Construction project failures weigh on industry
Over half of construction project owners experienced one or more underperforming projects in the previous year, despite confidence in project planning and controls, according to KPMG’s 2015 Global Construction Project Owner’s Survey: Climbing the Curve. Further, project owners said only 31% of their projects came within 10% of budget, and just 25% within 10% of original deadlines, in the past three years.
“As engineering and construction projects get bigger, the complexity grows significantly,” says Jeff Shaw, Director, Infrastructure and Major Projects at KPMG. “The improvements by owners in planning, project controls and risk management have been significant, yet there is further work to be done to reduce the number of project failures, and bring more projects in on-time and on-budget. The industry globally has not yet reached a stage of maturity where there is sufficient predictability of project outcomes and the African major projects industry is clearly no different.”
Greater emphasis on planning and prioritising
While rates of underperforming projects are troublesome, KPMG’s survey shows that owners of major capital projects are implementing more mature planning and approval processes, with 84% reporting that their company screens projects using both financial and risk analysis, and 74% of firms requiring formal project delivery and contract strategy analysis, prior to authorisation.
Project owners surveyed also expressed confidence in their approach to risk, controls and governance. 64% say their management controls are either ‘optimised’ or ‘monitored,’ and almost three-quarters feel comfortable with the accuracy and timeliness of project level reports. More than half also indicate that they are either ‘satisfied’ or ‘mostly satisfied’ with the return on investment in project management tools and training.
“Over the past decade, owners have introduced software to improve project controls, with some positive results,” says Shaw. “But at the same time, our research found only half of companies have project management information systems that raise the quality of decision-making in each phase of the project life cycle – which suggests that there is considerable room for improvement. Lack of robust interfacing between corporate information systems and project management information systems leaves management without the tools to gain full transparency into project status”
“And, it’s not just the quality of the controls,” adds Shaw, “You also need to develop the skills of those managing the projects and using the various tools. Across the board, there is a critical need for more skilled talent.”
This sentiment is reflected in the survey, with 44% acknowledging a struggle to attract qualified craft labour and 45% citing a lack of planners and project managers. Consequently, the majority – 69% – say their firms hire external resources equivalent to more than five% of their total project workforce. The shortage of skills in Africa is particularly acute and must be a cause for concern once the market improves. Project owners need to invest in talent management in all project disciples in order to identify, train and retain skills.
A push for greater contractor collaboration
KPMG’s survey also puts the owner/contractor relationship under the spotlight, revealing a global thirst for closer working ties, with 82% of respondents expecting to see greater collaboration with contractors in the next five years. However, there still appears to be a ‘trust gap,’ with only about a third claiming to have a ‘high level of trust’ in their contractors. Indeed, 69% identify poor contractor performance as the biggest reason for project underperformance.
Again the African market shows similar trends but it would seem that the lack of trust between contractors and public sector owners is of particular concern in our market. Global research into major projects shows that one of the most critical indicators of project success is the quality of leadership in both the contractor and owners teams and integrated teams working towards a common vision of project success is critical.
“Project owners should continue to invest in relationships with contractors to raise mutual trust and discuss problems or shortcomings,” says Shaw.
Consideration needs to be given to more collaborative forms of contract and the development of mature team members who are able to operate in mixed teams while maintain a focus on long term outcomes.
“Improving collaboration, along with continued investment in project management tools and processes together with a focus of talent management should help pave the way to greater project success.”