Posted by Heidi Schwartz
More than half of construction project owners worldwide (61% in the U.S.) experienced one or more under performing 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% 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 exponentially,” says Geno Armstrong, Global Chair, Engineering & Construction and a principal with KPMG in the U.S. “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.”
Planning And Prioritizing
While rates of under performing 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 authorization.
Project owners surveyed also expressed confidence in their approach to risk, controls, and governance. Sixty-four percent say their management controls are either “optimized” 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,” notes Armstrong. “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 there is considerable room for improvement.
“And, it’s not just the quality of the controls,” adds Armstrong, “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% globally and 56% in the U.S. acknowledging a struggle to attract qualified craft labor and 45% citing a lack of planners and project managers. Consequently, the majority—69% globally and 81% in the U.S.—say their firms hire external resources equivalent to more than 5% of their total project workforce.
Greater Contractor Collaboration
KPMG’s survey also puts the owner/contractor relationship under the spotlight, revealing a 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 (32%) claiming to have a “high level of trust” in their contractors. Indeed, 69% globally and 82% in the U.S., identify poor contractor performance as the biggest reason for project under performance.
“Project owners should continue to invest in relationships with contractors to raise mutual trust and discuss problems or shortcomings,” emphasizes Armstrong. “Improving collaboration, along with continued investment in project management tools and processes should help pave the way to greater project success.”