Agile vs Waterfall: What works best in capital projects

A project manager recently complained to me about how much grief she gets because she doesn't use Agile in her projects. I feel her pain. But there's more to it than just debating the advantages and disadvantages of which project management methodology is best.

Before you compare Agile vs Waterfall methodology for a project, there is a need to identify if a rigid structure is required or a flexible method would suit the project development.

From time to time, a project manager will ask me: Why doesn't CAPEXinsights support Agile? For context, CAPEXinsights is a capital project portfolio management software solution that helps teams get better results from their capital projects.

The platform automates and streamlines project management processes for the entire team, including risk management, development gates, and approvals. It also lets you view cash flow, risk, and results at a portfolio level using the waterfall method.

Spoiler alert: it’s not designed for Agile methodologies.

Two reasons why Agile methodology doesn't work for a capital project team.

1. No one uses Agile development to build a plane while actually trying to fly it.

‘Building the plane while trying to fly it' is the software development cliché at the heart of Agile methodology. In an Agile project, you deploy a Minimum Viable Product (MVP) and then enhance or fix defects through ongoing releases. This contrasts with the linear process of Waterfall methodology where you might refine and tinker for years before finally deploying a gold standard solution.

Iterations of crumpled paper planes on a yellow background

We all understand why Agile project management is an excellent choice – if you're working on software development.

However, if you're building a new factory or processing plant (or a plane!), some things have to be done in a linear order with specific project phases. You can't be Agile around a process like pouring concrete. You can use an Agile workflow to go away and support the invention of a faster drying concrete. But you can't produce a MVP of the ‘moment of pour'.

Similarly, once you've chosen your plant, installed the drainage pipes and concreted everything over, no one is going thank you for iterating the plant specifications.

I'm being facetious here – but you get the point. Capital projects involve investing in physical assets that (like planes) have annoyingly immutable boundaries – often shaped by the laws of physics.

2. Capital project risk management doesn't lend itself to Agile project management.

The Agile model and Agile teams famously prioritise individuals and interactions over processes. But sometimes processes are more important than people.

This key difference is fundamental to effective risk management, especially during the development process. For example, capital projects are subjected to a vast number of risk identification processes, including HAZOP, Layer Of Protection Analysis or Probabilistic Hazard Analysis studies. These processes unapologetically slow progress down and don't allow people to take short cuts.

This is because the consequences of getting capital projects wrong can be disastrous. Think: Exxon Valdez, Deepwater Horizon and the Union Carbide Bhopal gas leak.

The ISO 3100 risk management process involves systematically applying policies, procedures and practices. It takes time and discipline. You can automate and streamline the workflows around this process (did I mention CAPEXinsights?). But you cannot take short cuts. This is why the Waterfall approach works so well for capital project risk management.

Personally, if the new plant interfaces with the ammonia system, I'm all for the HAZOPs and risk management teams going through painstaking linear processes in their project development to make sure our factory doesn't have a catastrophic end, endangering people, the environment and the asset itself.

Risk is often identified and managed during the development lifecycle of a large project, which is why CAPEXinsights has a robust project development phase available to make risk management the highest priority before moving to the next stage. In this scenario, the debate of Agile vs Waterfall is irrelevant, as it's about applying the right methodology to suit the project management process required.

Does this mean you can't use Agile in a capital project?

 Agile and waterfall graphics with post-it notes around it with the principles words of each method. Not at all. Agile is great within a stage of a capital project, when you want continuous improvement through iterative development, or embedding in customer involvement with an incremental approach.

The value of agile practices lives outside of risk management processes and between development gates. If you're coming up with a new conceptual engineering product or process to support your capital project, Agile methodology is definitely the way to go.

If you want to perform the processes required between each development gate in parallel, or in a new order, it's all good (and by the way, CAPEXinsights lets development teams do that). And of course, Agile works for software projects where the development process has a high degree of requirements gathering or continuous delivery is needed through user feedback.

But when it comes to getting a capital project through its development gate, it's a different story. Achieving a point of confidence where the board can approve a hundred-million-dollar project and sleep at night requires a whole bunch of checks and balances, accountability and traceability. This is the value of the Waterfall methodology over the Agile method.

Fundamentally, the Agile vs Waterfall project management debate is flawed. One is not better than the other. They both have their purpose depending on the type of project and at different phases in the development lifecycle.

Does Waterfall project management mean you can't fast-track a capital project?

Not at all. But don't confuse fast-tracking with Agile. In a fast-tracked project you deliberately increase its risk profile. At this point, you actually need more discipline – not less. You have to be able to lower the guardrails to the point where you can still live with the risk. Doing it safely requires a huge amount of control – the opposite of Agile principles.

"Let me be clear. I'm not against Agile. It is incredibly useful for the continued software development of CAPEXinsights."

But Agile is not fit for purpose to manage the stage-gate development of large-scale, physical capital projects. Across capital project portfolio management broadly, we advocate Waterfall methodologies because ultimately that's the right approach to deliver successful, risk-managed capital projects.

For further information about project management approaches or to have a personalised demonstration of our product, please don’t hesitate to reach out to us.