• Productivity growth – remains an issue in Australia – 30 years of relatively weak productivity is equal to an estimated $47 billion in lost opportunity.
  • Project performance – 87 percent of respondents said project performance a continuing issue.
  • Completion pressures – Only 50 percent of project owners are meeting completion deadlines.
  • Risk management issues – 37 percent of respondents said they have missed budget and/or scheduled performance targets due to lack of effective risk management.


Lack of productivity gains and risk management pressures are two of the biggest challenges facing the Australian construction sector according to the KPMG Global Construction Survey 2023. However, a focus on both technology and ESG is expected to deliver positive opportunity for the sector the findings show.

“Project performance was highlighted as a continuing issue in the survey,” said Nigel Virgo, KPMG National Sector Leader, Property Construction and Logistics. “We’d point to the finding that 87 percent said their projects are coming under greater scrutiny – and only 50 percent of project owners are meeting completion deadlines.”

Mr Virgo said that, in addition, 37 percent of respondents revealed they have missed budget and/or scheduled performance targets due to lack of effective risk management.

“These findings underscore the need for risk rebalancing in the Australian construction sector. It’s a survival issue for many now,” he said. “In addition, while many of the older ‘fixed priced’ projects are coming to an end, there is still significant concern around further insolvencies across the construction supply chain. The construction industry is looking to rebalance how project risks are shared with clients, builders, and subcontractors – and focus on delivering productivity gains. Technology is one of the pathways to success – together with solutions such as modular manufacturing.”

Risk sharing opportunities

KPMG says construction firms will be drawn to relationships with those who understand cost pressures and that help mitigate outsized risks. Risk sharing contracts for contractors and subcontractors will help reduce the risk of further insolvencies across the construction supply chain. As well as managing risk via improved contracting arrangements, modular/off site manufacturing is gaining traction. Globally, the findings underscore this approach.

  • 25 percent of respondents reported that they leverage these approaches across all projects
  • 61 percent said they are starting to adopt this approach on a few projects
  • 42 percent of respondents are turning to process automation, with the use of virtual reality, project management information systems, drones, and AI to reduce costs pressures. 

Increased use of technology

Nigel Virgo said a second pathway to improved productivity was through the use of technology.

“We’re seeing a significant increase amongst KPMG clients using technology to help manage risk,” he said. “They are using modelling to problem-solve off site, ahead of a project kicking off. However, whilst companies are adopting technology, we see very few companies applying these across all projects. A lack of consistency across the industry is preventing the realisation of the full benefits of such innovations.”

  • 42 percent of respondents are using or starting to use robotic process automation. Take up of virtual reality, project management information systems, drones, smart sensors and AI has also increased significantly.
  • Use of AI is on the rise – in 2018, just 23 percent of respondents had adopted or were looking to adopt AI. In 2023, that figure has risen to 37 percent.
  • AI use is typically being seen in the form of digital twins, smarter construction equipment, data, document management, and enhanced safety and communication.

Gains in modular manufacturing

According to the survey, the use of modular/off site manufacturing is also gaining traction, particularly overseas. “This is a significant emerging trend especially in the Northern Hemisphere,” Nigel Virgo said. “Modular manufacturing addresses challenges like supply chain disruption, labour shortages and rising interest rates, as well as reducing carbon footprint, improving environmental impact and enhancing worker safety.”

  • 25 percent of respondents reported they are leveraging this approach across all projects
  • a further 61 percent said they are starting to adopt modular manufacturing on a few projects.

KPMG said there were downsides to the modular manufacturing approach including the challenges of plant capacity and financing the number and scale of modular projects (modular financing typically provides 45-50 percent unlike traditional projects where developers can get financing for 80 percent of project costs).

“Strong vertical integration across the project delivery lifecycle is also needed to deliver the potential such as transportation to site to avoid damage,” he said.

Integrating ESG

Given the broader energy transition as the market looks towards net zero targets of 2030, 2040 and 2050, ESG has become an integrated part of sector leaders’ thinking.

“A key finding is that 50 percent of construction and engineering companies seeing the opportunity to gain a competitive edge through investing in ESG initiatives,” said Mr Virgo. “When asked about the key benefits of embedding ESG into capital projects and programs, the top two responses were reputational improvement and competitive advantage. Diversity, equity and inclusion – relating to the ‘S’ in ESG – was ranked as the third most important factor in determining future success by respondents who believe diversified workplace demographics will help address disruption.”

He said rapid change is being seen with a shift away from traditional hard-hat on-site positions towards technology-related capability. This will also help attract the better talent by offering fulfilling careers that include flexible working conditions and greater work-life balance.

  • 32 percent of project owners also recognise the need to integrate ESG into both their projects and reporting in order to enhance access to capital to fund their projects.

Focus on embodied carbon

KPMG highlighted that half of all carbon emissions are emitted before a building is operational as a result of embodied carbon.

Nigel Virgo said: “Carbon capture is becoming more relevant for our clients as increasing Scope 3 regulations come into effect globally. Globally we are seeing owners asking service providers to disclose embodied as well as operational carbon. Decarbonisation has become a central part of any construction project with respondents listing the three most important practices as energy efficiency, reducing construction waste, and more efficient use of materials.”

Mr Virgo pointed to the work of the KPMG Origins team in its development of an ‘Asset Impact tool’ – which has an application for the construction sector. This block chain-based technology can track and trace materials allowing visibility and control of supply chain, and report on the embodied carbon in a building. 

For further information

Marjorie Johnston
M + 61407 329 430