Independent Project Readiness Reviews
Energy sector megaprojects are exposed to a high level of external, uncontrollable risks. It is not unusual for energy megaprojects to have cost and schedule overruns of more than 100% of the cost and duration premised at the Final Investment Decision (FID.)
Financial stakeholders – the owner/operator, non-operating partners, and passive investors; as well as lenders and government agencies – require assurance that the project’s business goals will be met. This assurance can best be provided by independent experts doing thorough and timely readiness reviews prior to major investment decisions.
The scope of an independent readiness review is illustrated below.
While most internal reviews focus on the completion of key deliverables in accordance with the operator’s project development process, the R/MW approach considers both the completion of deliverables as well as their correctness. For example, a cost estimate or schedule may have been prepared in accordance with best practice, and be highly detailed, yet reflect significant optimism and overconfidence. Many megaprojects overrun simply because the cost estimate and schedule approved at FID were optimistic (i.e., the expected cost or duration was too low) and overconfident (i.e., the range of possible outcomes too narrow.)
The R/MW Independent Readiness Review Process is designed to ensure that areas of optimism and overconfidence are identified, and realistic assessments made. Other areas of investigation include appropriate application of project management best practices, and project organizational effectiveness.