Many Companies Are Delaying or Putting Capital Projects on Hold Due to the Pandemic, Accenture Report Finds

Rhea-AI Summary

New research from Accenture (NYSE: ACN) reveals that 61% of industrial owner-operators foresee delays or indefinite holds on new projects due to COVID-19 impacts. The report titled "Building Value with Capital Projects" highlights that while 79% of executives utilize data analytics, only 34% reported cost reductions on completed projects. Additionally, 24% of owner-operators and 14% of EPCs outperformed industry peers in productivity. Key strategies such as strong data leadership and incentive-based contracts could yield a 6.6% increase in return on capital investment for owner-operators.

Positive

• 24% of owner-operators and 14% of EPCs exceed industry benchmarks in productivity and efficiency.
• Implementing differentiated strategies can drive a potential increase of 6.6% in return on capital for owner-operators.
• The report emphasizes the importance of a data-driven culture for capital projects.

Negative

• 61% of owner-operators expect project delays or indefinite holds due to COVID-19.
• Despite high usage of data analytics, only 34% achieved reduced costs in completed projects.
• A majority of companies have not realized the intended benefits from their digitization efforts.

New global research from Accenture (NYSE: ACN) shows that 61% of owner-operators of factories, mines, refineries and public, telecommunications and utility infrastructure organizations expect new projects to be delayed or put indefinitely on hold because of the COVID-19 pandemic. Additionally, 35% of engineering, procurement and construction service providers (EPCs) surveyed indicated that the scope of ongoing projects will likely be adjusted. The report, titled “Building Value with Capital Projects,” features a survey of more than 700 senior executives globally and found that the pandemic impacted an industry that was already challenged in using digital solutions to help deliver project results on-time and on-budget.

Capital project are being delayed or put on hold due to the pandemic (Graphic: Business Wire)

“Compared to other industrial sectors, many owner-operators and EPCs were already trailing behind in digital transformation when sudden shutdowns and delays challenged their efficiency and competitiveness even further,” said Tracey Countryman, global lead for Digital Manufacturing & Operations, Accenture Industry X. “To build greater resiliency, mitigate current and future disruption, and drive more value from capital projects execution, companies need to adopt greater data-driven digitization within and across their value chains.”

The report shows that many companies haven’t achieved the desired benefits from their digitization efforts:

• For example, 79% of the owner-operators use data analytics for predictive project performance forecasting and real-time project decision support. However, only 34% have reduced maintenance and operations cost on recently completed projects; 38% have increased construction productivity.
• Similarly, 79% of the EPCs deploy logistics control tower for logistics tracking, materials management, warehousing and people logistics; yet just 34% have been able to reduce equipment and material cost.

Other findings paint a similar picture, with 75-89% of the owner-operators and EPCs using data, data-driven insights and digital applications to better mitigate risk and increase project efficiency or execution, but only 32-44% achieving their set goals. The reasons, the report notes, are a strategic failure to build the right operating environment and incentives to create a data-centric culture, and an inability to operationalize data and technology.

“Data-driven insights play an integral role in creating digital solutions like digital twins,” said Andy Webster, global lead for Capital Projects, Accenture Industry X. “Generating, applying and collaborating on these insights are crucial to enabling greater value in productivity, efficiency, workforce safety and material wastage.”

The research found that 24% of owner-operators and 14% of EPCs exceeded their industry peers in terms of productivity and efficiency. It then identified four differentiated actions that these outperforming companies have taken and, if adopted by peers, can drive an additional 6.6% return on capital investment for owner-operators and grow EPCs’ operating margin by an additional 5.8%.

1. A data-committed C-suite. Most outperforming owner-operators (57%) and EPCs (60%) make a top senior executive such as the CEO or COO responsible for data-driven digitization of capital projects. They are also more likely to have infused a culture of data-sharing for informed and insightful collaboration within their organizations and across partners and value chains.
2. Data-sharing infrastructure and capabilities. Cloud platforms, data lakes, drones and reality capture are top technologies in which outperforming owner-operators invested in the past five years. EPC outperformers spent heavily on, for example, industrial IoT technologies to make supply chains more intelligent and predictive.
3. Data-centric talent. Owner-operators identified data stewards to use data for addressing schedule management, productivity and regulatory issues. Outperforming EPCs readied an army of digital coaches who work closely with their workforce in the field to help them execute projects and deliver outcomes with more efficiency, safety and certainty.
4. Incentive-based contracts: Over a fifth of all outperformers engage in contracts that incentivize project stakeholders to achieve financial, environmental and social responsibility goals (owner-operators: 22%, EPCs: 27%). These contracts foster collaboration on, and a more rigorous adoption of, data-driven solutions and advanced analytics to drive joint success.

“These actions are based on insights built from analyzing a million data points, making this a unique analysis of the Capital Projects industry,” said Raghav Narsalay, managing director and global research lead for Accenture Industry X.

Collaboration, as well as a strong data foundation and data culture have emerged as important value drivers in other recent studies. These include Accenture’s “Together Makes Better: How To Drive Cross-Function Collaboration” report published in June and its 2019 study titled “AI: Built to Scale.”

About the study

Between June and August 2020, Accenture surveyed 710 senior executives across owner-operators and EPCs in 13 industries and 20 countries with annual sales exceeding $1 billion. Respondents were asked about planned and ongoing projects, and how they have used digital applications and data-driven insights in recently completed projects. The survey results were combined with publicly available financial data and discussed with academic experts and senior industry experts for further insights. A proprietary regression model was built to use the collated data towards understanding the impact of actions being taken by EPCs and owner-operators on their key performance parameters such as operating margins and return on capital employed respectively.

About Accenture

Accenture is a global professional services company with leading capabilities in digital, cloud and security. Combining unmatched experience and specialized skills across more than 40 industries, we offer Strategy and Consulting, Interactive, Technology and Operations services—all powered by the world’s largest network of Advanced Technology and Intelligent Operations centers. Our 514,000 people deliver on the promise of technology and human ingenuity every day, serving clients in more than 120 countries. We embrace the power of change to create value and shared success for our clients, people, shareholders, partners and communities. Visit us at www.accenture.com.

Accenture Industry X embeds intelligence in how clients run factories and plants, as well as design and engineer connected products and services—making manufacturing and operations more efficient, effective and safe; enabling companies to transform how they make things, and the things they make, for sustainable growth. To learn more, visit www.accenture.com/industryx.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210112005014/en/

FAQ

What percentage of owner-operators expect project delays according to Accenture's recent study?

61% of owner-operators expect delays or indefinite holds on new projects due to COVID-19.

How have engineering, procurement, and construction companies fared during the pandemic according to Accenture?

35% of EPCs indicated that the scope of ongoing projects may be adjusted due to pandemic impacts.

What can be the potential return on capital investment for owner-operators adopting data-driven strategies?

Adopting differentiated strategies could lead to a 6.6% increase in return on capital investment for owner-operators.

What findings were reported regarding the effectiveness of digital solutions in capital projects?

Only 32-44% of companies reported achieving their goals despite high utilization of data and digital solutions.

How many companies were surveyed in Accenture's global research on capital projects?

Accenture surveyed 710 senior executives in 13 industries across 20 countries.