Without funding the project won’t proceed. Obviously! But this is also the opportunity to identify funding to secure the specific items of value which you aim to get out of the project.
You should consider:
- Develop a budget
- Ensure budget is realistic and based on whole life of asset
- Focus on “value” not “lowest price”
- Establish financial monitoring/reporting systems
- Review funding conditions to ensure “added value” requirements are considered
Develop a budget
A budget should be developed after a robust cost estimate for the project has been developed.
Ensure budget is realistic and based on whole life of asset
The budget should reflect both the initial capital cost of the project and the ongoing revenue estimates over the life of the project. This will ensure that considered decisions can be made around the initial capital costs based on the whole life cost of the project ie. It might be more prudent to spend more on the capital costs to ensure that whole life costs are minimised.
Focus on “value” not “lowest price”
“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey.
It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.
The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”
John Ruskin (1819-1900)
There are countless examples of construction projects being delivered to unrealistically low tender prices which have either not been fit for purpose, have not satisfied the expectations of the end users or have, ultimately, cost significantly more than originally intended. Sadly, these unfortunate consequences could have been avoided.
Review funding conditions to ensure “added value” requirements are considered
- Maintain a focus on any funding conditions laid down by funding bodies and ensure that these are built into monitoring/reporting systems
- Review critical success factors to ensure that these reflect funding conditions