Construction project failures weigh on industry | KPMG | SG

Construction project failures weigh on industry, finds KPMG survey

Construction project failures weigh on industry

Talent shortages are a challenge, with continued demand for external resources

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  • Project owners say fewer than one-third of projects completed on time and on budget 
  • Talent shortages are a challenge, with continued demand for external resources
  • Push towards greater project owner/contractor collaboration
  • Owners confident in their project planning and controls

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 International's 2015 Global Construction Project Owner's Survey: Climbing the Curve. 

Further, project owners said only 31 percent of their projects came within 10 percent of budget, and just 25 percent within 10 percent of original deadlines, in the past three years.

"As engineering and construction projects get bigger, the complexity grows exponentially," says Geno Armstrong, KPMG's Global Chair of Engineering & Construction. "The improvements by owners in planning 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."

 

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 percent reporting that their company screens projects using both financial and risk analysis, and 74 percent 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.

Sixty-four percent 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. However, at the same time, the report found that only half of the companies have project management information systems that raise the quality of decision-making in each phase of the project life cycle, suggesting considerable room for improvement.

There is also a 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 percent acknowledging a struggle to attract qualified craft labor and 45 percent citing a lack of planners and project managers. Consequently, the majority – 69 percent – say their firms hire external resources equivalent to more than five percent of their total project workforce.

 

A push for greater contractor collaboration

KPMG's survey also puts the owner/contractor relationship under the spotlight, revealing a thirst for closer working ties, with 82 percent 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 (32 percent) claiming to have a 'high level of trust' in their contractors. Indeed, 69 percent identify poor contractor performance as the biggest reason for project underperformance. 

"Project owners should continue to invest in relationships with contractors to raise mutual trust and discuss problems or shortcomings," says Mr Armstrong. "Improving collaboration, along with continued investment in project management tools and processes should help pave the way to greater project success." 

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