Despite their planning and risk management efforts, owners are still finding that a sizable percentage of their projects are either failing or aren’t coming in anywhere near on time or on budget.
More than half—53%—of owners say they suffered one or more underperforming projects in the previous year, a number that rises to 61% for larger organizations, according to KPMG International’s ninth annual Global Construction Survey 2015, based on interviews with 109 senior leaders from private and public organizations around the world that conduct construction activity.
Only 31% of respondents’ projects over the past three years came in within 10% of their budgeted cost. And only one quarter of projects over that period came in within 10% of their original deadlines.
The owners imply that these failures, delays, and overruns are less the result of poor project oversight than of talent shortages and the lack of integration of project management information systems into these companies’ accounting and procurement software programs.
Most owners polled assert that their companies use formal screening, prioritizing, and approval processes for projects, including financial and risk analysis (84%). More than 80% of respondents state that the majority of their capital projects are planned. Thirty percent of respondents use a design-bid-build project delivery strategy, while 32% use engineer-procure-construct.
“All potential projects should be systematically identified, classified, screened, prioritized, evaluated and selected,” writes Jeff Shaw, Director-KPMG in South Africa. “This process must be supported by an appropriate budget allocation and monitoring process. Throughout the capital allocation process, alignment between strategic objectives and the capital project portfolio must be tested.”
The report notes, however, that owners are challenged finding qualified project management personnel. Forty-five percent of respondents say they struggle to attract qualified craft labor, planners and project management professionals.
While 64% of respondents believe their management controls are either “optimized” or “monitored,” nearly one-third concede that their controls are “standardized,” with no testing or reporting or reporting to management and only limited staff training.
Most construction companies rely heavily on software to manage projects. Fifty-five percent of respondents say they are “satisfied” or “mostly satisfied” about the return on investment from project management tools and training. And 73% say they are confident about the accuracy and timeliness of reports they receive from managers and contractors.
However, only about half of respondents say their organizations have introduced an integrated project management information system (PMIS). Consequently, less than one-fifth of respondents could answer “yes” definitively when asked if investments in project governance and controls have reduced project costs.
In planning for delays and cost overruns, senior executives polled identify a range of methods to calculate contingency levels. The two most popular are setting aside an specific amount of contingency for all projects (e.g., 10%), and quantitative risk analysis. “The relative sophistication of the latter suggests that owners are trying to become more accurate in their forecasting,” the report states.
Sixty-nine percent of owners polled say that “poor contractor performance” is one of the biggest reasons for failing projects, delays, or cost overruns. And there’s definitely something negative going when only one-third could say they have a “high” level of trust with pros.
More than eight in 10 respondents expect greater collaboration with contractors over the next five years. How much these relationships actually change, though, remains to be seen. The report suggests that lump-sum, fixed-price contracts, which dominate among the survey’s respondents, are one reason for the fragile state of owner-contractor relationships, primarily because they defer risk onto the contractor. And owners believe the balance of power is shifting toward them; nearly half expect to have more negotiating strength when delivering capital projects over the next five years.
KPMG International offers five steps for owners to improve the performance of their projects:
- Take a fresh approach to talent management through more effective recruitment, development, and retention strategies;
- Execute a fully integrated PMIS for swift coordination and real-time reporting;
- Demand practical targets from contractors based on realistic expectations of what can go wrong;
- Use contingency planning to control costs rather than excuse overruns; and
- Invest in relationships with contractors by creating integrated project teams.
Related Stories
Healthcare Facilities | Jul 15, 2019
Can a kids’ healthcare space teach, entertain, and heal?
Standard building requirements don’t have to be boring. Here’s how you can inject whimsical touches into everyday design features.
BD+C University Course | Jul 8, 2019
Shadow box design: To vent or not to vent [AIA course]
A curtain wall shadow box is a spandrel assembly consisting of vision glass at the building exterior and an opaque infill at the interior side of the curtain wall system. This course is worth 1.0 AIA LU/HSW.
Contractors | Jun 26, 2019
Katerra launches apprenticeship program to help develop the future of construction
The program offers nationally recognized, portable construction trade credentials.
Building Tech | Jun 26, 2019
Modular construction can deliver projects 50% faster
Modular construction can deliver projects 20% to 50% faster than traditional methods and drastically reshape how buildings are delivered, according to a new report from McKinsey & Co.
Contractors | Jun 15, 2019
Turner tops off new classroom space at Middle Tennessee State University
The building includes a “command center” for training students to interact with emergency personnel.
Contractors | May 24, 2019
Two versions of a hard hat for the future are ready for production
Clayco worked with a Georgia college to design a hard hat with greater comfort and adaptability.
Contractors | May 20, 2019
SoCal’s oldest GC bounds into second century
C.W. Driver succeeds by sticking to core markets and practices.
Codes and Standards | Apr 25, 2019
Report: Contractors invest $1.6 billion in workforce development annually
ABC members increased training spending 45% from 2013, according to a new report.
Resiliency | Apr 22, 2019
Turner Construction doubles down on jobsite efficiency
The company targets a 50% cut in greenhouse gas emissions and water use from construction activities by 2030.
Building Tech | Apr 19, 2019
Skender, Z Modular reach agreement to fabricate multifamily housing components
Factory to open soon on the southwest side of Chicago.