3 Regulatory Changes and Project Value
Learn how laws, regulations, permits, and government policies can change a project’s costs, schedule, risks, benefits, and feasibility, and how to reassess its value.
How regulation affects project value
Laws, regulations, permits, and government policies can change a project’s cost, schedule, risk, and expected benefits. Assessing these effects helps decision-makers determine whether a project remains feasible, needs redesign, or requires a revised business case. Requirements differ by jurisdiction, so identify which authorities and rules apply to the specific project.
Costs, schedule, risks, and benefits
Regulatory requirements may affect a project throughout its life cycle, from site selection and design to construction, operation, and closure.
Costs: New or revised requirements may require design changes, equipment, monitoring, reporting, permit fees, mitigation, or staff training. They may also add financing and maintenance costs.
Schedule: Additional reviews, permit conditions, or public consultation may delay approvals or construction. Delay can increase financing and labor costs, defer revenue, and put funding or contractual deadlines at risk. Some streamlined approval processes can reduce delay.
Risks: Unclear requirements, changing interpretations, permit denial, or noncompliance can create uncertainty, penalties, rework, or interruption. A permit may also create continuing obligations after construction.
Benefits: Regulation can reduce harm, protect health and the environment, improve safety, or create eligibility for incentives or market access. These benefits may increase project or community value even when compliance adds direct costs.
Consider benefits as well as costs and uncertainty when assessing a requirement.
A practical assessment method
Use a consistent assessment process to connect each requirement to project activities and compare the resulting assessment with the original business case.
Establish the . Record the approved project scope, cost estimate, schedule, expected benefits, and assumptions under the rules currently in force.
Identify the change. Determine the relevant law, regulation, permit condition, or policy; the issuing authority; its status; and its effective date. Distinguish a proposed change from a final requirement. Check for , exemptions, and renewal or grandfathering terms.
Trace the project impact. Identify affected activities, locations, technologies, contracts, and operating stages. Translate each requirement into a project task, such as redesign, an application, construction control, testing, or ongoing reporting.
Estimate . Include one-time and recurring costs, permit and mitigation expenses, schedule delays, lost or deferred benefits, and any added benefits. Avoid counting the same effect twice. Potential compliance considerations include permit fees, monitoring, and required project changes.
Analyze uncertainty. Use scenarios such as no change, likely change, and stringent change, and estimate the likelihood and consequence of each. Test sensitive assumptions, including approval time, mitigation cost, and operating requirements. Document assumptions and use sensitivity and risk analysis in cost estimates.
Reassess value and act. Compare updated costs, schedule, risks, and benefits with the . Consider redesign, alternative sites or technologies, additional contingency, contract changes, or deferral. Assign responsibility for monitoring rulemaking and permit status, and update the assessment when requirements or project facts change.
Compare alternatives and outcomes
A useful comparison is the project’s expected value with the change versus its expected value without the change. For example, a new permit condition for a construction project might require sediment controls and monitoring. These add installation and operating costs, but may reduce environmental harm and the risk of enforcement or work stoppage.
In contrast, a permit process that allows an eligible activity under a rather than individual review may reduce approval time. The Clean Water Act’s Section 404 program includes both individual and general permits.
Keeping the business case current
Regulatory changes can increase or decrease project value. Identify applicable requirements and effective dates, map obligations to project activities, estimate full life-cycle costs and benefits, and test uncertainty. Keep the business case and risk plan current as rules, permits, and project assumptions evolve.