How does planning impact the predictability of project delivery?  There is some good data available on this topic and it has been raising eyebrows in the project management world.

One good way to measure project delivery competence is by evaluating capital effectiveness.  Capital effectiveness is an index measurement of how much money it takes to deliver a set dollar amount of capital projects within a one year period.  Companies which have a high level of competency and predictability in project delivery have a low Capital Effectiveness Measurement (CEM).

chart 1

The interesting findings come with the next layer of investigation into how the best and worst firms deliver projects.  It turns out that firms with the lowest CEM spend a larger percentage of their overall capital budget on planning.

The least effective organizations invest the least amount of money into the project planning process.  The most effective organizations invest the most amount of money into the project planning process.

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As any PhD candidate will tell you, correlation does not imply causation. But correlation is the first step in discovery. It turns out that one of the key impacts of emphasizing the planning process is getting better input from the project owners early in the process. This higher quality input yields benefits as the project moves from the planning stages into the construction stages. The early investment in planning decreases the dollars needed to construct the envisioned project. This makes sense because we have done a better job planning and “getting it right”: before we start building. This means fewer design changes during construction, which have the duel negative impact of increasing both time and dollars required to complete the project. As you can see from the chart below a solid investment in the initial phases of the project yields a substantially lower overall project cost. Inversely “saving” money on the early planning phases can become extremely expensive during execution.

chart 2

*the basis of this post is a presentation by Chris Luther of Camargo Associates