Study on Project Schedule and Cost Overruns - Expedite Infrastructure Projects

Study on Project Schedule and Cost Overruns - Expedite Infrastructure Projects Study by Project Management Institute & KPMG

Expedite Infrastructure Projects

Raj Kalady, Managing Director, Project Management Institute (PMI), India

The KPMG in India – Project Management Institute (PMI) study was initiated on the request of MoSPI, which highlights the major reasons for schedule and cost overruns across major sector's infrastructure projects. While some projects are impacted due to external factors which are beyond the control of the implementing agencies such as land acquisition, regulatory approvals, etc., majority of projects are delayed by factors which can be controlled at the project level through proper planning and project management. The study also highlights the severe skill shortage and the growing demand-supply gap for qualified project professionals affecting the infrastructure sector in India. Project owners feel this is a long-term issue which not only makes the projects more expensive and risky, but also results in compromise on quality as well as timelines.

Today, India is one of the leading outsourcing hubs in the world. However, the world judges us not just by the talent we have to offer, but also on the basis of our infrastructure capabilities. India has set an ambitious target of investing $1 trillion in infrastructure during the Twelfth Five Year Plan period. Given this factor, infrastructure development has been a key focus area in every Indian state more so in the recent past. At the center as well, big budgets have been allocated for infrastructure development in every Five Year plan. However, the country has consistently fallen short of meeting such targets over the last few years. These projects have been invariably riddled with issues of time and cost overruns. With the objective of finding out the reasons for such schedule and cost overruns, Ministry of Statistics and Programme implementation (MoSPI) recommended PMI to conduct a study, in consultation with KPMG to highlight the major reasons for the time and cost overruns across major sectors in infrastructure projects. The projects surveyed in this report are from nine sectors in the Infrastructure space viz. Power, Petroleum, Coal, Steel, Railways, Roads & Highways, Civil Aviation, Ports & Shipping, and Telecom.

It is a known fact that a large number of infrastructure projects in India have been delayed due to regulatory clearances, environmental issues and problems pertaining to land acquisition. Also, there are challenges in the tendering phase that affect viability of projects thus delaying implementation, construction phase is beset with over-runs and disputes and last but not the least; provider skills are weak all across the value chain. Given the critical role of infrastructure in ensuring a sustained growth trajectory for India, it is imperative that we identify the core issues affecting completion of infrastructure projects in India and chalk out initiatives that need to be acted upon in short-term as well as in long-term. This paper (based on survey) attempts to identify these pertinent issues and also brings out how professional project management practices can bring about a positive change in the completion of projects on time and within budget.

Almost 79% of the report survey respondents felt that the infrastructure sector faces an acute shortage of skilled project managers. This absence of project managers with the requisite skill sets has emerged as the major cause for time and cost overruns. Young graduates today are being lured away be other seemingly lucrative opportunities and project management education and training is not yet getting the priority it requires.

Though organizations are realizing the growing need for structured project management, many are looking at short-term training programs to enhance the skill sets of their project teams. However, the situation warrants a more serious approach. The survey reveals that by 2022 Indian infrastructure sector is likely to have a shortage of around 3 million project professionals including project managers, civil engineers, planners, surveyors, safety professionals, etc.

The government too realizes the urgency of meeting this skill dearth. In the Twelfth Five Year Plan, the government has plans to focus on improving the project management skills across the country to get better returns from public investment in infrastructure and also in the social sectors. Project management, with a view to deliver on time and within cost, is a learnable capability that can be institutionalized in India. There is therefore, a pressing need for industry and academia to realize this growing need. Organizations that employ qualified project managers must encourage and support their professional growth. In addition, organizations must start insisting on hiring qualified project managers. This will provide academia the impetus required to introduce project management into their curriculum. Infrastructure plays a paramount role in the economic growth of a country. Infrastructure investments in India have been growing on a consistent basis. In each five year plan, the Government sets an ambitious target which is higher than the previous one. Although, the sector is considered to be a key driver of economic growth, time and cost overruns threaten to limit the sector's potential to help achieve the desired growth and ensure efficient capital expenditure.

NBMCW April 2014

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