Capital Project

What is a capital project?

A capital project is a long-term, large-scale, capital-intensive investment to build upon or improve a significant capital asset, such as roads, railways, investment properties, and professional office spaces. Capital projects differ from non-capital, smaller-scale projects due to their scale, high costs, and extensive planning. 

Large companies, manufacturers, and retailers use capital project management software to handle operations and costs of capital projects. These tools facilitate the planning and monitoring of activities associated with the project. Capital project management software serves as a central repository of project information, including budget projections and actual costs for the work. 

Types of capital projects

Capital projects exist in the public and private sectors and can be categorized into various types based on the nature of the project and the industry. Some common types of capital projects include the following.

• Infrastructure projects: An infrastructure project focuses on the planning, development, renovation, or improvement of essential physical structures and the systems that support a business, community, country, or region. Infrastructure projects include building and repairing roads, bridges, tunnels, airports, railways, and public transportation. 

• Construction projects: A construction project generally refers to building new structures or renovating existing ones for improvement. Examples include the construction or renovation of commercial buildings, residential complexes and developments, warehouses, and distribution centers. 

• Manufacturing projects: Projects designed to focus on developing, improving, or expanding manufacturing operations can be considered capital projects. Building new manufacturing plans and upgrading equipment for more effective operations fall into this category. 
• Energy projects: Building new power plants, solar installations, and installing or upgrading electrical grids are all types of energy-related capital projects. 

Benefits of capital projects

Capital projects benefit organizations, communities, and local governments; they’re essential for economic development and growth. While the advantages vary with the type of capital project, some of the general benefits of capital projects may include the following.

• Job creation: Capital projects create job opportunities throughout their various phases. These projects often lead to the need for construction workers and other skilled trades, engineers, architects, project managers, safety professionals, security personnel, and legal professionals. Capital projects provide direct employment opportunities during the project and afterwards, they often pave the way for ongoing jobs for long-term maintenance and operations once the project is complete.

• Economic growth: Capital projects stimulate economic growth by increasing the demand for materials and services, increasing spending in the project’s vicinity on things like accommodations and dining during work, raising property values in the surrounding area, and providing direct and indirect job opportunities. 

• Improved infrastructure: Many capital projects are designed to improve infrastructure through new development or renovations. These improvements can lead to enhanced safety and an improved quality of life for those who use the infrastructure. 

• Boosted productivity: When organizations invest in capital projects that improve their facilities, technology, or operational procedures, they may experience increased productivity and efficiencies. Improved productivity leads to more revenue generation and ongoing benefits for the organization and its employees. 

Best practices for managing capital projects

Effective management of capital projects ensures the benefits of these initiatives are fully realized. By following general best practices, teams are more likely to complete the project on time and within budget. 

• Establish a clear objective and scope of work. A fully developed and detailed project scope helps accurately estimate budget needs and create a realistic schedule for project completion. Capital project managers must help define and share the objective and scope of work to get all stakeholders on the same page before starting any work. 

• Prepare a realistic budget. Capital project teams can set themselves up to fail if they underestimate the funding they need to meet the project objective. Teams should be sensible and overestimate within reason when planning their budget. It’s necessary to implement robust and thorough cost control procedures to execute within the budget.
• Don’t skimp on risk management. Capital projects are inherently risky due to their size and costs. A full risk management assists in mitigating risks as early as possible and using strategies to address them when they arise. 

Capital project managers should work with teams to identify the riskiest parts of the project and plan accordingly. Managers should also continuously monitor and flag risks, no matter how small. 

• Use capital project management software. There are many details and complexities in capital projects. The right software tool can help capital project managers improve the project management process, provide real-time visibility into project progress, and offer transparency among team members and stakeholders.

Read about program management and how it can be beneficial when working on initiatives like infrastructure development.