Achieving Superior Delivery of Capital Projects: Insights from the Accenture Global Survey of the Mining and Metals Industries

Mining and metals companies have seen unprecedented growth in capital projects investments due to rising commodity prices. Even with a recent downturn in commodity prices, investments will remain based on long-term demand for minerals and metals, which continues to be driven by economic growth and social development throughout the world.

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

This unprecedented scale, along with the innate complexity of capital projects in the mining and metals industries, leads to the question: How can capital projects delivery be improved? To answer this question, Accenture interviewed executives from these industries about key challenges and methods to improve outcomes.

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This report is based on primary research conducted by a third-party firm on behalf of Accenture. Interviews were conducted with executives in the metals and mining industries between February and May 2012. Survey interviewers conducted a phone survey with executives in North and South America, Europe, South Africa, India, Russia and China. All respondents were C-level executives and decision makers or influencers regarding decisions related to management of capital projects in their organizations.

Accenture defines a capital project as a long-term investment, usually exceeding $50 million, involving either greenfield or brownfield projects. For this survey, Accenture focused on delivery of major assets costing at least $1 billion to build and taking more than a year to deliver. Survey respondents cited a wide range of projects that fit the survey criteria.

An overwhelming majority of survey respondents, 78 percent, consider effective capital project delivery to be “critical,” with an additional 19 percent deeming it “important.” However, a majority of respondents concede they are not delivering consistently against their own targets .

Delivery consistency is a major issue. Less than a third adhere to approved budgets (within 25 percent) for all projects, with less than a fifth of respondents report being within 10 percent of costs for all projects.

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

Respondents were asked about their organizational priorities in the next three years. The top four for optimizing capital project management concern:

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

From analysis of the survey results, research and experience with clients, Accenture identifies five key areas to improve project delivery to meet cost and schedule demands, reduce risks and boost returns on investment:

1. Establish strong project governance and risk management tools

2. Proactively manage external stakeholders’ increasing expectations for sustainability

3. Optimize scarce talent through portfolio management, organizational flexibility and training

4. Integrate information systems among capital projects players

5. Accelerate operational readiness

José J. Suárez is the managing director for Accenture’s North American Mining industry group. He has more than 25 years of experience in engineering, procurement and construction (EPC); engineering, procurement and construction management (EPCM), and start-up and operations of major industrial plants for the mining, the power (coal-fired, combined cycle, and gas-fired), the pulp and paper, the oil and gas and the cement industries, and business/corporate management. In the mining sector, Mr. Suárez has worked on copper, nickel, alumina, iron ore, steel, gold, potash, and titanium projects/operations. His experience spans program management, business process management and capital projects around the world.

Amy M. Callahan is the managing director of Accenture Capital Projects Services. Based in Denver, Ms. Callahan has more than 14 years of experience as an industry and functional executive and consultant to the Resources industries across capital projects and operations.

John E. Lichtenstein is the managing director of the Accenture Metals industry group and also leads the Accenture Natural Resources group (metals, mining, forest products and building materials) for the Asia Pacific region. Based in Beijing, Mr. Lichtenstein has more than 25 years of experience as an industry executive and consultant to the global metals and mining industries.