Capital programs and projects play critical roles in defining quality of life. They are vehicles for generating economic value and creating comfort for the numerous lives connected to the infrastructure, manufacturing units and facilities built. Getting implementation right is essential for such programs and projects to become truly successful. Owners, contractors, financiers and stakeholders have often experienced their projects being battered by risks, overruns, and more recently, pandemic-related complexities. Some projects however, have been delivered well by stakeholder teams implementing a systemic approach to building resilience, managing risks, balancing their portfolio, and adopting technology.
This pandemic has really tested program and project management capability as investors, owners and contractors grapple to meet commitments. The 13th edition of the KPMG Global Construction Survey 2021 released recently demonstrates a renewed confidence worldwide around capital programs and projects. In India, three-quarters of the respondents expressed optimism; a vast majority of owners expect their capital investments to increase, with over one-fifth expecting at least 10% increase in capital investments. This enthusiasm is echoed in the contractor community with over 70% of the contractor respondents expecting a revenue growth of at least 10%.
Resilience and risk management are core strengths that organizations are predictably focusing on. Companies are seeking to change their contracting models and risk sharing mechanisms, fortifying supply chains, institutionalizing Project MIS or PMIS, integrating project management processes, and leveraging collaborative technologies. There is an increased emphasis on safety and labor management, building capacity for managing cashflows, creating stronger project organization structures and leaders, and a renewed focus on governance, project controls and compliance. KPMG professionals have had the privilege of serving a few strategic investment projects across their lifecycle. These were delivered safely, on time and within budget, through the entire pandemic by leveraging a strong project-risk based focus adopted by the stakeholders and by incorporating clear strategies for implementing each of these resilience building components.
Large programs and projects consume significant resources, and with size and scale of capital projects and investment stakes slated to only increase, adopting a wider view on risks is critical. This is reflected by two-thirds of the India survey participants making commitments on moderate to high levels of spends on risk management. The extent of interconnectedness of risks has surfaced more strongly over the past few years, and key stakeholders are starting to adopt an integrated view on risks. Current day focus on improvement for Indian respondents matches the rest of the world on areas such as accurate risk reporting, adopting clear and standardized risk processes and controls relevant to capital projects and risk integration across the enterprise, portfolio and individual projects. An opportunity for Indian companies that surfaced when comparing recent survey responses between India and the rest of the world, was around building a clearly defined risk culture.
Portfolio project management has continued to be a difficult subject, with seemingly attractive projects at times winning over important sustenance projects. Over two-thirds of the survey participants in India indicated the use of defined processes for screening, analyzing and selecting investment opportunities, and over half leverage quantitative tools. We have seen firms assigning independent agencies for an objective assessment of their programs and projects, leading to refinement of their investment models, and the findings and lessons learnt, feeding into new investment decisions. A potential component of decision-making around capital allocation that Indian companies should emphasize is around ESG and sustainability strategies. More than half of India respondents indicated that their capital investment decision-making lacks ESG and sustainability components.
Technology has become a big opportunity and disruptor in the planning and implementation of capital projects and programs. Typical technology tools currently leveraged to drive project success typically include PMIS, Building Information Modeling (BIM), drones and advanced data analytics. Contractors are typically tending to lead technology adoption vis-à-vis owners and investors. Contractors typically lead technology adoption on areas such as data management and on-ground project delivery. Owner organizations have expectedly invested in technology around investment oversight, performance tracking and reporting. There are several examples of successes achieved by leveraging technology with tangible cash savings being created through reduced material quantities, improved cycle times and resource productivity. Unfortunately, the rates of adoption and acceptance are lagging, largely driven by lack of standardization, access to information and comfort of key decision-makers. With the advent of improved collaboration and visualization of projects, the industry offers a unique opportunity for owners and contractors to integrate technology as a core element of their joint project delivery strategy. As stakeholders of a project adopt common platforms and collaboration tools, projects will likely be better conceived, and are expected to be planned and implemented faster with lesser costs.
Diversity, equity and inclusion (DEI) is an area that this industry has not emphasized, with remote locations, difficult working conditions and hours being some of the traditional reasons. Akin to the break-through opportunity offered by adopting the right technologies, enhancing DEI holds significant promise in India, with anticipated benefits including overall performance improvement, decision-making, innovation and controlling employee turnover. Many of the Indian survey respondents confirmed initiatives around DEI training, education and awareness, and recruitment initiatives, almost reflecting global respondent scores. DEI improvement opportunities in India vis-à-vis global responses were reflected in the areas of creating employee resource groups, retention and development initiatives, rewards and leadership programs for diversity and inclusion. Importantly, projects will likely gain from extending DEI initiatives to the wider project supply chain with similar initiatives applied by contracting partners.
Get the future strategy right
As the industry is emerging from the pandemic, the timing is right to reshape the business models for capital investments, program and project delivery, and portfolio decisions:
- Collaborative and integrated project teaming, improved sharing of risks through innovative contracting and compensation models across stakeholders and robust asset management decisions will likely drive future capital projects.
- Building core project team capabilities, organizational resilience, integrated project information systems, common technology platforms, rapid technology adoption and an integrated approach to risk are expected to enable improved project performance.
- Leadership level commitment to embrace diversity, internally and across the supply, can unlock value at portfolio and individual project levels.