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Few megaprojects come in on time and budget, global report shows

24th July 2015

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Only 25% of large construction projects surveyed in KPMG’s Global Construction Project Owner’s Survey, released in June, were concluded on time and within budget over the last three years.

“Every project owner wants predictability when it comes to large projects, and this is clearly not happening,” says KPMG South Africa Infra-structure and Major Projects director Jeff Shaw.

A variety of project owners in different sectors were surveyed, including public utilities, mining houses and oil and gas companies.

KPMG, in 2014, interviewed executives from more than 100 private and public organisations around the world for the survey. The yearly revenue of respondent companies varied in size from $250-million to $5-billion, covering a range of sectors. More than a quarter of the respondents worked for government agencies.

Just under 10% of respondents were from Africa.

A clear message from this year’s survey is that, while project owners are satisfied that many of the basic tools to manage large projects are in place, talent shortages remained a global challenge, notes Shaw.

This shortage of talent covers the full range of skills required on projects with 44% of respondents struggling to attract qualified craft labour and 45% lacking planners and project managers.

With the US experiencing a significant upswing in construction activity and the European market still flat, South African project owners will struggle to attract the right talent for large project execution should there be an increase in activity domestically.

The lack of the right people will be a limiting factor should construction in Africa accelerate, says Shaw.

This year’s survey also highlights another critical factor, namely, the notable lack of leadership skills within the project environment, he adds.

“A large project could mobilise around 20 000 people and 100 companies. Project owners feel that the leadership around these projects is severely lacking.

“Also, the relationship between the contractors and the owners are mostly adversarial, instead of collaborative, with little trust between the parties,” says Shaw.

“It is my feeling, and it is supported by the survey, that the biggest weakness in executing large projects can be found in the broad category of leadership and teamwork.

“The level of maturity within project owners in leading massive teams to manage a large, complex project is far too low, and there is nothing to say that this is not also the case in South Africa.

“It is far too easy to look at the nitty gritty stuff, such as implementing a new costing or scheduling system, instead of the softer issues, such as labour and leadership. These softer skills are completely undervalued and the impact on project success is underestimated.”

Shaw says there is a particular lack of trust between public sector project owners and contractors in South Africa, with the recent findings by the Competition Commission on collusion in the construction industry not helping matters.

“This is perhaps the biggest single message the survey has for South Africa. If we do not break the cycle of mistrust and a lack of leadership, we will not execute large projects successfully.”

Shaw makes the intriguing statement that most people, inside and outside the successful Gautrain project, knew who the leader of the project was, but that very few people can name the management leading the construction of many of the troubled projects currently under way in South Africa.

He also believes that the responsibility for strong, appropriate leadership rests with the project owner, but that the owner also requires cooperation and equal maturity from the contractor.

“Owners must actively manage the talent on major projects, and not just mobilise contractors. This will also help to address the lack of productivity on construction sites, which is a particular issue in South Africa.

“It is also important to provide continuity in leadership, as research shows that a change in project manager can cost a client up to six months in time lost.”

The survey notes that 69% of respondents identified poor contractor performance as the biggest reason for project underperformance.

It is clear, however, that project owners recognise that change is essential, with the KPMG survey showing that 82% of project owners expect greater owner/contractor collaboration over the next five years.

This could well lead to a fundamental reconsideration of procurement methods, contracting strategies and pricing mechanisms.

“We cannot have a situation where the contractor tries to earn as much as possible, with the owner working to limit costs. The contractor must be integrated into the project, perhaps with the gains and losses shared by both parties,” suggests Shaw.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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