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The full impact of COVID-19 on the Australian construction sector will become more apparent over the next quarter, but there has been much speculation regarding the outcomes for the industry as well as potential risk mitigation strategies. It is important for businesses to ensure a comprehensive risk assessment is undertaken which then informs a risk-based mitigation action plan. While the current situation is evolving, organisations should put processes in place in the first instance and then look to monitor and adjust on a regular basis into the future.

Engineering and construction industry survey

As Australian infrastructure projects get bigger and more complex, they are becoming inherently more risky. For construction and engineering companies, this trend means smarter approaches and techniques such integrated project controls, risk-based assurance and data-driven solutions are essential for efficient and effective delivery of capital projects. However in a recent survey of these organisations, we find that many are failing to fully adopt these and other vital capabilities, placing their productivity, profitability and project delivery at risk.

Following the launch of KPMG’s Global Construction Survey, the Australian firm surveyed local construction and engineering companies and project owners to measure how well their organisations are equipped in effective governance and controls, human capital, and innovation and technology.

The survey also enables engineering and construction organisations to benchmark whether they are a ‘leader’ or a ‘follower’ in the industry, providing an initial gauge on their future-readiness in the core capabilities surveyed.

Snapshot of survey findings

Our local survey results indicate that a mere 3 percent of respondents are investing effectively in project governance, technology and people. By contrast, KPMG’s Global Construction Survey indicates that globally the industry is moving in the right direction – with 20 percent of organisations considered ‘future-ready’ and embracing disruption, from strategy to execution.

The survey results highlight some immediate opportunities for improvement in relation to the adoption of integrated project controls: 69 percent of surveyed respondents have no integrated project controls in place, with only 6 percent implementing a full IPC approach to deliver their projects.

On-time and on-budget performance continues to be a concern with 89 percent of respondents reporting their projects were delivered late and over budget.

Overall, the survey results highlight that Australian construction and engineering organisations face a race to improve their productivity by developing and implementing robust governance, project controls, data-based solutions and new digital technologies. Armed with these capabilities, organisations will be better positioned to safe-guard themselves in a mega-project environment.

Survey results – leaders and followers of the industry

Survey participants responded to eight key questions relating to capabilities in governance and project controls, technology and innovation, and people. Based upon responses to these questions, we complied an index which yields a single score (between 1 - 100) to represent how effectively an organization embodies these core capabilities necessary to become efficient, diverse and high-performing.

Figure 1 shows the grouping of index scores: <18 = ‘Behind the curve’; score of 18-27 = ‘Follower’; score of >28 = ‘Innovative leader’. We also compared the Australia survey results to global results.

Figure 1: Overview of Australian and Global low/mid/high index groups

Innovative leaders are organisations that foster a strong innovation culture embodied in a clear governance, integrated project controls and technology vision and strategy. They constantly seek opportunities to improve performance, and anticipate change and risks, with an ultimate passion to create a better industry for all stakeholders. On this benchmark, only 3 percent of locally surveyed respondents fall into this category – well behind the global result of 20 percent.

Followers are organisations striving to gain a balance between investing in the future and addressing current challenges. Top perceived challenges are cost and time overruns. They are implementing BIM, basic data analytics and key elements of project controls. 42 percent of locally surveyed respondents fell into this category.

Behind the curve organisations are struggling to get to grips with immediate issues, with little longer-term strategic vision for integrated project controls, technology, governance and people. There is limited investment in, and adoption of, key project management, finance and reporting capabilities. The majority (56 percent) of locally surveyed respondents fall into this category. This group urgently needs to take action to improve across all core capabilities surveyed.

A closer look: Integrated Project Controls (IPC) & Assurance

Integrated Project Controls (IPC) is a discipline integrated into a project team, where cost controllers, estimators, schedulers, risk managers, document controllers, change managers and other relevant team members can greatly benefit.

Effective and efficient integrated project controls are widely regarded as essential to successful project delivery. When fully implemented they provide project leadership with time critical information on project cost and schedule performance metrics as well as issues identification. This enables early identification of risks and corrective action to be taken before it is too late, yet only 6 percent of our survey respondents have implemented full IPC.

Integrated Project Controls in Australian Companies

Innovative leaders are significantly ahead when it comes to technology, governance and integrated project controls, project management reporting systems, with multiple tools for projects and programs. In contrast, 85 percent of the ‘behind the curve’ (refer Figure 1) Australian organisations continue to use multiple spreadsheets or disparate systems requiring manual reconciliation and updates.

Benefits of Integrated Project Controls

A project’s likelihood of success considerably increases by taking a standardized and consolidated approach to project data gathering, management and analytical processes. Such an approach supports the development of achievable plans, predicts progress, accurately measures performance and constructively supports project management decision making.

In addition to learning from previous achievements and challenges, Integrated Project Controls (IPC) supports improvements across a range of core capabilities including cost estimation models, scheduling and risk identification.

What does IPC look like?

Put simply, project controls is an integrated and quality driven process model that enables project teams to exercise due diligence in:

  • planning what has to be done, how, by who and when
  • measuring what has been done and comparing actual performance against plans
  • identifying and assessing change (for schedule, cost and risk impacts) and managing changes
  • knowing what remains to be done and identifying trends to inform forecasting
  • identifying and implementing corrective actions
  • checking the impacts of corrective actions.

Infrastructure and construction businesses continue to be faced with the challenges of improving productivity and successful project delivery. Innovative leaders are turning to integrated project controls, risk-based assurance and data-driven solutions that have already improved many other sectors. Approaches and techniques such as these are emerging as vital tools for improving capital project delivery and reducing risks. By enabling organisations to leverage the vast amounts of project data they already collect, risk-based analytics can uncover critical insights that both speed up and improve the quality of management decisions.

Admittedly, adopting risk-based analytics tools may pose challenges for organisations in the construction and engineering sector. Project controls approaches and tools sometimes change during the delivery phase, causing incompatibilities and inconsistencies in the collected data. The cultures and processes within construction organisations can pose additional barriers. Commonly, the industry tends to put trust in individual experience and expertise over data analytics.

Infographic: 11% of respondents delivered their projects on time and under budget
Percentage of projects delivered on-time and within budget

Common challenges

Common challenges for organisations that develop and deliver infrastructure projects or maintain operations, typically revolve around fundamental constraints such as budgetary and/or timeline pressures, uncertain benefits, and risk exposure against target benefits. Some of the key challenges that our clients may face include:

  • Optimism bias on reliable project cost and timing
  • Reactive project risk management rather than proactive
  • Qualitative risk assessment rather than Quantitative Risk Analysis (QRA)
  • Misrepresentation of risks and uncertainties
  • Poor prioritisation leading to funding of wrong projects
  • Inefficient use of technology and data analytics
  • Not regularly measuring the likelihood of project success
  • Poor transparency of project decision making
  • Poor determination and management of project contingency
  • Contract strategies misalignment to contract risk profile.

About the survey and how you can participate

We encourage infrastructure and construction organisations to complete the ongoing KPMG Survey or talk to one of our Project Risk Consulting professionals to learn more about integrated project controls and how your organisation can improve its ‘future readiness’ for what lies ahead.

The survey results are managed and compiled by a team of senior KPMG representatives specialising in the engineering and construction industry and reflect current and ongoing concerns expressed by organisations and project owners.

If you would like to discuss the findings of this report, please contact KPMG’s Pedram Danesh-Mand.

Learn more about KPMG’s Project Risk Control services.

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A lack of data-driven quantitative risk assessment and underestimated or overestimated project cost and schedule can prove disastrous. Data-based project controls and assurance can replace cognitive biases and flawed assumptions with fact-based insights about a project’s likelihood of success – both winning and delivering successfully.

Our survey highlights that 89 percent of organisations are facing challenges in developing and delivering major infrastructure projects that are commercially successful and within their planned schedule. Conversely 11 percent organisations are delivering the majority of their projects within the original planned budget and schedule. Not surprisingly, an excellence in governance and project controls is reflected in project performance.