KPMG presents its 2013 Global Construction Survey... | KPMG | RU

KPMG presents its 2013 Global Construction Survey report

KPMG presents its 2013 Global Construction Survey...

The survey covered 165 companies in 29 countries around the world, operating in the fields of development, construction, investment, infrastructure and engineering. The respondents' annual revenue varied in size from turnovers of US$250 million to more than US$5 billion.

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The survey revealed that a general upward trend in backlogs and margins is giving cause for optimism across the industry. As economies recover after a prolonged recession, more new projects are starting to emerge, with increased funding available to maintain and build infrastructure, and develop power and mining capabilities.

This year, the answers from the Russian respondents mirrored those of their colleagues abroad in practically all key issues: their growth expectations for the industry, approach to risk management, and their views on the role of public-private partnerships. This indicates that compared to previous years Russian companies have a more mature understanding the industry issues.

However, it should be noted that in some important aspects the Russian respondents' answers differed from those from construction companies in other countries. For example, whereas the latter are placing high hopes on the power and energy sector, Russian companies see the biggest opportunities in the construction of sports facilities and transport infrastructure, as Russia prepares to host the Winter Olympics in Sochi in 2014 and the FIFA World Cup in 2018. Furthermore, as prices for construction projects in Russia have not fallen as much as they have globally, the mood of optimism linked to the current upturn is less noticeable in the Russian market.

The survey also includes an analysis of the quality of work by construction companies with subcontractors in the Russian market. This reveals that construction and real estate market players have recently started placing greater emphasis on the quality of subcontractors and the selection process for them, and on control procedures to ensure that construction costs are kept to a minimum and deadlines and budgets met.

Executive summary

Driving forces

  • 66 percent of respondents worldwide, and 80 percent of those in Russia, feel that national governments’ infrastructure plans are the single biggest driver of market growth
  • Economic growth, urbanization and population increases are also influential

Optimism over future prospects

  • A general upward trend in backlogs and margins between 2010 and 2013
  • 54 percent of respondents worldwide, and 67 percent of those in Russia, experienced a backlog increase of at least 5 percent for 2012-2013
  • 80 percent of respondents worldwide, and 78 percent of those in Russia, foresee stable or higher margins for 2012-13, a significant improvement over the prior period

Growth is on the agenda

  • Two-thirds of respondents expect their company’s revenue to grow by up to 25 percent in 2013
  • 75 percent of respondents worldwide, and 56 percent of those in Russia, feel it could take 2 to 5 years to see a real industry upswing
  • 71 percent believe growth will be organic, rather than through M&A
  • 56 percent of respondents worldwide, and 56 percent of those in Russia, say that effective mega-project management is crucial to future growth

Areas for expansion

  • Of all the new sectors being considered, power and energy top the list by a significant distance
  • Other target sectors include water, rail, mining, roads and bridges, and retail

International expansion

  • 47 percent say that they plan to move into new geographies
  • The most popular region is Africa
  • Much of the interest in this region is from firms in Europe and the Middle East
  • Americas firms are focused foremost on the Middle East

Russia's uniqueness

  • In Russia, housing remains top of the agenda, along with the construction of sports facilities and transport infrastructure
  • More than 50 percent of the Russian respondents cited the Ural Federal District offered good prospects for business growth and new business

Barriers to growth

  • 72 percent of respondents worldwide, and 56 percent of those in Russia, say budget deficits and public funding is the biggest barrier to growth
  • Private sector financing is the next biggest worry, yet only 28 percent of respondents worldwide, and only 20 percent of those in Russia, feel public-private partnerships (PPPs) are an important driver

Risk management

  • 77 percent of respondents worldwide, and 50 percent of those in Russia, report underperforming projects, due to delays, poor estimating processes, and failed risk management processes
  • 79 percent of respondents worldwide, and 80 percent of those in Russia,  believe their investments in risk management have paid off

Work with subcontractors in Russia

  • 61 percent of respondents said that the most important factor in a subcontractor's execution of a project is the design, while the same number regard compliance with the schedule as the most critical aspect
  • For the majority of respondents, the main risks affecting the execution of a project involving a subcontractor are inadequate design documentation, delays and increased costs
  • The key criteria in choosing a subcontractor are a successful track record with similar projects, level of expertise and business reputation

© 2017 KPMG Audit LLC, the Mongolian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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