Capital Program Management: Best Practices and Strategies

Project owners want to manage, deliver, and maintain projects in the most efficient and effective manner possible. But unpredictable weather, supply chain constraints, rigorous government regulations, and stringent funding cycles can disrupt their best-laid plans.

Capital program management gives organizations the ability to align their capital programs with their strategic goals while understanding the roadblocks they could face. This article will cover the value of standard processes and systems, intelligent workflows, and consistent data to increase efficiency, reliability, and trust throughout a project’s lifecycle.

What Is Capital Program Management?

Capital program management controls the processes for everything from planning through execution and ongoing maintenance of physical assets. Capital projects of all sizes have a greater chance of success when teams and stakeholders have a higher assurance of predictable outcomes. For most organizations, that encompasses new projects and renovations, remodels, and repair projects—think the Francis Scott Key Bridge rebuild in Baltimore, Maryland.

However, capital program management remains steeped in manual processes. Working from connected, cloud-based program management applications can give your teams the communications, consistency, and confidence to execute multiple complex projects, boost project efficiency, and improve overall project outcomes.

Key Takeaways

• Governments across the globe are prioritizing massive investments in new and renovated infrastructure and facilities projects.
• Public and private sector organizations each have different priorities driving capital program management.
• The complexity and varied nature of capital program management have resulted in multiple disconnected and inconsistent processes and applications to meet those needs.

Capital Program Management Explained

Improving capital program management processes and efficiency helps both public and private sector organizations maintain control over projects to limit the impact of errors or changes on project cost and duration. While they face similar challenges, the lens through which they view capital projects differs slightly.

Public agencies strive to complete projects that not only meet the public’s needs but also support organizational long-term strategic planning goals. The public sector landscape is shaped by an accountability to constituents, who expect prudent spending of their tax money on capital projects that provide the biggest benefit to the community. Governed by rigorous regulatory processes, public sector project owners need to show accountability for multiple funding streams, which usually come with strict limits.

For private organizations, the main goals of capital program management are to boost profit margins and shareholder returns, minimize risk, and deliver a better competitive position.

Both public and private sector organizations face a common challenge in dealing with unexpected changes at the project level, such as a sudden spike in the cost of steel. That results in the need to juggle priorities, given that there’s less money overall for the project, and could even lead to putting some projects on hold or even canceling them.

How Does Capital Program Management Work?

Using critical data, organizations analyze how to best manage their entire capital program to make the best use of the allotted funding and prioritize what must be built, maintained, or retrofitted as well as when and how it should happen. Building an airport runway or renovating a chain of car dealerships doesn’t occur ad hoc.

Capital program management requires the coordination of hundreds if not thousands of data-driven decisions and actions, starting with strategic capital planning to prioritize projects. Steps include creation of the budget and schedule, continuous collaboration, reviews, and reporting and ongoing management of countless interwoven disciplines—all to improve predictability and outcomes and optimize budget spend to meet the needs of stakeholders.

Capital Planning

To ensure that the right projects are prioritized, organizations must assess how each one aligns with and supports the organization’s strategic objectives. Capital planning establishes which projects the organization will take on and allocates available funds across those projects to align with objectives. Capital planning also should include a thorough risk assessment.

Program Governance

Program governance is critical to controlling and standardizing the way projects are delivered. It also increases efficiency, promotes decision-making accountability, and reduces risk through streamlined and standardized processes that improve visibility and support compliance.

Financial Management

Sound financial management of capital programs maintains control and visibility over projects to ensure that they’re operational, on time, and within budget. Stay on budget and schedule and few notice; veer off course and you raise red flags within your organization—and in some cases, poor financial management ends up in the public spotlight. Establishing policies, procedures, and standards, supported by proven technology, to manage these programs improves financial outcomes, enhances operational effectiveness, and promotes stakeholder confidence.

Risk Management

Capital projects and assets are inherently subject to risks such as adverse weather conditions, natural disasters, supply chain disruptions, and labor shortages. Effective risk management helps project teams predict, plan for, and allocate funds to anticipate potential challenges and reallocate resources as needed. Effective risk management also is crucial to maintaining accurate budgets, releasing contingency funds in a timely manner, staying on schedule, securing stakeholder trust, and improving project-to-project learning, all of which contribute to a project’s success and support future funding approvals.

Stakeholder Management

Capital project stakeholders demand different information at different times. Whether used by a public funding entity, a CFO in the office, or project manager on the jobsite, manual processes and spreadsheets can lead to siloed, error-prone information and produce outdated reports by the time they’re delivered. A secure, connected cloud-based capital program management system will help you provide reliable, current information to stakeholders. In-app reporting gives stakeholders the immediate visibility and transparency that instills trust in the data to make timely, better-informed decisions.

Resource Allocation

A project’s success can depend on how efficiently labor, capital, materials, and other resources are allocated and used. Tracking and changing their allocation as needed can be difficult and time consuming. When developing your capital program, access relevant data to develop the project requirements, consider resource availability, and then allocate and manage those resources using proven cloud-based solutions that support scenario planning and provide equal access and visibility to the office and field.

Performance Monitoring

Owners want to simultaneously track the progress of an individual project and all projects at the portfolio level. Having immediate access to outstanding items and the status of milestones against the schedule and budget, down to the line-item level, is crucial for taking corrective action and helping to ensure project success.

Public vs. Private Capital Program Management

Public sector organizations are established and financed by combinations of local, state, and national governments and at times take advantage of alternative funding models, such as public-private partnerships. Departments of transportation and water typically own and manage infrastructure projects, including dams, bridges, ports, roadways, and rail. Public sector project and program managers are accountable to a wide group of stakeholders, including funding agencies, elected officials, businesses, and taxpaying citizens.

Private sector capital program management focuses mainly on helping the business meet its projected goals, such as manufacturing yields and clients served, with overall goals related to turning a profit to satisfy board members, company owners, and shareholders. Accountability is much narrower.

5 Phases of Capital Program Management

Project owners require a formal process for approval and allocation of funding. Defining and implementing standard project controls and portfolio management processes help ensure consistency, control, and efficiency across the planning, execution, and operations phases of capital projects. Process governance and standardization provide discipline and consistency to ensure quality projects are delivered on time and with optimal value, taking into consideration scope, schedule, and budget.

Best Practices in Capital Program Management

Build your project and portfolio process structure to provide consistency, connected data, timely insights, and governance. Standardizing project and program fundamentals, including workflows, and providing consistent data instills confidence in reporting and increases efficiency. A centralized, cloud-based project, program, and portfolio management solution eliminates the need for siloed systems and offline, error-prone processes and spreadsheets.

• Robust governance structure. Many organizations implement systems and processes to improve project outcomes, but without governance parameters to help ensure those processes are consistently followed, the outcomes won’t likely improve and a lot of time will be wasted trying to police adherence to the processes.
• Proactive risk management. Identifying, quantifying, and assessing potential risks across projects helps organizations make more informed and strategic decisions. Adverse weather, supply chain disruptions, and labor constraints all present risk. The growing adoption of integrated systems, along with predictive data analytics, helps teams identify projects that mitigate their impacts, more accurately assign contingency, and release that contingency in a timely manner. Organizations also can employ generative AI techniques to help ask questions of past project documentation in order to identify risks that might arise on different types of projects.
• Effective communication and stakeholder engagement. Keeping all parties informed, engaged, and accessing the same up-to-date, accurate information helps prevent miscommunications, errors, rework, and disputes. It also creates a sense of collaboration and shared responsibility and cultivates long-term relationships and repeat work between owners and their delivery teams.
• Integrated program management tools. In a perfect world, key project management elements would live within a capital program management software solution. Still, that solution should allow for the integration of complementary system capabilities. It’s important to consider the maturity and success of system APIs, who builds the integrations, and who is responsible for ensuring that the integrations work consistently and meet the performance requirements. Look for solutions and middleware built to be integrated and with a proven track record.
• Continuous improvement via feedback. Given the complexity, variation, and immense spend on capital projects and programs, having a formal, automated process for regular feedback on lessons learned is integral to continuous improvement in areas such as processes management, material specifications, and risk management.

Challenges in Capital Program Management

Standardizing processes is a constant challenge. Every project is unique. You're working with different teams, sometimes across multiple time zones and continents, with different specifications, regulations, and workforces. Managing multiple capital projects, no matter their size or complexity, comes with inherent uncertainties that affect cost, schedules, and quality.

• Managing project interdependencies. Firms typically must manage labor, equipment, and materials across a portfolio of different but ultimately interdependent projects. If there are shortages or delays with one or more sets of inputs, multiple projects might be affected. An organization’s budget also affects multiple projects. For example, budget overruns in one project from, say, higher steel costs will negatively affect other projects’ budgets because of the shared overall capital budget assigned. Managers should understand that there’s a mutual reliance and shared risk, which is best managed using a cross-project software solution.
• Aligning with strategic objectives in changing environments. Too often, project teams lose sight of the big picture when trying to adjust to changing market conditions and meet short-term goals. For example, amid a short-term spike in labor costs, a manager decides to cut back on contractors in order to stay within budget, but the decision pushes the schedule out a month. The manager doesn’t take into account that the delay results in the firm missing a significant project milestone that would have allowed the firm to generate revenue that would have more than offset the higher labor costs that were avoided. By using systems that integrate capital planning and project execution, it’s more likely for execution teams to understand and align with organizational goals.
• Managing financial constraints and budget overruns. An estimated 69% of capital projects exceed budget by more than 10%, in part because of poor cost controls. Gathering data to inform accurate project budgets and forecasts, consistently tracking performance against forecast, and updating the forecast as new information becomes available help identify potential problems that could contribute to cost overruns before they become unrepairable. The longer a problem festers in a project, the harder it becomes to keep the budget in check. Implementing an effective project and portfolio management technology platform can provide the visibility, governance, and structure to identify potential issues and course correct to keep projects within budget.
• Navigating stakeholder dynamics. Managing many project stakeholders, including the public, shareholders, internal customers, and top executives, is much more complex than shooting off an occasional email or a holding monthly Zoom call. Clear, up-to-date, and credible project status information, provided regularly or through system access as appropriate, increases trust.
• Adapting to regulatory changes. Adapting to constantly changing engineering, environmental, safety, and other regulations isn’t easy. Need to be carbon negative by 2030? OK, how are you defining tactics to achieve that goal and tracking and reporting on your progress? Using a system that automates project management and tracking and provides the governance to ensure new procedures are being followed is an important first step. In-app reporting on compliance is the next piece.

Boost Your Returns with Oracle Capital Program Management

Oracle Primavera Unifier is a preconfigured capital project and program management application that uses weighted criteria and sophisticated Monte Carlo analysis to help construction and engineering teams make better decision, improve outcomes, and reduce risk. Primavera Unifier connects key processes, including cost, contract, change management, schedule milestone management, document management, and a form-based workflow engine. In-application reporting lets teams visualize both project-level and cross-project-level status and cash flow.

Native integration with Oracle Primavera Portfolio Management lets capital program planners access current project actuals to inform their budgeting decisions, while project teams can access budget decisions directly from Primavera Unifier with no lag time. Integration between Unifier and the gold-standard construction scheduling tools in Oracle Primavera P6 Enterprise Project Portfolio Management and Oracle Primavera Cloud lets teams manage and track project progress, scope changes, and deliverables.

Capital Program Management FAQs

How do you monitor and measure the performance of a capital program?
Track actual performance against the proposed schedule. Check your budget forecast against the actual spend. Track your schedule-based cash flow against the plan. Track deliverables against schedule. Track payments against the line-item budget and the value of work completed.

How does capital program management differ from capital project management?
Capital program management involves managing processes and providing reporting and oversight across projects, while capital project management applies to individual projects.

How does technology affect capital program management?
Using technology to automate capital program management provides the controls, consistency, and standardization crucial to managing the complexity of today’s projects. The latest cloud-based applications can help make capital program and individual project outcomes much more predictable and keep them on track. For example, technology can help team members proactively identify and rectify safety risks before someone gets hurt.