The net present value (NPV) of a project is determined by the actual onset of costs and then revenues. The ramp-up years of the project are especially critical, because of their disproportionate influence on the NPV calculation. A project ramp-up curve, such as the one shown below, is not atypical: under-delivery in the first years of a project can easily destroy 30 percent or more of the project's expected NPV. PIP is regularly engaged on major projects after they have significantly under-delivered on their expected ramp-up curve. In most of these projects, effective processes were in place to ensure rigorous review of project design and extensive analysis of costs. As well, there was usually regular and comprehensive reporting to the Board of Directors on progress vs. plan of project completion and cost. However, in almost all of these businesses, the planning and execution of the operational elements to enable project success was under-done. While tens, or in some cases hundreds of millions of dollars were poured into detailed planning and governance on the capital side, insufficient money and attention was focused on planning and execution on the operational side. The implication of this lack of attention is two-fold: under-delivery during ramp-up (eg lower output, quality issues and cost overruns) and an inability to rectify performance over the rest of the project.
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