Industry Insight

APAC construction sector shows strong optimism and investment post-COVID with digitisation tipped as key growth area, InEight Outlook finds.

TAKING THE PULSE OF THE

INDUSTRY

IN JULY, INEIGHT LAUNCHED ITS FIRST GLOBAL CAPITAL PROJECTS OUTLOOK REPORT. ROADS & INFRASTRUCTURE SITS DOWN WITH ROB BRYANT, INEIGHT’S EXECUTIVE VICE PRESIDENT FOR THE APAC REGION, TO DISCUSS SOME OF THE KEY FINDINGS FROM THE REPORT.

Rob Bryant, InEight’s Executive Vice President for the APAC region. The construction industry, like all industries, faced tremendous challenges during 2020. But despite difficulties like border closures, material shortages and scarcity of skilled workforce, construction professionals in the Asia Pacific (APAC) region remain fairly optimistic about the industry’s future, as InEight’s first Global Capital Projects Outlook report found earlier this year.

For its first [with potentially more] of such industry reports, InEight, a global leader in construction project management software, worked in conjunction with a global market research partner to survey 300 of the world’s largest capital project owners and construction professionals over six weeks in February and March, 2021. Survey questions were designed to gauge general confidence and optimism levels across the industry, and assess track record, plans and attitudes towards digital transformation.

As Rob Bryant, InEight’s Executive Vice President for the APAC region explains, respondents were selected to represent both project owners and contractors, with equal proportion from the three focus regions – namely the Americas, Europe and APAC.

“We wanted the report to include a broad range of organisations through the different tiers of the construction industry, both in the contractor space and in the owner space,” Bryant tells Roads & Infrastructure.

OPTIMISM REMAINS HIGH The report paints a positive picture of the level of optimism in the construction sector, with 93 per cent of respondents in the APAC region either fairly or very optimistic about their future, and 89 per cent saying they believed their organisation to be resilient.

Looking at the Australian industry from a privileged position of being able to compare it globally, Bryant attributes this high level of optimism to the rise in capital project spending and how the sector has worked its way through the challenges of 2020.

“With a project pipeline of around $100 billion over 10 years that the Australian Government has either committed to or brought forward, there’s obviously a cascading effect through all the different sectors and players in each sector.

“In 2020, the construction sector in APAC was one of the few sectors able to continue in a fairly seamless fashion. The industry, of course, faced a lot of challenges, but it wasn’t impacted the way some other sectors were. I think that also helped to make organisations feel that if they’ve been able to get through 2020 and maintain business, they could do that in the next few years as well.”

A GROWING INTEREST IN DATA Understanding the industry’s attitude towards digital transformation was another key objective the InEight Global Outlook report pursued.

In the APAC region, 78 per cent of respondents considered digital transformation as their biggest short-term source of opportunity, with data analytics, artificial intelligence and machine learning considered most critical for their success over the next one to three years.

For Bryant, the most interesting outcome was to see the level of interest in digitalisation coming from project owners.

“Traditionally, owners did not pay such close attention to project controls and data. They tended to just receive a project from the contractor, and they would expect the contractor to provide all of that information at the point of handover. But what we are seeing now is that government bodies and parties such as Transport for NSW, the North-East Link Project Authority and others are taking a very active part in requiring project data to be provided and expecting not just

their organisation, but the contractors’ organisations, to be digitally organised,” says Bryant.

“That’s encouraging because it shows that there’s a level of awareness and a commitment to see a high standard of data around projects,” he adds.

While the New South Wales and Victorian state governments have long been pioneers in adopting digital transformation initiatives, Bryant says Queensland and Western Australia are joining the party.

“I think in order of activities, certainly on the eastern states, New South Wales and Victoria have been first off the block. But we are seeing Queensland and Western Australia also being very active in those initiatives around digital transformation,” he observes.

On the contractors’ side, Bryant says higher levels of digital technology adoption is being regarded as a key differentiator in winning contracts.

“What we are seeing – and it’s brought on, to some extent, by that level of optimism and opportunity in the survey – is organisations that are using technology as a differentiator to appeal to the owners, to say that they’re not just providing the construction and engineering services, but they are also providing that digital component of visibility and transparency around what they do,” says Bryant.

“I think those ‘haves’ and ‘have-nots’ will become key points for organisations in the future. We are seeing that already, where some contractors are being brought into alliances and becoming desired partners on projects because of their technological abilities, in the same way that organisations previously had a reputation for their technical abilities.”

BETTER DELIVERY OUTCOMES For both owners and contractors of mega construction projects, delivering projects on time and on budget is one of the biggest outcomes they can achieve with higher digitalisation. When asked about the proportion of construction projects that were delivered on or ahead of their original approved schedule in the InEight survey, contractors reported that they achieved this on average 51 per cent of the time. Similarly, contractors said their projects were delivered on or under the original approved budget 51 per cent of the time, on average.

Delivering projects on budget remains a challenge within the APAC region, with 20 per cent of APAC respondents revealing the average cost of a project that goes over budget is 15-20 per cent over the original approved budget.

Bryant says the observations in the Outlook report are consistent with what InEight had presumed all along.

“A 51 per cent on-time delivery rate is a very low number. That means you can flip a coin and tell whether a project is going to be delivered on time or on budget. So, the opportunity to improve that is quite dramatic,” he says.

DIGITAL INVESTMENT INCREASING Interestingly, there seems to be a high level of confidence among APAC respondents about their organisations’ abilities to deliver projects on time and on budget in the future. While the average delivery delays and budget overruns are more or less the same as the global average, 89 per cent of APAC respondents are confident of completing future projects on or ahead of schedule, and 91 per cent are confident of doing so on or under budget.

Bryant justifies that higher confidence in the APAC region with the quick uptake of digital technologies.

“The construction industry has traditionally been very slow to invest [in digital tools]. If we look back over the last decade or two, construction has had a poor reputation for investing in technology, and the reports conducted by some of the major institutions in the past have highlighted that. Investment in technology from the construction sector was always behind that of the agriculture and manufacturing sectors over the last decade.

“But we are starting to see the construction sector pick up [speed], so the level of investment is increasing beyond that 1 to 1.5 per cent of revenue. It is still very low compared to some other sectors, but the engineering and construction sectors overall are investing more and are looking at that as a point of difference in some cases,” he observes.

The APAC region, in particular, appears to have a greater awareness of the importance of digital transformation, with more than half of respondents saying lagging behind competitors in their digital transformation efforts presented the biggest risk to their organisations, compared to 30 per cent in the Americas and 37 per cent in Europe.

“There is obviously a lot of work to do, but the fact that the contractors are conscious of the challenge at hand is encouraging, because being conscious is the first step,” says Bryant.

PLANNING AHEAD With the region showing a strong appetite to invest in digital transformation, Bryant says feedback received from the Global Capital Projects Outlook report enables InEight to reflect the results in its roadmap.

“We consult with the industry to develop a lot of the workflow processes that we cater to, and this [report] helps us to do that with more accuracy,” he says.

“So, as we look, for example, at demand around on-time and on-budget delivery, it is helping us to focus our efforts on products such as the InEight Schedule and the InEight Estimate software to help consider and mitigate project risks further and make time-phased forecasting even easier for our clients. These things are really important and [the report] helps us to validate our thinking and feeds directly into our roadmap.”

With InEight’s first Global Capital Projects Outlook report such a success, Bryant does not rule out the possibility if its continuation in the future.

“It’s been such a success for us in validating our thinking and helping to form our roadmap. Though in the future we might re-think the frequency or the regionality of the survey, I think as an exercise, it has definitely been worthwhile as it helps us make sure we are in tune with the industry and validate all the things that we believe we’re right in pursuing.”

“I THINK THOSE ‘HAVES’ AND ‘HAVE-NOTS’ WILL BECOME THE KEY POINTS IN ORGANISATIONS IN THE FUTURE. WE ARE SEEING THAT ALREADY SOME CONTRACTORS ARE BEING BROUGHT INTO ALLIANCES AND BECOMING DESIRED PARTNERS IN PROJECTS BECAUSE OF THEIR TECHNOLOGICAL ABILITY, IN THE SAME WAY THAT ORGANISATIONS PREVIOUSLY HAD A REPUTATION FOR THEIR TECHNICAL ABILITIES.”