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InEight’s insightful outlook

The industry’s support of sustainable procurement has led to new opportunities in renewable projects.

InEight’s 2023 Global Capital Projects Outlook marks the third submission of what is now an annual report, depicting areas of potential growth and improvement, as well as highlighting the progress and achievements of the construction industry.

Despite on-going pressures, the roads and infrastructure sectors continue to push on. 

The confidence and resilience of the sector is supported by a $17.9 billion commitment to major infrastructure projects over the next 10 years, as part of the 2022-23 Federal Budget.

According to the Federal Government, total investment in major infrastructure is expected to reach more than $218 billion. As such, gauging potential areas of growth and improvement will be essential in ensuring that the sector can successfully deliver this pipeline. It’s a key reason for the development of InEight’s Global Capital Projects Outlook.

The outlook is now an annual survey; a study of digital transformation across the sector, as well as a source of insights on important issues such as sustainability, innovation and more. 

Now in its third year, it provides valuable insights on trends and behaviours that are likely to shape the industry in its near- and long-term future.

The survey has often communicated the industry’s uncertainty due to lingering effects of the COVID-19 pandemic such as impacts on global supply chains, high demand for skilled personnel and price escalation for both products and services.

Despite these factors still having an impact on project delivery and development, Rob Bryant, Executive Vice President, Asia-Pacific & Japan for InEight, says the 2023 Outlook paints a positive picture for the sector’s future.

“Last year, I think, there was a bit of a pause and a restart off the back of COVID-19,” Bryant says. “There’s still a lot of contractors that are facing challenges around familiar issues of labour and material costs.”

The Global Capital Projects Outlook survey includes 26 questions. 

InEight received 300 responses from a variety of industries including manufacturing, construction, mining, utilities and more.

Of the 300 respondents, 100 each were drawn from the regions of Asia-Pacific (APAC), Europe, and North America. Sixty-seven per cent of these were project owners, with the remaining 33 per cent being contractors.

Opportunities for growth 

A common theme, since the first Global Capital Projects Outlook in 2021, has been the sector’s positivity towards growth and new opportunities.

According to the survey, 41 per cent of project owners are very optimistic for the future, while 51 per cent are fairly optimistic.

Similarly for contractors, 41 per cent say they’re very optimistic, with 58 per cent saying they’re fairly optimistic towards their organisation’s prospects for further growth over the next year.

One of the core themes addressed in this year’s Global Capital Projects Outlook is the depth of new opportunities provided by technology.

“There seems to be a lot of recognition by those in the APAC region that they can be doing a better job of optimising their use of technologies. Whether it be for managing their materials, tracking labour on site, or how they can improve productivity in general,” Bryant says.

This could be attributed to the lack of financial resources available for companies to adopt these new technologies, due to on-going economic stresses.

Despite this, Bryant says Australia’s enthusiasm towards adopting new technologies remains strong, particularly when compared to the rest of the world. 

“We’ve seen Australia and the APAC region be a leader and perhaps even more progressive than some other areas of the world. That’s a strong sign that we’re seeing this as a continued trend.”

This is reflected in the survey findings – 71 per cent of respondents from the APAC region consider digital technologies to be a significant opportunity, compared to 49 per cent of respondents from Europe.

Such interest in new technologies is already making an impact on project delivery domestically. 

Bryant says that the increase in alliance contracts, to decrease the risks associated with project delivery, has called for new collaborative systems.

“Alliances are a way that contractors are finding to deliver projects out of necessity, because they recognise that they don’t have the capacity to deliver on these major projects,” he says.

“If you look at the Level Crossing Removal Project [in Melbourne] for example, there’s some good case studies where alliances are coming together to provide their own expertise. Whether these strengths be in rail laying or signalling, tunnels or bridges.

“Then you need to collaborate and share information across those different disciplines. They’re doing that increasingly in a digital environment.”

Bryant adds that he’s seen greater acknowledgment of the role digital technologies can play in allowing construction teams from any discipline to collaborate remotely. 

This has also increased the need for ‘interoperability,’ the capacity for digital technologies to interact with each other. An increasingly important component for contractors using different programs and systems.

“A lot of conversations are now centred around what the desirable outcome is and why contractors and project owners are employing digital technologies, rather than just deploying it because they feel as though they should,” Bryant says.

The survey outcomes indicate that companies already implementing digital solutions are seeing improved results in project delivery. Of the organisations that deliver projects ahead or on schedule, 69 per cent use project controls software.


 

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The 2023 Global Capital Projects Outlook demonstrates the sectors confidence, despite on-going impacts such as supply chain issues.
The 2023 Global Capital Projects Outlook demonstrates the sectors confidence, despite on-going impacts such as supply chain issues.

Greener and greater

Bryant says this focus on technology has also produced benefits in achieving sustainable project development.

“From a road and rail perspective, there’s a strong path of delivery for projects over the next 12 to 24 months. What we’ve observed in parallel to the survey has been a shift in focus for companies to spread their portfolio of projects into renewables and the renewable energy sector,” Bryant says.

“That’s definitely a topic that’s come up for our APAC respondents, as well as globally. They’re starting to consider how they can deliver projects from a sustainability perspective. It’s not a new component, but it’s a more prevalent component now.” 

This notion is also supported by the Federal Government’s record funding of close to $25 billion for clean energy spending, including funding for new infrastructure in clean energy and renewables.

“An interesting part of the renewable energy sector is that it still requires a component of road and rail infrastructure a lot of the time,” Bryant says. 

“If there’s a wind farm project or a solar project, that doesn’t mean that you’re only delivering the energy generation asset. You’ve still got the access and transportation components of these projects that need to be considered as well.

“Alliances are coming together to deliver renewable energy projects that require disciplines in transport infrastructure, for example.”

This is also reflected in data from the Global Capital Projects Outlook which suggests that 54 per cent of contractors, as well as 48 per cent of project owners, see sustainable building projects and practices as the biggest opportunity for their organisations over the next 12 months. 

Data and risk 

Addressed in the Global Capital Projects Outlook is the concept of data “haves and have nots.” As Bryant explains, this concept refers to the importance of using historical data to provide more accurate insights to contribute to project delivery, granting more operational awareness.

Importantly, this also centres around gathering a solid foundation of data to compare and to contrast.

“It’s important that if you’re using data for benchmarking, you’ve obviously got to have the data to start with,” Bryant says. “If this has only started to be collected in a meaningful and consistent way over the past couple of years, then you’re only now starting to be in a position where you can use it and actually say ‘how do we compare?’

“Those that haven’t started to gather this data could be four or five years behind. That gap becomes more exaggerated because you’ve got organisations and project groups that are much more invested in their application of data and how it helps them to assess and plan effectively, versus those organisations that haven’t started that process.”

Not using such a data set can have detrimental impacts on project delivery. The results could include communication barriers, unforeseen risks, and a lack of data sharing, leading to a poor project outcome.

Bryant says that while Artificial Intelligence (AI) will likely contribute to clarifying these data points, it’s still essential that contractors and project owners understand how to use AI effectively.

“Some organisations have a perception that AI technology in general can look at a vast set of unstructured data and make sense of it,” he says. “That isn’t true.

“Data needs to be well organised for these technologies to be leveraged. If you keep your data unorganised, it will find invalidated trends, because it assumes that you’re telling the truth. The better organised your data is, the better quality of the insights that you will achieve.”

Future contracting models

Bryant says further adoption of new technologies may also require a shift of focus when it comes to traditional project contract models.

“With the traditional model, one of the issues has been trust, as there hasn’t been transparency during progress,” he says.

“What’s happening now is a shift. In recent years there’s been an acknowledgement that contracting models like NEC (New Engineering Contract) allows and encourages greater transparency.

“It’s an environment where stakeholders can share information. This can create a greater level of trust. They can share what they’re learning and can make decisions collaboratively around scheduling and budgeting.”

Bryant says this can create an environment that deviates from a fixed-cost model. 

“Why should a contractor absorb the cost change over the course of a four- or five-year project, when material chain costs and labour costs change, and issues are revealed that weren’t foreseen?” Bryant asks.

Bryant adds that projects such as the West Gate Tunnel in Melbourne or the George Street Light Rail in Sydney can act as benchmarks for these future models.

“Then you can say, ‘all right, next time something like that comes up, let’s make sufficient allowance in our budgets for [risks] that we don’t know about yet.’ Suddenly there are fewer surprises, and it becomes easier to reduce surprises over time.

“We have a good chance over the next few years for this to shift quite dramatically. But it will require a change in attitude from project owners.”

To download InEight’s Global Capital Projects Outlook, visit: ineight.com 

This article was originally published in the August edition of our magazine. To read the magazine, click here.

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