Everyone likes to talk about reducing their impact on the environment. But when it comes to installing a water recycling system or any other capital equipment, that equipment has to do more than just benefit the environment and improve plant operations; it also has to make good business sense as an investment. Most decision makers use a tool called a “business case” to evaluate potential capital equipment investments.

Everyone likes to talk about reducing their impact on the environment. But when it comes to installing a water recycling system or any other capital equipment, that equipment has to do more than just benefit the environment and improve plant operations; it also has to make good business sense as an investment. Most decision makers use a tool called a “business case” to evaluate potential capital equipment investments. Building a business case for a capital equipment investment is not terribly difficult if you follow a good outline and do all the analysis.

Begin in the Middle

A business case typically opens with one or more cover pages, sponsor pages and other information, depending on the level of formality. These pages are followed by the executive summary, the problem definition, project description, project evaluation and project selection, which includes the methodology and anticipated results. (See the sidebar, “A Business Case Outline at a Glance.”) The “meaty part” of a good business case starts with the executive summary - a concise description of the problem and how it can be solved. However, while the executive summary is placed at the beginning, it should always be the last detail that is finalized when building a business case, so that it accurately encompasses all of the definitions, project descriptions, analysis, and implementation information in the project. So where do you begin, if not at the beginning? To develop a solid business case, you essentially need to begin in the middle by establishing a detailed definition of the problem.

Define the Problem

There must be a need, or else you wouldn’t be evaluating new equipment. The problem definition should encompass a problem statement, a description of the stakeholder environment, and a description of the current environment. Each of these areas might require two to three pages to address fully.

The problem statement should describe the problem the project will address, including any issues related to technology, processes and services.

The section on the stakeholder environment should describe the departments that are affected by the project, both positively and negatively. For example, in a water recycling project, the production and quality departments would benefit from a consistent supply of clean water, while the maintenance and facilities departments would have some extra work to do. Be sure to explore these facets as much as you can.

The section on the current environment should describe the situation as it exists or, in the case of new installations, as it would exist without the equipment you’re hoping to install. For example, project managers building a new finishing plant in Reynosa, Mexico, knew that the facility would experience problems with water quality and availability. The current environment in the plant was summarized as follows:

“We know that the city of Reynosa is notorious for having bad water, and we know that water supplies in late summer go almost completely dry in the afternoons. Quality and quantity of water throughout the year are questionable, and it is known that at times there is zero pressure, and at other times the water is simply unusable. Under these current conditions, it will be impossible to maintain consistent finish quality, and at times it may be impossible to run the processes at all.”

Evaluate the Project

The next piece of the business case is the project description, but this section doesn’t get completed until all the other work is done. You’ll first need to evaluate the various approaches that might solve the problem, including the possibility of maintaining the status quo, or “doing nothing.” The project evaluation section should include a description of strategic alignment, an agency impact analysis, a financial analysis and an alternatives analysis. In the strategic alignment, describe how the project fits into the overall vision of both the company and the facility. For example, the importance of improving human productivity is not the same in China as it is in Ohio. Corporate priorities must be considered in scoping and selecting projects for approval.

In the agency impact analysis, summarize how the project would impact the use of resources at the corporate, plant, and operational levels. Include information such as who will champion the project once the implementation begins, who will be responsible at the plant level for making it work, and what resources will be needed to make this project successful.

The financial analysis should explore all of the financial aspects of the proposed project. The more fully you can expand the financial implications of your project, the more likely it will be approved. Managers and investors try to hire good people and trust them to do good things, but a large project carries a lot of risk. These “money people” will not approve any project until they see that the financial homework has been done. Include both quantitative and qualitative costs in your analysis. For example, quantitative costs might include the capital equipment itself; your time, staff time, compliance time, legal and engineering time; facility modifications that will allow the project to be successful; new operating costs expected from having done the project; and anticipated savings in material and operating costs, and labor, engineering and management time. Qualitative costs might include fewer issues with environmental compliance, more consistent quality and less process variation.

Finally, the alternatives analysis should describe the various options, including the option of not implementing any project at all and at least one non-selected project option.

In the Reynosa plant, the criteria for evaluation were as follows:
  • How well does the process handle the issue of supply variation, in terms of both availability and quality?
  • How well does the process handle the issue of making the water consistently high quality, available in plenty, and at the correct pressure and flow?
  • How well does the process handle the treatment of wastewater to within compliance limits?
  • What is the capital cost of the proposed equipment, plus the costs of facility modifications and other loads?
  • What is the return on invested capital (ROIC) in percent per year?
  • What is the expected life cycle of the equipment?
  • What operational and maintenance costs are associated with this process?
  • Are there any additional benefits or issues that should be considered? In the alternatives analysis for the Reynosa project, the status quo (doing nothing) was evaluated and found to be highly risky based on the following points:


  • Water supplies in Reynosa are highly variable during different parts of the year.
  • The quality of water varies widely depending on rainfall, and can range from acceptable to unsafe and unusable within a few days.
  • Guarantees from the local water utility have been aimed at supply, but not the quality or safety of the water. The water is not pure enough to be used in the plant’s processes without treatment.
  • The variation in quality of painted products and the risk of warranty claims far exceeds the cost of addressing the problem with equipment.
The non-selected project option - the traditional approach of purifying the process feed and “treat and dump” for the wastewater - was rejected based on the following analysis: “This is by far the most common method of dealing with water issues in Mexico and the U.S., but does not deal with the variation in supply, does not buffer against ‘zero-pressure’ days, and carries 80% of the cost of recycling without any of the benefits.”

A water recycling system installed at a new finishing plant in Reynosa, Mexico, is minimizing water costs and providing a consistent source of high-quality water to the plant. Photo courtesy of R3 Water Technologies.

Select the Solution

The project selection is a summary of the reasons the proposed solution was chosen over all other possibilities. The summary should focus on how this solution scored on the criteria listed in the evaluation, and should include the financial analysis and comparisons to be the best of the other options.

The two sections of the project selection are the methodology and the results. In the methodology section, describe how the comparisons were done, what metrics were measured and which areas were rated based on “knowledge and research.” Knowledge and research goes a lot further if it is called that, and if the decisions are backed up with facts and a certain amount of “real” comparative testing.

In the results section, describe in detail the ratings and measurements that were used to decide that the proposed equipment is better than any other course of action. These are the statements that highlight why the chosen equipment is best, and how it overcomes any shortcomings or any issues where another choice may be better in some way.

In the Reynosa project, a water recycling system installed by R3 Water Technologies, Claremont, NC, was chosen based on the following selection methodology:
  • Supply variation: The status quo would leave the facility open to unacceptable variation in both supply and quality. The “treat and dump” option addresses quality variation on the incoming stream by purifying the incoming water and, if a large enough surge tank is purchased, could buffer the supply variations. However, the recycling option eliminates the problems of supply variation almost completely because all that is required is makeup water to replace losses. The recycling option includes a certain amount of process water in “inventory” by nature of the process. Properly sized surge tanks and supply pumps will completely buffer the facility from supply problems.
  • Compliance: The status quo does not address compliance issues. The “treat and dump” option is designed to achieve environmental compliance but nothing further. The recycling option is designed to eliminate some of the compliance burden by dramatically lowering the amount of water that is released to the environment. The recycling system will produce wastewater at least as good as that produced by the treat and dump system, but it is designed almost never to release water to the sewer.
  • ROIC: The status quo has zero capital cost but is disqualified for other reasons. The “treat and dump” option has capital equipment costs, operating costs and facility modifications that will never have a payback. The recycling option is expected to have a 185% payback in the first two years.

Summarize the Project

Once you have chosen the project solution, you’re ready to compile the project description. This section is a description of the actual equipment and process in general terms, how the project will solve the problems described in the problem definition, and how the organization will be affected by the project. Describe in detail the goals and objectives, performance measures, assumptions, proposed environment, and major project milestones that will indicate success.

In the goals and objective section, you’ll want to answer the question, “What do you hope/expect will happen once this project is implemented?” In the Reynosa plant, the goals and objectives were defined as follows:
  • The extra 250,000 gallons of holding capacity in the fire tank will provide the needed surge capacity for raw water during supply shortages.
  • The proposed potable water system will treat and condition the water so that it is usable even during times when the city supply is substandard.
  • The potable water repressurization pumps will provide constant pressure and flow, so that consistent plant operations can be maintained.
  • The wastewater treatment system will treat all expected waste streams effectively to allow disposal to the sewer whether the water is recovered or not.
  • The recycling process will remove effectively all suspended and dissolved solids and provide pure water for rinsing, boiler feed and other applications.
  • The water treatment processes will operate almost transparently to the rest of the facility. Operator involvement and the need for maintenance time will be minimized in the design.
The performance measures should define exactly how the project will be measured against the above goals and objectives once it is implemented. It is well known that written goals with written metrics are much easier to reach than unwritten goals - both because the former are well documented and because everyone involved understands from the beginning what the targets actually are.

In the assumptions section, think about your assumptions and discuss them with other people to find out how accurate these assumptions might be. Identify assumptions that are germane to the project, and describe how these assumptions affect the decisions you’re attempting to make.

For the proposed environment section, describe the situation you envision. In business terms, and without glowing promises, describe how the plant will operate when the project is complete and operational. This section is the “vision” of the business case. If the new environment is not going to be significantly better than the existing situation, you can expect to have a hard time selling your idea.

To identify the major milestones, use a Gantt chart. A Gantt chart is simply a graphic representation of your project schedule, showing all the various tasks and the dependencies. By looking at the Gantt chart, you can quickly see which tasks must be delayed if any problems arise with certain aspects of the project. For example, if the rigging and positioning of the equipment is delayed, it is obvious that the utility connections, assembly, startup and training may all be delayed. Describe both implementation and financial milestones, including progress payments and the goals that must be achieved to trigger a payment. If the project will “ramp-up” slowly into full production, be sure to show the milestones for ramping up, and possibly a definition of metrics to define “completion.”

The business case outline at a glance.

Define the Project for the Decision-Makers

Finally, after the rest of the business case is complete, you should be ready to write the executive summary. This section comprises three parts: a problem statement, a project description and a project evaluation. It tells the executive decision makers what the problem is and promises to study it thoroughly in the remainder of the business case. The executive summary should make the case in business terms, and be readable and understandable in no more than 90 seconds. If your idea can’t be reduced to that amount of information, it’s not a summary yet.

For example, in the Reynosa plant, the problem was summarized as follows:

“Water in Mexico is known to be a problem. Incoming water quality and availability, and wastewater treatment and disposal are issues. This business case studies the need, benefits, costs, and implementation strategy for capital equipment to address water issues that will be present at the new facility.”

The project description for the Reynosa project was summarized as follows:

“This proposal is for capital equipment and other improvements to build a ‘closed-loop’ water recycling system designed to capture and recover 90 to 100% of the process water from the plant’s three washer operations. Equipment included in the project is a combination of a potable water system to soften and filter all the incoming water, a reverse-osmosis system to remove effectively all dissolved solids from any water used for plant processes, a traditional hydroxide precipitation system to treat the returning process wastewater, and recycling equipment to prepare the water for processing by the reverse osmosis system and return to the plant. This equipment will reduce our dependence on the Reynosa city water supply by reducing our overall water need, and will improve our process water consistency by always treating the same process waste-stream, thereby eliminating most of the variation in the feed stream. The facility will benefit from improved potable water, excellent process water, and better consistency of both. Another benefit is the almost complete elimination of the process waste stream and the associated compliance issues.”

Implement the Solution

Once you’ve studied, argued, researched, toured, justified and purchased capital equipment, it is time to move to the implementation phase. Get a good project manager and use a project plan with as much detail as you can. Typically the implementation team is not the same as the people who negotiated the deal, so the more detailed the contract, the shorter the discussions about who is supposed to do each item.

In the Reynosa project, the water recycling system was planned for its own building on a new construction site, so all of the equipment locations and utility connections were made on a “blank slate.” This situation helped facilitate implementation.

The basic building blocks of recycling for the industrial plant are the same as for the idea of dumping it down the sewer and pulling in new. The wastewater has to be treated, and the new water has to be at an acceptable level of quality. The project plan therefore began by “nailing down” the obvious details:
  • Wastewater would be treated by hydroxide precipitation to allow removal of complex phosphates, heavy metals, suspended solids and final adjustment of pH to within an operator selected range.
  • Process water for the plant would be treated to remove dissolved solids and would be delivered to the processes at a quality, flow and pressure that could be efficiently used in the processes.
To recycle water, you can’t just run a pipe from the wastewater system outlet to the inlet of the pure water system; the equipment would self-destruct. In selecting equipment, you have to consider what is to be removed, in what order, and what the process needs to look like. In the Reynosa project, these criteria were defined as follows:
  • Product water from the hydroxide precipitation system would contain suspended solids, emulsified oils, which must be removed prior to any pure water system such as deionization or reverse osmosis.
  • Ultrafiltration would be used to remove all suspended solids and oils effectively and to render the wastewater ready to be further processed for use in the plant.
  • Due to the high level of dissolved solids that would be present, reverse osmosis was selected for pure water production, and stainless steel repressurization pumps were selected for pushing the water back to the plant.
  • Holding tanks were sized to prevent the processes from running out of water during maintenance operations. Pressure switches and bladder tanks would be used to maintain pressure on the supply lines without the pumps running all the time.
Once you have identified all of the criteria for the system, you can lay out the process. For water recycling equipment, a layout would include internal flow rates, interim filtration, and other equipment designed to service the main process. Once the building layout, flow rates, dimensions of the equipment, and other details are all worked out, you can get to a much better idea of what the finished product will look like.

At this point in the project all the utility connections, sizes, locations, and all the footings, clear-heights, service access, and building code required spaces have been defined. This is this point at which the drawings need to be checked out in detail, with both experts and production and maintenance personnel getting their ideas in. Once the project moves “from paper to steel,” changes become not only very expensive but also hard to make, and they add time to the project timeline. Once the drawings exist, it is critical to get everyone involved to be sure the project being built is the project that is desired.

The recycling system installed at the Reynosa plant was selected because of its flexibility in handling a feed stream that could vary widely over the course of the day, both in terms of contaminants and flow rate. The solution included the proper steps, in the correct order and at the correct internal flow rates, to allow the plant to recycle 100% of the process wastewater from the plant effectively and return it for reuse. All makeup water for the system first comes through a potable water system that was also installed as part of this project. The potable system consists of a multimedia filter and softener, mainly to ensure that the water is safe for the facilities, having low hardness and few abrasive solids to wear the equipment. Additional equipment could be installed to allow for chlorine or ozone feeds, or other treatments as required for human uses.

Analyze the Results

The most important part of any capital equipment project is the final result. Can the company use the equipment as planned, and are the promised results being realized? In the case of the recycling system installed at the Reynosa plant, the answer is “yes.” After a learning curve and a few incidents of “playing with the controls,” the system is operating in automatic mode, not only recycling 100% of the process water but also receiving and making use of the condensate from the air conditioning and air compressors as makeup water.

In short, this system is saving the plant about 80 to 90% of the cost of water in a city where the cost of water is very high. The plant is buffered from the effects of variation in supply, and the finishing processes have a consistent source of high-quality water to operate with.

In considering water recycling equipment or any other capital project, it is critical to involve experts early, and to frame the business case in business terms. If a project can withstand the critical examination of a well done business case, it is almost always a good idea.

For more information, visit www.r3water.com.