KPMG International kpmg/gcs Reimagining governance, people and technology in the construction industry Global Construction Survey 2017 Make it, or break it Foreword Taking back control over projects Achieving change in a hesitant industry Over the past decades, owners and contractors have made considerable strides in improving the delivery of capital projects. We’ve seen a host of advances in the form of new construction techniques, project delivery strategies, and enhanced processes and controls for safety, risk management, budget, scope andschedule. But the industry’s overall performance during this period continues to tell a discouragingly different story, replete with a continued inability to increase productivity, raise performance levels and reduce project failures — a record that pales against the achievements in other sectors. KPMG’s 2017 Global Construction Survey — which reports the views of engineering and construction companies and project owners — reects this apparent contradiction. More than 80 percent of respondents report condence in their organization’s ability to deliver projects on time and within budget. An even bigger proportion (92percent) say their systems producetimely and accurate project andportfolio reporting. Yet half admit that, in the past3years, adverse project performance signicantly impacted their company— rising to nearly 60 percent for contractors. Additionally, just a quarter believe the industry as a whole has reached an acceptable level of performance in delivering capital projects on time and within budget. Which begs the question: Can we make the kind of step change needed to bring performance in line with stakeholder expectations With the industry under threat from the inevitable disruption caused by innovative and agile outsiders, it’s imperative to swiftly address this issue. Missing links in the transformation story To achieve a step change in performance, engineering and construction companies and owners alike need to reimagine governance, people and technology. Currently, despite signicant investment, the industry is not integrating these three performance drivers sufciently. It’s not enough to address these components independently — we have to nd new ways to make them work together in an integrated fashion. Our survey delves deeply into each of these critical areas to take a more holistic view of their impact upon project performance. Only by investigating and addressing these missing links can we attain the kind of improvements that other sectors have achieved. Standardization and optimization are worthy goals, but they are unlikely on their own to produce transformational progress. In the future, successful owners and contractors are likely to be those with a strategic vision that can expediently innovate and adapt, and cultivate a workforce and culture that embraces new technology while respecting the proven effectiveness of sound project management. In the following pages, we discuss how, by assessing, rationalizing and rethinking governance, focusing more on developing exceptional people, and creating a truly integrated digital strategy, we can start to make the kinds of changes that have thus far eluded us. We would like to thank all survey participants who gave their valuable time and insights to our latest annual Global Construction Survey. The moment of truth How can the engineering and construction industry overcome fragmentation, external competition and inconsistent performance by reimagining its approach to governance, people and technology Geno is a Partner responsible for KPMG’s Global Engineering and Construction practice. He is passionate about construction and has invested almost 30 years into studying major projects and organizations — cataloging what executives do well, and applying ‘reverse engineering’ to failed or struggling initiatives. His experience encompasses hundreds of the largest, most complex projects and organizations globally, across virtually every industry. Geno leads a team of trusted professionals focused on guiding companies through stormy seas, and doing everything humanly and digitally possible to ensure successful projects. A strong advocate of insightful research and thought leadership, he has been personally involved in each of KPMG’s 11 Global Construction Surveys since 2005. Geno lives in San Francisco, California, US. Geno Armstrong Global Sector Leader, Engineering and Construction KPMG International E: garmstrong@kpmg Clay leads the Major Projects Advisory practice for KPMG in the US and has over 20years of practical experience and research, giving him a deep understanding of what makes projects and organizations successful. He has been at the forefront of efforts to advance industry-leading methods and tools to objectively benchmark project controls. Additionally, Clay is also on the cutting edge of applying advanced data and analytics to improve transparency, and make better use of the vast data sets associated with major construction projects. A recognized industry thought leader, Clay has published papers on topics ranging from project controls, compliance, data and analytics, mega-project management to so-called ‘black swans’. In addition to the efforts of Geno, Clay and other experts attributed throughout this document, we want to recognize the contributions from countless KPMG professionals in our global network of member rms, who have played a vital role in helping us conduct our research by participating in face-to-face interviews. We thank each of you for your time, energy and dedication. Clay Gilge Major Projects Advisory Practice Lead KPMG in the US E: cgilge@kpmg About the authors Contributors To achieve a step change in performance, engineering and construction companies need to reimagine governance, people and technology. It’s not enough to address these components independently — we have to nd new ways to make them work together in an integrated fashion. Waiting for the technology breakthrough Placing the right bets — and seeing the benets from your investments. —Ninety-ve percent of respondents think technology/innovation will signicantly change their business, but a mere 5 percent view their organizations as “cutting edge” when it comes to technology. Survey at a glance Reimagining governance, people and technology How do the main performance drivers interact Rationalizing governance What’s working and what isn’t Should you be shredding those ancient manuals and rationalizing your governance, risk and controls —Only 8 percent of respondents have what they call “push one button, real-time, full PMIS reporting”, and just 31percent have integrated systems for project reporting. 021004 Maintaining the human touch With several generations of people under one roof, how can owners and contractors attract and motivate a diverse range of individuals for their project teams — and ensure these people have the capabilities and the supporting structure to achieve high-performing projects —Forty percent of employees are GenX and 37 percent are Millennials, but 24 percent of respondents say Millennials do not understand the fundamentals of project delivery. 26 In conversation: from the Stone Age to the digital age Bent Flyvbjerg, Professor of Major Programme Management at Oxford University’s Sad Business School, discusses the future with GenoArmstrong, KPMG International. 3428 Three steps to closing the performancegap Pulling our thoughts together to address the key challenges raised in this year’s survey: The key is integrating performance drivers through effective change management. About the survey Everything you need to know about the 201 survey participants. 38 KPMG’s Global E&C practice Showcasing our extensive experience and know-how. 39 Bookshelf Take a look at the KPMG network’s extensive range of thought leadership in infrastructure, engineering and construction. 40 Contacts Who to get in touch