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What could the world of construction look like in 2030?

Even for an industry that has experienced its fair share of volatility, the past few years have been dramatic for engineering and construction (E&C). COVID-19, massive supply chain disruption, continued material shortages, raging inflation, the war in Ukraine, and major talent gaps.

And these phenomena come on top of longstanding challenges of a variable performance record, poor productivity, inability to attract graduates and school leavers, boom-and-bust economic cycles, low contractor margins, and continued lack of cost certainty for owners. With some exceptions, the E&C sector remains a technology laggard and is struggling to get to grips with data and analytics — despite swimming in data. Major technology players are already eying up the sector, seeking to use their data mastery and fast innovation to steal market share.

Environmental, social, and governance (ESG) goals are also having a huge impact. On the one hand, E&C companies aim to be at the frontline of delivering sustainable infrastructure, energy production, factories, offices, schools, hospitals and homes, as well as carbon capture, biodiversity and other sustainability projects. On the other hand, the industry is a massive emitter of carbon, with concrete alone responsible for approximately eight percent of global CO2 annually.

The engineering and construction industry in the Philippines has been immensely affected by the COVID-19 pandemic. In addition to health and safety concerns, the pandemic has highlighted the need for sustainable solutions in the industry. As the world moves towards a greener future, the E&C industry in the country also started embracing sustainable practices to reduce its impact on the environment.

KPMG in the Philippines Deal Advisory Head and Infrastructure Sector Head Michael Arcatomy Guarin shares that "implementation of green building practices through the use of materials with low environmental impact, energy-efficient systems, and sustainable site development can help reduce the environmental consequences of construction projects.”

The future of construction and engineering in the Philippines is expected to be shaped by various factors in the coming years, including technological advancements, sustainability reporting, infrastructure development, and economic shifts. Hence, business leaders in the E&C sector must commit to their ESG goals through data-driven digital innovations, performance evaluation and risk management.

Michael Arcatomy Guarin
Deal Advisory Head and Infrastructure Sector Head
KPMG in the Philippines

The E&C industry in 2030

It’s now 2030 and the sector has made huge strides, working together to modernize, innovate and consolidate, learning lessons from other global industries and harnessing technologies and new ways of working. E&C companies are in much better financial shape, with healthy margins and the ability — and courage — to say “no” to high-risk or high-carbon projects. The threat from technology disruptors has not gone away, but the sector is adapting well to new competitors and welcoming them into the construction ecosystem. And the structure of E&C is less fragmented, with greater collaboration.

A step change in project performance

Productivity has improved dramatically, with a much higher record of on-time, on-budget, high-quality projects. The widespread use of data sharing, common data standards, and interoperability creates wide-ranging transparency across the value chain, enabling project managers to identify and address issues swiftly, to help minimize delays and cost overruns. Whether it's a measurement error, a leaking pipe, or damage to a vital substructure, the early resolution means that projects can resume with limited negative impact.

Decision-making has been greatly enhanced through the use of IoT, AI, ML, automation, and analytics, with sensors able to detect problems that would previously have been unseen. The E&C industry's productivity has improved immeasurably, thanks to up-to-the-minute benchmarking on why certain teams are not performing.

And the growing application of D&A has unlocked the potential of predictive forecasting and maintenance, enabling project managers to keep clients well-informed of progress, tackle potential problems before they arise, and keep equipment operational to help minimize shutdowns. 

Pushing the innovation envelope

In a few short years, E&C has embraced innovation with open arms. Companies have adopted startup mentalities, through innovation labs or hubs separate from the main business, where employees are encouraged to take risks to accelerate and improve performance. Many have also acquired startups from within and beyond the sector and worked in partnership with other leading-edge players in the construction ecosystem. And the sector has gained mastery over data, with E&C companies frequently considered to be “data companies that build things”. These advances have been helped by an influx of talent from nontraditional sources like data science, AI, and other technology companies, as well as mainstream business candidates attracted by innovation in the sector. 

Risk management from a higher altitude

In 2030, risk management has reached the same levels of maturity that health and safety had achieved by 2023. Thanks to the ability to aggregate risk at an enterprise level, contractors and owners now have a clearer view of portfolio risk. This helps avoid bids that could push the business beyond its accepted risk limit, as well as spotting potentially damaging risks earlier and taking decisive action to prevent project failure.

Increasing use of D&A has led to a better understanding of risk interdependence, both within and across projects. For example, E&C companies can now gain a more accurate view of the impact of disruption to supply chains, worker availability, or material cost inflation, on both projects and the wider portfolio. 

Reliable and resilient supply chains

In 2030, suppliers are treated as partners in strategic innovation, as the industry has shifted from contractual, transactional relationships to longer-term partnerships, where Tier 2 and 3 suppliers are involved much earlier in project planning and conversations, and risk and profit are shared across the supply chain. Consequently, supply chains are far more transparent, making it easier to spot problems and carry out ESG reporting.

The sector has also experienced growth in innovative, localized sourcing, which cuts transportation costs, lowers the carbon footprint, and hedges against the risk of disruption from geopolitical events, resource shortages and climate change. 3D printing has helped this transition. Higher use of renewables reduces emissions and protects supply chains against energy price increases or shortages.

A sector in demand

In a major turnaround, construction has become an industry of choice for graduates and school leavers, offering exciting careers involving technology, design and engineering, working on the cutting edge of innovation. Many of the jobs traditionally carried out onsite have moved to factories and design offices, while flexible, remote working (where appropriate) has become more common, with an emphasis on work-life balance.

The diversity barrier has been overcome, with a huge influx of women, and talent from around the world joining the sector, from a variety of educational backgrounds and disciplines. This has brought exciting new approaches to problem-solving and transformed the image from "hard hat, manual labor" to "slick creators of technologically advanced, beautiful and sustainable buildings and infrastructure". Potential recruits are increasingly attracted to E&C companies by the strong sense of purpose as the industry has embraced ESG and moved away from high-carbon projects.

ESG adoption drives investment

Throughout the 2020s the construction industry was responsible for building the next generation of sustainable infrastructure, including renewable energy facilities, and energy-efficient buildings with low lifetime carbon footprints and low water usage. And the construction value chain has become equally sustainable, with a circular design, sensitivity to biodiversity, and strong support of local communities. Consultations with those impacted by projects are at an early stage and continue throughout the project lifecycle and beyond.

Like any industry, E&C thrives when its customers have an outstanding experience, which means sustainable, circular and fast delivery of high-quality assets that are themselves sustainable throughout their lifetimes. 'Customers' doesn't just mean the owners, but a wide group of stakeholders including those individuals that use the infrastructure and buildings, as well as anyone impacted by them in their community. E&C companies are changing the world, and if the sector can reach the heady heights of this paper's 2030 vision, then a sustainable future is within reach.

The excerpt was taken from the KPMG Thought Leadership publication: https://kpmg.com/xx/en/home/industries/infrastructure/construction-2030.html


© 2023 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more information, you may reach out to Deal Advisory Head and Infrastructure Sector Head Michael Arcatomy Guarin through ph-kpmgmla@kpmg.com, social media or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.