Capital project keys

by Emily Buckley
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If you are a facility or operations manager that has been asked to coordinate a new capital improvement project for your company — even if you have had no previous project management experience — you are not alone. Design and construction companies are noticing a growing trend of projects being led by facility managers who are new to the process.

"There has been a dramatic change in the last 15 to 20 years," said Mark Melander, international vice-president of the design-build firm, Bratney Companies. "In the past, many of the larger companies in this industry were fully integrated and often had their own in-house engineering department and experienced project leaders. Most companies don’t have those anymore or have significantly downsized them as they are usually not considered a core competency or are subject to cost cuts. And the smaller companies have never had this luxury."

"Today, there is a growing percentage of clients unfamiliar with the design and project delivery process," he said, noting that projects are commonly headed up by the facility manager, operations or production manager.

This has created a shift in the way capital projects are handled from even just ten years ago when the design-bid-build system was popular, he said. The design-build process is now most commonly used for the grain and grain processing industries.

Richard Van Sickle, chief executive officer of the engineering firm Van Sickle Allen & Associates, said design-build has worked well because it provides planning, design, engineering and construction on a fast-track platform for clients.

Yet with the growing number of first-time project managers, design-build firms are finding their clients are requesting additional services.

"Design-build companies are being asked to expand their scope of services," Melander said. He said Bratney’s engineering umbrella is growing as a result. Some clients have requested that Bratney arrange financing, research permits, review codes and assist in site selection.

"Clients want their designer to be one-stop shopping with value-added engineering," he said.

There are several key things for the novice mill/elevator project manager to know when working with designers and contractors for a successful new project. These fall under the following sections:

Planning — Proper planning and research will confirm project feasibility and ensure a smooth construction process.

Time — Build in enough time for the project from start to finish. Mid-size projects will take at least a year for planning, designing and construction.

Communication — Facility managers need to have the highest level of communication possible between the engineers and contractors as well as internal operation departments and management.

Money — It is easy to underestimate the cost of a project. Proper project study should produce a realistic budget.


Effective communication on all levels is critical to developing the best project. Internally, the facility manager, production manager and operations departments all need to clarify project needs and concerns. Externally, companies need to communicate as clearly as possible with their consultant, engineer or contractor throughout every stage of the project.

"A meeting of the minds is the essence of a successful project," said Larry Groce, Bratney’s vice-president of business development. "If you don’t have the right communication, then the project will suffer. Communication builds confidence that the client and contractor will work together to find the best solutions to meet timelines and budget/investment criteria."

Melander said it is important to involve as many people within a company as possible.

"The more diverse project team a facility has, the better the result," he said. "It feels slower, but it creates more ownership in clients. The more people that clients can involve from their side, the better we understand their needs and are able to serve them."


"Proper planning and organization is the key to any good project," said Van Sickle. "If a facility manager is new to the process, there is just a whole lot to learn, so it’s good to seek outside advice through a consultant or engineer."

Most design-build and engineering firms offer project consulting without further obligation.

Melander also emphasized getting technical and project expertise as soon as possible. "It’s important to get someone who understands project delivery onto the project team a little earlier," Melander said. "Most people underestimate the amount of time and money a project will take and it’s hard to recoop after that. A customer doesn’t have to buy everything to get some project consulting expertise in the early steps of planning."

Van Sickle said the first step in planning is to develop a written "Scope of Work" project description.

If a facility needed increased production capacity, its project "Scope of Work" would need to clarify how much the capacity would be increased, what equipment should be added, the timeline, the budget, as well as additional factors to define the project in as much detail as possible.

Van Sickle suggests allowing approximately 2 to 3 months (relative to the project) for this process. "You need time to keep turning the rocks over," he said. It’s a gestation period in a lot of ways."

Creativity and communication is very important throughout this process. "It’s great to have a hands-on client who is very involved," Van Sickle said. "We push each other to find more creative solutions and very good things come out of that process when everyone’s sleeves are rolled up."

Van Sickle also suggests investing the time and money for an impartial "Study & Report" to discover the best way to approach a project, determine a more realistic capital cost and to schedule project milestones.

"The study is a re-defining of the "Scope of Work" to make sure everyone is in agreement and to verify the feasibility of the project," he said. "These are often kept internally by client companies to make sure the project is properly thought through and affordable."

He encourages clients to check with their operations department to make sure the itemized list of equipment is complete, that the project is efficient and that it enables a return on the investment.

"You always include the operations staff in this process, particularly in process-intensive plants like a mill, because they are the ones who have to make this work," he explained.

If the study is approved, it then moves on to decision makers within a company, such as a board of directors who would approve the project.

The "Study & Report" could take approximately 8 to 10 weeks, and a notable 20% decide not to move forward with a project after this stage.

"The study doesn’t cost that much so it’s money well saved," he said. "Most larger firms have this process well refined."

Melander reiterated the importance of the planning stage. "Clients have become more sophisticated and have a much more detailed project submittal/review process," he said. "Clients want to make sure we’re designing up to par. There is lots of paper passed back and forth. Basically, the more we can put our arms around in the planning stage, the better the project."

Bratney has designed a four-phase approach to working with clients unfamiliar with project development. At the end of each phase, Bratney gives a client an option to cease the project. Phase 1 consists of planning and consulting, with no obligation to proceed. Here Bratney puts together machinery lists, notes the time frame and regulations they will encounter, and develops a concept plan and a budget within 10%. Phase 2 includes engineering work. At Phase 3, it bids the project and Phase 4 consists of construction and implementation.

Melander encourages extra research in Phase 1 planning. "You need to know the relevant environmental permits and regulations to know if you can use a cyclone or if you need a baghouse filter," he explained. "A bad guess on the site’s soil bearing capacity can make a difference of hundreds of thousands of dollars."

"A project that lacks in planning can haunt you," Melander said. "There’s a lot of money going out the door in these projects and nobody wants to be surprised. If you know it up front, then things can really work out well."


You will need to know whether you want to use the traditional ‘design, bid, then build’ approach or if you want to streamline the process with a ‘design-build’ approach.

If you want to bid the manufacture of the major process equipment, Van Sickle recommends you hire an independent planning and engineering firm to prepare a professional set of contract and bid documents (drawings, specifications, and contract terms and conditions) to solicit quotations. Similarly, if you want to competitively bid the construction, hire an independent engineering firm to prepare the contract and bid documents to solicit those bids.

When selecting an engineer and/or design-build firm, look for several features.

Larry Groce encouraged companies to look for reputation, experience in a similar industry, its safety record and client list.

Van Sickle recommended that companies always ask for references. "Be sure to select your team member (designer, planners, engineers, your construction manager and/or your contractors)," he said, "on the basis of: having the necessary experience; having performed well for others in a similar type and size of capital project; having the proper size staff and specialty skills to do your job right and on time; ability to add value by expanding on your knowledge and providing you with excellent service and advice."

Whichever approach you take, Van Sickle strongly encourages you to take time to learn the "Standard Conditions of the Contract" provisions.


The most common project misconceptions relate to costs of both equipment and bid process as well as an underestimation for the time involved.

"The planning state will help alleviate this," Melander said.

Van Sickle said many companies who do repeat projects hire a cost consultant for larger capital projects. "They look over our shoulder and serve as a representative for the client," he said. "Actually it is quite common to use a cost consultant in capital projects, but the grain and milling industries tend to use cost consultants only for large projects."

Facility managers should be prepared to invest a lot time in managing a project, and starting a project early enough is critical.

An intermediate size project, say in the price range of $1 to $2 million, could take about a year to discuss, design, reach agreement, and perform construction, Melander estimated. "Facility managers will be heavily involved in first and second quarter — taking as much of 25% to 50% of their time," he said. "Towards the end, involvement will pick up as the project moves to training and startup."

Additional Resources

• The Grain Elevator & Processing Society’s 2002 Facility Design Conference covered project planning and also addressed the design and equipment needed for each component of a grain facility. GEAPS is now offering 24 of the presentations for purchase individually or in six thematically bundled CDs. To order, visit

Campden & Chorleywood Food Research Association recently published for guides for hygienic design of food factories (CCFRA Guideline No. 39, 40, 41, 44) to address fundamental aspects of the basic design and construction of factory layout, floors, walls/ceilings and cleaning of dry areas. To order, visit