Accenture Reports Improving Project and Cost Delivery in Metals and Minerals

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Mining and metals companies have seen unprecedented growth in capital project investments due to rising commodity prices, according to "Achieving Superior Delivery of Capital Projects," Accenture's (NYSE:ACN) (Dublin, Ireland) global survey of the metals and mining industries. Even with a recent downturn in commodity prices, investments will continue to be based on long-term demand for minerals and metals, which is driven by economic growth and social development throughout the world.

Accenture defines a capital project as a long-term investment, usually exceeding $50 million, involving either greenfield or brownfield projects. The survey focused on delivery of major assets costing at least $1 billion to build. Research was performed worldwide, and all respondents were top executives and decision-makers or influencers related to management of capital.

An overwhelming majority of survey respondents, 78%, consider effective capital project delivery to be "critical," with an additional 19% deeming it to be "important." A majority concede that they are not delivering consistently against their own targets. Less than one-third adhere to approved budgets (within 25%) for all projects, while less than one-fifth report being within 10% of costs for all projects.

More than two-thirds indicate projects will grow larger, and 81% say complexity will increase.

The top four organizational priorities in the next three years for optimizing project management concerns were:

• Availability of the right leaders and talent for project delivery
• Front-end loading and scheduling
• Start-up readiness
• Effective stakeholder engagement

The Accenture report identifies five key areas to improve project delivery to meet cost and schedule demands, reduce risks, and boost returns on investment: establish strong project governance and risk management tools; proactively manage external stakeholders' increasing expectations for sustainability; optimize scarce talent through portfolio management; organizational flexibility and training; integrate information systems among capital projects players; and accelerate operational readiness.

Projects are growing in scale and complexity, based on geological factors, the remoteness of project sites and increasing infrastructure requirements. In addition, risks for countries are increasing as companies search for minerals in higher-risk regions. Host country requirements and investor expectations are intensifying the sustainability focus. In addition, Accenture reports that price volatility during project executions can abruptly change cash flows and market perceptions.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.