Accenture Plc : Mining and Metals Companies Could Save Billions on Capital Projects, Accenture Research Finds
11/28/2012| 07:05am US/Eastern
Improved front-end project planning can mitigate risks and reduce
cost of increasingly complex projects
Faced with delays and budget overruns - which can add billions to total
project costs - mining and metals companies could significantly reduce
the cost of large capital projects by improving planning and addressing
workforce shortages, according to Accenture (NYSE: ACN) research on
capital projects delivery in the mining and metals industries.
The research was based on 31 interviews with mining and metals
executives with responsibility for capital projects around the world.
Less than a third (30 percent) of the respondents report staying within
25 percent of approved budgets for all projects, and less than a fifth
(17 percent) said they completed all projects within a 10 percent budget
The tremendous scale and complexity of mining projects - which are often
multi-billion dollar investments - mean that budget overruns and delays
in completion are not unusual. Among the contributing factors are
infrastructure needs such as roads, ports and electrical power in less
developed regions; the lack of talent and skilled workforces; and
environmental and regulatory requirements in developed regions. When
asked what typically causes delays in project schedules, survey
respondents cited the availability of talent (57%), new or unconsidered
regulatory requirements (45%) and insufficient detail during the
planning stage (42%). Metals companies tend to have fewer delays and
smaller budget overruns due to the reduced size and complexity of plants
as opposed to mining projects.
Accenture research estimates that metals and mining expenditures for
capital projects will reach more than U.S. $140 billion in 20121,
and between U.S. $1 trillion and U.S. $1.5 trillion during the period
from 2011 to 20252. Even with the current downturn in
commodity prices, long-term demand for minerals and metals, driven by
economic growth and social development throughout the world, continues
to spur investment in mining and metals. With $100 - $200 billion in
annual spend, the impact of project delivery overruns on individual
companies and the industry as a whole is enormous.
"The potential savings and returns through effective management and
delivery of a capital project investment can be huge," said Jose J.
Suarez, managing director for Accenture's North American Mining industry
group and the research lead. "Keeping on budget and within planned
timelines across a portfolio of multi-year projects can save millions
for a company - in today's environment strong project management can be
an important competitive advantage."
More than two-thirds of the survey respondents indicated that their
portfolio of projects will grow larger, and 81 percent said their
complexity will increase. When asked about their top priorities in
optimizing capital project management in response to the expected growth
in project size and complexity, the executives cited ensuring the
availability of the right leaders and talent for project delivery (72
percent), improving front-end planning and scheduling (52 percent),
improved readiness for start-up and a more effective transition from
planning to operations (43 percent), and effective stakeholder
engagement (39 percent).
Based on the research findings, analysis and Accenture's experience
working with mining and metals companies, Accenture has identified five
key areas for improvement in project delivery:
Establish strong project governance and risk management capabilities.
Multi-year capital projects have many variables, making strong
governance and the ability to manage risks essential requirements.
Proactively manage stakeholders' increasing expectations for
sustainability. The already broad range of environmental issues,
including biodiversity, is growing, and concern for sustainability is
becoming a major barrier to moving forward with capital projects.
Optimize scarce talent through portfolio management, organizational
flexibility, selective outsourcing and training. Since talent in a
wide range of areas will be in high demand for many years to come,
companies should find the best ways to leverage resources, develop a
strategic talent plan to identify and train the next generation of
workforces, and improve productivity and safety with more effective
training, especially with new hires who have little or no mining and
Integrate information systems among capital project players.
The progress of a project cannot be accurately measured if proper data
standards are not established at the outset and integration between
the information systems of functional areas and service providers is
not promoted throughout the project's life cycle.
Accelerate operational readiness. A well-planned and managed
handover process - from a completed project to operational readiness -
can help companies avoid rework and delays and support high production
levels from the initial operation of the mine or plant.
"While it is difficult to anticipate all of the changes that can arise
from a multi-year project, companies can improve their project
management delivery, reduce risks and boost returns on investment by
looking beyond aspects of engineering and procurement. To be leading
performers, companies will need to increase their focus on governance,
human capital strategy, and integrating information systems with
business suppliers and operations," said Suarez.
1Accenture Research, © 2012 Capital IQ.
Research analysis, Industrial Info Resources, Oxford Economics.
About the research and research methodology
Achieving Effective Delivery of Capital Projects, Insights from the
Accenture global survey of the mining and metals industries is based
on primary research conducted by a third-party firm on behalf of
Accenture. Thirty-one interviews were conducted with executives in the
metals and mining industries between February and May 2012. All
respondents were C-level executives and decision makers or influencers
in the management of capital projects in their organizations.
Interviewers conducted a phone survey with executives in North and South
America, Europe, South Africa, India, Russia and China. Accenture
defines a capital project as a long-term investment in excess of $50
million, involving either greenfield or brownfield projects. For this
survey, Accenture focused on delivery of major assets costing at least
$1 billion to build and taking more than a year to deliver. To gain
insights on leading practices, Accenture also looked at characteristics
of companies that self-reported higher scores for capital project
Accenture is a global management consulting, technology services and
outsourcing company, with 257,000 people serving clients in more than
120 countries. Combining unparalleled experience, comprehensive
capabilities across all industries and business functions, and extensive
research on the world's most successful companies, Accenture
collaborates with clients to help them become high-performance
businesses and governments. The company generated net revenues of
US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page
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