Construction project failures weigh on industry despite advances in planning and controls, finds KPMG survey

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 per cent of their projects came within 10 per cent of budget, and just 25 per cent within 10 per cent 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 US. “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 prioritizing

While rates of underperforming projects are troublesome, KPMG’s survey shows that owners of major capital projects globally are implementing more mature planning and approval processes, with 84 per cent reporting that their company screens projects using both financial and risk analysis, and 74 per cent 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 per cent 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 Geno 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 Mr. 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 per cent acknowledging a struggle to attract qualified craft labor and 45 per cent citing a lack of planners and project managers.  Consequently, the majority – 69 per cent – say their firms hire external resources equivalent to more than five per cent 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 per cent 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 per cent) claiming to have a ‘high level of trust’ in their contractors. Indeed, 69 per cent 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,” emphasizes 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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