Advanced analytics and digital disruption in infrastructure projects

May 2021  |  TALKINGPOINT  |  SECTOR ANALYSIS

Financier Worldwide Magazine

May 2021 Issue

FW discusses advanced analytics and digital disruption in infrastructure projects with Clay Gilge, Jordan Thomson, Suneel Vora and Gary Webster at KPMG.

FW: Reflecting on the last 12 months or so, what major trends have shaped the infrastructure sector? How would you describe general activity around infrastructure investment and project delivery?

Gilge: A survey we conducted in May of 2020 found that 66 percent of construction executives expected the return to normal to occur within six months. That was clearly ambitious, but, more importantly, almost all infrastructure projects have seen an immediate impact on the day-to-day aspects – from design planning and coordination to job site safety protocols and supply chain management. The news is not all bad, though. Coronavirus (COVID-19) accelerated many trends, with the biggest three being the following. First, the decentralisation of operations to hub and spoke models across multiple industries, including technology, energy, healthcare and industrial manufacturing. Second, the reimagining of the workplace by focusing on purpose-built spaces that align with the changing needs of the workforce. And third, a major shift in the US around environmental, social and governance (ESG), which is not only changing the makeup of planned infrastructure investment, but is also changing corporate and asset management strategies and impacting the entire project delivery and asset management lifecycle.

Webster: The past 12 months have obviously put a significant strain on all industries and have driven significant change and innovation. Interestingly, this has coincided with a major shift in the North American infrastructure sector toward collaborative forms of contracting, and away from the confrontational models of the past. While past models were intended to allocate risk to the best-suited party, this has been increasingly abused, with owners often abdicating risk ownership entirely to the contractor. In times like these with significant risks and uncertainties, collaborative approaches like alliancing and integrated project delivery (IPD) allow project teams to come together to share risks and devise joint strategies to address and mitigate them. With the profits or overruns of the project being shared by the team, data analytics will be critical for collaborative projects by providing important insights into cost and schedule performance, and ensuring all parties are sharing profits evenly.

Vora: The pandemic and its attendant challenges significantly impacted the infrastructure sector, with COVID-19 exposing many fragilities: dependency on colocated teams and labour intensive construction sites are two striking examples – project teams had to learn to collaborate virtually on a daily basis. Labour migrations and limited mechanisation rendered construction sites ineffective. The outcomes of these forced learnings have been significant, and we have emerged stronger. The increased willingness to work in virtual modes has made teams more efficient. The search to unlock project value and savings to enhance margins has spawned new methods for project conceptualisation, engineering, procurement and construction. In India, with several government and private sector initiatives around infrastructure, we are seeing a big surge in project announcements, and capital investments have increased. The demand for reduced costs and project cycle times is the new normal, as firms rush in to capitalise on business opportunities and anticipated growth.

FW: How are digitalisation and analytics shaping the projects business?

Thomson: The truth of the matter is the industry has been slow to catch onto the possibilities offered by these technologies and companies are now only scratching at the surface of how they can transform our industry. Data and analytics solutions are slowly being adopted, but in siloed ways – one discipline or function at a time. The real power of these technologies is realised when they are integrated across the project team and project site, enabling new insights on performance and opportunities for improvement throughout the project lifecycle. The increasing adoption of building information modelling (BIM) and digital twin technologies will help to drive this integrated approach to managing data across the project by providing a central repository for project data and facilitating collaborative decision making across the project team.

Vora: Digitalisation and analytics for the infrastructure sector is akin to a generational change. Indeed, a slow adopter, some segments of the infrastructure value chain have leveraged such technologies effectively in a few pockets. For example, engineering design, if done right, is dependent on modelling enabled by digitalisation, but unfortunately the outcomes remain restricted to the segment. As the sector primes to enter its new generation, digitalisation and analytics will shape the project business on three major fronts: visualisation and collaboration, decision making and enhanced compliance. Visualisation and collaboration includes digital twinning beyond 4/5D building information modelling, enabling enhanced visibility, oversight and collaboration across remote teams. The ability to process data digitally allows larger coverage for analytics than any manual method could offer, driving more confident decisions. Enhanced compliance with policies and processes is easier and less intrusive when digitalisation and analytics are coupled with adjacent technologies such as robotic process automation.

Gilge: In our 2005 ‘Global Construction Survey’, 63 percent of respondents said that ‘managing risk’ was one of the top three challenges. In 2016, the survey found that ‘technology’ was the critical issue. Within technology, 61 percent of respondents were utilising BIM, 42 percent were utilising drones and 65 percent were employing remote monitoring. More recent surveys indicate that the adoption of technology is increasing and starting to pay off in project performance and productivity. This is driving further investments in technology across the entire industry. The expected next phase of evolution will focus on integrating the fragmented supply chain across the project lifecycle to drive productivity and efficiencies, as well as adapting technology to help project teams overcome barriers throughout the project lifecycle and achieve optimal project performance.

FW: In what ways have industry players initiated digital transformation and adopted analytics?

Gilge: In our ‘2019 Global Construction Survey’, 83 percent of engineering and construction executives said their organisations will be data driven within the next five years. Yet, in the same survey, 52 percent did not perform data analytics across all projects, 32 percent used only basic analytics and only 14 percent used advanced analytics. Viewed from another perspective, 48 percent of what we label ‘innovative leaders’, the top 20 percent in performance, had already implemented advanced analytics across all of their capital projects compared to 29 percent of ‘industry followers’, the middle 60 percent, and 8 percent of those ‘behind the curve’, the bottom 20 percent. By investing early and embracing technology, ‘innovative leaders’ are developing and implementing predictive models for safety, equipment performance, productivity and project profitability based on real-time information, crowdsourced data and projections and analyses of project attributes and trends.

Vora: The industry is bursting with examples of projects dabbling in digitalisation and analytics. We have seen firms adopting digital models for approving designs collaboratively and remotely, generating construction drawings and bills of quantities for tendering. This has aided design accuracy, prevented expensive rework during construction and made procurement more efficient. There are examples of firms creating databases on the back of reams of project data generated daily, to study patterns and trends for creating forecasts. While this paints quite a rosy picture, the impact of digital transformation and adopting analytics will be felt when firms apply these technologies consistently, across the project lifecycle and across the span of stakeholders involved.

Webster: While it is no secret that the construction sector has lagged behind the rest of the market in the adoption of new technologies, we are beginning to see an increased appetite for analytics and supporting technologies in major projects. This is being driven largely by owners, who are increasingly getting more involved in the project delivery process and wish to better understand how projects are progressing, and how the finished asset is performing against specifications. This increased desire for data is driving new developments in BIM and digital twin technologies that provide valuable insights for owners into the design and operation of their assets. As these technologies continue to develop, they will be able to leverage data gathered through internet of things (IoT) sensors and machine learning analysis to help us optimise the design and operation of assets to maximise their full-life value.

FW: What benefits may be derived from adopting advanced analytics?

Vora: Advanced analytics applied to project delivery, when done correctly, is something like playing a video game in ‘god-mode’. The benefits are numerous. Imagine a situation wherein gigabytes of data generated each day at a project site are deposited into a massive data lake. Various datatypes are pulled to create live dashboards for specific users. Beyond daily or even hourly updates, simple programming and defined upper and lower limits, the system can be trained to escalate exceptions reducing the demand on manager bandwidth. With basic statistics, one could create trends and forecasts of likely outcomes. Confident predictions on likely completion dates for projects can be made on the back of baseline schedules, productivities, progress data and other inputs. These predictions have held even 12 months or more ahead of the actual completion date, allowing for proactive decisions and risk avoidance.

Thomson: One of the biggest benefits of analytics and new technologies is that they can provide a real-time understanding of project performance. Project reporting is generally a month behind and provides only a snapshot in time, which severely limits management’s ability to identify and quickly respond to schedule and cost drivers on site. These new technologies will also help project teams improve their understanding and management of risk. While projects are predominantly about allocating and managing risk, we are generally very poor at assessing the probability and impact of risks, leading to issues with optimism bias and underestimating risk exposure. We also struggle with understanding the interconnectivity of risks, and how the occurrence of one risk can affect the probability of others. Analytics and new technologies will help give management a more accurate and unbiased understanding of risks and provide invaluable insights into how the project risk profile changes over time.

Gilge: A top commercial contractor developed advanced analytics that identified up to $40m in near-term margin improvement and up to $500m in overall project value opportunities. In our ‘2019 Global Construction Survey’, advanced analytics was ranked at number three behind project management information systems (PMIS) and BIM in terms of potential in delivering return on investment (ROI) of different technologies. Unfortunately, most efforts tend to be inconsistent. Half of engineering and construction executives say their companies do not apply data analytics across all of their projects. In addition, less than 15 percent have advanced capabilities, which leaves a lot of value on the table. Data and analytics allow companies to answer difficult questions and identify strategic advantages that may lead to higher productivity and improve business results, not to mention they also help with avoiding troubled projects – which also continues to plague the industry. Up-to-the-minute data on project performance can allow for rapid responses to changes and keep firms on schedule by properly sizing manpower and keeping ahead of procurement. With corruption and billing fraud being frequent schemes in the industry, engineering and construction can analyse costs against controls and other data for red flags as part of risk and compliance efforts.

FW: In what ways can advanced analytics assist with decision making and problem solving around infrastructure projects?

Webster: Infrastructure projects have historically been very good at creating data, but very bad at using that data. The real value in data analytics is the ability to leverage the vast amounts of information on a major project to make informed, data-driven decisions. This spans the design phase, providing important insights into usage loads and customer behaviours, through construction, enabling identification and analysis of cost and schedule drivers on site, and into operations, helping asset owners understand the performance of their assets to maximise value. The challenge, however, is making advanced analytics accessible and useful to the project team – distilling the data down to provide meaningful insights to decision makers in their own language. Without clear and concise communication, the true power of data analytics is easily lost.

Gilge: Organisations are successfully applying predictive analytics around infrastructure projects to enhance business development, increase project performance, mitigate risk, monitor compliance and improve their bottom line. Beyond safety, there are numerous similar opportunities for predicting and preventing operational disruption, quality and warranty issues, schedule activity delays and financial performance issues early in the project’s life. There are also significant opportunities to improve, automate and streamline processes. These include developing early cost estimates and schedules based on past projects, cost forecasts, logistics decision optimisation, procurement timing optimisation and design automation and optimisation. All of this is possible today and is quickly becoming a reality for more and more organisations. With new technologies, opportunities to leverage advanced data analytics, automation, prediction and optimisation will increase significantly. On-site tracking sensors, drones and robotics can all contribute more data for even better predictive capability.

Vora: Advanced analytics can be applied across the value chain, right from ideating projects, to design engineering, procurement and contracting, fabrication and construction, erection and commissioning, and right into asset maintenance and management. Using advanced analytics, one could, for example, create optimisation models that can aid in sizing and throughput decisions to drive confident investment decisions. With backward linkages to the investment’s financial model, commodity prices, progress status and forecasts to completion, one could decide the best returns on capital and undertake ongoing funding decisions across the capital portfolio. Benchmarking is another dimension that aids in decision making, made easy by leveraging advanced analytics to compare data across projects. We have had use cases of using natural language processing to train digital assistants to guide project managers on their daily decisions, providing options and suggesting the most optimal decisions. Advanced analytics has been used to predict unsafe construction site events and avoid accidents.

FW: When using advanced analytics, what is the biggest challenge related to data privacy and security?

Vora: The big benefits of advanced analytics are in using project data comprehensively for sharing risks and making optimal decisions for all key stakeholders. This requires trust across key stakeholders in providing their data, say, to a collaborative project data lake. With collaborative contracts and integrated project delivery, this becomes relatively easier, while with conventional contracting, contractual terms often dictate the sharing of project data. Achieving a level of trust to enable the two key stakeholders – owners and contractors – to share project data for improving project performance is a big challenge. The other twin of this challenge is in applying information security and data privacy protocols consistently across diverse technology platforms to secure the information, anonymise personal data for example, and ensure compliance with diverse regulations across nations. Importantly, these regulations are evolving, and the advanced analytics platforms, and related security and privacy protocols, will have to keep up.

Gilge: Data privacy challenges arise when integrating advanced analytics in infrastructure programmes. Too frequently there is a lack of overall data management and governance strategy and appropriate data privacy and security over disaggregated data environments. Only 35 percent of our ‘2019 Global Construction Survey’ respondents indicated that they had implemented a PMIS across all of their projects. In other words, many companies do not have a centralised or integrated PMIS in place and project data is scattered across multiple programmes. Making matters worse, the information is most often not automatically populated or even routinely updated. Tracking is cumbersome and viewed as additional and unnecessary work. The lack of a true enterprise data warehouse also contributes to limited reporting and functionalities and requires integration tools to extract and transform data from cloud and on-premise applications. All of these challenges are further compounded when crowdsourced and unstructured vendor data is incorporated into advanced analytical models.

Thomson: Privacy and security of project execution as well as operational data is a significant concern in the industry, especially given the important role of the public sector in the ownership and operation of major infrastructure assets, and the societal pressure to protect personal information. In Canada, the challenge is that there is lack of clear legislative requirements or industry standards on how data privacy and security needs to be managed. This lack of clarity makes it challenging for designers, contractors and owners to be aligned on expectations and procedures. Naturally, this can result in delays and claims, and generally impact the efficiency of delivering the project.

FW: What essential advice would you offer on designing and implementing an effective infrastructure project programme which utilises advanced analytics?

Gilge: Applying advanced analytics to drive the performance of infrastructure project programmes requires knowledge of current needs and capabilities, as well as an overall vision for the programme and corresponding goals and objectives. According to our ‘2019 Global Construction Survey’, only 24 percent of ‘behind the curve’ respondents indicated they ‘created a technology vision’ as opposed to 90 percent of ‘innovative leaders’. Key questions that need to be asked include the following. Is the goal to drive overall performance in every area? Or through targeted improvement in key areas such as productivity and project budget performance? Or is it to develop predictive performance capabilities in one area? Determining the endgame before investing time and money will allow the greatest return on that investment. Start by developing a plan to use analytics by performing a thorough initial assessment to establish goals and objectives for the programme. The initial baseline assessment should also include a data diagnostic and technology assessment, as well as the development of a roadmap with a phased timeline for implementation. There will be a desire to make a big impact on day one, however, according to our 2009 survey, 83 percent of ‘innovative leaders’ experiment with new technology on pilot projects as opposed to 48 percent of ‘behind the curve’ respondents – which is why it is important to prioritise and phase the rollout in order to build buy-in and work out issues and bugs to increase the adoption rate during full implementation.

Webster: First and foremost, it is critical to think proactively about the kinds of information the project needs to be collecting to realise the kinds of insights it wants to gather. While data can be powerful when properly harnessed, it is critical that the project is gathering the right data in an accurate and trustworthy way. Failing to actively plan your data strategy can severely hamper the kinds of analytics you can perform and the level of insights you can provide. And ultimately, if you cannot trust the data coming in, no one will trust the outputs. Just like every software engineer says: garbage in, garbage out.

Vora: Advanced analytics is quite similar to any other capital project initiative that requires collaborative application across key stakeholders for the project initiative to be effective. Advanced analytics can aid in successful project delivery by collaborating across key stakeholders and setting a common agenda right before the start of an infrastructure project. Advanced analytics takes some investment that is usually paid off manifold by the benefits it creates. It is important to articulate this business case, the benefits and investments required, and secondly, to ensure that the benefits are balanced across the key stakeholders. This will go a long way in creating trust and driving mutual accountability toward a successful programme delivery.

FW: In your experience, what kinds of challenges typically arise when introducing digital technologies into the infrastructure project process? What steps can be taken to overcome these pitfalls?

Thomson: The biggest challenges we see going forward with the rollout of new technologies is the varying level of digital literacy and different skillsets across the project site. With an aging workforce that is not necessarily used to using digital systems and tools, upskilling of craft labour and field management will be critical to ensuring information is being captured and fully leveraged at each stage of the value chain. In Canada, we have also seen concerns raised from union groups as to how these new technologies will affect jobs going forward. It will be critical to get buy-in from these important stakeholder groups to ensure a unified and fully connected job site. The key will be to demonstrate that these new technologies and ways of working are not just helpful for improving project performance and profitability, but also the health and safety of everyone on the job site.

Vora: Systematic implementation and consistent application and use of the selected digital technologies is a common challenge. Applying digital technologies takes the same discipline as any other project initiative that spans the project lifecycle. User groups need to be trained, made confident of the benefits and coached in the event of misses. To use a very simple example, if a group of project users fails to update their progress data, the outputs generated would not show the right comparisons vis-à-vis the baselines, affecting the remaining users and possibly themselves. Things become more difficult with other use cases, and when diverse cultures are involved. Preparing a list of instructions and periodic training can help overcome such challenges. For advanced systems, it would also help to build in preventive safeguards that catch such misses. Smart sponsors would also read the signs of reluctance upfront and address them maturely and conclusively.

Gilge: Efforts to improve project performance through technology require buy-in from project personnel, including those directly on project sites. Convincing project staff and field personnel that they can trust technology to help make sound business decisions is one of the hardest transitions companies have to make. It is easy to fall back on the status quo, relying instead on antiquated practices, beliefs and gut instincts. The bottom line is that if a tool does not help someone do their job easier, they will not use it. Organisations that can get commitment down to field personnel, integrate their systems and leverage data to drive productivity and performance for the project team will quickly differentiate themselves. While there are various ways to accomplish this objective, roadshows to gather input from both business and geographic functional leaders and field representatives help make sure the technology will be impactful and deliver the desired benefits. Following up with communication and messaging focused on meeting the field’s objectives – in contrast to simply meeting management’s directives – will also help drive commitment.

FW: What are the consequences for those that fail to invest in and embrace new technologies?

Gilge: For the past four years, our global construction surveys, as well as our internal tools, have focused on benchmarking people, governance processes and technology in construction and correlating this benchmarking into project performance. ‘Innovative leaders’ indicated 66 percent of their projects come within 90 percent of their planned schedule. Of the ‘industry followers’, only 14 percent achieved 90 percent of their planned schedule. Zero percent of ‘behind the curve’ organisations achieved this benchmark. As for adopting advanced analytics on construction projects, which highlights the importance of technology investment, the results were similar. ‘Innovative leaders’ were roughly 20 percent ahead of the ‘industry followers’ and 50 percent ahead of those ‘behind the curve’. Infrastructure companies are acutely aware of the difficulty to maintain competitive operating margins and manage risks. It is not uncommon for the largest engineering and construction companies to fall behind the market and face bankruptcy due to a handful of failed or troubled projects.

Vora: With businesses bouncing back and an increased willingness to accept a new normal, the time for embracing new technologies has never been better. We are already seeing the demand for reduced project costs and faster asset operationalisation cycle-times, something that can be made more likely by adopting new technologies. This would enhance competitiveness across early movers, laying the foundations for a tech-enabled organisational culture. With a preponderance of relatively younger persons in the workforce in India, the application of technology can also serve as a major source of talent retention. For owners, contractors, technical consultants, financiers and even regulators, the inability to adopt new technologies will render the entire ecosystem inefficient and prevent the resulting capital investment from achieving its full potential.

Webster: Ultimately, the infrastructure and construction industries are focused on cost. Failure to embrace new technologies and tools that help to improve cost performance will mean higher costs and lower profitability. Furthermore, as the supply chain becomes more integrated and automated through design and project management systems and smart contracts, the more difficult, time consuming and costly it will become for traditional project delivery approaches. In the long run, owners that do not embrace these new technologies will find it increasingly expensive to deliver their projects, which will put constraints on their capital plans. Contractors and consultants that fail to adopt these new technologies and adapt their offerings will likely find themselves unable to compete in the new digital landscape, driving down margins and potentially driving them out of the market altogether.

FW: Where is digital disruption in this sector headed? What are the next steps?

Vora: Capital project design and implementation will evolve possibly through a combination of decisive action by early movers – owners and contractors alike – and through government regulation. We have already seen such signs in the use of BIM. Its adoption started with the intent to reduce design risk and, for example, catch potential clashes in the digital world before they could occur physically. This created benefits for all stakeholders involved. Some governments have compelled the use of BIM to create architectural designs. A tech-enabled integrated and collaborative approach to project planning and implementation is an obvious next step. This would leverage technologies that enable enhanced visualisation, virtual collaboration, artificial intelligence-driven and machine learning-driven decision-making tools, and virtual assistants to guide investment decisions, control supply chains, prioritise project activities, create options and generate decision drafts to solve complex problems.

Thomson: The infrastructure sector, and particularly construction, have historically been slow to adopt new technologies, and as such are primed for disruption. While data analytics and technologies like BIM have been used in piecemeal applications for years now, we are on the precipice of being able to integrate technologies and data from across the project value chain to create a unified project data model and connected worksite that will enable entirely new ways of delivering projects. From innovative designs integrating IoT sensors that feed data to a digital twin of the asset that can be used to optimise operations, to automated equipment providing real-time progress data that automatically triggers smart contracts to release payment and proceed with the next phase of procurement, data analytics and continued digital disruption will allow the sector to deliver more projects, faster and more efficiently with better outcomes for all involved.

Gilge: In our ‘2019 Global Construction Survey’, ‘innovative leaders’ were rapidly piloting and adopting new technology around smart sensors, automation, augmented reality, radio frequency identification (RFID) and 3D printing to transform how projects are delivered. Their approaches are enabled by embedding innovation into their overall business model and strategy through technology roadmaps supported by dedicated innovation teams, organic and inorganic innovation investments and targeted pilots and partnerships to rapidly test, iterate and learn. Geographic, sector and supply chain fragmentation of the industry complicates innovation investment decisions as the benefits often get lost, distorted or passed along to other parties. The final challenge will be overcoming the industry fragmentation dynamics in ways that help the sector collectively adapt and integrate people and project culture, governance processes and technology to achieve optimal project and team performance.

Clay L. Gilge is a principal at KPMG and leads its major projects advisory practice. He has more than 24 years of experience assisting energy, technology, infrastructure, manufacturing and healthcare organisations to improve the performance of their construction portfolios, programmes and projects. He is the chief architect behind KPMG’s global major projects methodology as well as its industry leading major projects adviser. He can be contacted on +1 (206) 851 2655 or by email: cgilge@kpmg.com.

Jordan Thomson is a senior manager with KPMG Canada’s global infrastructure advisory group. With a background spanning construction management and design engineering across the mining, oil & gas, utilities and infrastructure sectors, he has advised some of the largest and most complex programmes in Canada, specialising in project and programme management, risk management, commercial strategy and operating model transformation. He can be contacted on +1 (416) 228 4320 or by email: jordanthomson@kpmg.ca.

Suneel Vora is a partner at KPMG’s member firm in India and has more than 18 years of professional experience in offering consulting solutions for planning and implementation of capital programmes and projects. He serves project owners, investors, financiers and bankers, engineering, procurement and construction (EPC) contractors, regulators and governments across industry sectors, in enhancing project and portfolio performance, reducing time, cost and risk. He can be contacted on +91 98 2004 1112 or by email: suneelvora@kpmg.com.

Gary Webster is the national leader of KPMG Canada’s infrastructure team and the head of KPMG global infrastructure’s capital projects leadership practice. He has been a practicing professional engineer for more than 35 years and specialises in the organisation, procurement and implementation of large-scale infrastructure projects for both public and private sector participants. He can be contacted on +1 (604) 646 6367 or by email: gwebster@kpmg.ca.

© Financier Worldwide

THE PANELLISTS

Clay Gilge

Jordan Thomson

Suneel Vora

Gary Webster

KPMG