The foundation for an optimal utility capital project delivery model is built on a thorough understanding of the expected portfolio of work that the organization needs to accomplish. Portfolio spend profile analysis provides capital program organizations with the insight needed to determine the appropriate resourcing and risk mitigation strategies to employ in its delivery model.

Three Areas of Analysis

Portfolio spend profile analysis encompasses three broad categories: (1) the level of risk associated with undertaking each project, (2) the number and size of each project, and (3) the amount of projected variability in project load from year to year.

Each aspect of this analysis can have unique bearing on resourcing requirements for each functional group within a Capital Program Office. For example, the number of required project managers may be more closely tied with the total number of projects, while craft labor requirements may scale more directly with the total volume of work to be completed. In order to capture how specific aspects of an organization’s project portfolio may impact functional resourcing requirements, it is often helpful to calculate explicit functional “scaling factors” to test how changes to the portfolio of work may result in changes to overall resourcing requirements.

Tackling the Time Horizon Conundrum

One of the most difficult aspects of analyzing a portfolio of projects over a multi-year time horizon is that there is usually a large degree of uncertainty associated with projects as the time horizon moves further in to the future. For this reason, it is usually helpful to develop several project portfolio scenarios to analyze personnel requirements, and ensure that the chosen Delivery Model is able to appropriately respond to the likely changes to the baseline project plan.

Demand Planning and the validation of several scenarios can provide more clarity as to the probability and impact of changes in forecast portfolio spend. While it may be impossible to gain full and certain knowledge of the volume and nature of work that a firm will take on in the medium term, a thorough examination of potential workload scenarios will help inform all decisions around designing the appropriate Delivery Model.

Ask the Right Questions

Costs associated with developing inaccurate project estimates, forecasts, and budgets are often attributed to a variety of sources, but rarely aggregated and traced back to uncertainty in project planning vs. execution. These unintended and unplanned costs include the inefficiencies associated with processing and executing change orders, associated changes to project financing requirements, overtime payments to achieve expedited work, reputational damage associated with delayed public-facing work, and the internal labor associated with reworking budgets and financial analysis.

Asking key questions can lend perspective to the portfolio work forecast:

• What is the level of performance risk inherent in the projected portfolio of projects?

• What is the nature of the mix of projects within the projected portfolio? Are there many smaller projects, few larger projects, or some balance between these two extremes?

• What is the level of certainty and projected annual cost variability in the current projected portfolio of projects?

For additional insight into optimizing a Delivery Model, read our whitepaper Capital Program Structure and Delivery Approach for Utilities. This paper lays out a three-tiered structure for identifying opportunities within a Capital Project Organization, reviews a strategy for successfully implementing that transition process, and discusses several industrywide best practices for executing an organizational transition.

This is second in our series of posts on Projects lead by PowerAdvocate's team of Capital Project consultants. Read the first post How to Approach Utility Capital Project Delivery Model Optimization.

About Our Capital Projects Consulting Team 

PowerAdvocate's Capital Projects consulting practice helps energy clients plan, source, and execute large, complex capital portfolios and projects across a wide range of industries. From helping design organizational approaches, leveraging market data to estimate and forecast project costs, procuring and negotiating large contracts, and implementing sophisticated risk-reward programs, the practice has added value to our clients' projects across North America, Europe, and the Middle East.

Read our Capital Projects blog posts: www.costinsights.com/topic/capital-projects 

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