MIL OSI – Source: KPMG – Australia and New Zealand climb the global construction curve
The KPMG Survey looks at a range of construction and major project drivers in the region against a background of global construction activity and trends.
In a report highlight, 73 percent of Australian and New Zealand respondents reported using ‘sophisticated’ management controls on projects compared with only 51 percent globally.
Mitchell Petrie, Partner in Charge for Major Projects Advisory at KPMG Australia said this reflected a significant improvement in local project delivery through work on mega projects as part of the mining boom.
“In the last five years, we have seen a spike in energy and natural resources mega projects focusing the world’s best construction professionals and contractors on the Australian market,” he said. “That has meant a significant ‘step up’ the construction curve and has brought a benefit in the form of increasing local capability and capacity.”
He noted that the last two years had also seen an overall decline in construction activity in the Australia and New Zealand marketplace resulting in increased competition and downward pressure on pricing.
“Fifty three percent of Australia and New Zealand survey respondents reported that more than 90 percent of projects were within original budget compared with only 31 percent globally,” said Mr Petrie. “That translates into favourable market conditions in terms of available contracting resources and positive budget outcomes. In other words, it’s a good time to be a project owner.”
While the KPMG 2015 Global Construction Project Owners Survey shows excellent progress in planning, risk and execution, it also highlights opportunities for improvement.
In the global context, project owners are continually striving for a balance between power, responsibility and control according to Geno Armstrong, International Sector leader Engineering & Construction, KPMG USA. Mr Petrie agreed that they have the power that comes from control over the budget, yet are ultimately responsible to their corporate Boards and Chief executive officers and that this was a key driver.
Five key issues were identified as vital to ongoing success, according to the KPMG Survey.
These included ensuring construction sector contracting talent was effectively managed and retained particularly as the net of potential candidates widened; that owners should demand practical targets from contractors via balanced scheduling; and that project owners invest in the ‘contractor relationship’ creating an integrated project team with common goals and rewards as a way of managing risk.
“There is a significant cost differential in getting these points right,” said Mr Petrie. “It’s an ongoing challenge for project owners to match the risk of the project with the most appropriate contracting method. Getting it wrong can mean a significant risk to time, quality and cost.”