Feb 5, 2020
The construction industry has long struggled using off-the-shelf-software that many businesses find suitable for day-to-day needs. However, megaprojects require more than a standard software solution. Major capital projects require complex calculations and analytics to determine the best path forward and evaluating the ROI of the megaproject itself. In short, there needs to be a tool to juggle the multiple financial measurements such as capital cost, payback period, and growth rate.
Here are three key factors to keep in mind when developing a customized forecasting tool for your megaprojects. The goal is to make a more sound major capital decision that will ultimately bring your project on-time and in-budget.
When developing a custom forecasting tool, keep the end-goal in mind. Keep the tool flexible to adjust to growth beyond the major capital project's original scope of work. The future will be here before you know it, and a custom tool should adapt to your future needs.
When making decisions about major capital projects keep asking "what if" and "what about" types of questions. Leadership must incorporate every possible scenario in your megaproject decision-making process. The goal here is risk mitigation and minimizing uncertainty as much as possible.
Even the greatest and most accurate tool is useless without the buy-in and trust of your megaproject team. It's important to get the input of your team from the earliest stages of the software tool's development. It is these stakeholders which will ultimately be using the forecasting provided by the software systems. They need to be confident in the software to trust the development, uses, and outcomes for their major capital projects.
Off-the-shelf software, such as the kind used for basic accounting or word processing, is typically great for meeting standard business needs. It can be challenging to use commoditized software to assist with more complex calculations or decisions, such as those involving major capital projects, without significant thought, preparation and execution of utilizing higher-level functions.
Specialized, big-ticket and enterprise-critical projects that depend on software tool analytics and assistance typically require significant financial and time investment that comes with custom applications. That was the reality faced by a leading health system nearing several key decisions regarding a major capital project. The organization’s leaders wanted to make the best-informed choices possible regarding their project need, including around the project’s potential financial, operational and community impact. They lacked a tool, however, to properly factor in multiple financial metrics, such as cost of capital, payback period, and growth rate.
Rather than relying on off-the-shelf software as-is, the health system chose to develop a customized forecasting tool capable of providing the analytical and scenario-planning capabilities its leaders needed to make well-informed decisions. Ultimately, the tool the organization gained, which allowed for evolving and time-modified inputs and assumptions, gave decision-makers a new and valuable way of looking at different scenarios to gauge multiple potential project risks and opportunities.
The lessons this health system learned in creating its customized forecasting tool offers valuable insights applicable to any health care organization seeking greater analytical insight about a major capital decision. The following are five key factors that should be considered whenever developing a customized tool for capital project planning.