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An old joke is this: If you look at a paper machine (or pulp mill) that is ten or more years old and add up all the incremental capital projects that have been done on this asset, the claimed accumulative return on investment would suggest that the mill should be operating for free.

Obviously, this is not true, so what went wrong?

The first place to look for errors is in the design basis. What is a design basis? If this is your question, the first problem is that you do not know what a design basis is and why it is necessary.

The first document that one leading a project should produce is a design basis. This is a narrative, largely text with few numbers, which describes the intent of the project. It is a story, a story about how a certain asset operates today, what is desired to be changed about that asset, and the subsequent way the asset will operate upon completion of the project. While the design basis has a primary author, it should have many, many contributors--in fact, anyone in the company who will have the opportunity to make a judgment call when the project is completed should be solicited for input into the design basis. Creating a design basis is painful and slow. But it is extremely important. For if you don't get the design basis correct, you stand little chance of having a successful project.

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Once the design basis is hammered out and all the parties agree to its contents, objectives and goals, it is not to be put on the shelf. It is to be a dog-eared document referenced often throughout the capital project process. It is your road map. If you experience rocky traveling in your excursion through your capital project it is because either (a) your road map is faulty or (b) you never bothered to make a road map in the beginning.

Failure takes many forms--the budget was too low, the schedule was wrong, training was poor, markets were not as predicted and on and on and on. However, I have never seen a project fail badly if it had a good design basis.

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So, when people come to me wringing their hands about their projects, I drag them back to the beginning and ask about the effort invested in and the nature of their design basis. The failure of nearly all disappointing projects begins here.

What are some of the failures you have seen? Please keep the guilty anonymous, but please take our quiz and tell us about them.

Of course, your safety plan is part of your design basis. Start there and build from a viewpoint of safety and you will be off to a great start.

Be safe and we will talk next week.

You can own your Nip Impressions Library by ordering "Raising EBITDA ... the lessons of Nip Impressions."