Global Construction Survey 2012

KPMG INTERNATIONAL

The great global infrastructure opportunity
Global Construction Survey 2012
kpmg.com/building

b | The great global infrastructure opportunity

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A brave new direction for engineering and construction?
The last three years have been full of uncertainty for many in the engineering and construction industry. However, one constant is the insatiable demand for infrastructure in all forms, which is causing a fundamental shift in focus for nearly all players in the sector. The ‘old’ imperatives of commercial, residential andindustrial building projects have taken second place in many geographies to energy, natural resources, transportation, communication and technology, and other vital civil and social infrastructure projects.
Much of this change is driven by the pressing challenge of urban growth; with the proportion of the world’s population living in cities set to rise to more than 70 percent by 20501, there isimmense pressure to provide an effective and reliable support network to the teeming millions. And while the continuing economic instability is impacting many parts of the industry, infrastructure is so vital to growth that even the most cashstrapped governments will inevitably give it a higher priority – or face a drastic change in lifestyles for their people. Worldwide the expected cost forinfrastructure over the next forty years is approximately US$70 trillion.2 Engineering and construction companies are changing to meet the growing demands of infrastructure, with the traditional general engineering providers and contractors giving way to larger, more diversified businesses with specialized skills. Winning new contracts is increasingly about having the right expertise, so the battle forskilled resources is likely to intensify even further, with a possible rise in acquisitions to buy that expertise. New infrastructure projects are expected to be on a huge scale, particularly in emerging markets such as India, China and Brazil, so size and global reach will also matter. With scale comes complexity as the global industry players navigate a tough political, commercial, regulatoryand governance environment which will test their risk management ability to the maximum extent. Margins on mega-projects can be severely impacted by unforeseen schedule delays, sometimes customer driven and sometimes self-inflicted. Although the sector has invested considerably in risk management in recent years, a number of high profile project failures in the past twelve months raises questionmarks over the effectiveness of some of this investment. The shape of the industry is changing as the main players seek to optimize costs, focus on tax efficiencies, streamline supply chains, improve information technology systems (IT), capitalize on emerging markets, and grow through mergers and acquisitions. But will these efforts be enough to succeed? As the world rises to meet the greatinfrastructure challenge of the next decade, what role will engineering and construction companies play? With these questions in mind, the latest KPMG Global Construction Survey comes at an opportune moment, gauging the views of many of the senior executives of leading engineering and construction companies from around the world. I would like to thank all those who gave their valuable time to contribute tothis vital and ongoing assessment of the future of the sector.

Geno Armstrong International Sector Leader, Engineering & Construction, KPMG in the US

1. United Nations, Department of Economic and Social Affairs, Population Division (2011). World Population Prospects: The 2010 Revision 2. Booz Allen Hamilton, Global Infrastructure Partners, World Energy Outlook, Organisation for Economic...