Considerations and success factors for the preparation and implementation of large capital expenditure project contracts in the cement industry.

Cement manufacturing has matured over the past decades with limited new advances in technological solution and machinery design. In this context an overall planning and execution of large scale cement manufacturing capital projects, in particular in terms of quality of installations and time of implementation, would have improved significantly over the same time period. This has not been the case with longer implementation times and lower end product quality being regularly encountered in both machinery and installations. Several factors have contributed to this deterioration of overall sector development in terms of long term technological and financial performance, including:
- Loss of technological & project management expertise and experience at the original equipment manufacturer (OEM), the Owners and Support Services levels. This in particular relevant in the current Russian environment where multiple ageing facilities continue to operate and implementation of newer technologies are subject to extreme material and climatic considerations;
- The entrance of new OEM’s and sub-suppliers in the engineering, manufacturing / supply chain;
- Reduction of the entry level barrier e.g. initial investment cost, in large capital projects and reduced focus of Owners on all the long term project success factors;
- Systemic risk avoidance by project stakeholders resulting in-decision or (mis)-evaluation of the impact, both negatively affecting project development.
During all stages of the planning and execution of large scale capital projects, Owners are suggested to allocated adequate resources and effort to ensure that the business unit expectations are met and the overall structuring, including content, presents a beneficial (win- win) scenario for the various stakeholders.

Author: P.H. Heersche, H.W. Meyer

Section: Review

Keywords: cement industry, large scale capital project, initial investment, long term financial performance metrics.