achieving high performance in capital projects

7/31/2019 Achieving High Performance in Capital Projects

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Achieving High Performance in

Capital ProjectsSecuring Indias future through infrastructuredevelopment


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Table of ContentsForeword 3

Executive summary 5

The infrastructure conundrum 9

Bridging infrastructure deficits: Challenges to address 13

Operational levers for excellence in project execution 19

Accentures framework:Building blocks to high performance 23

Market focus and positioning 26

Distinctive capabilities 28

Performance culture 34

Creating an enabling environment 36

Closing words 39

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India is alive with possibility. Whilemany economies are struggling toget back on their feet after the globaleconomic crisis, the Indian economycontinues to astonish. In 2010, India is

set to emerge as the worlds second-fastest-growing major economy. Butif the nation is to merit its newlyprominent place on the global geo-economic map, it is imperative toplot a more stable, broad-basedand inclusive growth trajectory.

There is no mystery about what it willtake to plot that course. It calls foraccelerated and balanced growth ininfrastructure and capital-intensive

industries that will help unleashproductive forces across all sectorsand all regions in India. It demandslarge, complex projects that connectrural communities to markets,expand Indias manufacturing baseand achieve macro-developmenttargets. Moreover, the new, lessinflationary growth trajectoryalso will demand unprecedentedattention to efficiencya whole-hearted, open-ended, nationwidecommitment to quash time and cost

overruns, waste and accidents.

Businesses spanning the infrastructurevalue chain will need to think and

Forewordact differently to fully engage withthis growth opportunity. But howcan they do so? What are the newpriorities for Indias business leaders?

Accenture launched a large-scaleresearch effort to get answers tothose questions. We acquired amore nuanced understanding of thechanging priorities and challenges forthe infrastructure industry. We alsowere focused on identifying evolvingsources of competitive advantagewithin the infrastructure and capitalprojects industry during these excitingtimes. Our study began with detailed

interviews of the business leaderswhose organizations are shaping thepresent and future of Indias physicalinfrastructureroads and bridges,airports, ports, electricity, gas,telecommunications, water supply andrailways. We also talked to executivesat capital-intensive industries suchas oil, cement and steel. Intervieweesincluded business leaders from entitiesowning infrastructure and capitalprojects, as well as engineering,procurement and construction(EPC) companies. And we spoke tothe leaders of large contractors,senior functionaries from policy andfinancial institutions, and executivesfrom consulting organizations. Inall, we were able to conduct 25thought-provoking discussions.

The results of our research areinvaluable. Blending insightsgathered during interviews andextensive secondary analysis with

Accentures time-tested HighPerformance Business research, wehave developed a robust frameworkfor achieving high performance incommissioning physical infrastructureand capital projects throughexcellence in project execution.

Our framework identifies threedistinctive capabilities thatorganizations must build todifferentiate themselves from thecompetition: an empowered talent

pool, innovation and localizationand a collaborative ecosystem.Through examples and case studies,this report shares rich insights into

how leading companies acrossIndias infrastructure and capitalprojects industry are focusing theirenergies to build such capabilities.

But we do not stop at identifyingdistinctive capabilities. The newAccenture framework enables us tooffer a set of six action points thatbusiness leaders can use to buildthese capabilitiesand thus developa performance culture within theirorganizations. Many of the actionswe proposeempowering projectmanagers, fostering a best-in-classoperating environment and nurturing

a learning environmentcombineto deliver a powerful incentiveto go back to basics,but withfar greater levels of expertise.

The challenge to build India's stronginfrastructure is not only borne byIndias business leaders. The sizeand scale of investments in theinfrastructure and capital projectssector make it imperative for industry,government and other stakeholdersto collectively find ways to foster a

predictable and enabling businessenvironment. While the list ofissues to be addressed is long, thisreport identifies three critical waysto achieve excellence in projectexecution: creating talent pools,streamlining bidding and regulatoryprocesses such as land acquisitionand environmental clearances, andresolving disputes in a timely manner.

It is Accentures conviction that a

concerted focus on infrastructurewill lay solid foundations for Indiasinternational competitiveness. Weare pleased to see a wide range ofcompanies in the infrastructure andcapital projects industry beginningto lay such foundations. And we arecommitted to working as a trustedpartner with those organizationsand many others like them tohelp India realize its potential asa global economic powerhouse.

Sanjay Dawar

Sanjay DawarDeputy leadmanagementconsulting, India, andmanaging partnersupply chainmanagement, Asia Pacific


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Executive summaryThe efforts are plain to see from

Mumbai to Chennai and from Patnato Pondicherry: Everywhere, cranesand excavators are raucous witnessesto Indias enormous investmentsin physical infrastructure.1 Theubiquitous construction equipmentis the outward sign of a nationbusy commissioning projectsin infrastructure and capital-intensive industries such as oil,coal, cement and steel, at a speedand on a scale never before seen.

Yet, the vast public-sector budgetcommitments and all-too-obviousnationwide need for infrastructureupgrades are no guarantee of successfor players in those industries. Inmany cases, infrastructure andcapital projects are suffering withstaggering overruns in time andcost. As a result, commissioningprojects without cost and timeoverruns has become the new growthimperative within these industries.

According to business leaders,policymakers and consultingexecutives interviewed as a part ofthis research, excellence in project

execution is key to effectively

address the new growth imperative.

Therefore, we recommend aframework (illustrated in Figure 5 onpage 25) that can help asset owners,EPC companies and large contractorsachieve high performance ininfrastructure development throughexcellence in project execution.According to this framework, toachieve high performance, companiesmust consistently strive to balance,align and renew three essential

building blocks of high performance:

Marketfocusandpositioningdecisions regarding whereand when to compete

Distinctivecapabilitieshard-to-replicate capabilities thatdefine how businesses compete

Performanceculturecommonmindsets relating to culture,leadership and the workforce

Market focus andpositioningThe decision to work on specificprojects is intrinsic to the corestrategy of a company and is bestguided by the companys long-termvision and strategic fit. While it istoo ambitious to recommend specificmarkets upon which companies mustfocus, following are strategic insightsAccenture has to offer on howmarket focus becomes an important

building block in helping companiesachieve high performance throughexcellence in project execution.

Select projects through

careful analysis

High-performance businesses carryout comprehensive and systematicanalysis to understand budgetaryand revenue implications of: delaysin acquiring regulatory approvals,escalations in cost of raw materialsand other relevant key factors.This analysis enables them to focuson right projects, with the rightsize, in the right geography.


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Leverage relative diversification

High-performance businesses utilizetheir presence across a portfolio ofsegments in different infrastructureand capital project verticals to drawkey lessons to be shared across teamswith the goal of completing projectson time, reducing risks and cuttingcosts. It also helps develop robustrelationships that can be leveragedto efficiently execute projects inother growth markets. One of Indiaslargest engineering and constructioncompanies, keen to leverage itsshallow-water pipeline experiencein the area of offshore projects,has executed a memorandum ofunderstanding with a shipyard todevelop a fabrication facility foroffshore platforms, rigs and vessels

for petrochemicals and refineries.

Constantly move up the value chain

Backed with deep industry knowledgeand committed leadership, high-performance businesses rapidly moveup the value chain, enter markets forhighly advanced infrastructure andcapital projects, and set very highbenchmarks in various aspects ofproject execution in these markets.

Distinctive capabilitiesAccenture has identified a setof three capabilities which canhelp companies differentiatethemselves from the competition.

Empowered talent pool

With talent in short supply acrossall levels, companies must instituteways of retaining and empoweringtalent to build a cadre of experiencedproject managers and a pool of

skilled workers capable of providinginnovative solutions. For instance,Bharat Oman Refineries Ltd. hascreated incentives for its talentedproject managers and engineersto work in remote locations suchas Bina, in Madhya Pradesh, byproactively investing in developmentof a world-class social infrastructurearound the project site. Thecompany is investing in the futureof its workforce and their families

at Bina by helping set up a state-of-the-art school and a hospital.These measures also are helpingraise the infrastructure profile of

Bina, thus earning the trust andsupport of the local populace.

Innovation and localization

To be a high-performancebusiness, a company must notonly constantly focus on buildingand upgrading technology and

talent pools but also becomeadept at innovatively utilizing theirtalent and technological assets toovercome location and project-specific obstacles. For instance, KECInternational has mastered the artof innovating, with the help of itssuperior talent and technology pool,on site. In one of its recent projectsin Saudi Arabia, KEC was requiredto cross six 230 kV energized linesin a single span for the construction

of an overhead D/C transmissionline. The company used innovativetechniques and carried out hot-linestringing. KEC used guns to throwropes across lines and also put to useits state-of-the-art, preassembledrider poles and cranes. This helpedthe company save manpowercosts and avoid resource idling.

Collaborative ecosystem

To be a high-performance business, a

company must focus on creating anecosystem that treats subcontractorsand the onsite workforce ascollaborators, by clearly articulatingtheir roles and responsibilities. Thisleads to a reduction in contractbreaches and painful litigation. Ithelps to build trusted teams acrossfunctions that can be leveragedacross projects. For instance, TataRealty and Infrastructure Ltd.(TRIL) has adopted the AllianceContracting approach to ensure

timely completion of its Rs 3.6billion (US$780 million) IT andITES SEZ in Chennai. The companyhas signed a Project AllianceAgreement (PAA) with theircontractors, architects, engineersand consultants. As a part of theagreement, TRIL has created a virtualcompanyAlliance 1stin whicheach participant company deputesits best resource as employees ofAlliance 1st. The company plans

to save up to 5 percent of theanticipated construction cost; ithas already achieved a significantmilestone5.3 million man hours

clocked in May 2010, without anylost time due to injuries onsite.

Performance cultureTo nurture the organizationalmindsets required to build threedistinctive capabilities, Accenture

recommends six actions:

Empower project managers

Businesses must take deliberatesteps to empower project managersto make local decisions that arerelevant to the projectand to acton those decisions. It is crucialto be able to create a pool ofproject managers and engineerscapable of taking tough decisionsin a responsible manner.

Inject innovation culture into

the organizations DNA

Companies need to institutionalizethe process of innovation bybuilding a strong R&D tradition.That way, they can create robusttechnology platformsfacilitatingbetter collaboration across internaland external stakeholdersandcreate assets, which employeesacross various levels can utilizeto drive business growth.

Foster a best-in-class

operating environment

Creating a safe and healthy workenvironment must become a businesspriority. It helps retain labor, reducesmigration and helps in developmentof a trusted and productiveworkforce whose skill sets can besteadily enhanced with training.

Create a roadmap for effective

career progressionTop management must take thetime to chart clear career roadmapsfor project managers. By doingso, their companies stand tobenefit from the experience ofthose project managers during theentire life cycle of the project.

Nurture a learning environment

Companies must offer theiremployees full-fledged learning

experience powered by technology.Documenting and sharing failuresand "near-misses" provide invaluablelessons for project teams across


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various verticals. For example, onelarge Indian EPC does not penalizeor fire managers who make errorsin assumptions related to costing,but instead utilizes these scenariosto make the individual and theteam learn from the outcomes.

Leverage IT to improve productivityacross collaborators

Companies must invest in creatinga sound IT infrastructure. If theprocess of reaching and making keyproject decisions is to become moreefficient and inclusive, it is essentialto make information available amonga wide swath of stakeholders indifferent locations at the same time.

Creating anenablingenvironment:action agendaUsing our framework as a basis,industry players should closelywork with government, educationalinstitutions and other relevantstakeholders to create a predictable

and enabling business environmentaimed at strengthening projectexecution.

Creating talent pools

through collaboration

If not immediately addressed, thetalent crisis across all levels willcut short many of the opportunitiesfor infrastructure-driven growth.Accenture recommends creation ofcenters for project managementexcellence to impart necessaryskills to existing mid-level engineersenlisting the joint efforts of thegovernment and industry. Businessesalso can look at f inancing newdepartments in the innovationuniversities being set up by theGovernment of India across thecountry.

Streamlining bidding and

regulatory processes

Bidding, land acquisition and

acquiring regulatory clearancesare the three key areas that mostoften put industry and governmentdepartments in contact with each

otherand sometimes at odds witheach other. Accenture recommendsdevising more mature mechanisms toshare risks and improve efficiencyespecially in the context of issues,such as land acquisition.

Creating mechanisms to resolve

disputes in a timely manner

Delays in dispute resolution oftenreduce stakeholder interests in theproject and exacerbate time and costoverruns, making the project unviablefor the asset owner. Accenturerecommends establishing of a high-powered, fast-track administrativetribunal whose sole job is to resolveadministrative disputes associatedwith the implementation of projectsabove certain investment thresholds.

Closing wordsOver the next decade, infrastructuredevelopment is expected to be asource of continued economic growthfor India and in many other nations.Organizations that are bold enoughto experimentand are committedto delivering excellence in projectexecutionwill gain a considerableadvantage in the immediate future.

It is not an overstatement to saythat the Indian companies that excelwith infrastructure opportunities athome will be well-placed to pursueand capture opportunities abroad.

To be a high-performance businessby excelling in project execution,companies will need to:

Diversifyinrelatedsectorsthrough sound analysis, leveragediversification to excel in projectexecution and single-mindedly focus

on moving up the value chain insectors where they are present.

Institutionalizeuniquewaysto empower and retain talent,create capabilities to innovateand localize solutions and builda collaborative ecosystemfacilitating durable and healthyrelationships among stakeholders.

Nurtureaperformanceculturethat motivates its workforceto learn, innovate and becomeempowered to deliver world-classinfrastructure to the nation.

1 Physical infrastructure in the context ofthis report encapsulates the followingsectors: roads and bridges, airports, ports ,electricity, gas, telecommunications, watersupply, and railways.


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The infrastructure conundrumThe development of physical infrastructure has historically

received inadequate attention in India. A quick comparisonwith China shows the extent to which the sector has sufferedneglect. According to Accenture calculations, Chinas averageyearly public expenditure on physical infrastructure duringthe period 19802000 was 12 percent of its gross domesticproduct (GDP) as compared to a meager 5 percent by Indiaduring the same period. In the year 2002-2003, infrastructureinvestments in India dipped to a low of around 3.4 percent ofIndias GDPthe lowest on record for the period 19612003.2


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Figure 2. Capacity deficits in key infrastructure and capital-intensive sectors as of February2010 during the Eleventh Five-Year Plan.

Steel

Crude oil

Natural gas

National highway upgradation

Electricity

6%

7%

8%

16%

49%

Ports

Airports

Telecommunications

Electricity

Railways

Roads and bridges

Gas

525%

358%

150%

128%

117%

73%

119%

From $3.5 billion to $22 billion

From $1.7 billion to $7.7 billion






Note: Currency in US dollars.

Source: Planning Commission, Government of India and Accenture calculations.

Figure 1. Percentage increase in projected public spending on key infrastructure sectors

during the Eleventh Five-Year Plan over the Tenth Five-Year Plan.

Since 20032004, public spending oninfrastructure has been on the rise. Theaverage yearly public investment inIndias infrastructure during the period20032009 has been consistentlyabove 4.5 percent of its GDP and isexpected to reach a figure of 9.34percent by the end of 20112012.3

The data on projected investmentsin Figure 1 clearly shows that publicspending on key infrastructure sectorsin India during the period 20072012(Indias Eleventh Five-Year Plan)is expected to be much higher incomparison to what was anticipatedto be spent during the period 20022007 (Indias Tenth Five-Year Plan).

Most importantly, gross capitalformation in infrastructure (GCFI)orthe amount of money actually put onthe ground to create infrastructurecapacitiesis set to more thandouble from about 3 percent of GDPduring the Tenth Five-Year Plan toabout 7.55 percent of GDP at theend of the Eleventh Five-Year Plan(20112012). On achieving this number,

India will miss its projected GCFI asa percentage of GDP figure for theEleventh Five-Year Plan by just 0.05percentan exemplary achievement.4

To seize growth opportunitiesevolving from such large realinvestments across a range of physical

infrastructure sectors, coupled withthe rapid expansion in consumerdemand for housing, automobiles andconsumer goods across urban andrural markets, a number of privateand public players are investingaggressively to increase theircapacities in capital-intensive sectorssuch as oil, cement and steel.

However, poor project management,resulting in time and cost overruns,is leading to suboptimal utilizationof large investments being made ininfrastructure and capital-intensivesectors. The deficits resulting fromsuch overruns are eating into Indiascompetitiveness as a world-classmanufacturing destination.

Poor projectmanagement resultsin infrastructuredeficitsPoor project management has resultedin cost overruns and time delays ofa high order across infrastructureprojects being implemented in India.

Accenture calculationsbased onthe data published by the Ministryof Statistics and ProgrammeImplementation (MoSPI), Governmentof Indiashow that actual capacityadditions in the electricity sectorhave fallen short by 49 percent of the

targeted capacity to be created duringthe period of April 2007February2010 under the Eleventh Five-YearPlan. The target of upgrading nationalhighways during the same period hassuffered by 16 percent. Sectors suchas natural gas and crude oil, criticalfor Indias energy security, are plaguedby capacity deficits to the tune of 8


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percent and 7 percent, respectively,during the same period (see Figure 2).

As also noted in The Economic Surveyof India 2010, underachievementof capacity addition targets in theelectricity sector during the EleventhFive-Year Plan is directly linked to

poor project management. Lack ofmanpower planning for constructionand commissioning of projects;contractual disputes among projectauthorities, contractors and sub-vendors; design-related problems;delayed supplies of raw materials;and shortage of fuel have beencited as the key reasons in TheEconomic Survey 2010for delays inthe commissioning of power plantsduring the Eleventh Five-Year Plan.5

A study published by the PlanningCommission of India evaluating therural roads component of the BharatNirmanprogram(theprogramtorebuild rural India) reveals that only20.3 percent of the roads coveredin the pan-India sample have beencompleted on time. Delays in landacquisition and unavailability ofraw materials and labor have beenidentified as two key reasons fordelays in the completion of projects

under the aegis of this program.6

If not rectified in a timelymanner, such deficits will resultin acute capacity deficits acrosskey infrastructure and capital-intensive sectors at the end ofthe Eleventh Five-Year Plan.

The impactShortfalls will increase the cost for

governments, businesses and otherstakeholders to access and createsustainable growth opportunitiesacross the Indian landscape.

The structural rebalancing betweenIndias manufacturing and servicessectors, critical to withstandingfuture economic shocks, will failto materialize in the near term.This is because poor quality ofpower supply, roads and costly

resources such as oil and gas willcontinue to erode the manufacturingcompetitiveness of India, therebyreducing its attractiveness toinvestors. The potential of the

manufacturing sector to providegainful employment to millions ofunskilled people who are ill-equippedto benefit from the opportunities inthe flourishing knowledge sector, willtherefore take time to materialize.

Deficits in transportation

infrastructure, especially roads,will slow the pace of integratingIndian villages into the mainstreammarket economy. At present, about40 percent of Indias villages arenot even connected to a road,making it difficult for the farmersto have their produce reach themarkets, cities or food processors.7

Shortage of physical infrastructure,including roads, power and railways,will decelerate the pace at whichincome-generating opportunitiesemerge in Indias rural areas. Infact, more than 70 percent of thesenior executives across 100 largecompanies interviewed by Accenturefor its research report, Masters ofRural Markets: The Hallmarks of High

Performance, identified the poorroad and rail network as the keystructural handicap to overcomein unlocking growth opportunitiesin Indias rural regions.8

Persistent deficits of good roads andcontinuing poor rail connectivity inthe future will increase the cost ofupfront investments to be incurredby industry to create efficientrural supply chains across Indiasremote areas. If these costs donot match the benefits, industrywill not be incentivized to investin rural India, thereby deceleratingthe pace of gainful employment

opportunities in Indias hinterlands.

Moreover, a large number of ruralIndian children, who are expectedto shape the countrys demographicdividend for the next two decades,will continue to be disconnectedfrom opportunities to acquire skillsand knowledge due to deficits inphysical infrastructure. Industry willbe compelled to hire skills and talent,external to rural regions, to fire itsgrowth cylinders in Indias remote

regions. Rural youth will thereforeremain on the fringes of growth.

The inability to bridge sustainedshortages in the domestic oil and gas

sector will make it difficult to deliverpower and energy-intensive productsto industries and people at affordableprices. Already, Indias energy demandhas increased by more than 400percent in comparison to what it wasin 1980, much higher than the globalaverage during the same period.

India is now the worlds fifth-largestenergy-consuming nation.9 Allowingdeficits to proliferate will furtherintensify its dependency on externalmarkets for oil and other petroleumproducts, which at present stands ataround 75 percent, according to theEconomic Survey of India 2010.10

2 Calculations for China are based on thedatafromtheNationalBureauofStatisticsand in the context of India from the dataacquired from the Ministry of Statistics and

Programme Implementation.

3 Planning Commission, Government ofIndia (2008); Projections of Investment inInfrastructure during the Eleventh Five-YearPlan.

4 Planning Commission, Government ofIndia (2008); Projections of Investmentin Infrastructure during the EleventhFive-Year Plan and based on discussionsat the Proceedings of the InfrastructureConference of the Planning Commission onMarch 23, 2010.

5 Chapter on Energy, Infrastructure, andCommunications in The Economic Survey

of India 2010.6 Planning Commission, Government of India

(2010); "Evaluation Study on Rural RoadsComponentofBharatNirman;"PEOReportNo.210.

7 World Bank (2009); "India: Using IDAEffectively in a Large Country."

8 Accenture (2009), Masters of RuralMarkets: The Hallmarks of HighPerformance. http://www.accenture.com/Countries/India/Research_and_Insights/Indian_Research_and_Executive_Insights/Masters-of-Rural-Markets.htm.

9 Energy Information Administration (2009),"Country Analysis Briefs: India."

10 Chapter on Energy, Infrastructure, andCommunications in The Economic Surveyof India 2010. http://www.eia.doe.gov/emeu/cabs/India/Background.html.


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Bridging infrastructure deficits:Challenges to addressBridging deficits at an unprecedented speed and scale will

require businesses to consistently deliver projects on time andwithin projected costs. We asked companies the key strategiclevers they focus on to commission projects without time andcost overruns. An overwhelming majority pointed to projectexecution and delivery capabilities. We also asked them to gradethe challenges they face while executing projects (see Figure 3).


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High-intensitychallenges

Talent shortages

The shortage of experienced projectmanagers with an ability to graspprojects end to end has beenhighlighted as the biggest hurdlein executing large and complexinfrastructure projects in India.Business leaders believe that withgrowing project complexity, thedemand for experienced projectmanagers with multidisciplinaryskills will significantly increase inthe near future. Projects will requireexperienced and skilled personnelwho can take an integrated view ofnot only engineering and operationalaspects, but also the financial,legal, social and environmentalaspects associated with projects.

Compounding this issue is the

shortage of a skilled workforce.Interviewees identified this shortageas one of the biggest risks to

theirfuturegrowth.Notonlyare

junior engineers and techniciansin short supply, but so are masons,electricians, welders, carpentersand machine operators. Absence ofan adequate number of institutionswithin India to create a pipeline ofskilled workers capable of workingon complex tasks was identified as akey area of concern by executives.

Capacity constraints in keyresources and equipment

The shortage of natural resourcesand high-end equipment is anothermajor challenge being experiencedwhile executing projects. As noted

by one senior executive, a key

reason for rescheduling mega-thermal power projects in India isthe scarcity of good-quality coal.Similarly, a number of projectowners interviewed expressed theirreservations to initiate work on largeprojects simultaneously, given thefull order books of EPC companiesand contractors with the experienceto handle such complex projects.

A senior executive noted that theoil industry is facing about a 60

percent shortage of drilling rigs.According to interviewees, very fewIndian companies are capable ofmanufacturing high-end equipment,such as boilers and reactors that candeliver output at the scale and speedrequired to make mega-capacityventures profitable. A large projectowner in the petroleum-refiningsector, who we interviewed, wascompelled to import large boilers fromChina. Due to poor roads and bridges,

it took seven months to transport allthe boilers from the port in Gujaratto the project site in the interiors of

Figure 3. Mapping business challenges.

Project

conceptualization

and initiation

FinanceEngineering

and procurementConstruction

Operation and

maintenance Intensity of

challenge

Medium

LowDifficulty in findingthe right partners

- Unavailability of good vendors- Lack of IT tools to manage projects

- Multidimensional stakeholdermanagement

- Weak risk management capabilities- Inadequate schedule/cost control

- Talent shortages- Capacity constraints in key resources and

equipment- Complex contractor management

HighSuboptimal

project operability

Ambiguous projectdocumentationand processes

Financial closuredelays

Regulatory

inconsistency

It is difficult to findindividuals in the industrywho can handle a projectend to end.

Chairman and managingdirector of a public-sector oilrefining and marketing company


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central Indiafour months longer than

planned. This resulted in delaying thecommissioning of the oil refinery.

Complex contractormanagement

With increasing scale and complexity,project owners and EPC companiesare wary of the available contractorexperience in executing criticalprojects within given time frames.Most companies are compelled to relyon a variety of local contractorsnecessitating a complex contractorsetup. The unavailability of qualityvendors, coupled with the prevalentculture of not honoring contractualcommitments within the contractor

ecosystem in India, is makingcontractor and subcontractormanagement increasingly difficult.

Due to multiple projects being

executed simultaneously, projectowners and EPC companies arerequired to manage experiencedcontractors and subcontractors in anenvironment in which the balance ofpower is tilting in favor of contractors.As a result, negotiations are becomingmore challenging and outcomesmore favorable to contractors.

Regulatory inconsistency

The complexity and scale ofinfrastructure projects beingundertaken in India have significantlytransformed the industry. A numberof projects currently being executed,especially in the space of petroleum

products, are interstate in character.Therefore, companies are compelledto work closely with authoritiesat different levels across states.

Outdated and poor-quality land

revenue records, disparate landregulations and different workcultures across local institutionsin various states affect the timelycompletion of projects. Delays inclearances from state environmentalauthorities and district forest off icials,as well as the need to acquire licensesfrom local authorities, also havebeen cited as key factors responsible

for derailing project schedules.

Where is the capacity tocreate capacity?

CEO of a large power generationcompany

To find contractors thatdeliver on time is one of thebiggest challenges for us.

CEO of a large EPC company

The complexity ofacquiring the necessarypermissions stretched ourproject resources beyondimagination.

CEO of a large constructioncompany


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Suboptimal project operability

Making the project operate at fullcapacity within the shortest period oftime (project operability) continuesto remain a challenge. In most cases,personnel responsible for operatingthe asset are involved only when

the project is nearing completion.As a result, project execution teamsdo not receive the required inputto modify standardized procedurestoward making the asset fullyoperational under real-life situations.

According to one senior executivewe interviewed, operations teamsare not fully conversant with projectdesigns, are unaware of wherethese designs are kept and, in somecases, even lack the capacity to put

them to use during emergencies.

Medium-intensitychallenges

Ambiguous projectdocumentation and processes

Having requisite information toprepare accurate bids with a clearlydefined project scope continues toremain a challenge for companies,especially in the context of publiclyfunded projects. According to

interviewees, despite two decadesof liberalization, on many occasions,critical information required toaccurately scope a project is nota part of the bid document.

Interviewees appreciated the effortsmade by the Planning Commission ofIndia toward developing standardizedtemplates for bid documentsapplicable to various sectors, butnoted that state governmentsoften do not use these templates

while issuing bid documents. Stateagencies frequently transfer therisk disproportionately onto thedevelopers or EPC companies ina public-private partnership.

It also was noted that bidders areonly provided bid extensions very latein the bidding process, sometimesat the last minute. This practice isnot beneficial to serious bidderswho may have already decided notto bid due to the shortage of timebefore extension notification.

Financial closure delays

The cost and availability of fundinghave far-reaching implications forinfrastructure projects for variousreasons. Delays in financial closuresoften result in a lower internal rateof return for projects, stretchingpayback periods and raising questionson the viability of such projects.

Availability of funds is a big concern

as projects become larger and morecomplex. With the increasing projectscale, players find it more difficult tobid and achieve financial closures ofprojects and to fund working capitalrequirements on their own. Players notonly have to scout for debt sources,but also have to look for sources tofund their equity contribution, giventhe massive size of the projects.

Multidimensional stakeholder

managementInfrastructure projects, withtheir demands of increased scale,complexity and pace of execution,require the participation ofmultiple entities in consortia orin subcontractor relationships. Acomprehensive understanding oflocal norms regulating relationshipsacross players in the value chainbecomes extremely critical todelivering projects on time.

According to a number of seniorexecutives interviewed, creatingand managing direct channels ofcommunicationsand managingexpectations across a diverse rangeof stakeholders with different workculturesare challenges that theyare slowly learning to tackle.

Weak risk managementcapabilities

The ability to determine, assessand mitigate risk is one of the mostcritical aspects of effective projectexecution. Organizations often find

it challenging to preempt the riskareas that need to be addressedat the stage of project planning.

As pointed out by interviewees,vendors do not always deliveras planned, clients are slowto approve completed stages,

specifications change, unexpectedtechnical problems emerge andresources are constantly pulled indifferent directions for multipleuse. Technical and business risksmay be easier to manage, butproject execution risks are usuallydifficult to predict and manage.

Many interviewees agreed thatwhen uncertainties strike, executionpriorities such as which tasksto do first become unclear andunsynchronized. Each departmentand person is likely to prioritizetasks based on its own pressuresand targets, without regardto overall project delivery.

Inadequate schedule and costcontrol

Unanticipated hurdlessuchas satisfying new regulatoryrequirements, ineffective project

conceptualization, frequent designchanges at the level of technologyor plants and iterations due to scopecreepwere cited by executives asthe three major reasons for schedulesand costs to spin out of control.

To bring the projects back ontrack, project teams may have towait for clearances from otherstakeholders. At times, they may haveto deal with delays by vendors andcontractors in supplying materialswith changed specifications.

When we asked theengineering consultingfirm for drawings, theyemptied a container.

CEO of an oil and gas major


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Operational levers for excellence inproject executionDespite these evolving challenges, a number of companies

operating in the infrastructure and capital projects value chaincontinue to grow aggressively by successfully completingcomplex projects in geographically dispersed locations.

In this section, we identify key operational leversto achieve excellence in project execution.


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Robust projectmanagement mechanismsHaving robust project managementmechanisms in place was identifiedas the most important operationallever for successfully executingprojects. The establishment of aproject management office (PMO)was recognized as an effective wayto help achieve project excellencethrough close project monitoring andindependent reviews. Establishing a

PMO facilitated in highlighting andmitigating risks in a timely manner.

Key requirements for a

successful PMOActiveinvolvementofall stakeholders

Seniormanagementinvolvementinreviewing and acting on problem areas

Useofindustry-standardprogram management tools

Identificationofallprojectdependencies, including procurement,logistics and contractors

Abilitytoproactivelyidentifybottlenecks and act on them

Perspective from a market

leaderWith the support of a PMO, a largeoil company was able to identifylogistics as an area where it couldsave significant costs. The PMOeffectively linked high logistics spendand heavy detention and demurragecharges paid in the first phase topoor planning, documentation andtracking. To streamline processes, thePMO suggested that the companyalso employ a fourth-party logistics(4PL) partner. Implementing therecommendations of the PMO, themultinational saved almost one-third of its projected logistics cost.

Figure 4. Mapping operational levers.

Robust projectmanagement mechanisms

Medium priority

Effective contractormanagement

Capability development

Cost-effectiveprocurement

Effective riskmanagement

Useful informationtechnology tools

Early involvement ofoperations team

Strong forecastingcapabilities

Appropriate technicaltie-ups

High priority

(voted by 60% ormore intervieweesas an operationallever with highlevel ofimportance)

Low priority

(voted by 60% ormore intervieweesas an operationallever with low level

of importance)

Operational leverscritical to achievingexcellence inproject executionWe asked interviewees to identifythe key operational levers that havehelped them achieve excellencein project execution (see Figure 4).They identified robust projectmanagement mechanisms, effectivecontractor management andcapability development as the mostimportant operational levers.


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Effective contractormanagementContractor management processeswere identified as the secondmost important operational lever.Contractors may lag in their abilitiesand compliance, and may needtraining for basic administrative andtechnical skills and safety awareness.Executives interviewed believe thataddressing these deficits can workwonders for the project, especially inthe area of schedule and cost control.

Capability developmentThe third most important lever iscapability development. For aroundtwo-thirds of interviewees, capabilitydevelopment is about not onlydeveloping more project managersand a skilled workforce, but alsonurturing design, equipment andother technological capabilities ofthe organization to provide the mostcompetitive solution to the client.Creating capabilities has helpedproject owners and EPC companies

to be less dependent on contractorsto deliver projects of smaller sizes. Inaddition, it has helped them develop agroup of confident project managers,willing to take informed risks and tomake their projects less susceptible tothe tight availability of outside skills.

Key requirements foreffective contractormanagement

Subcontractorcategorizationbased on type of service provided

Databasewithqualification

and evaluation criteria

Developmentofstandardizedcost sheets to facilitate fact-based negotiations

Creationofamechanismtosharerisks in a more balanced manner withcontractors and subcontractors

Developmentofanetworkof preferred contractors

Perspective from a marketleader

Managing contractors wasincreasingly becoming a key problemfor a large EPC company. Problemsincluded the identification andselection of capable subcontractors,

screening of workers deployed bythe contractors, monitoring ofsubcontractor productivity, andavoiding rate escalations. The EPCcompany developed and rolled outa standard operating procedurefor subcontractor management. Acategory database of around 70capable subcontractors was createdwith the support of project personneland market intelligence. A centralizedsubcontracting management cell,

owning the subcontracting processwas institutionalized. The company hasbeen able to reduce its time overrunson projects by more than one-thirdas a result of making its contractormanagement processes more efficient.

Key requirements for

development of robust in-house capabilities

Leadershipcapableofarrivingata long-term view of market growthand corresponding requirements

Organizationalculturesupportingproblem-solving innovations

ArobustIT-basedknowledgenetwork to facilitateexchange of knowledge

Perspective from a marketleader

One of the largest EPC companiesin Asia has achieved its presentstatus by constantly focusing oncreating in-house capabilities.During the last three decades, thisEPC-operator invested in buildingand upgrading in-house engineeringR&D and manufacturing capabilities,along with alliances with major

technology licensors. In the early1980s, it acquired the appetiteto execute medium-scale turnkeyprojects. It invested in building

robust in-house project management

capabilities. As the 1990s unfolded,the operator invested in gainingaccess to proprietary engineeringtechnology through strategic alliancesto leverage investments in the oiland gas, power, cement and steelsectors. It consciously invested increating Indias first state-of-the-artfabrication facility for large-scaleindustrial structures. This enabled itto participate in large-scale turnkeyprojects undertaken in India and inforeign locations. The EPC-operatorcontinues to focus on bolstering itsproject management talent pool,capabilities to manage multiplestakeholders, and is expanding itsglobal fabrication capacity. As aresult, the EPC-operator is uniquelypositioned to provide value to itsclients across different geographiesglobally.


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Accentures framework:Building blocks to high performanceDuring interviews, it became increasingly evident that

business leaders in the infrastructure and capital projectssector are steadily steering their organizations to becomewhat Accenture calls high-performance businesses. Whilesome businesses have become adept at implementing a well-conceived business strategy to survive and thrive acrosseconomic cycles and sustainably outperform peers, many aretaking concerted steps to steadily move ahead on this path.

In this section, we examine a framework that can helporganizations achieve high performance in commissioning

physical infrastructure and capital projects.


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From our perspective, sustaining high

performance in infrastructure andcapital projects will require businessleaders to think beyond removingbottlenecks in the organizationand the system. Moreover, as theyexpand their footprint across sectorsand geographies, business leaderscannot allow the future of theirenterprises to be shaped by actionshinged only to the development oforganization-wide capabilitiestheymust also factor in cultural issues.

Accenture has developed a proprietaryframework (see Figure 5) addressingall these dimensions. This framework,capturing the essence of evolvingbusiness dynamics in India, is basedon our High Performance Businessresearch (which covers more than6,000 companies) as well as insightsgathered during various interviews.The three essential buildingblocks of our framework are:

Marketfocusandpositioning

decisions regarding whereand when to compete.

Distinctivecapabilitieshard-

to-replicate capabilities thatdefine how businesses compete.

Performanceculturecommon

mindsets relating to culture,leadership, and the workforce.


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Market focusand positioning

Distinctivecapabilities

Performanceculture(Performanceanatomy)

Enabling environment

Creating talent pools

through collaboration

Streamlining bidding and

regulatory processes

Creating mechanisms to resolve

disputes in a time-bound manner

Based on sound analysis, diversify in related sectors and constantly focus on moving up the value chain

Develop capabilities that customers value and competitors find difficult to copy

Develop the right capabilities - and act on them

Collaborative ecosystem

Focus on treating subcontractors andon-site workforce as collaborators by clearly

articulating their roles and responsibilities,

leading to a reduction in contract breaches

and painful litigation


Inject innovation culture into the organizations DNA

Foster a best-in-class operating environment

Create a roadmap for effective career progression

Nurture a learning environment

Leverage IT to improve productivity across collaborators

Empowered talent pool

Institutionalize unique ways of retaining andempowering talent to build a cadre of

experienced project managers and a skilled

workforce pool capable of providing

innovative solutions

Innovation and localization

Innovate and localize technology tofacilitate adoption of solutions and business

models being practiced in other projects or

other verticals toward providing unique

solutions to customers

Figure 5. Accentures proprietary framework, based on the High Performance Business research.

Market focus and positioning is keyto becoming a high-performance

business. High performers havea remarkable clarity on whichmarkets to be in and how toposition themselves in relevantmarkets. They are always foundwhere the market action is. High-performance businesses buildtheir presence across marketsby systematically analyzing theimpact of key variables on variousaspects of project execution.

Typically in the context ofinfrastructure and capital projects,high-performance businessesare seen to diversify in keysegments across various verticals.They leverage diversification todraw key lessons in the area ofproject execution and focus onpositioning themselves up thevalue chain in markets of interest.

Without the support of distinctive

capabilities, the market focus andpositioning of high-performance

businesses would be hard tosustain. Accenture identifies

three distinctive capabilities fororganizations to achieve highperformance through excellencein project execution (see Figure5). Most important is retainingand empowering talent to builda cadre of experienced projectmanagers and a skilled workforce.The ability to innovate and localizehelps companies provide uniquevalue-added solutions and facilitate

the adoption of problem-solvingmethods developed in otherprojects or infrastructure areas.Fostering a collaborative ecosystemto minimize risks and reduce theprobability of contract breachesthe third capabilityis equallyimportant. We discuss these indetail in the following section.

At the base of the framework arethe organizational imperatives that

sustain high performance overthe long termwhat Accenture

refers to as performance anatomyor performance culture. We

have identified six actions thatorganizations can take to nurture amindset for developing distinctivecapabilities (see Figure 5). Thesesix actions are discussed ingreater detail on pages 34-35.

We also believe that an overarchingenabling environment bridgingtalent deficits, streamliningregulatory procedures and helpingsettle disputes in a time-boundmanner is critical for achievinghigh performance. Accenturehas developed a point of view onsome of the key action points thatgovernment, financial institutionsand businesses can implementcollaboratively in these areas.These are discussed in greaterdetail on pages 36-38, Creatingan enabling environment.

Decoding building blocks of high performance in thecontext of infrastructure and capital projects ecosystem


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Market focus and positioningThe decision to work on specific projects is intrinsic to the corestrategy of a company and is best guided by the companyslong-term vision and strategic fit. While it is too ambitious

to recommend specific markets to focus on, the followingare strategic insights from Accenture on how market focusand positioning is helping companies achieve excellence inproject execution and become high-performance businesses.

Select projects through

careful analysisLarge players, specifically in the areasof cement and steel and oil and gas,have started employing sophisticatedtools to analyze the impact ofregulatory delays, rehabilitation ofproject-affected persons, escalationof raw material costs, contractualdelays on cash flows and internalrate-of-return (IRR) calculations.

Interestingly, many of these tools

continue to be developed andsharpened by in-house teams. Withthe help of such analysis, companiesensure that they are focused on theright projects, with the right size, inthe right geography. To enhance theircapacities of in-house teams in thisarea, some organizations also havestepped up their level of collaborationwith academic institutions.

Leverage relative diversification

High performers focus on relative

diversification and continue tomaintain a strong foothold acrossa portfolio of segments in differentinfrastructure and capital project

verticals. These companies leverage

diversification to excel in projectexecution. They identify actionsresponsible for successful projectexecution in one vertical and findways of copying them while executingprojects across other verticals.

It also helps develop robustrelationships that can be leveragedto efficiently execute projects inother growth markets. One of Indiaslargest engineering and constructioncompanies keen to leverage its

shallow-water pipeline experiencein the area of offshore projectshas executed a memorandum ofunderstanding with a shipyard todevelop a fabrication facility foroffshore platforms, rigs and vesselsfor petrochemicals and refineries.

Constantly move up the value chain

Senior leadership in high-performancebusinesses is focused on making theirorganizations move up the value

chain. One of the largest EPCs hasconsistently utilized this strategyto be the first to enter marketsfor highly advanced infrastructure

and capital projects. On entering

these markets, the EPC has createdbenchmarks that are very difficultfor competitors to emulate invarious aspects of project executionthereby making it number one inthese specialized-verticals. Similarly,a large infrastructure company israpidly expanding its capabilities intooffering fee-based O&M services bycapitalizing on its experience acrossmany infrastructure projects.


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Empoweredtalent poolOver the past two decades, the flowof talent into the infrastructureand capital projects industries hassuffered due to the availability ofmore lucrative career options inother sectors. As noted by one of theleading minds in the industry, thesituation has improved of late due tothe reverse brain-drain from the

United States and the Middle East.

Businesses across the infrastructureand capital projects value chain mustinvest in developing mechanismsinternal and external to theirorganizations to retain and empowertalent. The industry must focus onidentifying leading practices evolvedin other sectors, such as software, toensure that quality talent is developedand made available in a timely manner.

High-performance businesses arealready on the move. Project managersand project planners capable ofsimultaneously visualizing projects

and their various moving parts are

being lured by incentive-based salarystructures that compete with the bestacross the entire services industry.

One successful infrastructure andreal estate company is activelybridging talent gaps by attractingthe right talent from outside thereal estate sector. This companyhas been able to bring in the designhead of an electronics giant to runits design and engineering wing. Theexecutives leading the companys

marketing and investor relations andthe human resources team have beenhired from a highly reputable globalmedia giant. The senior leadershipat the real estate company conductsorientation courses for theseexecutives to bring them up to speedon the realty and housing sector.

The PMO has become a vehicle tocreate career destinations for retainingexperienced project managers. In one

of the largest oil companies in India,highly talented project managers arebeing given senior positions withinthe PMO, and are vested with moreauthority and a larger oversight role.

Concerted efforts are being taken

by high-performance businesses tonurture specific project managementskills within their junior projectmanagement workforce throughshort-term courses. One of thecountrys oldest constructioncompanies follows the classroom-at-site system to deliver skills to itson-site workforce. It has convertedevery project site into a traininglaboratory wherein the expert andexperienced employees train peopleworking under them at the job site.

If we do not invest intalent now, we will losethe game.

Managing director of a private-sector oil refinery

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Distinctive capabilitiesBecause distinctive capabilities are hard to replicate, theyenable a company to develop offerings of unique value to theircustomers. It is only with these capabilities that industries

can make the best use of their growth levers to achieveexcellence in project execution. Accenture has identifiedthree distinctive capabilities that organizations must nurturein order to emerge as high-performance businesses.


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Case study: BharatOman Refineries Ltd.

Bharat Oman Refineries Ltd. (BORL),a company promoted by BharatPetroleum Corporation Limited(BPCL), is setting up a 6 MMTPAgrassroots refinery at Bina, in thedistrict of Sagar, Madhya Pradesh,along with a crude supply system.

To attract and retain the right

talent on this project, BORL offerssuitable candidates a combinationof a competitive and transparentbenefits package and a flexibleand friendly work environment.Senior leadership at BORL continuesto push its project staff to gothe extra mile professionally.

Moreover, the senior leadershiphas unequivocally expressed its

commitment to allow for innovationfailures in regard to new-to-the-market solutions. Empowered toinnovate, engineers and projectmanagers are utilizing the results

from their past experience to solve

problems, which have led to fastercompletion of critical phases ofthe project. The contribution ofon-site teams is appreciated andrewarded by leadership at BORL.As a result, the workforce atBina continues to be motivatedto perform and derives immenseprofessional satisfaction.

BORL has proactively startedcreating a world-class socialinfrastructure around the projectsite, displaying its willingnessto invest in the future of itsworkforce and their families atBina. BORL has provided state-of-the-art infrastructure toreputable educational and healthinstitutions toward creatinga modern school and hospitalat Bina. Most importantly,before collaborating with these

institutions, BORL worked outa plan with them to run theinstitutions professionally and makethem revenue-neutral for BORL.

BORL also has initiated a

program to find suitablepositions for spouses of itsemployees in institutionssupporting the project at Bina.

These measures not only arecreating the right incentives forproject managers and engineersto shift to Bina with their families,but also are helping to raisethe infrastructure profile ofBina, thus earning the trust andsupport of the local populace.

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Innovation andlocalizationInnovation and localizationare emerging as key distinctivecapabilities being developed by marketleaders to complete complex andchallenging projects on schedule.

Technology is increasinglybecoming the fulcrum that enablescompanies to achieve their goalsmore competitively and effectively.The ability to localize technologyfacilitates the adoption of solutionsand business models being practicedin other projects or infrastructureareas. Localization of technologicaltools also helps in implementing

better front-end engineering design(FEED) processes, thereby providingbusinesses a better perspective onthe possible risks associated withmanagement of costs and time.

A large rail infrastructure operatoris introducing cost-effectiveand maintenance-free rail tracktechnology, currently implementedin the European Union, for the DelhiAirport Express Link, by sufficientlymodifying it to Indian conditions.This technology will help reducemaintenance costs of tracks andcarriages substantively and willprovide high-speed, comfortableand safe travel to commuters.

A large, publicly listed civil contractorhas built a web-based monitoringsystem that seamlessly ties intothe enterprise resource planning(ERP) platform of the organization.This has helped the contractor

automate the critical processes ofestimation, contract management,inspection, and facilities, which hassaved resources and helped enhanceaccuracy in decision-making.

Interestingly, technology localizationstimulates innovation aimed atsmoothly and efficiently integratingstandardized designs and businesssimulations locally. For example,high-performance businesses havedeveloped innovative processes of

preconfiguring product machine-toolprocess routings in SAP to conformto exact country operating methods.While doing so, these companies

strive to arrive at an optimal mixbetween what to standardize andwhat to localize, and then explorehow this mix can be efficientlyscaled across various projects.

High-performance businesses alsoare investing heavily in developing

capabilities to innovate and localize.The motivation is to stay ahead ofthe curve and provide value-addedsolutions to clients. One of the largestpower transmission EPC companiesrecently announced the launch ofthe world's largest tower testingstation in India. This state-of-the-art facility will facilitate validationof the largest towers ever designedfor India's futuristic extra highvoltage energy network. Costing

more than Rs 400 million (US$10million) the test station also is themost advanced using cutting edgetechnology, controls and systems.

Investing in innovation isinvesting in the future.

Executive director of a largepower transmission EPC company

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Case study: KECInternational

KEC International is one of thelargest power transmission EPCcompanies globally. It is theinfrastructure EPC business arm ofthe Rs. 160 billion (US$3.75 billion)RPG Group. KEC International Ltd.utilizes its global scale and projectmanagement experience towardidentifying the leading practicesthat can be taken to a particulargeography and suitably modifiesand innovates around it to suit theproject requirements of the client.

KEC International has masteredthe art of innovating as theprocess unfolds, with the help ofits superior talent and technologypool. Armed with such a capability,KEC International was able to

implement bold and innovativemeasures while installing a 35km-long 400 kV overhead D/Cline to ensure smooth facilitation

of the United Arab Emirates

first ever Formula-1 Grand Prixevent. Provided with very littletime to install this D/C line, KECtook calculated risks and clearedmanufacturing of towers, procuredrelevant items and services withoutwaiting for formal approvals forthe entire project. Shortages wereaddressed innovatively. A differentbut efficient piling methodologywas adopted to deploy additional

piling rigs to overcome deficitsin piling equipments. KECInternational leveraged its long-term presence in the United ArabEmirates and addressed a numberof operational and technicalissues (such as right of way androute configurations) proactively.By drawing resources withinits organization and from otherstakeholders at the right time, KECwas able to efficiently utilize talent,technology and experience to itsadvantage during various stages ofproject execution and completedinstallation of the D/C line on time.

In one of its other projects in Saudi

Arabia, KEC was required to crosssix 230 kV energized lines in asingle span for the constructionof an overhead D/C transmissionline. The client expressed aninability to arrange outages onany of the lines as switching offany of the single lines would have

jeopardized the stability of thepower systems of the region andwould have severely impacted the

power grid. KEC used innovativetechniques and carried out hot-linestringing. KEC used guns to throwropes across lines and also putto use its state-of-the-art, pre-assembled rider poles and cranes.In so doing, KEC saved manpowercosts and avoided resource idling.

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CollaborativeecosystemDifferent parties in a project havedifferent priorities, often leadingto an inherent conflict of interestamong speed, cost and quality. Whilemanaging collaborations is not new tobusinesses operating in infrastructureand capital projects, the growingfinancial outlays, multiplicity ofpartners and increasing technical andregulatory complexities demand newapproaches and solutions to buildingand retaining trust across stakeholders.

For asset owners and EPCs, it isimportant to treat stakeholderssuch as government, contractors,

subcontractors and on-site laboras collaborators, enabling themto appreciate the risks associatedwith the project and securing theirbuy-in through key aspects of theproject. Trusted collaborationsbased on clear articulation of rolesand responsibilities and culturalintegration help minimize risk andreduce the probability of contractbreaches and painful litigation.

Interesting collaborative formats arebeing used in the Indian market. TheAlliance Contracting model, whichhas been successfully practiced interritories such as Australia, is nowbeing introduced for projects in India.Alliance facilitates the linking togetherof client, contractor and supply chainplayers, helping them to share risks,create the right incentives to engineervalue and build mutually beneficialrelationships. The model allows theasset owner to focus on core business

as well as strategy issues, while at thesame time reducing operational costs.

In an era of public-privatepartnerships, trust-basedcollaborations with public agenciesbased on honesty and integrity canhelp companies acquire critical assetsand factors of production at pricepoints that can be game changing.High-performance businesses in Indiahave found unique ways to create suchtrust-based relationships. For example,a large petroleum company leveragedits foray into the biofuels sectorto acquire ailing but strategicallyimportant public assets in one of

the Indian states. Injection of capitalin these assets helped resuscitategrowth in the region. For thebusiness, the gains were multifoldthey also earned the respect of theadministration and people, so muchso that the administration awarded astrategically located piece of land to

the company for their next project.

With the goal of aligning expectationsbetween itself and stakeholders ina changing business environment, alarge Indian EPC company organizesa quarterly conclave involving theparticipation of senior leadershipfrom its subsidiaries, various India andglobal stakeholders, and vendors.

Most important, trusted collaborationsare critical across teams within theorganization. Challenges experiencedduring the project and technicalglitches on project sites need to becommunicated across teams linkedwith the project, and in a timelymanner. A large asset owner companyencourages its employees to useits robust IT network for sharingsuch information on a real-timebasis, wherever possible. Such aprocess has improved relationshipsacross various teamsand workable

solutions to problems have emergedfrom unexpected quarters.

We have built trust in theorganizationsDNA.Soour employees exhibitit with whoever theycollaborate.

Chief strategist of one of the

fastest-growing EPC companiesin India

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Case study: Tata Realtyand InfrastructureLtd. (TRIL)

TRIL Infopark Ltd., an SPV of TRIL,is setting up the Rs 3.6 billion(US$780 million) IT and ITES SEZincluding service apartments, retailand residential components alongwith a convention center in Chennai.Dubbed the "Ramanujan IT City"

after the legendary mathematician,the project at Taramani, on the ITcorridor, will have a 3,250,000 sq.ft. IT space. It is planned to havea gold-rated green building.

In order to facilitate timelycommissioning of the project,TRIL is undertaking theimplementation of this projectunder the Alliance Contractingframework, an approach thathas been utilized probably forthe first time in the history ofmodern construction in India.

TRIL has signed a Project

Alliance Agreement (PAA) withtheir contractors, architects,engineers and consultants.

The salient features of thePAA between TRIL and othercontracting parties are:

Projectimplementationbywayofcreating a virtual companyAlliance1stin which each participantcompany deputes its best resource

as employees of Alliance 1st.

ThemembersofAlliance1stworktoward completing the projectwithin the jointly agreed targetcost (TOC) and within the agreedmilestones. Also, there are fewother key responsibility areas andkey partner initiatives, such assafety and quality for reviewingperformance of the alliance.

Iftheactualcostsgobeyond/fall within the TOC, then thepain (loss)/gain (profit) is sharedamong the participants.

Theparticipantsagreenot

to blame each other and notto litigate. All disagreements/disputes are discussed and resolvedbetween the participants untilthere is unanimous agreement.

TheAlliance1stisavirtualcompany and is managed bythe Alliance management team(representatives of all companies),headed by the Alliance manager(akin to the CEO) and governed bythe project alliance board (PAB). PABcomprises senior representatives ofindividual participant companies.

By embracing such an approach, TRILbelieves it can save up to 5 percentof the anticipated constructioncost. Interestingly, Alliance 1sthas already achieved a significantmilestone5.3 million man hoursclocked in May 2010, without any

lost time due to injuries on site.

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Performance cultureThe following six actions can help organizations create themindsets required to nurture distinctive capabilities. Many ofthese actions remind us to go back to the basics and some

organizations are already heading in that direction.


Executing projects exactly as plannedholds more optimism than reality.On the ground, project engineersoften have to make hard choicesto achieve their project objectives.It is critical to empower projectmanagers to make decisions onissues relevant to the project andimplement them in a timely manner.

One of the fastest-growingengineering construction companies

follows a work culture wherein the on-site engineers and project managersare empowered to arrive at localdecisions relevant to the project andact upon them. Engineers can get intouch with the project directors andregional managers directly. Institutingsuch a process across all of its projectshas enabled the company to empowerits project managers to arrive atand implement tough decisions.

Inject innovation culture into

the organizations DNAProject owners and EPC companiesare increasingly recognizing the worthof creating a culture of innovationin their companies. Innovations inthis sector are not necessarily aboutproducts, but rather about waysto solve a construction problemor to arrive at more cost-effectiveways to achieve a particular task.Innovation needs to be a practicein these organizations, andleadership needs to invest in thesame in a concerted manner.

At a large EPC operator in India,teams of highly trained and talentedengineers across projects are broughttogether at a central location toprovide input critical to variousaspects of products and servicesutilized during project execution. Thesenior leadership in this companyis committed to building a strong

R&D tradition to create a poolof innovators that can provideadvanced technical support to itsengineering and operating divisions.

Foster a best-in-class

operating environmentSafety is among the most crucialaspects in infrastructure companies,and also is a key business requirementtoday. It is important to weavesafety holistically into the projectexecution process as it is linkedwith all functions, such as methods,technology, training and development.Injecting the culture of safetywithin a workforce from variousbackgrounds across a project that isinterstate in character is challenging.

On the Ramanujan IT City project, TRILensures that on-site labor is broughton to the construction site in well-maintained buses and is provided withsimple yet healthy food. The companyensures that the premises where theworkforce resides are well-ventilatedand clean with comfortable bunkbeds. This has helped to not onlyretain labor, but also improve their

productivity and reduce absenteeism.


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Create a roadmap foreffective career progression

This particularly applies to companiesthat are project owners. When theproject is completed, the personnelinvolved in the project are oftenat a loss, as the company may be

unable to provide opportunitiesfor actively engaging thesepeople. Such experienced talenteither moves to other companiesin the process of setting up newprojects or are compelled to moveinto other lines of business.

Businesses must carefully plan thecareer paths of project personneland invest adequately in buildingsystems and structures that position

such talent in meaningful rolesafter the project is commissioned.A joint venture oil refinery is tryingto institute a mechanism to plan acareer roadmap for its project talent.The objective is to use the experienceof the project teams across theproject life cycle, to treat them as anasset, to incentivize them to mentorothers, and to keep them involved inthe project after it is commissionedto help support maintenance andenhanced operability. The leadership

expects that such efforts will help increating trustworthy and dignifiedteams of project professionals.

Nurture a learningenvironment

High-performance businesses also areusing IT to launch in-house e-learningplatforms. To sustain its growthmomentum, a large steel maker fromIndia has launched an e-learning

management system. This systemoffers full-fledged learning experienceto its employees by utilizing an ITinterface to fully or partially delivertrainings. The interface allows learnersto monitor various aspects of theirlearning, such as pace and scores.

Documentation is critical to sharingproject experiences across theworkforce. Sharing how one avoidednear-misses or learned from a failureat a particular stage of the project

can avoid replication of errors acrossprojects of the same type and acrosssectors. Project managers generally donot document failures and near-misses

due to the fear of penalties. A correctset of incentives needs to be put inplace to facilitate the documentationand sharing of project experiences.For example, a large Indian EPC doesnot penalize or fire managers whomake errors in assumptions relatedto costing, but instead utilizes these

scenarios to make the individual andthe team learn from the outcomes.

Leverage IT to improveproductivity acrosscollaborators

IT can help businesses create a virtualenvironment for collaboration inwhich all partnering entities can beintegrated on one platform. This canresult in improved overall capital

project delivery, efficiency, assetoperability and cost control throughenhanced data and informationtransparency. Better integration andintegrity of engineering and projectsystems can also be achieved.

To overcome the inefficiencies of thetraditional ERP system, one of thelargest EPC operators in India hasimplemented an in-house, portal-based enterprise system providing asolid backbone to project execution.Complete job details from conceptto implementation and completionare automatically uploaded ontothe system and are available acrossall teams linked to projects. Thishas helped bring together differentphases of construction cyclesdesign,development, tendering/bidding,budgets, and planning/scheduling.


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Creating talentpools throughcollaborationIndian businesses have startedto address talent deficits at thebottom rung of the talent spectrumby working collaboratively withstate governments and educationalinstitutes to create skilled poolsof welders, masons, carpenters,

technicians and junior engineers.

A number of project owners andEPC companies have already startedputting into place institutionalmechanisms to create a skilledworkforce pool that can be tappedby industry at large. Accenture alsois at the forefront of such efforts.We support the development of 10multilingual training modules andtheir deployment in two pilot centersimpacting 4,000 workers. Beneficiaries

for the project are selected from thedatabase of more than 5,800 microand small entrepreneurs and informalworkersregisteredwithLabourNeta

social initiative professionally run

by a nongovernmental organization.Workers are trained in multipleareas to make them capable ofhandling an array of additional

jobs in the construction industry.

China presents a classic exampleof how government can be anactive player in sustainably creatingthe executive talent required togrow its capital and infrastructureprojects. (See The Chinese talent

juggernaut on page 37).

Moving ahead1. Taking a page from the Chineseexperience, industryin collaborationwith the Ministry of Educationshouldconsider the creation of centersfor project management excellenceto impart the necessary skills toexisting middle-level engineers.

2. Toward ensuring a flow of

innovative talent into the industry,businesses should proactivelyfinance new departments in theinnovation universities beingset up by the Government of

India across the country.

3. The Skills Initiative in theEleventh Five-Year Plan providesa unique opportunity for industryand labor departments in variousstates to drive sustained initiatives,whereby a number of unemployedyouth can acquire the skillsrequired in the construction ofinfrastructure and capital projects.

4. To achieve higher scale in its skillsendeavor, industry should explore

opportunities to share interactiveand e-learning packages with majoruniversities, private and publiceducational institutions, and othertechnical seats of learning over a high-speedNationalKnowledgeGridbeingdeveloped by the Government of India.

36

Creating an enabling environmentThe mammoth investments being made by the government,industry and financial agencies clearly exhibit that there is toomuch at stake to risk failure. All stakeholders stand to gain

tremendously, if they can create an enabling environment aimedat strengthening project execution.

The following discussion examines the actions industrycan collaboratively take with governments and educationalinstitutions to support the effective development of nationalinfrastructure.


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The Ministry of Construction(MOC) is playing a leading role inpromoting project managementin China. The MOC launched anumber of reform programs in 1984,aiming to raise the efficiency andeffectiveness of the state-ownedconstruction enterprises and theconstruction industry as a whole.One of the issues that the reform

programs addressed was closelyrelated to the implementation ofproject management techniquesby the enterprisesseparating fieldoperations from management.

InNovember1987,theStatePlanning Commission instructed15 selected engineering enterprisesto apply project managementtechniques to their operations.

Encouraged by their success, manyother enterprises followed suit. TheConstruction Project ManagementCommittee (CPMC) was formedunder the China ConstructionIndustry Association in 1994.

Under the auspices of the MOC, aseries of training programs weredesigned and offered to projectmanagers and other members ofproject management teams.

By the end of 1995, the MOChad accredited 140 educationalinstitutions or training centersas project management training

providers. During the same period,321,983 project managers tookthe training courses, and 297,774of them were certified by theMOC. More than 600,000 projectmanagers in total are certified bythe MOC.

The World Bank offered a number oftraining programs in Beijing, Dalian,and Shanghai, aimed at improvingthe project management capabilityof China. In July 1994, IBRD madean Institutional DevelopmentFacility (IDF) grant in the amount ofUS$478,000 to China for the

development of project managementtraining capability, and theestablishment of an institutionalframework for such training. Chinacontributed 33 percent of the totalcost of US$757,650.

Immediately after the trainingprogram, a training network wasformed with five major universities

in Beijing, Tianjin, Shanghai andXian, aimed at training projectmanagers and specialists throughoutthe country on a regular basis.The Project Management Centerof Tsinghua University furtherexpanded into the Institute forInternational Engineering ProjectManagement of Tsinghua Universityin April 2000.

Source: Project Management in China; Lu,

You Jie and Wang, Shou Qing; South East AsiaConstruction; Sept/Oct 2004.

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The Chinese talent juggernaut


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Streamliningbidding andregulatory processesBidding, land acquisition andacquiring regulatory clearances arethe three areas involving maximumtouch points between industry andgovernment departments. Lack ofuniformity in norms with regardto the inclusion of information inbid documents creates negativeincentives for companies to followinformal methods to reduceinformation asymmetry. It alsoenhances the transactions costfor the industry and unnecessarilyheightens an element of risk

associated with the project.

Moving ahead1. Tender documents for public-private-partnerships (PPP) andEPC projects for the same sectormust be issued by the governmentdepartments using a single templatebased on established international

norms. The tender document shouldspecify deviations from the templatein the form of a separate noteincluded as a part of the document.

2. Governments and industry shouldcollaboratively work out a norm forthe percentage of land acquisition,which is to be completed beforeissuing a tender for PPP projects orin the context of projects for whichservices of EPC companies are sought.

3. Risks associated with landacquisition should be shared througha mechanism that transfers theburden of risk to those who arebest suited to bear it. For example,governments should not pass theburden of land acquisition on theEPC in the context of a PPP project,

especially if the former is betterpositioned to bear the same.

4. A detailed plan should be in placefor managing the resettlement ofthe affected population and workingclosely with them to help ensure theirrequirements and needs are adequatelyhandled. Having social anthropologistsand social planners as part of theproject team to manage these issuescan help to address potential problems.

Creatingmechanisms toresolve disputes ina timely mannerDisputes during project executioncomplicate the relationship betweenproject owners and the contractor.Delays associated with resolvingadministrative hurdles and disputes

reduce stakeholder interests in theproject by adding to the transactioncosts and may lead to the transfer ofrisks in an arbitrary manner. Moreover,delays in dispute resolution lead totime and cost overruns, making theproject unviable for the asset owner.

Moving ahead1. Industry and government need toestablish a high-powered, fast-trackadministrative tribunal dedicatedto resolving administrative disputesassociated with the implementationof capital projects over and abovea certain investment threshold.

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39

It is clear from this snapshot that

players across the infrastructure andcapital projects value chain are well-positioned to achieve and sustaingrowth.

Organizations that are bold enough toexperimentand that are committedto delivering excellence in projectexecutionwill continue to gain aconsiderable advantage in the yearsto come. Over the next decade,infrastructure development isexpected to be a source of continued

economic growth. Companies thatstart engaging in this opportunitynow can establish a footprint in thisgrowing market and, at the sametime, help create the Indian economyof the future.

To make the best use of theseopportunities, businesses needto make serious investments indeveloping a collaborative ecosystem,empowering their talent pool and

injecting innovation and localizationinto their core strategy. Perhapsthe most significant challenge theynow face is creating the cultureand mindsets required to achieve

excellence in project execution, while

increasing scale and reach.

To unleash growth opportunities,commitment is required not onlyfrom businesses, but also fromgovernment and other stakeholders.All stakeholders stand to gaintremendously, if they can acttogether quickly and eff iciently.Each stakeholder has a uniqueset of capacities and mandatesthat can often be enhancedor extended through effective

collaboration with others. The netresult will substantially improvefuture prospects, while generatingeconomic growth for companies andstakeholders alike.

It remains to be seen whichorganizations will seize theseopportunities, transform them intoprofitable outcomes and ultimatelyachieve high performance.

Closing words


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