Capital Project Management for Utilities: Bridging the Gap Between Teams
Capital project management for utilities continues to be a front-and-center priority. Capital expenditures reached record levels in 2023, and these increases are expected to continue for years to come. While many of these capital expenditures focus on modernizing the grid, there are also growing priorities to focus on responding to key external factors impacting infrastructure. This includes changing weather patterns, cyberattacks, and wildfire prevention. Because of this, many utilities are evaluating how to balance these rising costs with rate increases that are often passed on to their customers.
Ensuring affordable service while optimizing infrastructure for ongoing power delivery becomes challenging for utilities who want to offer the best services to their customers. Capital programs can help to reduce these expenditures, but there is also an opportunity for organizations to look internally to optimize their own programs for significant cost savings.
Today, many initiatives for capital project management for utilities are initiated and led across teams within the organization. This disparate focus impacts projects, often extending out timelines or even resulting in the wrong outcome due to lack of information.
While there are several stakeholders typically involved in the capital planning process, bridging the gap between two key teams – engineering and finance – sits at the core of this optimization. Engineering provides insight into projects that need to occur, while finance focuses on how to allocate and prioritize the budget. Without the right level of communication between both departments, utilities can experience significant cost increases, schedule delays, and other challenges with capital projects.
The State of Today’s Capital Project Management for Utilities
An increased focus on capital funding shines a light on the internal challenges with managing these types of projects, especially considering the scale and quantity at which they must progress. Capital projects require coordination across teams and multiple stakeholders. For many utility companies, this presents challenges as all resources have their own priorities and areas of focus.
Status Tracking
Multiple stakeholders managing one project means that there are often issues with accountability. This isn’t intentional, but rather a simple mechanism in managing multiple responsibilities.
It can be challenging to know when and where the responsibilities end for one stakeholder, and when they begin for the next. Add this to the workload outside of the projects that require management, and the complexity for managing capital plans grows substantially.
When it comes to tracking the status of a project, understanding its current state serves as one component. Comprehensive action lists make it clear who should own what throughout the project; and these are often missing. Key milestones, like project start, funding date, and project completion are often identified – but how to get from one point to the other can be challenging.
There are a few reasons for this, beyond stakeholder accountability. While most organizations understand the importance of capital planning and aim to have a long-range plan in place, this often doesn’t come to fruition. From aging infrastructure to increasing macro issues, reactive maintenance continues to drive a significant portion of resourcing.
Unclear Processes
Within any business operation or department, processes serve as the backbone to success. Capital planning often faces challenges with processes because of some of the problems already highlighted in this eBook. The accountability of multiple stakeholders on one project means that it can be confusing to understand who does what; and where and when ownership gets transferred.
As capital planning continues to be a cross-departmental need there are communication breakdowns that are natural in organizations. This can significantly impact processes and impede progress for capital plans. This focus across departments can also result in some uneven allocation for capital funds – especially if there is no process in place to define which projects get funded and when.
Reactive Decision Making
Recent estimates show that 70 percent of utilities do not practice predictive maintenance. The main reason? There’re too many reactive issues that need attention.
This focus also distracts from capital planning. With stakeholders focused on how to respond to the latest emergent issue, it can be challenging to step away and build a proactive plan that focuses on the future. Many utilities don’t have a long-range project plan in place, which forecasts projects five to 10+ years in the future.
Reactive maintenance isn’t the only reason for this, however. This may also be because:
- Lack of prioritization process within the capital planning framework. This means that all issues needing funding can be treated equally – and often times, those that are funded are simply because someone prepared more than someone else or had a louder voice in the meeting.
- Inconsistency in presenting potential projects. Without having a consistent framework in place, it can mean that each project has different data points and considerations for the committee.
- Limited insight into project funding. Many committee members look at what can be accomplished the fastest – but leveraging software and data analytics to help identify how to fit various projects together could result in productivity gains.
As we think about the future of capital project management for utilities, the right technology sits at the core. This technology can serve as a single source of truth for information, making it easy to track projects, resources, and processes. But, it can also be helpful to break down the divides between teams and departments to ensure everyone’s priorities align with organizational strategic priorities.
Learn more about how to bridge the gap between teams for capital project management for utilities in our eBook, Optimizing Capital Planning; Bridging the Gap from Engineering to Finance.