# Familiar challenges— new approaches

###### 2023 Global Construction Survey


-----

## Foreword

The 2023 Global Construction Survey finds the pressure to reduce embodied and operational
industry in a cautiously optimistic mood, as carbon footprint, waste and pollution—at pace—
the combination of widespread government that could be costly and presents significant and
infrastructure stimuli, the renewable energy multi-dimensional obstacles. **01**
revolution, increasing capital investment in

The technology dilemma persists, as both

strategically important sectors, and a post-

project owners and, particularly, E&C companies

COVID-19 pipeline create excellent opportunities

ponder where to invest and how to find the

#### 02

for engineering and construction (E&C)

substantial sums needed to become digital

companies.

leaders. Some of the key breakthroughs—like

At the same time, the industry faces a modular/offsite manufacturing—are still relatively
continuing volatile environment, with continued low-tech and, if not widespread, are definitely **03**
supply chain disruption, rising inflation of energy, gaining momentum. According to our survey **Geno Armstrong**
materials and wages, labor shortages and a respondents, the proportion of projects using 50 _Global Lead and Principal, Infrastructure,_
possible recession, which could have a major impact on certain subsectors. percent or more modular/offsite manufacturing is set to rise from 14 percent to 28 percent in the _Capital Projects, and Climate Advisory KPMG in the US_ **04**

next five years (see Exhibit 19).

Meanwhile, the perennial challenges of poor

**Clay Gilge**

project performance, low productivity, and costly And the looming specter of big tech casts a

_National Lead and Principal, Infrastructure,_

major project failures—and high-profile industry perpetual shadow over an industry ripe for _Capital Projects, and Climate Advisory_ **05**
bankruptcies—continue to dog the sector. disruption, as traditional players face the threat

KPMG in the US

of convergence, and losing market share to

Environmental, Social, and Governance (ESG)

more digital-savvy interlopers. **Kevin Max**

presents both opportunities and risks. On

_Principal, Infrastructure, Capital_ **06**

the positive side, the shift to a low-carbon, This is KPMG’s 14th Global Construction Survey,

_Projects, and Climate Advisory_

biodiverse, circular world can drive infrastructure and the biggest to date, containing the insights

KPMG in the US

and construction spend and bring competitive of nearly 300 E&C firms from around the globe.
advantage, improved ROI for forward-thinking, Thank you to all those who took the time to Suneel Vora
diverse, and purposeful businesses, who should participate in the ongoing debate about how to _Partner, Business Consulting – Capital_
be top of the queue for both capital and new advance an industry that plays a huge part in all _Projects and Industry 4.0_
talent. However, ESG also brings rising scrutiny our lives and can be an incredible force for good. KPMG in India
and compliance requirements, as well as


-----

## Contents

sustainable
growth–or boom
and bust?


_View from the_
_industry:_

Building supply
chain resilience

_View from the_
_industry:_

Reducing wildfire
risk in California

_View from the_
_industry:_

Embracing
modularization and
digital technologies


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 03

 04

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_View from the_
_industry:_

Driving continuous
improvement

_View from the_
_industry:_

At the forefront
of sustainable
construction

Key
takeaways


The rising
influence of ESG

The great
innovation
race


Engineering &
Construction
practice


-----

## Survey at a glance


**Addressing industry**
**performance**
**challenges**

**Rising influence of**
**ESG**

**The great**
**innovation race**



-  Two-thirds (66 percent) of respondents are optimistic about the direction of the construction market, and 78
percent feel infrastructure stimuli will have a positive impact.

-  Yet project performance remains in the spotlight, with only half of owners saying their projects are completing
on time and 87 percent stating that projects are coming under greater scrutiny.

-  To address ongoing volatility, the biggest priority is improving estimating accuracy, transferring risk, and
increasing innovation.

-  ESG has climbed construction leaders’ agendas, with 54 percent “fully envisioning” the benefits of ESG and
aggressively pursuing maturity. Survey respondents say the key benefits of ESG are reputational improvement
and competitive advantage—as well as a necessity to enhance access to project capital

-  Diversity, equity, and inclusion (DEI) is the third most important factor determining future success, as the sector
shifts away from its hard-hat image toward greater use of technology and more remote working.

-  Owners are relatively more concerned with reducing greenhouse gases (GHG) while E&C companies place the
highest priority on DEI. Embodied carbon (carbon released during the construction process) is a growing concern
and is likely to be the subject of future regulations.

-  The construction industry is starting to embrace the power of technology to transform performance—with 81
percent of E&C firms adopting mobile platforms, 43 percent using robotics process automation (RPA) and 40
percent adopting artificial intelligence (AI)—although many are in the early stages.

-  When it comes to improving ROI on capability projects, project management information systems (PMIS),
building information modeling (BIM), and advanced data analytics are considered to have the greatest potential;
digital twins, modular/offsite manufacturing, AI, and BIM are driving the greatest gains in project performance.

-  A vast majority of respondents say prefabrication is an important solution for capability projects, although just
one-quarter of E&C companies use modular manufacturing across all projects.

-  There’s growing recognition of the power of technology to improve safety, notably from use of D&A and modular
manufacturing—the latter reduces dangerous, onsite work.


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Chapter 1

## Profitable,  sustainable growth— or boom and bust?


-----

## Profitable, sustainable growth—or boom and bust?

On the surface, the global engineering and construction (E&C) industry appears
to be benefiting from positive momentum.


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With a significant post-COVID-19 pipeline,
government infrastructure funding in the
U.S. and beyond, and ESG demands driving
renewable energy and circular economy
projects, it’s perhaps little surprise that many of
the respondents to the 2023 Global Construction
Survey are in a positive frame of mind.

Two-thirds of this year’s respondents (66
percent) say they are optimistic about the
direction of the construction market and 38
percent of project owners are “very optimistic”
(see Exhibit 1) compared to just 18 percent in
2021. And the proportion of owners anticipating
greater than 20 percent capital program growth
has more than tripled from 10 percent in 2021 to
36 percent in 2023 (see Exhibit 1), the highest
figure in the 20-year history of the survey.


**Exhibit 1: Which of the following statements best describes the direction of the construction**
**market?**


N=
267

28% 38% 25% 6%

16% 37% 36% 6%


Project or infrastructure
owner organization

38% 38% 16% 6%


0% 20% 40% 60% 80% 100%


Very optimistic Somewhat optimistic Neutral Somewhat pessimistic Very pessimistic


Four out of 10 E&C respondents expect revenue
growth in the next 12 months to be greater than
10 percent, with just 18 percent predicting zero
or negative growth (see Exhibit 2). E&C firms
remain more cautious than project owners,
but only a small proportion (7 percent) express


pessimism about the future state of the
market—the corresponding figure for 2021 was
29 percent (see Exhibit 1). With contractors in
the middle of supply chain disruptions and with
limited visibility into owners’ robust capital plans,
such differences are to be expected.


-----

**Exhibit 2: What is the planned revenue growth for your organization over the next 12 months?**

30%

20%


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0%


27% 27%

14% 15% 13%

2% 2%
1% 0%


Increase by Increase by Increase by Increase by No growth Decrease by Decrease by Decrease by Decrease by
more than 20% 11-20% 6-10% 1-5% expected (0%) 1-5% 6-10% 11-20% more than 20%


Note: Applicable only for engineering and construction firm (N=121)


There’s also plenty of excitement about the
prospect of government funding, investment and
stimuli for large-scale infrastructure programs,
such as Creating Helpful Incentives to Produce
Semiconductors (CHIPS) and Science Act,
Inflation Reduction Act (IRA), and Infrastructure
Investment and Jobs Act (IIJA) in the U.S.,
India’s Production Linked Incentives (PLI) and
Make in India campaigns, and similar programs


in other countries. According to global research
from Oxford Economics, civil engineering is
set to be the fastest-growing sector in the
construction market.[1] More than one-third of
survey participants (35 percent) feel this
funding will have a significant impact and a
further 43 percent expect a moderate impact
(see Exhibit 3).


**Exhibit 3: What impact will the government’s funding, investment and/or stimulus of**
**large-scale construction programs (e.g., CHIPS and IRA in the U.S., other programs in the**
**jurisdictions where you operate) have on your organization in the next 12 months?**

35% 43% 22%

34% 49% 18%


Project or infrastructure
owner organization

35% 39% 26%

0% 20% 40% 60% 80% 100%

Significant impact Moderate impact No impact


N=
267

121

146


1
Nicholas Fearnley “Key Construction Themes 2023 Infrastructure to drive growth” Oxford Economics December 14 2022


-----

### Project performance in the spotlight


Despite the confidence expressed by
respondents, the industry continues to face a
number of challenges, in the form of continued
supply chain disruption, high energy and
materials prices, and labor shortages that are
further pushing up costs and holding up projects.

The after-effects of COVID-19 are still apparent,
with 45 percent of respondents saying they have
experienced a pandemic-related schedule delay
or cost impact of more than 20 percent (see
Exhibit 4).

And the sector continues to struggle with
poor project performance, with 37 percent of
respondents reporting that they’ve missed
budget and/or schedule performance targets
over the past year due to lack of effective risk
management—this is up from 32 percent in
the corresponding 2021 survey (see Exhibit 5).
In fact, only half of owners’ projects are being
completed on time.


**Exhibit 4: What percentage of your projects have experienced a schedule delay or cost impact**
**attributable to COVID-19?**


N=
267

121

146


3% 13% 12% 16% 45% 11%

2% 17% 13% 17% 40% 11%

Project or infrastructure
owner organization

3% 9% 12% 16% 49% 11%

0% 20% 40% 60% 80% 100%


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0% 1–5% 6–10%


11–20% More than 20% Don’t know/not sure


**Exhibit 5: Over the past 12 months, have any of your capital projects significantly missed**
**budget and/or schedule performance targets (20 percent or more) due to lack of effective risk**
**management?**


N=
267

121

146


37% 44% 19%

40% 44% 16%

Project or infrastructure
owner organization

35% 44% 21%

0% 20% 40% 60% 80% 100%

Yes No Don’t know/not sure


-----

Consequently, owners are seeing increased
interest in the economics of large capital
projects, with 87 percent stating that they’re
coming under greater scrutiny (see Exhibit 6).
Indeed, 28 percent of project owners say they’re
facing “greatly increased” focus and scrutiny.

Volatility has fueled market challenges, but so
have the continued stagnant productivity and
lack of innovation in E&C. Much of this is due
to a highly fragmented structure where many
players have neither the size nor the incentive
to invest in new technology or methodologies,
especially when contractors take on paper-thin
margins that leave little room for error. Between
1997 and 2021, construction productivity actually
fell by 7 percent, whereas in the manufacturing
sector it rose by 126 percent.

Inadequate risk management has hardly helped,
with insufficient linkage between project risk
management and enterprise risk management
that prevents owners and contractors from
accurately aggregating all their risks to fully
understand their corporate risk profile. With a
multitude of players, a dearth of data sharing and
interoperability, and a siloed value chain, visibility
across individual and multiple projects is often
lacking. Project managers are often unable to
identify and address poor performing projects,
sites, or individuals.


**Exhibit 6: Which statement best reflects your perspective of the economics of large capital**
**projects and the scrutiny surrounding their actual measured benefits and return on capital**
**post project completion?**


N=
267

121

146


24% 63% 4% 9%

19% 64% 10% 7%

Project or infrastructure
owner organization

28% 61% 0% 11%

0% 20% 40% 60% 80% 100%


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Greatly increasing focus and scrutiny Increasing focus and scrutiny Decreasing focus and scrutiny


No change


### How is the industry responding to high volatility  and poor performance?


According to U.S. Bureau of Labor Statistics
in March 2023, construction costs rose 17.3
percent year-on-year.[2] Add to this the war in
Ukraine, the West potentially de-coupling its
economy from China, resource constraints,
and ongoing supply chain disruption, and it’s
evident that E&C firms and project owners face
continuous volatility.

In response, 83 percent of survey participants
say their single biggest priority is improving the
estimating accuracy of materials and equipment,
which accounts for a significant proportion
of project costs (see Exhibit 7). Achieving


better contractual protection—which is about
transferring risk—is another key imperative for
both owners and contractors. However, such
an approach can damage owner/contractor
relationships at a time when the two parties
should work together more closely to enable
owners to better manage their own risks.
With both owners and contractors attempting
to transfer risk, there is likely to be an impasse,
although continued tightness in the market
should favor contractors, who are in high
demand.


2 US Bureau of Labor Statistics, New Manufacturing and Industrial Building Construction PPI, March 2023


-----

**Exhibit 7: How important are each of the following regarding your organization’s response to**
**supply chain disruption, cost escalation, resource constraints, deglobalization, COVID-19 and**
**other disruptive events?**

Extending the duration of planning

project scope, schedule, quantities, etc

71% 21% 7%


Incorporating contractual protections for
supply chain disruptions

78% 17% 5%


Increasing the use of commodity hedging

prices

47% 30% 23%


Improving the estimating accuracy of
materials and equipment

83% 14% 3%


Implementing or updating the models for
remote working and job site travel

46% 31% 22%


Exploring new and innovative approaches
for project execution, including modular

assembly (DFMA) and 3D printing

72% 15% 13%

0% 20% 40% 60% 80% 100%

4–5 More important 3 Neutral 1–2 Less important Total (N=257)


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We are seeing a dramatic shift by
contractors away from fixed-price and
guaranteed maximum-price contracts
for major projects. Whether this is the
result of learning from past mistakes,
acknowledging that systems and tools
are still not where they need to be, or
simply driven by boards, bankers or risk
officers, one thing is clear: we cannot
expect business as usual. Contractors
are no longer willing to assume primary
responsibility for performance risk and,
as contractors transition to more open-
ended, cost-plus and time-and-materials
contracts, owners will need to adjust
how they control projects and programs.”

**Colin Cagney, Director, Infrastructure,**
_Capital Projects and Climate Advisory,_
_KPMG in the US_


-----

Further potential options include longer planning
periods to better manage project scope,
schedule and quantities, which, regrettably, is
not always an option in commercial and missioncritical projects.

When it comes to dealing with disruptive
events, respondents are placing a greater
focus on innovation (up to 74 percent from 60
percent) and workplace demographics (up to 49
percent from 42 percent) than in the previous
2021 Global Construction Survey (see Exhibit
8). Effective risk management processes and
resilience planning are also on the “to-do” list to
help build resilience.


**Exhibit 8: Please rate the following attributes that influence your organization’s success or**
**failure in dealing with disruptive events.**


72% 19% 8%


71% 20% 9%


Regions of operations

Size and scale (revenue)

Focus on innovation

Adoption of technology

Workplace demographics

Company leadership

Ownership (public or private)

Effective risk management
processes and resilience planning



57% 26% 16%


69% 26% 5%


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74% 22% 4%


78% 18% 4%


49% 35% 15%


94% 4%


54% 29% 17%


84% 14%


0% 20% 40% 60% 80% 100%

4–5 More important 3 Neutral 1–2 Less important Total (N=257)


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View from the industry
##### Building supply chain resilience

**S. N. Subrahmanyan, CEO & MD, Larsen & Toubro Limited**

To address the pandemic and wider geopolitical disruptions, And, in response to sometimes unreliable supply chains,
we enhanced our supply chain with alternate sourcing we’ve adopted indigenization, to gain greater independence.
channels, multiple local vendors and strategic tie-ups. In one instance we manufactured complex launching
We devised deeper hedging strategies, adopted just-in- equipment for India’s high speed railways. In another, during
time sourcing, and proactively engaged with our clients the pandemic, we assembled and operated the country’s
to address price variations/contractual indexation of raw largest tunnel boring machine, creating a world record for
material input costs. the highest monthly tunnelling rate of 456 meters on the

iconic Mumbai Coastal Road project.


-----

Finally, given the risks inherent in the market in general, and in large and mega-projects in particular,
E&C companies and capital project owners are seeking ways to improve portfolio-wide risk
management. Their number one aim is to achieve clearly defined and standardized risk management
processes and controls. There is a greater emphasis upon accurate risk reporting (up to 36 percent
from 25 percent) and establishing a dedicated risk management department (up to 20 percent from
17 percent) compared to the previous 2021 survey (see Exhibit 9).

**Exhibit 9: Which of the following elements are you focusing on to achieve successful portfolio-wide risk management?**


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53%

36%

31% 32% 54%

23%

39% 22%

26% 20%

35%

15%

26% 19% 21%

52%

15% 9%

37% 34%
15% 21% 27% 9% 21% 23% 4%

9% 5%


Formal risk
management
training


Board-level risk
management
committee


Clearly
defined risk
culture


Common risk
taxonomy and
risk tolerances


Integration
between
enterprise,
portfolio and
project risks
functions


Clearly
defined and
standardized
project risk
management
processes
and controls


Accurate risk Dedicated risk
reporting management
department


Quantitative
risk analysis
tools


Don't
know/not
sure


Total (N=267) Engineering/construction firm (N=121) Project or infrastructure owner organization (N=146)


-----

### Cracking the productivity and performance code

How can the E&C industry break the vicious
cycle of poor performance, low productivity, and
major project failures?

From a risk management perspective, the ability
to aggregate risk at an enterprise level can bring
a clearer view of portfolio risk, to avoid taking
on projects that could break the company, as
well as identifying emerging risks earlier to
enable preventative action. Better transparency,
allied with D&A, opens up understanding of
risk interdependence, both within and across
projects.

There are a number of ways to improve
productivity, including the use of IoT sensors and
data analytics to detect and assess problems
like damage—this enables rapid response times
that help minimize delays and cost overruns.
Benchmarks for team performance can be
easily created through shared data. Predictive
maintenance—which can increase the likelihood
of heavy equipment staying operational and
minimizes shutdowns. Access to suppliers’ data
helps anticipate supply chain delays or shortages

[3 Capex decisions in a downturn, April 2023, KPMG](https://advisory.kpmg.us/articles/2023/capex-decisions-downturn.html)


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earlier, enabling procurement teams to seek
alternative sources.

It’s also important to drive capital efficiency and
effectiveness in a transparent and integrated
manner. The first step is a robust capital planning
and portfolio management process that is well
integrated into project governance and PMO
activities through strong processes. Dashboards
and KPIs show the status and performance of
projects and portfolios, and also provide insights
into updated business cases linked to operations
as well as customer and supply chain plans and
models. (To learn more, read our recent paper,
CapEx decisions in a downturn[3].)


In a fragmented sector, E&C companies have
an opportunity to form construction ecosystems
where data and insights flow between
contractors, suppliers, and owners to introduce
a common understanding of project delivery
objectives that’s aided by greater supply chain
transparency.

And finally, by paying careful attention to asset
owners’ customer experience, it’s possible to
create more society-friendly projects that reduce
negative impact, whether it’s reducing noise and
pollution, or avoiding transport closures.


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View from the industry
##### Driving continuous improvement

**John Murphy, CEO, J. Murphy & Sons Limited**

One of our main core values is to continually improve. Our want to get swamped in data that overwhelms us and
other core values are to always deliver on time, on budget, ceases to be useful.
and to a high level of quality. I feel our family ownership

We generate a lot of data from our projects, so we have to

helps us to achieve these goals, enabling a longer-term view

think about how we can utilize the data, get it into the right

on how to realize sustainable growth five-to-ten years from

hands at the right time to drive better decision-making, and

now and to think differently about how we invest in the

make more accurate predictions. Sharing data and insights

business.

from project to project prevents us from reinventing the

We apply innovation from the very start of a project during wheel and helps us to work smarter across the business
engineering and design, so we can deliver the project safely, and learn from our successes, as well as our failures. Our
efficiently, with timeliness better cost control, and ultimately, application of technology and intellectual property also
with better quality. By investing in engineering capabilities benefits our clients through improved project outcomes.
and tools, we can drive efficient, practical solutions and find

As our business grows, we want to be evolutionary rather

even more efficient ways to deliver projects year-on-year.

than revolutionary. We are continuously investing to keep

In an increasingly digital age, data is critical for measuring up with the pace of technological change—constantly
our productivity, determining how we deploy our resources progressing. I believe that’s how we’ll be able to maintain
more efficiently, and reducing the carbon impact of our growth and improve our performance in the future and
projects, which is especially relevant to our work in the continue to deliver high-quality projects for our clients.
transport and energy sectors. At the same time, we don’t


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Chapter 2

## The rising  influence of ESG


-----

## The rising influence of ESG

Our recent paper, Construction in 2030[4], notes how the industry is regarded as high-carbon, high-waste, and highpolluting, with significant use of scarce resources like water and minerals, moderate usage of renewable energy, and
limited progress with diversity in what remains a male-dominated sector. At the same time, E&C companies face
growing regulatory pressure for sustainability in both its construction methods and the buildings and infrastructure it
produces. Failure to meet such demands could impact access to—and push up the cost of—capital.


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Looking back to our Global Construction
Survey from 15 years ago, the top drivers for
sustainability among E&C companies (see
Exhibit 10) was to position themselves as
innovative or environmentally aware (cited by
56 percent of respondents), and to increase
business opportunities and competitiveness
(29 percent).

However, in the 2023 survey, we see a strong
commitment from the respondents. Nearly
54 percent fully envision the benefits of ESG
and are aggressively pursuing maturity and
improvement, whereas, nearly 37 percent see
some benefit in ESG and are using targeted
approach (Exhibit 10). In addition, nearly 50
percent of E&C firms view implementing
ESG into capital projects and programs as a
competitive advantage (Exhibit 11).

4
[Construction in 2030, February 2023, KPMG](https://kpmg.com/xx/en/home/industries/infrastructure/construction-2030.html)


**Exhibit 10: Changing trends of an organization’s internal views on ESG**


#### 2008


#### 2023

**6%**
Not in alignment with ESG and
only pursuing as required


**6%**

Skeptical regarding ESG
and consider it to be
similar to previous
sustainability trends.
(Wait and see approach)


**56%**

Positioned in
the industry as
innovative and/or
environmentally
aware company


**54%**
Fully envision the
benefits of ESG and
are aggressively
pursuing maturity
**37%**
and improvement
See some benefit

in ESG and are using
targeted approach


**29%**

Opportunity to
partner with
additional types
of clients


-----

Project owners taking part in our global survey
show substantially greater maturity in their
approach to ESG compared to E&C companies.
In the U.S. in particular, they face increasingly
stringent legislation, procurement requirements,
and building code improvements, and any
laggards will have to play a fast game of catch-up.

When asked about the key benefits of embedding
ESG into capital projects and programs,
the top two responses were reputational
improvement and competitive advantage. Half
of E&C companies see opportunities to gain a
competitive edge through ESG, suggesting that
they’re beginning to grasp the value of more fully
embracing ESG (see Exhibit 11). Respondents
from E&C also consider safe, inclusive sites as
a benefit, reflecting a desire to attract a wider
range of workers.

And 32 percent of owners recognize the need to
integrate ESG in order to enhance their access
to capital to fund projects (see Exhibit 11)—an
acknowledgment of the importance of strong
sustainability credentials to satisfy investors.

Interestingly, project owners and E&C firms
differ in their views over the most crucial ESG
trends. The former feel that reducing GHG output
and developing renewable facilities are most
important, while contractors are more concerned
with social considerations, such as DEI, and
meeting government requirements.


**Exhibit 11: What benefits could your organization realize by implementing ESG into your**
**capital projects and programs?**


6%


Fight green washing

Operationalize ESG commitments

Enhance project success

Explore viable sustainability options

Increased reliability

Improved resiliency

More inclusive and safe job sites

Enhanced ESG reporting

Reputational improvement

Optimized resource consumption

Enhanced capital access

Competitive advantage

Enhanced productivity or occupants

Enhanced circular economy

Enhanced ROI based on lifecycle approach


4%

2%


32%

31%

32%

35%

32%

29%


28%

27%

29%


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 03

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 06


31%

28%

26%


25%


21%

17%



45%

48%

50%


39%

34%

47%

33%

35%


23%

22%

23%


32%


30%

32%


26%



50%


42%

35%


12%

11%

14%


24%

23%

25%


28%


24%

18%


0% 10% 20% 30% 40% 50%

Total (N=267) Engineering/construction firm (N=121) Project or infrastructure owner organization (N=146)


As the three forces of ‘Environmental,’ ‘Social,’ and ‘Governance’ converge, E&C companies and
project owners are set to accelerate their investment in ESG.”

**Geno Armstrong, Global Lead and Principal, Infrastructure, Capital Projects, and Climate Advisory**


-----

This discrepancy is understandable as owners
are currently being measured by Scope 1 and
Scope 2 emissions of their facilities, whereas
service providers gain market advantage by
improving their DEI performance and adhering to
requirements. As increasing Scope 3 regulations
come into effect globally, owners are likely to
ask service providers to disclose embodied as
well as operational carbon, which in turn will
direct the industry’s focus to total lifetime GHG
emissions.

any construction project, and respondents listed
the three most important practices as energy
efficiency, reducing construction waste, and
more efficient use of materials.

The built environment generates around 40 percent of global greenhouse gas emissions
(GHGs) and uses approximately 40 percent of global energy resources. It is, therefore, no
surprise that ESG regulatory and stakeholder pressure is on the increase. The industry has
also shifted its thinking since our 2008 Global Construction Survey—where sustainability was
thought of primarily as a profit vehicle—to 2023, where a higher proportion of leaders see ESG
as a core element of business strategy. The next step is to operationalize ESG principles into
capital projects to increase efficiency and sustainability, reduce waste, avoid greenwashing,
mitigate risks, and enhance long-term value for all stakeholders.”

**Firuzan Speroni, Ph.D., Director, Infrastructure, Capital Projects and Climate Advisory,**
_KPMG in the US_


**Exhibit 12: Which of the following ESG trends are the most important for the success of your organization?**

47%


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 06


31%

30%

35% 37%

35%

32% 31%

28%

28% 26% 26% 26%

23%

21%

21%21% 25% 16%18% 21%16% 15% 23% 16% 18% 19%

10% 16%

14% 14%


Pressure for Governmental
contractors requirements
to align ESG
goals with
clients


23% 21%
25% 21%

19% 21% 18%
21% 16% 16%

15%


7%

Embodied
carbon
measurement


Construction
of ESG/
Green-certified buildings


Uptick in
adoption of
sustainable
materials and
technology


Sustainable
construction
codes and
specifications


Green
procurement
initiatives


Modular/
off-site
construction


Reducing
total greenhouse gas
(GHG) output


Development
of renewable
energy
facilities


Social
considerations
– diversity,
equity &
inclusion
(DE&I)


Investor and
consumer
pressures for
green
financing


Total (N=267) Engineering/construction firm (N=121) Project or infrastructure owner organization (N=146)


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Embodied carbon: The missing half of GHG emissions

Up to half of all carbon emissions are emitted before the building is operational, as a result of
embodied carbon: the amount of the GHG emitted during the manufacturing, transportation,
installation, maintenance, and disposal of building materials.

To date, facilities, real estate, and construction functions have ignored this half of their carbon
emissions and it’s not just them; current standards, guidelines, codes, and measurements
mostly focus on operational carbon (from heating, air conditioning, and operating the facility)
emissions. This presents a huge opportunity for many teams to further their commitments
to decarbonization. For more on this vital topic, read our recent report, Embodied carbon: the
missing half of GHG emissions.

**Firuzan Speroni, Ph.D., Director, Infrastructure, Capital Projects and Climate Advisory,**
_KPMG in the US_


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View from the industry
##### Undergrounding to reduce wildfire risk and improve resilience in California

**Jamie Martin, Vice President, Undergrounding, Pacific Gas and Electric Company (PG&E)**

Over the past decade California has experienced collection programs include wildfire cameras need help from our customers, communities,
an unprecedented increase in catastrophic and inspections to give valuable insights into and other stakeholders. Through our outreach
wildfires, with over half of PG&E’s 70,000 changing environmental hazards around our approach, we share a comprehensive vision for
square mile service area designated as high-fire assets. Enhanced Powerline Safety Settings wildfire risk reduction, including how we plan
risk areas. By putting power lines underground, (EPSS) automatically turn off power within one- to utilize undergrounding, communicating early
we can reduce the risk of wildfires by 99 tenth of a second if the system detects a fault and often with customers and stakeholders to
percent along the undergrounded circuit – that could cause an ignition—like a tree branch keep them informed and answer questions and
and improve reliability and resiliency at the striking the power line. Downed Conductor concerns. For our local, state, federal and tribal
same time. At PG&E, we’ve committed to Detection (DCD) technology can improve the partners, we communicate through regular
underground 10,000 miles (16,000 km) of ability to detect and isolate high impedance meetings, permitting discussions, and updates
overhead electric distribution lines in high faults before an ignition. We are also managing of planned work locations.
wildfire risk areas. the environment around the electric grid, such

Through collaboration and breakthrough

as trimming back vegetation.

Undergrounding is just one part of our thinking, we are working together to mitigate
integrated strategy to reduce ignition risk. We know that we cannot complete this wildfire risk and make our hometowns safer and
Our comprehensive monitoring and data important wildfire safety work alone and will more reliable for generations to come.


-----

### Continuing efforts to improve worker safety


The construction sector has made impressive
advances in worker safety in the past decades,
and the responses to our global survey suggest
that companies continue to prioritize this vital
area. For both project owners and E&C firms,
the single most crucial factor is the tried-andtrusted behavioral, leadership and cultural
change, to create a climate with zero-tolerance
towards accidents. Respondents—especially
owners—are keen to increase safety monitoring
and onsite health and wellness testing of
workers, to reduce the risk of incidents.

Technology also plays more of a role to create
safer working spaces, with respondents making
greater use of data and analytics (D&A) to
predict and prevent, as well as modular/offsite
fabrication to reduce potentially dangerous
onsite tasks. Our survey results suggest that
other innovations are at an earlier stage, with
less frequent use, such as smart sensors and
monitors, drones, remote-operated machines,
and robotics. The low take-up of such potentially
advantageous technology could be a wakeup call for progressive players to improve


their safety records through digitalization and
automation.

Mental health is becoming destigmatized in
the industry, with many companies taking
tangible steps to support workers, including
risk assessments that cover both physical and
mental health, sharing resources around mental
wellbeing, and offering practical help like trained
peer support.

Post-COVID-19, the use of PPE and worker
wellbeing has become high-priority, with some


construction companies going the extra mile by
providing employees with innovative new PPE
items that not only help keep them safe, but also
enable them to do their jobs more comfortably—
such as 3D printed masks and safety footwear
that helps revitalize blood flow through the legs
and feet and gives the wearer greater energy.[6]

As one would expect, safety is a crucial pillar of
ESG-led performance and part of all ESG ratings
assessments.


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Safety training and information exchange are increasingly benefiting from technology and
software that engages staff and empowers workers to communicate risks. Smart devices
like connected wristbands and helmets enable workers to be more proactive in their safety
processes, share information about hazards and potential incidents in real-time, all while
fostering a positive safety culture.”

**Clare Lunn, Partner, ESG, Advisory, KPMG in the US**


6 Grant Prior, “Anti-fatigue safety footwear boosts energy,” Construction Enquirer, October 3, 2019


-----

### Adapting to the needs of a future, diverse workforce

The E&C industry is undergoing rapid change
in its working practices, with a shift away from
traditional, hard-hat, onsite positions towards
technology-related capabilities that are often
performed remotely. At the same time, both
E&C firms and project owners are competing
for scarce talent with companies from virtually
every other sector.

Respondents to the 2023 global survey rank DEI
as the third most important factor determining
future success. An increasing proportion (50
percent, compared to 42 percent in 2021)
cite the importance of diversified workplace
demographics to help address disruption—
the diversity helps introduce new skills to
tackle longstanding project cost and schedule
challenges.


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-----

And almost half (46 percent) acknowledge that
implementing or updating models for remote
working and job site travel can play a part in
making construction projects more resilient
and able to thrive during volatile times (see
Exhibit 14).

But it will be tough to make these breakthroughs
without the right people, which means doubling
down on efforts to build a more diverse
workforce.


**Exhibit 14: How important are each of the following regarding your organization’s response to**
**supply chain disruption, cost escalation, resource constraints, deglobalization, COVID-19 and**
**other disruptive events?**

Extending the duration of planning

project scope, schedule, quantities, etc

71% 21% 7%


Incorporating contractual protections for
supply chain disruptions

78% 17% 5%


Increasing the use of commodity hedging

prices

47% 30% 23%


Improving the estimating accuracy of
materials and equipment

83% 14% 3%


Implementing or updating the models for
remote working and job site travel

46% 31% 22%


Exploring new and innovative approaches
for project execution, including modular

assembly (DFMA) and 3D printing

72% 15% 13%

0% 20% 40% 60% 80% 100%

4–5 More important 3 Neutral 1–2 Less important Total (N=257)


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-----

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employer. Almost half—45 percent—don’t

### Creating an industry feel they have adequate, diverse career path of choice for the best opportunities into lateral and upward roles.

Another KPMG paper, “Navigating the tech We need to think differently about the
hiring freeze[9],” argues for a greater focus people that we attract into the industry,

### talent on workforce planning to determine an so that businesses become far more

organization’s talent needs and identify how to diverse and far more reflective of society.”
satisfy these demands by training and upskilling.

Attracting the best graduates and school leavers **John Murphy, CEO, J. Murphy & Sons**

And by building a compelling digital workplace

means offering fulfilling careers on the cutting _Limited_

experience, E&C companies can enthuse

edge of innovation, in purposeful, sustainable

existing workers and attract future stars.

organizations, offering varied development paths,
flexible working conditions and greater work-life Respondents to this year’s Global Construction
balance. More and more employees are looking Survey rank the development of improved and
for companies that prioritize DEI, employee innovative training programs as the number one
health and wellbeing, community building, and strategy to attract next-generation talent into the
strong governance—while minimizing their sector. The metaverse offers particularly exciting
environmental impact. opportunities to onboard, train, and interact. In

“Want to win in the metaverse? Think internal

As we discuss in Construction in 2030[7], the

first[10],” KPMG surveyed companies from the

sector has a golden opportunity to shed its male-

technology, media and telecommunications

dominated, “hard-hat, manual labor” image by

industry and found the top uses of the

becoming more technology- and sustainability-

metaverse were for internal activities such

oriented. This shift should help persuade

as employee training and onboarding, and

graduates that this is an exciting industry to join.

employee collaboration.

In a 2022 KPMG survey of U.S. workers,

Given the continued digitalization of E&C,

“Looking for more: Employee expectations

investment in the metaverse could be a catalyst

are on the rise[8],” an overwhelming 90 percent

for improving the employee experience.

of respondents said work-life balance is an
important factor when looking for a new

7”Construction in 2030,” February 2023, KPMG,

8 “Looking for more: Employee expectations are on the rise,” August 2022, KPMG

9 “Navigating the tech hiring freeze,” January 2023, KPMG

10 “Want to win in the metaverse? Think internal first,” KPMG


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View from the industry
##### At the forefront of sustainable construction

**David Paterson, Managing Director, Construction, Lendlease**

**Sustainability underpins everything we do** the Materials & Embodied Carbon Leaders grants, and a phase-out of financial support for
As a company we’re absolutely committed to Alliance—Responsible Steel, and the University fossil fuels.
climate action, with an intentionally bold goal of Queensland.

All state governments have carbon emission

of “absolute zero carbon” by 2040. To achieve

No single party can fix the environment—it reduction targets, and governments can align

this, we must eliminate all emissions from

needs to be a team effort across the value their procurement policies with decarbonization

construction sites, without the use of carbon

chain. We need clients to request zero- and targets for construction activities, to help reduce

offsets. And we’ve set ambitious targets:

low-carbon options, for contractors to assess emissions on infrastructure projects.

-  Phase out fossil fuel diesel and gas across their supply chain, suppliers to innovate, while

**No time to lose**

our operations designers need to trust the options and be

Don’t delay—there are solutions available today

-  Use 100 percent renewable electricity before willing to test new things. Governments need to

that can be deployed at scale. Understand

2030 set supportive policies, and industry advocacy

your data, your emissions profile and the risks

-  Collaborate with supply chain partners to set groups need to champion fossil fuel-free

and opportunities to your business strategy.

pathways to absolute zero by 2040 construction.

Learn about climate change, carbon emissions,

Good data is essential to a credible plan, not **A key role for governments** scope boundaries and accounting and educate
just to report performance, but also to forecast Here in Australia, the government, state your employees, clients, and customers. The
our emissions to stay on track. governments and the finance industry can G20’s Taskforce on Climate-related Financial

support a domestic renewable diesel industry Disclosure framework (TCFD) is a powerful way

**We must pull together to tackle climate**

with investment into refineries or financial to explore the impact of climate change. Lastly,

**change**

support for the use of renewable diesel. align to 1.5 degrees, this is the change the world

We’re fortunate to be working with some

Mechanisms include tax relief, subsidies and needs us to make.

amazing partners to accelerate our net

rebates, green low interest loans and finance,

zero ambitions. These include MECLA—


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Chapter 3

## The great  innovation race


-----

## The great innovation race

What is the role of digital and other innovative technologies in the new construction landscape?


That’s a burning question facing the sector’s
leaders as they ponder how to overcome
continued poor project performance, adopt, safe,
sustainable construction methods, and improve
the quality, efficiency and carbon footprint of
buildings and infrastructure. Tech giants are
both potential collaborators—bringing new and
exciting innovations—as well as competitors,
as they use their data mastery to gain market
share, and also attract the best talent.

Our 2017 Global Construction Survey took a
deep dive into technology and found an industry
embracing building information modeling (BIM),
analytics and project management information
systems (PIMS), just starting to adopt drones,
smart sensors and mobile, with a few bold
innovators exploring 3D printing, machine
learning (ML), virtual reality (VR) and robotic
process automation (RPA).

Fast forward to this year’s survey and
81 percent of respondents from E&C firms say
their organizations have adopted, or are starting
to adopt, mobile platforms (up from 69 percent
in 2017, see Exhibit 15), while 43 percent are
either using or starting to use RPA compared to
just 10 percent in 2017. Meanwhile, take-up of
VR (either using or starting to use) has doubled
from 28 percent to 56 in the same time period.


**Exhibit 15: Please rate your level of adoption of each of the following technologies**
_E&C firms_


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Integrated project management

information systems (PMIS)

Use of basic data analytics

Use of advanced data analytics

Mobile platforms

Building information modeling

Radio frequency identification

Robotics process automation/digital labor

Cognitive machine learning

3D printing

Drones (remote monitoring, quantity
_verification, construction status)_

Smart sensors (tracking
_people and productivity, security, etc.)_
Virtual reality

Augmentable reality

Artificial intelligence

Machine engineering and design

Modular/off-site manufacturing

Digital twins


17% 37% 46%

11% 45% 45%

31% 47% 21%

19% 47% 34%

16% 45% 39%

57% 33% 10%

57% 36% 7%

68% 28% 4%

60% 32% 8%

26% 47% 26%

37% 49% 14%

44% 41% 15%

46% 41% 12%

60% 36% 4%

44% 44% 12%

20% 60% 21%

51% 37% 12%


0% 20% 40% 60% 80% 100%

Have not adopted Just started with a few projects Adopting across all projects (N=121)


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Accelerating tech adoption

Innovation is a familiar buzzword in board rooms, corporate offices and construction sites, and
some companies have made impressive progress. We’ve seen robotic dogs that “sniff out”
unsafe incidents and practices onsite, capture ongoing construction in three dimensions for
close-to-real-time work measurement, and check design alignment vis-à-vis a 3D model.

Then there’s the project owner organization that ordered out all major packages in record
time, by collectively bargaining with its service providers, shaving precious months off the
implementation schedule. In another example, a prime contractor uses 5D BIM layered
with its custom workflows and internally developed Theory Of Constraints (TOC)-based lean
construction methodology, for a fully integrated concept-to-design-to-delivery approach.

Digital technologies serve as one of the largest levers for owners and E&C firms to implement
innovative ideas and solve project implementation problems. The key is to use a combination
of already available and tested technologies.

In the rush for instant results that yield a positive, short-term ROI, many potential digital
technology investments are overlooked. A 3–5 year horizon is realistic when assessing the
investment case. And don’t underestimate the importance of cultural barriers in both owner
and contractor organizations; a shift in culture is often necessary to drive innovation at
business unit, functional and individual levels, creating a virtuous cycle.

As our survey responses demonstrate, established industry players are deploying PMIS, BIM
and advanced data analytics, and are making inroads into the use of digital twins, AI, VR/AR,
3D printing, RPA. The successful adopters are championing innovation from the very top and
investing in educating their teams. In addition to encouraging digital technology use for project
implementation, management can also apply these technologies to conduct management
reviews and governance, sending a further signal that the organisation is shunning
conventional, manual methods and striving for digital leadership.”

**Suneel Vora, (PMP), Partner, Business Consulting – Capital Projects and Industry 4.0,**
_KPMG in India_


-----

However, a far smaller proportion of
respondents’ companies are applying these
and other technologies across all projects—just
6 percent for RPA, 5 percent for 3D printing,
4 percent for ML and 8 percent for AR. With
a lack of consistent standards across the
industry, the full benefits of such innovations
are some way off.

Another technology growing in popularity is
AI. Since the 2018 Global Construction Survey,
use of AI—in the form of digital twins, smarter
construction equipment, data and document
management, and enhanced safety and
communication—has increased significantly.
In 2018, just 23 percent of respondents said
they were either adopting or just started to
adopt AI. That figure rose to 29 percent in
2021, and climbed to 37 percent in 2023 (see
Exhibit 16). As a measure of how far there is
to go, a mere 4 percent are applying AI across
every project, although 33 percent have
started to use AI on a few projects.


**Exhibit 16: Please rate your level of adoption of each of the following technologies**
_Total_


Integrated project management

information systems (PMIS)

Use of basic data analytics

Use of advanced data analytics

Mobile platforms

Building information modeling

Radio frequency identification

Robotics process automation/digital labor

Cognitive machine learning

3D printing

Drones (remote monitoring, quantity
_verification, construction status)_

Smart sensors (tracking
_people and productivity, security, etc.)_
Virtual reality

Augmentable reality

Artificial intelligence

Machine engineering and design

Modular/off-site manufacturing

Digital twins


21% 39% 40%

12% 47% 42%

36% 47% 17%

27% 44% 29%

25% 43% 32%

58% 31% 10%

64% 30% 6%

73% 22% 4%

69% 27% 5%

28% 48% 25%

39% 44% 17%

53% 34% 13%

60% 32% 8%

63% 33% 4%

44% 40% 16%

24% 54% 22%

59% 32% 9%


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0% 20% 40% 60% 80% 100%

Have not adopted Just started with a few projects Adopting across all projects Total (N=267)


-----

### Making the right technology investment bets


Which technologies have the potential to deliver
the greatest overall return on investment (ROI)
in capital projects? The picture has changed little
since the same question was asked in our 2017
survey, with integrated project management
information systems (PMIS), BIM and advanced
data analytics as the top three responses. These
proven innovations are clearly making their mark,
but the survey findings suggest there is a lot of
untapped potential from newer, emerging tech
such as digital twins, AI, VR/AR, 3D printing,
RPA and—as we will discuss shortly, modular
manufacturing.

The industry’s mixed record of going over budget
and over schedule is something that everyone
involved in construction has been striving to
overcome for decades. So it was fascinating to
hear how the various new technologies were
contributing to cost and schedule performance
improvement, or avoiding overruns.

The technologies that are gaining most
traction are digital twins and modular/offsite
manufacturing, while, AI and RPA appear to be
in early stages of adoption. These responses
suggest that, while some forward-looking
companies are gaining tangible benefits on
project performance metrics, others are failing
to make the best use of technology. They could
benefit from team members with business
process, technology and change management
experience, and individuals who can drive


technology implementations to ensure they
deliver on their approved business cases. This
often requires a structured project management


office (PMO) dedicated to technology
implementation and associated business
processes.


**Exhibit 17: Technologies with potential to deliver the greatest overall ROI**

**2018 (N=166)** **2021(N=186)** **2023 (N=267)**


#### 01

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3D printing

Artificial intelligence

Augmented reality

Building information modeling (BIM)

Cognitive machine learning

Digital twins

Don’t know/not sure

Drones

Integrated PMIS

Machine engineering and design

Mobile platforms

Modular/off-site manufacturing

Radio frequency identification

Robotics process automation/digital labor

Smart sensors

Use of advanced data analytics

Use of basic data analytics

Virtual reality

Other


6%

17%

7%

4%

0%

0%

17%

12%

24%

0%

1%

14%

21%


3%

16%

4%

6%

0%

6%

23%

13%

21%

0%

1%

15%

23%


2%

9%

2%

4%

11%

3%

15%

10%

11%


53%

61%


42%

45%


49%

48%


31%

36%


1%

9%

12%


38%


31%

14%

4%

1%


17%

7%

0%


18%

5%

0%


-----

### The stage is set for modular


In their new book “How Big things Get Done[11],”
Bent Flyvbjerg—chair of major programme
management at Oxford University’s Saïd
Business School—and co-author Dan Gardner
present a passionate argument for the benefits
of modular manufacturing, taking construction
from the site to the factory floor, making use
of standardized designs to cut costs, improve
quality and safety, and speed up construction.

Accordingly, 2023 is the first year the Global
Construction Survey has tracked the use of
modular/off-site manufacturing, with onequarter of E&C respondents reporting that they
leverage such an approach across all projects,
and a further 61 percent starting to adopt
on a few projects. More than eight out of 10
(84 percent) of respondents—both owners


and E&C companies—say that prefabrication
is an important solution for capital projects,
suggesting that all parts of the industry should
work together to advance its use.

Looking more closely at the use of modular
manufacturing, a majority (69 percent) apply it
for less than one-fifth of projects (see Exhibit
18). Interestingly, only 28 percent expect to
adopt this technology across more than half
of their projects within five years. Hopes are
high for modular—almost one-third (31 percent)
feel that it has potential to deliver the greatest
ROI. It’s now time for this approach to go
mainstream, to achieve the kind of industry
disruption that other sectors have experienced,
like automotive with electric vehicles (EVs).


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### Technology and worker safety


Having worked tirelessly to create a safety-first
culture, E&C companies are turning to more
technical solutions to ensure that workers
don’t come to harm. The most widely used
technologies in this respect are data and
analytics to predict and prevent incidents, and
modular manufacturing, to reduce the volume of
onsite work.


Other advancements that improve safety
include robotics (cited by 8 percent as driving
better safety), remote operated machines (15
percent), drones for monitoring (18 percent) and
smart sensors for notifying high-risk activity or
health concerns (24 percent). These relatively
modest figures indicate significant room for
improvement in use of digital technologies to
meet critical safety KPIs.


11 Bent Flyvbjerg, Dan Gardner, “How Big Things Get Done,” Currency, February 7, 2023


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To deliver on its full potential, modular complete when it ships from the factory,

### Making modular construction requires strong vertical integration modular buildings need to be treated with

across the project delivery lifecycle, to drive great care during delivery and commissioning.

### manufacturing work standardization, enjoy economies of scale Therefore, manufacturers need onsite

and bulk purchasing, and reduce (and, ideally representatives, which add cost and limit
eliminate) inefficiencies and errors that occur the potential customer reach—unless

It may have been around for decades, but

at key interface points between design, delivery support is provided by a trusted and

modular construction’s moment has arrived as

procurement, construction, and commissioning. knowledgeable dealer or a general contractor

a way to address challenges like supply chain

(GC) construction partner.

disruption, labor shortages, and rising interest Delivery support. Unlike traditional
rates, as well as reducing carbon footprint, manufacturing, where the product is (largely)
improving environmental impact, and enhancing
worker safety. To fulfill modular’s potential and
drive the industry forward, we need to address **Exhibit 18: What percentage of your projects currently leverage modular/off-site**
several key challenges... **manufacturing?**

One of the factors limiting modular’s growth

14% 100%

is plant capacity. Although new modular 17%
manufacturing facilities are emerging, many of 27%
the more ambitious larger-scale projects cannot

35%

be fulfilled directly from regional suppliers.
This means they either manufacture (with all 7%
the added time and complexity) or revert to 0% 1-10% 11-20% 21-50% Over 50% Total
hybrid construction models. We expect a wave
of financing to expand manufacturing footprint
and increase production throughput, along with

**Exhibit 19: What percentage of your projects currently leverage modular/off-site**

creative collaborations to use excess capacity

**manufacturing in five years?**

between projects.

Financing is a key bottleneck limiting the Total 2% 16% 22% 32% 28% 6%N=

267

number and scale of modular projects. Unlike
traditional construction, where developers can Engineering/construction firm 3% 15% 21% 36% 25% 121
get financing for around 80 percent of project

Project or infrastructure

costs, modular financing typically provides just owner organization 2% 17% 23% 28% 30% 146
40–50 percent, with a higher proportion paid out 0% 20% 40% 60% 80% 100%
up front.

0% 1-10% 11-20% 21-50% Over 50%


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|duced edule time|Improved safety product|
|---|---|


|wer labor sts|Controlled costs|
|---|---|


**Benefits of modular**
**construction**

Reduced Improved
schedule time safety product

Greater consistency
of delivery

**Modular can**
**be used on all types**

Lower labor Controlled
costs costs **of projects but is**

**particularly well suited to:**

Urban midrise Low income Urban medical
multifamily multifamily centers

Commercial Labs Data centers
offices


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View from the industry
##### Embracing modularization and digital technologies

**S. N. Subrahmanyan, CEO & MD, Larsen & Toubro Limited**

Our clients are becoming ever more demanding, development of designs and allow us to
which is why we employ multiple digital customize designs more closely to client needs.
construction technologies and continue to focus

It’s not just about construction; digitalization

on improved productivity. Greater pre-fabrication,

also enhances operations of our client’s assets

pre-casting, and modular manufacturing improves

to reduce operating costs and maintenance, by

quality, reduces the risk of error, and speeds

making them smarter. And 5G is set to bring

up construction, as does mechanization and

even higher speed and lower latency.

automation.

Underpinning much of this is our continued

By combining prefabricated, pre-finished

investment in our IT and technology services

volumetric construction (PPVC), structural steel

businesses, which we plan to grow multi

construction, modular construction and 3D

fold. We are building our capabilities in high-

printing, we’ve managed to reduce typical project

growth areas such as data centers, cloud, AI,

durations by an incredible 50 percent. In one

cybersecurity, and blockchain, among others.

example, we successfully built 96 residential flats

We have already launched two new digital

in just 96 days, and a seven-story building in less

e-commerce platforms: a B2B marketplace for

than 45 days. These kinds of timescales would

industrial goods (called L&T SuFin), and an online

have been unthinkable a few years ago.

learning platform for upskilling and vocational

And thanks to our digital tools and systems, training (L&T Edutech).
we now get the benefit of real-time updates,

With these kinds of advances, we’re confident

predictive forecasting and better collaboration

that our business will be in a strong position to

between different teams—together they enable

compete in an increasingly digital world.

faster decision-making. Digital twins accelerate


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## Key takeaways

**Address productivity as a matter of urgency**
By taking an outside-in approach, the E&C industry can learn from the best practices from other
sectors—primarily manufacturing—to gain efficiencies from scale, standardization/ modularity,
and value chain ecosystems. In doing so, project owners and E&C companies can finally make
the kind of productivity gains that have eluded them for so long.

**Master enterprise risk management**
The capability to assess organization-wide risks, across multiple projects, large and small, is
vital in bidding, pricing, and resourcing. A modern E&C company, with a good understanding of
risk interdependence, should have the confidence to say “no” to unprofitable projects and avoid
a race to the bottom, as well as spotting potentially damaging risks earlier and taking decisive
action to prevent project failure.

**Truly embed ESG**
Future leaders spanning the construction sector will likely lead purposeful organizations
that recognize the benefits of sustainable construction, infrastructure, and buildings, along
with sustainable supply chains, diverse workplaces, and strong community ties. A changing
regulatory environment, compounded by heightened expectations from investors, employees,
and customers, has made ESG a business imperative. Failure to prioritize ESG could result
in a negative sustainability profile, reducing access to capital and top talent, further limiting
companies’ ability to keep up with ESG leaders. Lip service to ESG is no longer enough.

**Become data masters**
Those companies that can capture data, analyze it, and produce practical insights will likely enjoy
lower costs, better project performance, greater efficiency, and safer workplaces. They are also
likely to attract a new breed of digital worker who sees exciting opportunities to create the smart,
sustainable buildings and infrastructure of the future.


-----

## About the survey

In this survey, you will find the perspectives of 267 people from engineering and construction
companies and project owners from a variety of industries (121 represented E&C companies,146
represented project owners).

Many of the responses were gathered during face-to-face interviews in 2022 and 2023 with senior
leaders, with a large number of them serving as chief executive officers. The vast majority of
respondents are from organizations carrying out significant capital investment projects.


**HQ region**

**60%**

EMEA


**14%**
ASPAC


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**26%**
Americas


**Organization category**

**45%**
Engineering/
construction
**55%**

Project/
infrastructure
owner


**Regions of operation (multiple selections allowed)**

60%

30%

15%


0%


51%

29%
26%
22% 22%
19% 17% 16% 16% 11% 5%


India North Europe
America (excluding
UK)


Middle Central/
East South
America


Rest Africa Australia UK China Other
of Asia


**Industry sector** **Approximate entity revenue from operations** **Entity type (multiple selections allowed)**

Healthcare/Life Sciences 11% **in the last 12 months**


Quoted
(public company)

Subsidiary of a
quoted company

Private company

Government
company

Other


Technology

Retail/Consumer Products

Financial Services/Insurance

Resources/Chemicals

Government/Education

Industrial manufacturing

Media/Telecom

Power/Utilities

Real Estate/Hospitality

Other


11%

5%

3%

12%

4%


US$20 billion
or more

<US$5 billion to
>US$20 billion

<US$1 billion
to >US$5 billion

>US$1 billion


27%


11%

15%


13%

10%

7%


50%


21%

21%

28%

20%


32%


42%


37%


-----

## The KPMG Global Engineering & Construction practice

When engineering and construction leaders turn to KPMG member firms for advice, they do so
because our professionals understand the industry at a local, national, and global level. For decades,
we have provided services tailored specifically to meet the needs of the industry. To do this, we
have created a diverse practice that includes strategists, financiers, certified public accountants,
professional engineers, architects, project managers, owner representatives, contract and
procurement specialists, tax professionals, business valuation specialists, cost estimators, certified
fraud examiners and technology specialists.

KPMG’s Engineering & Construction professionals provide strategic insights and relevant guidance
wherever our clients operate. Services are delivered through the global network of KPMG member
firms by over 2,000 professionals in more than 40 countries worldwide. KPMG professionals
help clients identify and mitigate project risks throughout the project life cycle. Our capabilities
encompasses, “having the right strategy,” “doing the right project,” and “doing the project right.”

Engineering & Construction practice services include business model evolution, mergers and
acquisitions, ESG, site selection, technology selection and implementation, construction program
evaluations, project risk and controls assessments, contract compliance analyses, as well as project
support on complex and troubled projects. We provide industry knowledge, multidisciplinary teams,
and substantive experience in managing both the financial and technical aspects of major capital
projects and programs. By combining valuable global insight with hands-on local experience, we can
help you address challenges at any stage of the life cycle of infrastructure assets or programs.


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Get more information and access a selection
of other relevant KPMG reports and insights,
please visit:

home.kpmg/infrastructure

Access all past editions of the Global
Construction Survey


-----

## Authors

**Geno Armstrong**
_Global Lead and Principal, Infrastructure, Capital Projects,_
_and Climate Advisory_
KPMG in the US
[E: garmstrong@kpmg.com](mailto:garmstrong%40kpmg.com?subject=)

Geno has invested more than 30 years studying major projects and
organizations, cataloging what executives do well, and applying “reverse
engineering” to failed or struggling initiatives. His experience encompasses
hundreds of the largest, most complex projects and organizations globally,
across virtually every industry.

**Kevin Max**
_Principal, Infrastructure, Capital Projects,_
_and Climate Advisory_
KPMG in the US
[E: kmax@kpmg.com](mailto:kmax%40kpmg.com?subject=)

Kevin is a professional engineer with extensive civil engineering and
construction management experience. Kevin advises clients on a wide
variety of large public and private sector projects including infrastructure
development and industrial manufacturing facilities.


**Clay Gilge**
_National Lead and Principal, Infrastructure,_
_Capital Projects, and Climate Advisory_
KPMG in the US
[E: cgilge@kpmg.com](mailto:cgilge%40kpmg.com?subject=)

Clay has more than 25 years of practical experience and research,
giving him a deep understanding of how organizations can improve the
performance of their construction portfolios, programs, and projects by
empowering their teams, enabling technology and rationalizing governance
and oversight. He has been at the forefront in advancing industry-leading
methods and tools to objectively benchmark project management controls
and overall project readiness.

**Suneel Vora**
_Partner, Business Consulting – Capital Projects and_
_Industry 4.0_
KPMG in India
[E: suneelvora@kpmg.com](mailto:suneelvora%40kpmg.com?subject=)

Suneel has more than 20 years of experience conceptualizing, planning,
and implementing capital portfolios, programs, and projects for the private,
institutional and government sector clients in India and overseas. He
serves as a leader in supporting clients with technology enabled solutions.


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**We would like to thank our contributors:**
[Colin J. Cagney, Firuzan Speroni and Gaurav Mathur. We would also like to extend a special thanks to Clare E. Lunn and Brian Relle.](mailto:jcagney%40kpmg.com?subject=)


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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely
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© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved.

KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity.

KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. For more detail about our structure please visit
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The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization.

Throughout this document, “we”, “KPMG”, “us” and “our” refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a
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The views and opinions expressed herein are those of the interviewees and do not necessarily represent the views and opinions of KPMG.

Designed by DAS Design. DASD-2023-12491

Publication name: Familiar challenges—new solutions

Publication date: June 2023


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