The utility of a well-thought-out and robust project controls program on individual construction projects has been well-established within the construction industry. This value has been so well-established that it has been integrated into industry best practices – you would be hard-pressed to find experienced construction managers not requiring a project controls system in any RFP, and you would be equally hard-pressed to find a construction company that does not require its project management staff to establish and track a strict project controls program including budgets, schedules, KPIs, and OKRs.
Project controls as an idea on a project is well-established and continues to evolve, becoming more sophisticated and useful (see).
However, many organizations are letting a valuable trove of data go to waste by not standardizing their project controls programs holistically. The same information that is used to track individual projects can be harnessed as a valuable tool for making higher-level strategic decisions. Often, large construction companies will have project controls requirements, but they do not look at all of their projects from a holistic view. Additionally, organizations with large capital spends and arrays of projects often treat each project individually, and not as an entire, integrated program. Here are a few case studies for companies and industries that have benefited from investment in a robust project controls program:
Solar Installation
Nearly a decade ago, Renewable Energy Credits (RECs) were all the rage in the power generation industry. Strong legislation was put into place to incentivize clean energy. Companies that generated power by burning hydrocarbons were to be fined for every unit of power generated unless they generated a corresponding unit of power utilizing clean energy. Some companies elected to build out a clean energy grid, while others chose to purchase their clean energy offsets from other companies who had a surplus of these renewable energy offsets (RECs). This created a race to get as much clean power online as soon as possible. Most of this clean energy came in the form of solar power.
I was retained by a company to generate a project controls program for each of their solar projects through the design and construction process. We built out the project controls program so that each manager was tracking a standardized set of KPIs, which allowed management to keep tabs on their portfolio of dozens of projects. We generated a program that tracked cash outflows and the date at which revenue generation would start. The CFO of the organization was able to utilize the project controls data to model the company’s financials with incredible accuracy and gain funding at better terms than the competition. Risks were identified, and problem projects were given increased scrutiny and resources.
However, this was only the beginning of the benefits. After the program was built out to include the design and construction process, we noticed that the Engineering, Procurement, and Construction (EPC) firms that build solar installations were generally good at what they did. Aside from the risk factors that we were already tracking, the design and construction timeline and budget were very consistent. We were able to expand the program to include the entire life cycle of a project, from opportunity identification through feasibility studies, interconnection agreements, power purchase agreement negotiation, and maintenance. We found two major issues that, once solved, nearly doubled the profitability for this company.
First, we identified that a significant investment in terms of time and money was made in the feasibility study stage of the project before the board of directors green-lit the project. Meaning that a tremendous amount of manpower was spent on projects that never moved forward. With this in mind, we were able to use information from completed projects in similar areas to inform the feasibility studies for new projects, which helped identify projects that were not likely to be feasible, and eliminate those projects before resources were expended. This eliminated a tremendous amount of waste for the company and increased the conversion rate of opportunities to green-lit projects. The amount of projects that went to a formal feasibility study and were not green-lit was cut in half.
A second “choke point” that was identified was in the entitlement process. Often, the biggest sticking point in the entire life cycle of the projects was the negotiation of power purchase agreements, leases, and interconnection agreements. The resources that were dedicated to feasibility studies were refocused on negotiating these agreements. First, the company hired consultants and extra resources to focus on these agreements, often knocking months or years off the overall project timeline.
This fine-tuned program eventually expired, making many of these business models obsolete, and many companies that got into this industry never turned a profit. However, our client was able to utilize our project controls program to make a tidy sum of money while helping to build out the renewable energy grid.
Fast-Casual Restaurant Expansion
We were also retained by a popular fast-casual restaurant chain that could not expand fast enough to meet demand. An infusion of investment capital opened the door to fast expansion, but came with the pressure to generate returns as quickly as possible. Their construction program was mainly focused on tenant buildouts, which are simple on their face, but these seasoned restaurateurs found themselves outside of their comfort zone. Rather than running a food service operation, they found themselves focused on running a construction program. These tenant fitouts were often fraught with budget overruns, disputes, and delays.
Similar to our solar client, the first step was to standardize the EPC process with similar KPIs, OKRs, and project controls processes. Key risks were identified and often avoided or managed before they were encountered. But with such a robust program built out, and the restaurant buildout portion of their company running well, another choke point came to light – the supply chain. Unlike other restaurants that place weekly orders with Sysco, the management insisted on sourcing ingredients directly from farmers and producers. This insistence came with an eye on using local, fresh ingredients, supporting sustainable and organic farming, and supporting the local community. Often, as a restaurant opened, they would frequently be out of key ingredients and have to remove significant portions of their menu during meal rush times.
Our project controls program was able to identify this next choke point and allowed our client to focus on their local distribution centers. These centers were a smaller portion of their overall budget when compared to the array of tenant buildouts, but they took longer to identify, lease, and build out the space. These distribution centers were the linchpin of the operation in a region, and focusing on these buildouts with their most experienced staff and trusted EPC partners cut down on the time for them to come online.
This project controls program allowed our client to come to market in a new area much faster and with better coverage, making for happy customers, a happy client, and happy investors.
Data Centers
Data is growing at a faster rate than ever before. As of August 2023, there were 64 zettabytes of data in the world (a zettabyte is 1,000,000,000,000,000,000,000 bytes). 90% of the world’s data was created in the last two years, and every two years, the volume of data across the world doubles in size. Anyone who has rented a car recently can see the change – rather than the rental car employee walking around the car and marking up a piece of paper with existing damage, a video of the outside of the car is taken. Albeit more useful, this video is orders of magnitude larger in terms of data than the piece of paper, and has to be stored somewhere. This trend continues across all industries.
With the increased need for data storage, there is a modern-day gold rush to build out the data center infrastructure to support the cloud computing, data storage, and artificial intelligence industries. Some companies like Google, Amazon, and Meta build their own data centers, while other companies build data centers with the express purpose of leasing out the computing power (Lease providers). Regardless of the strategy, these companies all have the same issue – getting these data centers online as quickly and efficiently as possible. Professionals that were in tech or real estate all of a sudden find themselves in the construction business. Enter project controls.
Stelic’s professionals have worked with some of the biggest suppliers and end users of these data centers to help build out their project controls programs. Similar to our solar provider and restaurant client, we were able to quickly build out a program to track the individual construction projects, identifying key KPIs, OKRs, durations, and risks. But as with our other clients, the EPC process was only the first layer of the problem. The second and third-order challenges that surfaced after getting construction under control include:
Manpower: Data centers are often located in geographically remote areas, and therefore staffing the projects can be an issue. This includes both craft labor and in-house commissioning labor. Nothing is worse than having a data center built, but waiting on the commissioning agents available to start up the system. A holistic program developed by Stelic staff has been used to track these resources across an entire data center build program and staff accordingly.
Procurement: The after-effects of COVID-19, coupled with increased demand, have heavily strained the supply chain for much of the equipment needed to build data centers. This includes switchgears, special generators, and is starting to include medium and low voltage transformers. The lead times on this equipment vary, but can often exceed the entire duration for an EPC contract. Our clients are utilizing our project controls platforms to identify and track equipment that may delay the project, often allowing the owners to order this equipment in advance and identify the capital need to do so. This has led to many of our clients standardizing their designs so that they know which pieces of equipment will be needed before the design commences.
Power: Electrical demand is ever-increasing. With the electrification of many household appliances, the increasing EV fleet, and the construction of data centers coupled with the decommissioning of older, more pollutant power plants, the electrical grid is being squeezed from all ends. Sometimes getting the power needed to run your data center is the longest lead time issue for the entire project. Our holistic project controls programs have allowed our clients to plan for these electrical availability dates and plan their business accordingly.
Our professionals have worked with the largest lease providers and end users to create holistic project controls programs and help plan for these and other scenarios.
I have an array of case studies similar to this in industries from Battery Manufacturing, Vertical Farming, Restaurants, Critical Infrastructure, EV Charging, Transportation, Municipal Capital Spend programs, O&M programs, and Servicing General Contractors. If you are looking for help setting up, managing, or revamping your project controls program, drop Stelic a line – we can help.
