completely bogus, too. There was a rumor that the executives of one paper company, in the 1950's when air travel was still a bit novel, happened to fly over the confluence of the Ohio and Mississippi Rivers and remarked, "We should build a paper mill there." Whether that was true or not, a paper mill was built there and that mill, young by most standards, is standing idle today. I know of other mills that were built in certain locations due to energy sources or logistics. They, too, have struggled.

A successful project starts with getting it right from the beginning. A lousy plan executed by team members who think they are going to save it, or perfect it through some sort of heroics, is bound to yield a lousy result.

Have you seen a major capital project succeed in all parameters--money, space, time and operational excellence? If so, we would like to hear about it--please take our quiz this week here.

For safety this week, a poorly executed capital project is bound to have a poor safety record.

Be safe and we will talk next week.

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