November 19, 2013

Industry sees bright future: survey

A survey carried out by giant KPMG has found that the majority of companies in the global engineering and construction sectors “have fresh optimism” and anticipate further growth across the industry.

“After prolonged economic uncertainty, companies are experiencing a general increase in backlogs and margins, showing an overall positive outlook in the industry,” the audit, tax and advisory firm said in a news release.

The survey, entitled “Ready for the Next Big Wave?,” was conducted early in 2013 through face-to-face interviews with 165 senior leaders from leading engineering and construction companies in 29 countries worldwide.

Nineteen per cent of respondents — seven from Canada — were based in the Americas. KPMG said respondent companies’ turnover ranged from less than US$250 million to more than US$5 billion, with a mix of operations from global through regional to purely domestic.

The survey found that more than 50 per cent of respondents from the Americas Europe, Middle East and Africa and Asia-Pacific regions say their companies experienced a backlog increase of at least five per cent from 2012 to 2013. “Though margins are not rising at the same rate as backlogs, 80 per cent of respondents say their margins will either remain stable or increase more than two per cent in the same period,” KPMG said.

In Canada, KPMG said the majority of respondents cite:

—A reported backlog increase of more than 10 per cent in 2012, as compared to the end of 2011;

—Stable profit margins at the end of 2012 (compared to 2011); and

—Stability in 2013 volume of orders (compared to 2012).

Canadian Construction Association president Michael Atkinson deferred comment on the findings, saying his organization has not yet reviewed the report “in any detail.” Neither has the Association of Consulting Engineering Companies-Canada.

While the survey shows optimism across the global construction and engineering industry, KPMG said there are still barriers to growth.

“The industry is heavily reliant on national governments’ infrastructure plans for future growth, with two-thirds of respondents citing this as the single most important market driver.”

Risk management continues to remain a challenge for the sector.

KPMG said heavy investments in risk management over the past decade are paying off with the majority of respondents saying their risk management programs have improved project performance.

“However, 77 per cent claim the existence of underperforming projects are due to project delays, poor estimating practices and failed risk management processes.”

Augusto Patmore, partner, advisory, global infrastructure advisory & mining, KPMG in Canada, said Canadian respondents see stability, leading to cautious optimism.

“The survey results suggest that growth is going to be slow but there are a number of factors that will support steady activity, including demand for new infrastructure projects in the mining and energy sectors, government funding for public transit and population growth. In the next few years, companies will be tested on their ability to diversify, manage labour cost escalation and deploy human talent in remote areas.”

Lorne Burns, partner and national industry leader, real estate, KPMG in Canada, said a key theme that is being seen, particularly in Canada, is the focus on ethical practices and enhanced standards particularly over bid and tendering processes.

“Canadian respondents believe that effective risk management is critical to future growth,” he said. “As the sector looks forward, there will greater accountability for effective processes and control over construction practices.”

The survey was conducted by KPMG International.

Follow Patricia Williams on Twittter @Patricia_DCN.

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