## Construction  in 2030

**Insights about the future to help guide your actions today**

KPMG International

kpmg.com


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###### Foreword

**What could the world of construction look like in 2030?**

Even for an industry that has experienced its fair share of volatility, the past few years have been
dramatic for engineering and construction (E&C).

COVID-19, massive supply chain disruption, continued material shortages, raging inflation, war in the
Ukraine, and major talent gaps.

And these phenomena come on top of longstanding challenges of a variable performance record, poor
productivity, inability to attract graduates and school leavers, boom-and-bust economic cycles, low
contractor margins, and continued lack of cost certainty for owners.

With some exceptions, the E&C sector remains a technology laggard and is struggling to get to grips
with data and analytics — despite swimming in data. Major technology players are already eying up the
sector, seeking to use their data mastery and fast innovation to steal market share.

Environmental, social, and governance (ESG) goals are also having a huge impact. On the one hand, E&C
companies aim to be at the frontline of delivering sustainable infrastructure, energy production, factories,
offices, schools, hospitals and homes, as well as carbon capture, biodiversity and other sustainability
projects. On the other hand, the industry is a massive emitter of carbon, with concrete alone responsible
for approximately eight percent of global co2 annually.1

If all this paints a rather grim picture — it also presents incredibly exciting opportunities. Which is why the
October 2022 Engineering & Construction Risk Institute Risk Management Conference, in the stunning
setting of Athens, Greece, provided a timely opportunity to discuss the way forward for the industry.

One of the sessions was joined by some of the world’s leading E&C minds, people with extensive
experience dealing with the pressing issues facing the sector — and in many cases already coming up
with interesting answers.

This paper aims to look at the world of construction from the year 2030, casting eyes back to today and
then reflecting on the progress made. Future gazing is always an intriguing exercise, but also one that
can provide pointers — and inspiration — to help take the necessary steps to drive the sector forward
and fulfil its potential.

KPMG International have a longstanding relationship with the Engineering & Construction Risk Institute,
and would like to thank them for the opportunity to hold this debate — and look forward to similar
conversations in the coming years.


**Geno Armstrong**
Sector Leader —
Engineering & Construction,
KPMG International


**Clay Gilge**
Lead, Major
Projects Advisory,
KPMG in the US


**Roni Michael**
Global Head of Innovation,
KPMG International


**Lisa Kelvey**
Global Infrastructure
Sustainability Lead,
KPMG International


1 Ellis, L.D., Badel, A.F., Chiang, M.L., Park, R.J.-Y. & Chiang, Y.-M. Proc. Natl Acad. Sci.
_USA 117, 12584–12591 (2020)._


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### Contents

**08**

**05**

**11**


**Looking back to 2023** **05**

**The E&C industry in 2030** **08**

**Conclusion** **11**

**Acknowledgements** **13**


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##### The past is a foreign
# ‟
##### country; they do things differently there.

L.P. Hartley, ‘The Go-Between’

# ‟


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#### Looking back to 2023


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In 2023, one can see an industry that was grappling with age-old, sector-specific challenges
whilst adapting to a post COVID world of fractured supply chains and inflation, resource and talent
shortages, rising ESG pressures and huge technological disruption.


**Project performance under the spotlight**

Despite heavy investment in project management tools
to help improve processes through technology, the
industry continued to experience projects going over
budget and over schedule — occasionally spectacularly
so — with a mixed record of predictability over
performance.

Project owners, meanwhile, often failed to achieve the
cost certainty they desired, clouding their investment
decisions and causing considerable frustration. Part
of the problem was the historically thin margins that
contractors had become accustomed to, due to the
competitive nature of bids, which at times resembled
a race to the bottom that benefited neither owners nor
E&C companies.

The industry was also plagued by fragmentation, both
within projects and across the wider supply chain.
With a multitude of players, lack of data sharing and
interoperability, and a siloed value chain, visibility across
individual and multiple projects was often lacking —
again hindering predictability.

Construction productivity lagged behind other sectors,
actually falling by seven percent between 1997–2021 —
in contrast with the manufacturing sector, whose
average productivity rose by 126 percent over the
same period. And, with limited transparency, project
managers were often unable to identify and address
poor performing projects, sites or individuals.

As the University of Oxford’s Bent Flyvberg
commented in the 2021 KPMG Global Construction
Survey, “With a lack of competition on a global
scale, the sector has struggled to innovate leaving a
productivity gap compared with other industries.”

**At a low point on the innovation curve**

Although adoption of technologies like automation,
AI/ML, robotics and drones had gathered pace by
2023, overall the construction sector lagged behind
many others in innovation, with outmoded production


and construction methods and lack of investment in
technology. The shift to a manufacturing-led mentality
had been slow to catch on.

The often paper-thin margins earned by contractors
hardly helped, reducing the capital available for funding
new technologies. And in a conservative industry, the
concept of ‘failing fast’ — associated with startups
and other disruptive businesses — had not really taken
hold.

Another factor that held back innovation was
the fragmented structure of construction, where
each player tended to have its own agenda. This
was contrary to the trends towards cross-sector
ecosystems built around customers, which encouraged
both individual companies and groups of participants to
collaborate in pursuit of mutual benefits.

The need to innovate was exacerbated by the growing
threat of disruption from technology companies eying
opportunities to gain market share. As traditional bootson-the-ground construction became superseded by
automated design, prefab manufacturing, 3D printing
and robots, E&C companies risked being relegated to
commodity providers or even faced extinction.

What these disruptors bring, above all, is excellence
in making data work for them, to gain insights, drive
decision-making and create value. Becoming data
leaders, rather than laggards, is one of the single
biggest innovation challenge facing the E&C industry.

**Questions over risk management**

By the early 2020s, the increasing scale of megaprojects had placed enormous strain on E&C
companies. One major project failure at best had the
potential to wipe out a year of strong performance, and
at worst could bring down the entire company. A lack of
robust enterprise risk management — and insufficient
linkage between project risk management and
enterprise risk management — prevented contractors
from accurately aggregating all their risks to fully
understand their corporate risk profile.


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**Stressed supply chains and resource**
**management**

Geopolitical forces, climate change, the COVID-19
pandemic and conflict in Ukraine had pushed up energy
and material costs and severely disrupted supply chains
in the early years of the decade. With no obvious sign
of when these trends were likely to flatten out, E&C
companies had to maintain margins while winning
competitive bids. Extreme volatility in supply chains —
especially long-distance chains — impacted the ability
to schedule accurately and left teams onsite without
essential materials, pushing up costs.

With suppliers often held at arm’s length via strict
contracts, there was a distinct lack of collaboration,
which heightened the possibility of disputes, and
contributed to poor transparency across the supply
chain, as suppliers had less incentive to invest in
technology such as internet of things (IoT) and data and
analytics (D&A).

**Talent shortfalls threatened progress**

A limited talent pipeline was one of the most serious
challenges to the E&C industry, especially in technology
and data skills. The overall tight labor market — with
high job vacancy rates and an ageing workforce —
made talent a long-term, strategic imperative. With
actual and future employees seeking flexibility both in
working hours and locations, companies had to adapt to
remote working — something which flew in the face of
established ways of working.

The industry’s reputation as a male-dominated, hardhat, long-hours, culture, with unpleasant working
conditions, deterred potential recruits — and held back
efforts to make workforces more diverse. Diversity
offered an opportunity to attract a wider pool of people


and bring in essential new skills and thinking, but by
2023 the sector was only making limited progress in
this respect.

Across the E&C industry, insufficient attention was
paid to developing a talent pipeline, from craft worker
to professional level, with other industries perceived as
more exciting, with better pay and prospects, placing
them ahead in the race to attract new recruits.

**Slow shift to ESG**

Despite some progress, in 2023 the construction
industry was still often regarded as being highcarbon footprint, high-waste and high-polluting, with
a lack of appreciation of biodiversity, high use of
scarce resources like water and minerals, and a lack
of engagement with local communities. Usage of
renewable energy was moderate, while diversity was
limited. There were shining exceptions to this, with
projects in remote sites training local workers, and
growing attention to sustainability and biodiversity, but
overall the sector had some way to go.

At the same time, regulatory demands for sustainable
construction were growing, demanding circular, lowcarbon projects and energy- and resource-efficient,
low-waste buildings and infrastructure. Paradoxically,
the E&C sector was also on the forefront of delivering
ESG, but has yet to translate these concepts fully into
their own businesses.

All of which was starting to impact access to capital from
investors shunning fossil-fuel, energy-intensive, projects
and seeking sustainability and strong human rights
records. Any E&C businesses that were not addressing
ESG concerns faced higher costs of capital — or even
barriers to capital entirely.


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#### The E&C industry in 2030


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It’s now 2030 and the sector has made huge strides, working together to modernize, innovate and
consolidate, learning lessons from other global industries and harnessing technologies and new

ways of working. E&C companies are in much better financial shape, with healthy margins and the
ability — and courage — to say “no” to high-risk or high-carbon projects. The threat from technology
disruptors has not gone away, but the sector is adapting well to new competitors and welcoming
them into the construction ecosystem. And the structure of E&C is less fragmented, with greater
collaboration.


**A step change in project performance**

Productivity has improved dramatically, with a much
higher record of on-time, on-budget, high-quality
projects. The widespread use of data sharing, common
data standards, and interoperability creates wide-ranging
transparency across the value chain, enabling project
managers to identify and address issues swiftly, to
help minimize delays and cost overruns. Whether it’s
a measurement error, a leaking pipe or damage to vital
substructure, the early resolution means that projects
can resume with limited negative impact.

Decision-making has been greatly enhanced through
use of IoT, AI, ML, automation, and analytics, with
sensors able to detect problems that would previously
have been unseen. The E&C industry’s productivity
has improved immeasurably, thanks to up-to-the
minute benchmarking on why certain teams are not
performing.

And the growing application of D&A has unlocked the
potential of predictive forecasting and maintenance,
enabling project managers to keep clients wellinformed of progress, tackle potential problems before
they arise and keep equipment operational to help
minimize shutdowns.

Construction ecosystems have fostered a new spirit
of collaboration, fueled by knowledge management
that lets data and insights flow between contractors,
suppliers and owners. This spreads best practice
learned from other projects, helping different players
meet their performance objectives through improved
understanding of project delivery.

Asset owners’ customer experience has become
central to contractors’ operations, which has required
a significant change in mindset. Rather than simply
getting a project over the line, E&C companies are now
focused on high quality delivery at all stages, with clear
communications to clients and awareness of issues
like ESG and customer satisfaction. For instance: a road
building project considers how to keep lane closure to
a minimum to avoid major traffic delays. Or a building
construction aims to reduce noise and pollution.


Above all, there is strong focus on giving project
owners greater certainty over cost, through realistic
pricing and effective cost and schedule management
that also protects contractors’ margins.

Today’s balanced scorecards don’t just cover cost
and time; they also take into account safety, quality,
sustainability and impact on the wider public, as well as
improving whole-of-life costs for the asset. In today’s
customer-centric world, a seamless, personalized client
experience is front of mind for contractors.

**Pushing the innovation envelope**

In a few short years, E&C has embraced innovation
with open arms. Companies have adopted startup
mentalities, through innovation labs or hubs separate
from the main business, where employees are
encouraged to take risks to accelerate and improve
performance. Many have also acquired startups from
within and beyond the sector and worked in partnership
with other leading-edge players in the construction
ecosystem. And the sector has gained mastery over
data, with E&C companies frequently considered to
be “data companies that build things”. These advances
have been helped by an influx of talent from nontraditional sources like data science, AI, and other
technology companies, as well as mainstream business
candidates attracted by the innovation in the sector.

Modularization and standardization have gone
mainstream, with a major emphasis on better, often
automated design for manufacture and assembly,
with far less work performed on site, remote working
and design, and routine use of 3D printing. With
designs transferred direct to manufacturing, complete
stages are removed, with the time taken to progress
from design to construction cut substantially. Also
significantly reduced are the carbon footprint and the
levels of waste and pollution, with material choices
based upon sustainability and circularity, using fewer
scarce resources. Safety has also been a big winner,
with a lot of dangerous jobs carried out by robots and
remote operating equipment.


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**Risk management from a higher altitude**

In 2030, risk management has reached the same
levels of maturity that health and safety had achieved
by 2023. Thanks to the ability to aggregate risk at an
enterprise level, contractors and owners now have a
clearer view of portfolio risk. This helps avoid bids that
could push the business beyond its accepted risk limit,
as well as spotting potentially damaging risks earlier
and taking decisive action to prevent project failure.

Increasing use of D&A has led to a better
understanding of risk interdependence, both within and
across projects. For example, E&C companies can now
gain a more accurate view of the impact of disruption
to supply chains, or worker availability, or material cost
inflation, on both projects and the wider portfolio.

**Reliable and resilient supply chains**

In 2030, suppliers are treated as partners in strategic
innovation, as the industry has shifted from contractual,
transactional relationships to longer-term partnerships,
where Tier 2 and 3 suppliers are involved much earlier
in project planning and conversations, and risk and
profit is shared across the supply chain. Consequently,
supply chains are far more transparent, making it easier
to spot problems and carry out ESG reporting.

The sector has also experienced a growth in innovative,
localized sourcing, which cuts transportation costs,
lowers carbon footprint and hedges against the risk of
disruption from geopolitical events, resource shortages
and climate change. 3D printing has helped this
transition. Higher use of renewables reduces emissions
and protects supply chains against energy price
increases or shortages.

These developments have had a tremendous impact
upon supply chain reliability and resilience, with the
sector far more adaptable to risks from climate change.

**A sector in demand**

In a major turnaround, construction has become an
industry of choice for graduates and school leavers,
offering exciting careers involving technology, design
and engineering, working on the cutting edge of
innovation. Many of the jobs traditionally carried out
onsite have moved to factories and design offices,
while flexible, remote working (where appropriate) has
become more common, with an emphasis upon worklife balance.


The diversity barrier has been overcome, with a
huge influx of women, and talent from around the
world joining the sector, from a variety of educational
backgrounds and disciplines. Which has brough exciting
new approaches to problem-solving and transformed
the image from “hard-hat, manual labor” to “slick
creators of technologically advanced, beautiful and
sustainable buildings and infrastructure”. Potential
recruits are increasingly attracted to E&C companies
by the strong sense of purpose as the industry has
embraced ESG and moved away from high-carbon
projects.

Learning and development has also come a long way
since 2023, with compelling and flexible career paths,
strong affiliations with colleges and universities,
and an increased proportion of workers joining on
apprenticeships. E&C talent hubs have emerged around
the world, offering a rich source of talent.

**ESG adoption drives investment**

Throughout the 2020s the construction industry
was responsible for building the next generation
of sustainable infrastructure, including renewable
energy facilities, and energy-efficient buildings with
low lifetime carbon footprints and low water usage.
And the construction value chain has become equally
sustainable, with circular design, sensitivity to
biodiversity, and strong support of local communities.
Consultations with those impacted by projects being
at an early stage and continue throughout the project
lifecycle and beyond.

The buildings and infrastructure that the sector creates
have also become far more resilient to the effects
of climate change, such as rising sea levels, floods,
droughts, heatwaves, wildfires and other extreme
weather events. E&C companies and consultants
have been heavily involved with owners to help them
improve capital planning, with detailed operational
planning that incorporates net zero targets, circularity
and diversity, while balancing short-term shareholder
expectations.

E&C businesses are now predominantly value-based,
with an ethical stance on the types of projects they
take on, and high standards of ESG reporting. All of
which makes the sector appealing to investors, with
low-cost capital flowing into projects.


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#### Conclusion


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Like any industry, E&C thrives when its customers have an outstanding experience, which means
sustainable, circular and fast delivery of high-quality assets that are themselves sustainable

throughout their lifetimes. ’Customers‘ doesn’t just mean the owners, but a wide group of
stakeholders including those individuals that use the infrastructure and buildings, as well as anyone
impacted by them in their community.

E&C companies are literally changing the world, and if the sector can reach the heady heights of
this paper’s 2030 vision, then a sustainable future is within reach.


**How KPMG professionals can help**

When engineering and construction leaders turn to
KPMG firms for advice, they do so because KPMG
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. KPMG firms have certified
public accountants, professional engineers, architects,
project managers, owner representatives, contract and
procurement specialists, finance and tax professionals,
business valuation specialists, cost estimators and
specialists, certified fraud examiners and forensic
technology specialists to assist you.

KPMG professionals can provide strategic insights and
relevant guidance where clients operate. Services are
delivered through the global organization of KPMG
firms operating in 143 countries and territories with
more than 265,000 partners and employees working
around the world. KPMG professionals help clients


identify and mitigate project risks throughout the
project life cycle. Their methodology encompasses
both ‘doing the right project’ and ‘doing the project
right’. KPMG professionals can assist with construction
program evaluations, project risk and controls
assessments, contract compliance analyses and cost
investigations, as well as project support on complex
and troubled projects.

They can provide industry knowledge, multidisciplinary
teams, and substantive experience in assisting with
both the financial and technical aspects of major
capital projects and programs. KPMG firms’ advisory
practice consists of professionals from diverse formal
backgrounds. By combining valuable global insight
with hands-on local experience, they can help you
address challenges at various stages of the life cycle
of infrastructure assets or programs — from planning,
strategy and construction through to operations and
hand-back.


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###### Acknowledgements

Thank you to all of the participants in this report and for sharing your insights and
perspectives.

**Jon Nield** **Greg Amparano** **Xanthe Larsen**
Chief Executive Officer, Chief Operating Officer, Attorney,
Engineering & Engineering & Engineering &
Construction Risk Construction Risk Construction Risk
Institute (ECRI) Institute (ECRI) Institute (ECRI)

**John Kouchoukos** **Mayank Agarwal** **Damien Jeannolle**
Vice President, Manager, Risk Manager,
AECOM Projects and Project Controls, Air Liquide

Air Liquide

**Zahi Ghantous** **Mustafa Abusalah** **Greg Ramsay**
Vice President, Manager, Global Director,
Construction Support and Learning & Innovation, Risk and Consulting,
Quality Management Consolidated Contractors Hatch
Department, Consolidated Group (CCC)
Contractors Group (CCC)


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**Kris Reid** **Borys Yarosh** **Pietro Profeta**
Senior Project Vice President, Head of Business
Risk Manager, Risk Management — Risk Management,
Worley Corporate/Global SBM Offshore

Projects Support,
SNC Lavalin

**Alex Budzier** **Moe Roghabadi** **Isidora Kosta**
Fellow in Management Risk Manager Lead,
Practice, Hatch Infrastructure Industries,
Saïd Business School, World Economic Forum
University of Oxford

In addition to all the participants interviewed, this report was a team effort around the
world. A special thank you to Athanasia Kiritsi, Blenda Runebjork, Camelia Bucur, Charlotte
Buchholdt, Chris Harris, Dimitrios Papakanellou, Dimitra, Caravelis, Jamie Anderson,
Jamie MacDonald, Jennifer Laffitte, Jonathan Sedger, Lily Ainapure, Maria Mallinos,
Michelle Carter, Nikolaos Dimakos, Penny Vithoulka, Peter Valentin, Samantha Dann, Tim
Bedingfield, and Vikram Ramakutty.


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###### Contact us

**Geno Armstrong**
Sector Leader — Engineering & Construction
KPMG International
garmstrong@kpmg.com

**Clay Gilge**
Lead, Major Projects Advisory
KPMG in the US
cgilge@kpmg.com

**Roni Michael**
Global Head of Innovation
KPMG International
ronimichael@kpmg.com


**Rob Fisher**
KPMG IMPACT and ESG Leader, Partner
KPMG in the US
[rpfisher@kpmg.com](mailto:rpfisher@kpmg.com)

**Lisa Kelvey**
Global Infrastructure Sustainability Lead
KPMG International
lisa.kelvey@kpmg.co.uk

**Richard Threlfall**
Global Head of Infrastructure,
Government and Healthcare (IGH)
KPMG International
[richard.threlfall@kpmg.co.uk](mailto:richard.threlfall@kpmg.co.uk)


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Publication name: Construction in 2030

Publication number: 138561-G

Publication date: February 2023


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