When capital projects are conceived, budgets for various costs of the project are developed and then refined over the life of the project. For a new facility one of those costs is “Site Acquisition”.
It’s fairly common for a community to offer “free land or work” in some form to entice a desirable business to locate there. Who doesn’t want something for free? Especially if you have budget responsibility for the project.
Sometimes these are good sites and worth consideration. But sometimes, they aren’t.
Several years ago, a site was selected by a future Client mainly because it was “free” and in a desirable location. The Client felt good about the decision because the budget for site acquisition was about $1 million.
Then came the bad news – because of soils issues, the costs of site grading and development would be more than $3 million over their budget. And extended their schedule by 2 months. Not exactly “free land” anymore.
Reasonable due diligence and an understanding of the results would have identified the problem and without doubt the Client would have made a different decision. They got excited about the prospect of savings $1 million early in the process and failed to count the total cost of the “free land.” It was a hard earned lesson we’re sure they never repeated.