This article is from the Australian Property Journal archive
AUSTRALIA’S construction industry is underperforming, with three decades of relatively weak productivity growth equating to around $47 billion in lost opportunity.
According to the latest KPMG Global Construction Survey 2023, the Australian construction sector’s two greatest challenges are a lack of productivity gains and risk management pressures.
“Project performance was highlighted as a continuing issue in the survey. We’d point to the finding that 87% said their projects are coming under greater scrutiny – and only 50% of project owners are meeting completion deadlines,” said Nigel Virgo, national sector leader, property construction and logistics at KPMG.
Additionally, 37% of survey respondents said they have missed budget and/or scheduled performance targets due to a lack of effective risk management
KPMG found risk sharing contracts for contractors and subcontractors will help reduce the risk of further insolvencies across the construction supply chain.
This on top of managing risk via improved contracting arrangements, modular/off site manufacturing is gaining traction.
The survey found 25% plan to use these approaches across all projects, with 61% starting to do so across a few projects.
While 42% said they are utilising automation, with the use of virtual reality, project management information systems, drones, and AI to reduce costs pressures.
“We’re seeing a significant increase amongst KPMG clients using technology to help manage risk. They are using modelling to problem-solve off site, ahead of a project kicking off,” said Virgo.
“However, whilst companies are adopting technology, we see very few companies applying these across all projects. A lack of consistency across the industry is preventing the realisation of the full benefits of such innovations.”
AI technology is unsurprisingly seeing a boost in uptake, with those adopting or looking to adopt AI at 37% compared to 23% in 2018.
Modular or off-site manufacturing is also gaining traction in construction globally, though more so in the Northern Hemisphere.
“Modular manufacturing addresses challenges like supply chain disruption, labour shortages and rising interest rates, as well as reducing carbon footprint, improving environmental impact and enhancing worker safety,” added Virgo.
25% of respondents reported to leveraging this approach across all projects, with a further 61% starting to adopt modular manufacturing on a few projects.
The modular manufacturing approach still has downsides, with challenges with plant capacity and financing the number and scale of such projects.
“Strong vertical integration across the project delivery lifecycle is also needed to deliver the potential such as transportation to site to avoid damage,” added Virgo.
ESG continues to be a major factor across the sector, with 50% of construction and engineering companies seeing the opportunity to gain a competitive edge through investing in ESG initiatives.
While 32% of project owners also recognise the need to integrate ESG into both their projects and reporting in order to enhance access to capital to fund their projects.
“When asked about the key benefits of embedding ESG into capital projects and programs, the top two responses were reputational improvement and competitive advantage,” added Virgo.
“Diversity, equity and inclusion – relating to the ‘S’ in ESG – was ranked as the third most important factor in determining future success by respondents who believe diversified workplace demographics will help address disruption.”
