Across the world, there is surging demand for new infrastructure. Rising global populations and concerns about economic slowdown are making infrastructure investment a top priority for government. In the UK, capital projects like Crossrail, HS2 and new nuclear power generation plants are all high-profile, but not always for the right reasons.
Capital projects, such as these across industries, not just infrastructure, typically overrun cost and time projections by significant margins. The Financial Times recently reported that Crossrail is expected to require further cash injections of almost £2.5 billion and is likely to start operations nearly two years behind schedule1.
Crossrail is far from being the only capital project that’s run into difficulties. So, why is this happening and what can be done to overcome these issues? While there is no single solution, a more concentrated focus on ecosystem collaboration, workforce and digital transformation can combine to have a major, lasting impact.
By nature, capital projects are hugely complex. They involve large goals within the overall plan and require many parties to deliver them. Across industries, there are owners, EPCs (Engineering, Procurement and Construction) and sub-contractors, third-party logistics providers, expediters, quality assurance organisations and other service providers. These parties manage multiple functions individually or collectively: from project planning to supply chain and logistics, execution and commissioning. These groups all have different commercial objectives, ways of working and measures of success, which makes coordinating them a huge task. These differences also often lead to a lack of transparency, which limits collaboration. That means:
- An absence of cross-functional insights and analytics leaves integrated project planning and execution unsupported. After financial services, capital projects generate more data than any other industry. But most of it is poorly managed, misplaced or discarded during execution. This means little value is extracted from historical data. And the lack of information symmetry, intelligent insights and access to lessons learned can result in sub-optimal decision making.
- Design and engineering often do not span the lifecycle of a capital project. Designs that do not incorporate cost, design and scheduling data, lead to scope growth and/or rework. Typically, across the industry, around 10 per cent of a project’s value is lost as a result of rework. Inefficiencies can arise owing to incorrect material selection and construction methods, which in turn often lead to excessive waste (in fact, some studies suggest capital projects generate approximately 40 per cent of the world’s waste). And all these issues are exacerbated by changes to original designs not being effectively communicated across all parties involved.
Lack of diversity and an ageing workforce
There is limited diversity in the capital projects workforce. In the UK construction industry, women2 make up only 13% with BAME workers accounting for only 5.7%3. A lack of diversity means that there is a bias towards doing things the way they have always been done. With few alternative voices, there is less chance of sparking innovation.
Additionally, there’s still relatively limited use of intelligent machines that can augment human workers, enhancing project safety and upskilling people throughout the value chain. That’s particularly pertinent for the construction sector, which is challenged by an ageing workforce and the sustainability of skills coming through the next generation.
So many moving parts and inter-dependencies, limited collaboration and an inability to drive change, mean most large projects are almost destined to fall short of expectations before they’ve even begun. The statistics paint a bleak picture. In construction alone, the average is 80% overspent on original budget and less than 60% of projects completed on time. And with this sector contributing up to 6.5% of Gross Value Added to the UK economy, any improvements will have a decisive impact on the country’s performance.
Value left on the table
While the industry faces some formidable challenges, solving them could deliver massive gains. According to a recent Accenture study, in the UK alone, almost £90 billion of value over 10 years is waiting to be unlocked through efficiency gains and environmental benefits by improving how capital projects in construction are planned, managed and run.
The construction industry has been slow to implement digital technologies as transformation tools to drive value. That has to change. Advances in various digital technologies such as edge computing, Industrial IoT, AI, robotics, additive manufacturing and mobile can support transformational solutions for capital project delivery. Rather than seeing these as standalone, individual technologies, it’s essential that industry players harness their combinatorial impact to support decision-making, enhance productivity, integrate business functions and improve safety. So how can the industry start to realise the gains available from adopting digital technologies?
Monetise existing data to incentivise collaboration
First, there is a need to encourage more collaboration and sharing of the vast amounts of valuable data across the industry. Each party could monetise their own data by trading it with others in return for better contractual terms and/or financial gains to incentivise collaboration. Overall this could help to enable and be funded by the collective prize of on-time and on budget delivery. This will require enabling technologies such as a trusted collaboration platform, but most importantly a change in mindset and a redesign of incentive structures based on the data available and its potential value to the industry. External collaboration will have limited value if it is hindered by internal organisational barriers. Hence, within each organisation, operating models also need to be modified to encourage more cross-functional collaboration through redesign of individual and team measures of success and ways of working.
Obtain real-time supply chain and construction execution data
Speeding up the feedback loop for monitoring execution progress against plan will enable faster issue resolution and more effective risk mitigation. This can be achieved with the IoT. Collecting real-time location data for people, equipment and valuable materials will support actions to ensure everything’s in the right place, at the right time in line with the project plan. Edge technologies in combination with cloud enable data from the most remote location to be collected, aggregated and analysed.
For example, connecting up a construction site in this way provides unparalleled insights into productivity. Ask a construction company what they estimate their productivity (outputs over inputs) to be and they typically put it at around 60%. Our analysis shows it’s likely to be nearer 35%. One reason? It can take workers 90 minutes to get on and offsite every day. But it’s only possible to prove that and have meaningful conversations across parties to do something about it, with connected technology that can provide actual information.
Build a ‘Control Tower’ to process data and optimise decision-making
Data collected as described, can be combined into a trusted digital platform in the form of a ‘Control Tower’ with up to date engineering designs and documentation, enabling real time end-to-end supply chain visibility and progress of execution against plan. This visibility combined with complex algorithms, available on a platform incorporating artificial intelligence, can process and optimise proposed solutions, accurately predict and mitigate risks and reduce the time it takes to resolve issues. Digital Twins, or representation of the physical site and assets with associated engineering properties, can be created and used to simulate decisions and redesigns further increasing efficiency and certainty.
Automate and diversify the workforce
Adopt robotics to augment humans for repetitive tasks, increasing productivity and safety, especially in challenging environments such as restricted facilities. Adopting all these technologies will attract a different type of talent, including digitally native workers, to the industry. That will increase diversity, driving innovation, continuous improvement, and act as a catalyst effecting change in the existing workforce in terms of behaviour and skills; ultimately transforming the workforce in capital projects.
Big challenges, bigger opportunities
The challenges in capital projects are massive. But the potential opportunities are even greater. The key to unlocking them? Combining the right technologies with the right talent.
To discuss practical examples of how these challenges can be turned into opportunities, please contact IX.0-Zone@accenture.com.
If you would like to learn more about how Industry X.0 can help a business thrive in the digital revolution, please read our report "Combine and Conquer: Unlocking the Power of Digital".
1 https://www.ft.com/content/6e63cfe6-20bc-11e9-b126-46fc3ad87c65
2 http://www.infrastructure-intelligence.com/article/may-2015/infrastructure-insider-power-diversity
3 http://www.constructionmanagermagazine.com/insight/diversity-are-these-our-true-colours/
4 European Contech Summit London 2018
UK productivity hindered by digital skills deficit – report
This is a bit of a nebulous subject. There are several sub-disciplines of 'digital skills' which all need different approaches. ...