For many utilities the annual capital planning cycle to find the optimal mix of projects is often complicated and time consuming. But as challenging as it is, things get worse when priorities have to change during the year.
But that is the reality of the utilities business. Every year something unplanned will happen, something either breaks or burns down, and then there is no alternative but to fix it. The money then has to come from somewhere, with minimal disruption to the organization.
In our experience there are four key questions that need answering in these budget change situations:
Question One: What did we agree to?
For many organizations just reassembling all the information for the current capital plan is a challenge. Many organizations rely on spreadsheets which have different versions, come from different parts of the organization and have changed since the last planning cycle. But it’s critical that the plan-of-record and all the associated information can be quickly reassembled.
Question Two: What projects are already underway?
The further into the year the change is required, the larger the number of active projects. Those projects will have suppliers contracted, engineering resources assigned and money spent. So before any plan re-optimization the first step is to see which projects are underway and therefore what remains of the budget after those projects, and the unplanned investment, are taken out.
Question Three: What is the best use of remaining funds?
The optimization activity that occurred during the annual capital planning cycle has to happen again. Projects from across departments, organizations, lines of business need to be compared once again, looking at what-if scenarios to understand the implications of cancelling different projects.
Question Four: Does everyone understand the new plan?
It’s not just about creating the (new) optimal mix of capital investment projects, it is also important to be able to communicate the new plan and its implications to key stakeholders. Affected project teams, executives and regulators may all require visibility into the implications of the new plan as the changes ripple through the organization.
Asset Investment Planning (AIP) software helps organizations to answer these questions. First of all users can quickly get access to the current capital plan updated with the most current project information so you can see what projects are already underway. Users can then apply the new budget constraints and using advanced optimization capabilities the user can run what-if scenarios to look at different alternatives. Finally, because all the information for each project is readily available, including quantifiable project benefits, communicating the new plan to internal and external stakeholders can be done quickly and efficiently.
Budget changes and tough decisions will remain a fact of life; Asset Investment Planning software makes the task easier.