Furthermore, with demand for construction expected to increase significantly over the next five years, the problem looks set to intensify as the pool of qualified contractors able to bid for projects is reduced and the wider shortage of skilled labour impacts the ability of teams to deliver projects on time and to budget.

KPMG’s Global Construction Survey 2007 sought the views of senior executives at some of the world’s largest and most frequent procurers of construction services, for instance, looking at their take on the current state of the industry, their levels of satisfaction and the key issues facing future project planning and the appointment of contractors.

Key findings
Key findings of the survey include:

• Almost half of respondents (42 per cent) voiced concerns that the availability of qualified contactors and the rising costs of construction pose a serious risk to the success of future projects;


• A total of 75 per cent of respondents expect growth in demand to increase significantly over the next five years, with 39 per cent foreseeing a substantial increase in expenditure on construction projects;


• Owner confidence in their selected contractor appears to remain very high, with almost 80 per cent of owners claiming they would work with the same contractor on their next project;


• Additionally, on-time project delivery seems to have improved in recent years, with 84 per cent of those surveyed indicating their last project was delivered to schedule. Disappointingly, however, more than a third (35 per cent) of projects were not delivered on budget;


• The issue of fraud appears to be hitting firms hard, with 20 percent of organisations claiming to have fallen victim to fraud as part of the delivery of recent projects.

War on talent
Richard Whittington, head of building and construction at KPMG LLP in the UK, said: “The ‘war on talent’ has for a long time now been a topic at the heart of boardroom agendas across the industry, with more and more firms seeking to tackle the apparent dearth of qualified workers.

"However, there is a clear threat that as this finite pool of skilled contractors get pulled in ever-increasing directions, projects are at a greater risk of not being delivered on time or to budget. This may have an adverse effect on both the quality of work being delivered and the reputation of the contractors themselves.”

“Contractors do have to look within and question whether they are equipped with the right people. Too many of the companies we surveyed said that they had seen contractors put forward one team as part of their bid to win work, only for them to supply a totally different, and often less experienced team, in order to deliver the project without a commensurate change in costs.”

Fraud
Turning to the issue of fraud, Richard Whittington said: “The fact that one fifth of all respondents indicated that they had been aware of fraudulent activity during recent projects gives grave cause for concern, particularly as this is an issue which can have severe consequences, both financial and on a firm’s reputation. However, it is nevertheless pleasing to see is that more than 70 percent of firms indicated that they are comfortable with the internal controls they have in place to detect and prevent fraud, as it shows that boardroom executives really are taking the issue seriously.”

Margins
The survey went on to raise question with regards to profit assumptions, with responses indicating that buyers of construction often assume that much higher margins have been achieved than what is actually the case. Indeed, a total of 65 per cent of people questioned felt the contractor made the expected or more profit on the project.

Richard Whittington said: “There is an impression that the construction industry achieves greater profit margins than is actually the case. Some of the companies we spoke to indicated they were sceptical about construction claims, as they believe these to have included an element to increase margin.”

Reputation
The study also confirmed that reputation really does matter when it comes to carving out a competitive advantage, with 57 percent of respondents citing expertise and credibility as the two most influential qualities that owners look for when selecting a contractor. Perhaps rather surprisingly, these two factors far outstripped price as a significant consideration, as only 12 per cent indicated this was a top priority.

Richard Whittington concluded: “It’s often said that a good reputation is more valuable than money, and never has this been more applicable to the building and construction industry. Certainly, with three quarters of respondents to the survey expecting growth in demand to increase significantly over the next five years, having a strong reputation and track record could become the greatest string to a contractor’s competitive bow.

“However, if the issues raised in our survey– ie, the lack of qualified contractors, fraud and rising costs – worsen, the reputation of the industry as a whole could become tarnished. Yet by coming together to tackle such problems, firms can ensure that they are at the forefront of construction growth and change over the coming years.”

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Susie Hughes
The Editor © Hardhatter 2007