Rationalizing governance

Rationalizing governance

By aligning controls more closely with business strategy, and being brutal about rationalizing the number and degree of controls, owners and contractors can refocus on the key issues that make or break projects.

Man in orange carrying wood

It’s no exaggeration to say that governance and controls are the very lifeblood of projects, and which, for a large part, guide engineering and construction companies towards their objectives. These systems are the foundation for planning and monitoring progress towards a high-quality, on-time, on-budget project or program.

And we know these controls are being widely used. Of this year’s survey respondents, 70 percent track project performance based on original approved baseline project schedule and budget. A healthy 60 percent hold routine project review meetings with management, which trigger additional reviews — and if necessary, intervention — for any issues that could impair project performance.

These findings mirror KPMG’s own experience in the marketplace, where over the years we have evaluated the design and effectiveness of controls for close to 1,000 projects and organizations. Additionally, our involvement with industry-leading organizations like the Engineering Construction Risk Institute (www. ecriline.org) indicates that many owners and contractors have made advances in the way they control projects.

Against which benchmark does your organization track project performance (check all that apply)?

track project performance infographic

What triggers/KPIs are used to initiate project recovery or intervention activities?

KPIs are used to initiate project recovery or intervention activities infographic

So why do projects continue to underperform? When asked this question, the executives taking part in this year’s global survey had a variety of responses, pointing to factors like “Wrong estimations and forecasts in planning and scheduling processes”, “bad contract management and acceptance of too much risk” and “incomplete scope definition, scope creep and quantity growth, along with insufficient change management rigor.”

Another respondent summed up his concerns by saying that “The rate of failure seems not to have changed in over 30 years. Other than BIM, value seems elusive. We must give greater attention to process, measurement and how we use data to make better decisions.”

A closer look at how owners and contractors approach governance, risk and controls reveals some potential areas for improvement.

Just under half (47 percent) of the respondents say their organizations have separate systems for project reporting, yet a mere 8 percent have what they call ‘push one button, realtime, full PMIS, capable of project and portfolio dashboard reporting’. It seems that the days of instant project reporting are still some way away for most of the sector. And only 31 percent of survey participants report that their companies do have integrated systems for project reporting, which means that most project managers lack the capability to control all elements of the work.

Which statement best describes your organization’s project reporting?

Which statement describes organization’s project reporting infographic

Cracking the code for project controls

The incredible complexity of many of today’s projects is simply outpacing our ability to control them given our current governance, process transformation, and technology models and tools.. They are typically, larger and more integrated, with faster schedules and creative financing mechanisms that lead to tighter budgets. And in our desire to be thorough and systematic, we have underestimated the human element. Rules and procedures are only as good as the people administering them. And finally, few companies have truly exploited the new technology available to integrate each element of the controls environment.

Three steps to simpler and more effective controls:

  1. Make the controls flexible and aligned with broader business strategy, so that they reflect the key project priorities.
  2. Rationalize all controls on an ongoing basis to ensure they are as simple and relevant as possible 
  3. Balance ‘soft’ versus ‘hard’ controls.

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