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
| Sep 13, 2013
Loews Hotels & Resorts announces major cross-portfolio upgrades
Loews Hotels & Resorts is currently in the midst of a major growth and property redesign initiative, reflecting a strong national trend in hospitality renovation.
| Sep 13, 2013
Video: Arup offers tour of world's first algae-powered building
Dubbed BIQ house, the building features a bright green façade consisting of hollow glass panels filled with algae and water.
| Sep 11, 2013
Inaugural BUILDINGChicago/Greening the Heartland Expo & Conference draws attendees from 27 states
More than 500 attendees from 27 states attended the inaugural BUILDINGChicago/Greening the Heartland Conference, held September 9-11, at the Holiday Inn Chicago Mart Plaza.
| Sep 10, 2013
The new medical office building: 7 things to know about today’s outpatient clinic
Regulatory pressures, economic constraints, and emerging technologies are transforming healthcare. Learn how Building Teams are responding with efficient, appealing, boundary-blurring outpatient buildings.
| Sep 10, 2013
BUILDINGChicago eShow Daily – Day 2 coverage
The BD+C editorial team brings you this real-time coverage of day 2 of the BUILDINGChicago/Greening the Heartland conference and expo taking place this week at the Holiday Inn Chicago Mart Plaza.
| Sep 9, 2013
Top 25 continuing education courses on BDCuniversity
An overview of the 25 most popular continuing education courses on BDCuniversity.com.
| Sep 6, 2013
Public Architecture's Day Labor Station: Just the type of 'great idea' we're looking for in the $5,000 Vision U40 competition
Thinking about competing in BD+C's Vision U40 program at next month's U40 Leadership Summit? Here's a good example of the kind of "great idea" we're looking for.
| Sep 6, 2013
U40 Summit featured speaker: Arthur Gensler on how to build a world-class AEC practice
Gensler, founder of the world’s largest architecture firm, will talk about the role of the architect in society, the impact of great design, and the practicalities of starting and running a practice, and will offer advice for today’s young design and construction professionals.
| Sep 6, 2013
CertainTeed announces roofing contractor program partnership with Angie’s List
By teaming with Angie’s List, CertainTeed is helping local contractors build awareness for their services by providing access to exclusive advertising discounts, local business growth marketing opportunities and support.
| Sep 4, 2013
Augmented reality: 12 applications for design and construction professionals
Building Design+Construction reached out to AEC professionals who have studied and applied augmented reality and asked them to pinpoint applications that are ripe for the technology. Here’s what they had to offer.