Capital Projects

11Approve, Recycle, Cancel, or HoldMaking Good Stage-Gate Decisions

Stage-gates are checkpoints built into the project delivery process that give executives the opportunity to review the merits of a capital project to decide whether money should be invested in pursuing an opportunity or solving a problem. Let me give you a very simple example to illustrate their purpose. Let's say the furniture in an office building is worn and outdated. The office manager proposes to replace all the furniture with a more modern design, especially getting the height-adjustable desks that everybody wants now. However, the owner of the business knows that the office lease is up in three years and the office will probably move to a new location. Spending money on new furniture now would be a waste of money. The owner does not know the layout of the new office building. The company might even get rid of offices altogether and go with an open-concept design. In this case, the best course of action is to live with the current furniture and only replace what is broken.

The owner is able to stop the proposal before much time and effort is spent developing the idea if the business has a requirement that all proposals must be reviewed early. This review—or gate—prevents ideas that should never get approved from gaining momentum. Without the requirement, the owner may not see the proposal until after the office manager has formed a committee to decide on the kind of furniture that should be purchased, ...