Achieving High Performance in Capital Projects

Securing Indias future through infrastructure development

Table of Contents
Foreword Executive summary The infrastructure conundrum Bridging infrastructure deficits: Challenges to address Operational levers for excellence in project execution Accentures framework: Building blocks to high performance Market focus and positioning Distinctive capabilities Performance culture Creating an enabling environment Closing words 3 5 9 13 19 23 26 28 34 36 39

Foreword
act differently to fully engage with this growth opportunity. But how can they do so? What are the new priorities for Indias business leaders? Accenture launched a large-scale research effort to get answers to those questions. We acquired a more nuanced understanding of the changing priorities and challenges for the infrastructure industry. We also were focused on identifying evolving sources of competitive advantage within the infrastructure and capital projects industry during these exciting times. Our study began with detailed interviews of the business leaders whose organizations are shaping the present and future of Indias physical infrastructureroads and bridges, airports, ports, electricity, gas, telecommunications, water supply and railways. We also talked to executives at capital-intensive industries such as oil, cement and steel. Interviewees included business leaders from entities owning infrastructure and capital projects, as well as engineering, procurement and construction (EPC) companies. And we spoke to the leaders of large contractors, senior functionaries from policy and financial institutions, and executives from consulting organizations. In all, we were able to conduct 25 thought-provoking discussions. The results of our research are invaluable. Blending insights gathered during interviews and extensive secondary analysis with Accentures time-tested High Performance Business research, we have developed a robust framework for achieving high performance in commissioning physical infrastructure and capital projects through excellence in project execution. Our framework identifies three distinctive capabilities that organizations must build to differentiate themselves from the competition: an empowered talent pool, innovation and localization and a collaborative ecosystem. Through examples and case studies, this report shares rich insights into how leading companies across Indias infrastructure and capital projects industry are focusing their energies to build such capabilities. But we do not stop at identifying distinctive capabilities. The new Accenture framework enables us to offer a set of six action points that business leaders can use to build these capabilitiesand thus develop a performance culture within their organizations. Many of the actions we proposeempowering project managers, fostering a best-in-class operating environment and nurturing a learning environmentcombine to deliver a powerful incentive to go back to basics,but with far greater levels of expertise. The challenge to build India's strong infrastructure is not only borne by Indias business leaders. The size and scale of investments in the infrastructure and capital projects sector make it imperative for industry, government and other stakeholders to collectively find ways to foster a predictable and enabling business environment. While the list of issues to be addressed is long, this report identifies three critical ways to achieve excellence in project execution: creating talent pools, streamlining bidding and regulatory processes such as land acquisition and environmental clearances, and resolving disputes in a timely manner. It is Accentures conviction that a concerted focus on infrastructure will lay solid foundations for Indias international competitiveness. We are pleased to see a wide range of companies in the infrastructure and capital projects industry beginning to lay such foundations. And we are committed to working as a trusted partner with those organizations and many others like them to help India realize its potential as a global economic powerhouse.

Sanjay Dawar
Deputy leadmanagement consulting, India, and managing partnersupply chain management, Asia Pacific
India is alive with possibility. While many economies are struggling to get back on their feet after the global economic crisis, the Indian economy continues to astonish. In 2010, India is set to emerge as the worlds secondfastest-growing major economy. But if the nation is to merit its newly prominent place on the global geoeconomic map, it is imperative to plot a more stable, broad-based and inclusive growth trajectory. There is no mystery about what it will take to plot that course. It calls for accelerated and balanced growth in infrastructure and capital-intensive industries that will help unleash productive forces across all sectors and all regions in India. It demands large, complex projects that connect rural communities to markets, expand Indias manufacturing base and achieve macro-development targets. Moreover, the new, less inflationary growth trajectory also will demand unprecedented attention to efficiencya wholehearted, open-ended, nationwide commitment to quash time and cost overruns, waste and accidents. Businesses spanning the infrastructure value chain will need to think and

Sanjay Dawar

Executive summary
The efforts are plain to see from Mumbai to Chennai and from Patna to Pondicherry: Everywhere, cranes and excavators are raucous witnesses to Indias enormous investments in physical infrastructure.1 The ubiquitous construction equipment is the outward sign of a nation busy commissioning projects in infrastructure and capitalintensive industries such as oil, coal, cement and steel, at a speed and on a scale never before seen. Yet, the vast public-sector budget commitments and all-too-obvious nationwide need for infrastructure upgrades are no guarantee of success for players in those industries. In many cases, infrastructure and capital projects are suffering with staggering overruns in time and cost. As a result, commissioning projects without cost and time overruns has become the new growth imperative within these industries. According to business leaders, policymakers and consulting executives interviewed as a part of this research, excellence in project execution is key to effectively address the new growth imperative. Therefore, we recommend a framework (illustrated in Figure 5 on page 25) that can help asset owners, EPC companies and large contractors achieve high performance in infrastructure development through excellence in project execution. According to this framework, to achieve high performance, companies must consistently strive to balance, align and renew three essential building blocks of high performance: Market focus and positioning decisions regarding where and when to compete Distinctive capabilitieshardto-replicate capabilities that define how businesses compete Performance culturecommon mindsets relating to culture, leadership and the workforce

Market focus and positioning

The decision to work on specific projects is intrinsic to the core strategy of a company and is best guided by the companys long-term vision and strategic fit. While it is too ambitious to recommend specific markets upon which companies must focus, following are strategic insights Accenture has to offer on how market focus becomes an important building block in helping companies achieve high performance through excellence in project execution. Select projects through careful analysis High-performance businesses carry out comprehensive and systematic analysis to understand budgetary and revenue implications of: delays in acquiring regulatory approvals, escalations in cost of raw materials and other relevant key factors. This analysis enables them to focus on right projects, with the right size, in the right geography.

Leverage relative diversification High-performance businesses utilize their presence across a portfolio of segments in different infrastructure and capital project verticals to draw key lessons to be shared across teams with the goal of completing projects on time, reducing risks and cutting costs. It also helps develop robust relationships that can be leveraged to efficiently execute projects in other growth markets. One of Indias largest engineering and construction companies, keen to leverage its shallow-water pipeline experience in the area of offshore projects, has executed a memorandum of understanding with a shipyard to develop a fabrication facility for offshore platforms, rigs and vessels for petrochemicals and refineries. Constantly move up the value chain Backed with deep industry knowledge and committed leadership, highperformance businesses rapidly move up the value chain, enter markets for highly advanced infrastructure and capital projects, and set very high benchmarks in various aspects of project execution in these markets.

Bina, thus earning the trust and support of the local populace. Innovation and localization To be a high-performance business, a company must not only constantly focus on building and upgrading technology and talent pools but also become adept at innovatively utilizing their talent and technological assets to overcome location and projectspecific obstacles. For instance, KEC International has mastered the art of innovating, with the help of its superior talent and technology pool, on site. In one of its recent projects in Saudi Arabia, KEC was required to cross six 230 kV energized lines in a single span for the construction of an overhead D/C transmission line. The company used innovative techniques and carried out hot-line stringing. KEC used guns to throw ropes across lines and also put to use its state-of-the-art, preassembled rider poles and cranes. This helped the company save manpower costs and avoid resource idling. Collaborative ecosystem To be a high-performance business, a company must focus on creating an ecosystem that treats subcontractors and the onsite workforce as collaborators, by clearly articulating their roles and responsibilities. This leads to a reduction in contract breaches and painful litigation. It helps to build trusted teams across functions that can be leveraged across projects. For instance, Tata Realty and Infrastructure Ltd. (TRIL) has adopted the Alliance Contracting approach to ensure timely completion of its Rs 3.6 billion (US$780 million) IT and ITES SEZ in Chennai. The company has signed a Project Alliance Agreement (PAA) with their contractors, architects, engineers and consultants. As a part of the agreement, TRIL has created a virtual companyAlliance 1stin which each participant company deputes its best resource as employees of Alliance 1st. The company plans to save up to 5 percent of the anticipated construction cost; it has already achieved a significant milestone5.3 million man hours

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

Performance culture
To nurture the organizational mindsets required to build three distinctive capabilities, Accenture recommends six actions: Empower project managers Businesses must take deliberate steps to empower project managers to make local decisions that are relevant to the projectand to act on those decisions. It is crucial to be able to create a pool of project managers and engineers capable of taking tough decisions in a responsible manner. Inject innovation culture into the organizations DNA Companies need to institutionalize the process of innovation by building a strong R&D tradition. That way, they can create robust technology platformsfacilitating better collaboration across internal and external stakeholdersand create assets, which employees across various levels can utilize to drive business growth. Foster a best-in-class operating environment Creating a safe and healthy work environment must become a business priority. It helps retain labor, reduces migration and helps in development of a trusted and productive workforce whose skill sets can be steadily enhanced with training. Create a roadmap for effective career progression Top management must take the time to chart clear career roadmaps for project managers. By doing so, their companies stand to benefit from the experience of those project managers during the entire life cycle of the project. Nurture a learning environment Companies must offer their employees full-fledged learning experience powered by technology. Documenting and sharing failures and "near-misses" provide invaluable lessons for project teams across

Distinctive capabilities
Accenture has identified a set of three capabilities which can help companies differentiate themselves from the competition. Empowered talent pool With talent in short supply across all levels, companies must institute ways of retaining and empowering talent to build a cadre of experienced project managers and a pool of skilled workers capable of providing innovative solutions. For instance, Bharat Oman Refineries Ltd. has created incentives for its talented project managers and engineers to work in remote locations such as Bina, in Madhya Pradesh, by proactively investing in development of a world-class social infrastructure around the project site. The company is investing in the future of its workforce and their families at Bina by helping set up a stateof-the-art school and a hospital. These measures also are helping raise the infrastructure profile of

various verticals. For example, one large Indian EPC does not penalize or fire managers who make errors in assumptions related to costing, but instead utilizes these scenarios to make the individual and the team learn from the outcomes. Leverage IT to improve productivity across collaborators Companies must invest in creating a sound IT infrastructure. If the process of reaching and making key project decisions is to become more efficient and inclusive, it is essential to make information available among a wide swath of stakeholders in different locations at the same time.

otherand sometimes at odds with each other. Accenture recommends devising more mature mechanisms to share risks and improve efficiency especially in the context of issues, such as land acquisition. Creating mechanisms to resolve disputes in a timely manner Delays in dispute resolution often reduce stakeholder interests in the project and exacerbate time and cost overruns, making the project unviable for the asset owner. Accenture recommends establishing of a highpowered, fast-track administrative tribunal whose sole job is to resolve administrative disputes associated with the implementation of projects above certain investment thresholds.

To be a high-performance business by excelling in project execution, companies will need to: Diversify in related sectors through sound analysis, leverage diversification to excel in project execution and single-mindedly focus on moving up the value chain in sectors where they are present. Institutionalize unique ways to empower and retain talent, create capabilities to innovate and localize solutions and build a collaborative ecosystem facilitating durable and healthy relationships among stakeholders. Nurture a performance culture that motivates its workforce to learn, innovate and become empowered to deliver world-class infrastructure to the nation.
1 Physical infrastructure in the context of this report encapsulates the following sectors: roads and bridges, airports, ports, electricity, gas, telecommunications, water supply, and railways.

Creating an enabling environment: action agenda

Using our framework as a basis, industry players should closely work with government, educational institutions and other relevant stakeholders to create a predictable and enabling business environment aimed at strengthening project execution. Creating talent pools through collaboration If not immediately addressed, the talent crisis across all levels will cut short many of the opportunities for infrastructure-driven growth. Accenture recommends creation of centers for project management excellence to impart necessary skills to existing mid-level engineers enlisting the joint efforts of the government and industry. Businesses also can look at financing new departments in the innovation universities being set up by the Government of India across the country. Streamlining bidding and regulatory processes Bidding, land acquisition and acquiring regulatory clearances are the three key areas that most often put industry and government departments in contact with each

Closing words
Over the next decade, infrastructure development is expected to be a source of continued economic growth for India and in many other nations. Organizations that are bold enough to experimentand are committed to delivering excellence in project executionwill gain a considerable advantage in the immediate future. It is not an overstatement to say that the Indian companies that excel with infrastructure opportunities at home will be well-placed to pursue and capture opportunities abroad.

The infrastructure conundrum

The development of physical infrastructure has historically received inadequate attention in India. A quick comparison with China shows the extent to which the sector has suffered neglect. According to Accenture calculations, Chinas average yearly public expenditure on physical infrastructure during the period 19802000 was 12 percent of its gross domestic product (GDP) as compared to a meager 5 percent by India during the same period. In the year 2002-2003, infrastructure investments in India dipped to a low of around 3.4 percent of Indias GDPthe lowest on record for the period 19612003.2

Since 20032004, public spending on infrastructure has been on the rise. The average yearly public investment in Indias infrastructure during the period 20032009 has been consistently above 4.5 percent of its GDP and is expected to reach a figure of 9.34 percent by the end of 20112012.3 The data on projected investments in Figure 1 clearly shows that public spending on key infrastructure sectors in India during the period 20072012 (Indias Eleventh Five-Year Plan) is expected to be much higher in comparison to what was anticipated to be spent during the period 2002 2007 (Indias Tenth Five-Year Plan). Most importantly, gross capital formation in infrastructure (GCFI)or the amount of money actually put on the ground to create infrastructure capacitiesis set to more than double from about 3 percent of GDP during the Tenth Five-Year Plan to about 7.55 percent of GDP at the end of the Eleventh Five-Year Plan (20112012). On achieving this number,

India will miss its projected GCFI as a percentage of GDP figure for the Eleventh Five-Year Plan by just 0.05 percentan exemplary achievement.4 To seize growth opportunities evolving from such large real investments across a range of physical infrastructure sectors, coupled with the rapid expansion in consumer demand for housing, automobiles and consumer goods across urban and rural markets, a number of private and public players are investing aggressively to increase their capacities in capital-intensive sectors such as oil, cement and steel. However, poor project management, resulting in time and cost overruns, is leading to suboptimal utilization of large investments being made in infrastructure and capital-intensive sectors. The deficits resulting from such overruns are eating into Indias competitiveness as a world-class manufacturing destination.

Poor project management results in infrastructure deficits

Poor project management has resulted in cost overruns and time delays of a high order across infrastructure projects being implemented in India. Accenture calculationsbased on the data published by the Ministry of Statistics and Programme Implementation (MoSPI), Government of Indiashow that actual capacity additions in the electricity sector have fallen short by 49 percent of the targeted capacity to be created during the period of April 2007February 2010 under the Eleventh Five-Year Plan. The target of upgrading national highways during the same period has suffered by 16 percent. Sectors such as natural gas and crude oil, critical for Indias energy security, are plagued by capacity deficits to the tune of 8

Figure 1. Percentage increase in projected public spending on key infrastructure sectors during the Eleventh Five-Year Plan over the Tenth Five-Year Plan. Ports Airports Telecommunications Electricity Railways Roads and bridges Gas 358% 525%
From $3.5 billion to $22 billion

From $1.7 billion to $7.7 billion

150% From $25.8 billion to $64.6 billion 128% 119% 117%

From $72.9 billion to $166.6 billion From $29.9 billion to $65.4 billion From $36.2 billion to $78.5 billion

73% From $2.4 billion to $4.2 billion

Note: Currency in US dollars. Source: Planning Commission, Government of India and Accenture calculations.

Figure 2. Capacity deficits in key infrastructure and capital-intensive sectors as of February 2010 during the Eleventh Five-Year Plan. Steel Crude oil Natural gas National highway upgradation Electricity
Source: Accenture calculations based on MoSPI data

6% 7% 8% 16% 49%

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percent and 7 percent, respectively, during the same period (see Figure 2). As also noted in The Economic Survey of India 2010, underachievement of capacity addition targets in the electricity sector during the Eleventh Five-Year Plan is directly linked to poor project management. Lack of manpower planning for construction and commissioning of projects; contractual disputes among project authorities, contractors and subvendors; design-related problems; delayed supplies of raw materials; and shortage of fuel have been cited as the key reasons in The Economic Survey 2010 for delays in the commissioning of power plants during the Eleventh Five-Year Plan.5 A study published by the Planning Commission of India evaluating the rural roads component of the Bharat Nirman program (the program to rebuild rural India) reveals that only 20.3 percent of the roads covered in the pan-India sample have been completed on time. Delays in land acquisition and unavailability of raw materials and labor have been identified as two key reasons for delays in the completion of projects under the aegis of this program.6 If not rectified in a timely manner, such deficits will result in acute capacity deficits across key infrastructure and capitalintensive sectors at the end of the Eleventh Five-Year Plan.

manufacturing sector to provide gainful employment to millions of unskilled people who are ill-equipped to benefit from the opportunities in the flourishing knowledge sector, will therefore take time to materialize. Deficits in transportation infrastructure, especially roads, will slow the pace of integrating Indian villages into the mainstream market economy. At present, about 40 percent of Indias villages are not even connected to a road, making it difficult for the farmers to have their produce reach the markets, cities or food processors.7 Shortage of physical infrastructure, including roads, power and railways, will decelerate the pace at which income-generating opportunities emerge in Indias rural areas. In fact, more than 70 percent of the senior executives across 100 large companies interviewed by Accenture for its research report, Masters of Rural Markets: The Hallmarks of High Performance, identified the poor road and rail network as the key structural handicap to overcome in unlocking growth opportunities in Indias rural regions.8 Persistent deficits of good roads and continuing poor rail connectivity in the future will increase the cost of upfront investments to be incurred by industry to create efficient rural supply chains across Indias remote areas. If these costs do not match the benefits, industry will not be incentivized to invest in rural India, thereby decelerating the pace of gainful employment opportunities in Indias hinterlands. Moreover, a large number of rural Indian children, who are expected to shape the countrys demographic dividend for the next two decades, will continue to be disconnected from opportunities to acquire skills and knowledge due to deficits in physical infrastructure. Industry will be compelled to hire skills and talent, external to rural regions, to fire its growth cylinders in Indias remote regions. Rural youth will therefore remain on the fringes of growth. The inability to bridge sustained shortages in the domestic oil and gas

sector will make it difficult to deliver power and energy-intensive products to industries and people at affordable prices. Already, Indias energy demand has increased by more than 400 percent in comparison to what it was in 1980, much higher than the global average during the same period. India is now the worlds fifth-largest energy-consuming nation.9 Allowing deficits to proliferate will further intensify its dependency on external markets for oil and other petroleum products, which at present stands at around 75 percent, according to the Economic Survey of India 2010.10
2 Calculations for China are based on the data from the National Bureau of Statistics and in the context of India from the data acquired from the Ministry of Statistics and Programme Implementation. Planning Commission, Government of India (2008); Projections of Investment in Infrastructure during the Eleventh Five-Year Plan. Planning Commission, Government of India (2008); Projections of Investment in Infrastructure during the Eleventh Five-Year Plan and based on discussions at the Proceedings of the Infrastructure Conference of the Planning Commission on March 23, 2010. Chapter on Energy, Infrastructure, and Communications in The Economic Survey of India 2010. Planning Commission, Government of India (2010); "Evaluation Study on Rural Roads Component of Bharat Nirman;" PEO Report No. 210. World Bank (2009); "India: Using IDA Effectively in a Large Country." Accenture (2009), Masters of Rural Markets: The Hallmarks of High Performance. http://www.accenture.com/ Countries/India/Research_and_Insights/ Indian_Research_and_Executive_Insights/ Masters-of-Rural-Markets.htm. Energy Information Administration (2009), "Country Analysis Briefs: India."

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The impact
Shortfalls will increase the cost for governments, businesses and other stakeholders to access and create sustainable growth opportunities across the Indian landscape. The structural rebalancing between Indias manufacturing and services sectors, critical to withstanding future economic shocks, will fail to materialize in the near term. This is because poor quality of power supply, roads and costly resources such as oil and gas will continue to erode the manufacturing competitiveness of India, thereby reducing its attractiveness to investors. The potential of the

10 Chapter on Energy, Infrastructure, and Communications in The Economic Survey of India 2010. http://www.eia.doe.gov/ emeu/cabs/India/Background.html.

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Bridging infrastructure deficits: Challenges to address

Bridging deficits at an unprecedented speed and scale will require businesses to consistently deliver projects on time and within projected costs. We asked companies the key strategic levers they focus on to commission projects without time and cost overruns. An overwhelming majority pointed to project execution and delivery capabilities. We also asked them to grade the challenges they face while executing projects (see Figure 3).

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Figure 3. Mapping business challenges.

Project conceptualization and initiation Finance Engineering and procurement Construction Operation and maintenance

Intensity of challenge

Regulatory inconsistency

- Talent shortages - Capacity constraints in key resources and equipment - Complex contractor management - Multidimensional stakeholder management - Weak risk management capabilities - Inadequate schedule/cost control

Suboptimal project operability

High

Ambiguous project documentation and processes

Financial closure delays

Medium

Difficulty in finding the right partners

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

Low

High-intensity challenges
Talent shortages
The shortage of experienced project managers with an ability to grasp projects end to end has been highlighted as the biggest hurdle in executing large and complex infrastructure projects in India. Business leaders believe that with growing project complexity, the demand for experienced project managers with multidisciplinary skills will significantly increase in the near future. Projects will require experienced and skilled personnel who can take an integrated view of not only engineering and operational aspects, but also the financial, legal, social and environmental aspects associated with projects. Compounding this issue is the shortage of a skilled workforce. Interviewees identified this shortage as one of the biggest risks to

their future growth. Not only are junior engineers and technicians in short supply, but so are masons, electricians, welders, carpenters and machine operators. Absence of an adequate number of institutions within India to create a pipeline of skilled workers capable of working on complex tasks was identified as a key area of concern by executives.

It is difficult to find individuals in the industry who can handle a project end to end.
Chairman and managing director of a public-sector oil refining and marketing company

by one senior executive, a key reason for rescheduling megathermal power projects in India is the scarcity of good-quality coal. Similarly, a number of project owners interviewed expressed their reservations to initiate work on large projects simultaneously, given the full order books of EPC companies and contractors with the experience to handle such complex projects. A senior executive noted that the oil industry is facing about a 60 percent shortage of drilling rigs. According to interviewees, very few Indian companies are capable of manufacturing high-end equipment, such as boilers and reactors that can deliver output at the scale and speed required to make mega-capacity ventures profitable. A large project owner in the petroleum-refining sector, who we interviewed, was compelled to import large boilers from China. Due to poor roads and bridges, it took seven months to transport all the boilers from the port in Gujarat to the project site in the interiors of

Capacity constraints in key resources and equipment

The shortage of natural resources and high-end equipment is another major challenge being experienced while executing projects. As noted

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central Indiafour months longer than planned. This resulted in delaying the commissioning of the oil refinery.

Where is the capacity to create capacity?

CEO of a large power generation company

Due to multiple projects being executed simultaneously, project owners and EPC companies are required to manage experienced contractors and subcontractors in an environment in which the balance of power is tilting in favor of contractors. As a result, negotiations are becoming more challenging and outcomes more favorable to contractors.

Complex contractor management

With increasing scale and complexity, project owners and EPC companies are wary of the available contractor experience in executing critical projects within given time frames. Most companies are compelled to rely on a variety of local contractors necessitating a complex contractor setup. The unavailability of quality vendors, coupled with the prevalent culture of not honoring contractual commitments within the contractor ecosystem in India, is making contractor and subcontractor management increasingly difficult.

To find contractors that deliver on time is one of the biggest challenges for us.
CEO of a large EPC company

Outdated and poor-quality land revenue records, disparate land regulations and different work cultures across local institutions in various states affect the timely completion of projects. Delays in clearances from state environmental authorities and district forest officials, as well as the need to acquire licenses from local authorities, also have been cited as key factors responsible for derailing project schedules.

Regulatory inconsistency
The complexity and scale of infrastructure projects being undertaken in India have significantly transformed the industry. A number of projects currently being executed, especially in the space of petroleum products, are interstate in character. Therefore, companies are compelled to work closely with authorities at different levels across states.

The complexity of acquiring the necessary permissions stretched our project resources beyond imagination.
CEO of a large construction company

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Suboptimal project operability

Making the project operate at full capacity within the shortest period of time (project operability) continues to remain a challenge. In most cases, personnel responsible for operating the asset are involved only when the project is nearing completion. As a result, project execution teams do not receive the required input to modify standardized procedures toward making the asset fully operational under real-life situations. According to one senior executive we interviewed, operations teams are not fully conversant with project designs, are unaware of where these designs are kept and, in some cases, even lack the capacity to put them to use during emergencies.

It also was noted that bidders are only provided bid extensions very late in the bidding process, sometimes at the last minute. This practice is not beneficial to serious bidders who may have already decided not to bid due to the shortage of time before extension notification.

it challenging to preempt the risk areas that need to be addressed at the stage of project planning. As pointed out by interviewees, vendors do not always deliver as planned, clients are slow to approve completed stages, specifications change, unexpected technical problems emerge and resources are constantly pulled in different directions for multiple use. Technical and business risks may be easier to manage, but project execution risks are usually difficult to predict and manage. Many interviewees agreed that when uncertainties strike, execution priorities such as which tasks to do first become unclear and unsynchronized. Each department and person is likely to prioritize tasks based on its own pressures and targets, without regard to overall project delivery.

Financial closure delays

The cost and availability of funding have far-reaching implications for infrastructure projects for various reasons. Delays in financial closures often result in a lower internal rate of return for projects, stretching payback periods and raising questions on the viability of such projects. Availability of funds is a big concern as projects become larger and more complex. With the increasing project scale, players find it more difficult to bid and achieve financial closures of projects and to fund working capital requirements on their own. Players not only have to scout for debt sources, but also have to look for sources to fund their equity contribution, given the massive size of the projects.

When we asked the engineering consulting firm for drawings, they emptied a container.
CEO of an oil and gas major

Inadequate schedule and cost control

Unanticipated hurdlessuch as satisfying new regulatory requirements, ineffective project conceptualization, frequent design changes at the level of technology or plants and iterations due to scope creepwere cited by executives as the three major reasons for schedules and costs to spin out of control. To bring the projects back on track, project teams may have to wait for clearances from other stakeholders. At times, they may have to deal with delays by vendors and contractors in supplying materials with changed specifications.

Medium-intensity challenges
Ambiguous project documentation and processes
Having requisite information to prepare accurate bids with a clearly defined project scope continues to remain a challenge for companies, especially in the context of publicly funded projects. According to interviewees, despite two decades of liberalization, on many occasions, critical information required to accurately scope a project is not a part of the bid document. Interviewees appreciated the efforts made by the Planning Commission of India toward developing standardized templates for bid documents applicable to various sectors, but noted that state governments often do not use these templates while issuing bid documents. State agencies frequently transfer the risk disproportionately onto the developers or EPC companies in a public-private partnership.
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Multidimensional stakeholder management

Infrastructure projects, with their demands of increased scale, complexity and pace of execution, require the participation of multiple entities in consortia or in subcontractor relationships. A comprehensive understanding of local norms regulating relationships across players in the value chain becomes extremely critical to delivering projects on time. According to a number of senior executives interviewed, creating and managing direct channels of communicationsand managing expectations across a diverse range of stakeholders with different work culturesare challenges that they are slowly learning to tackle.

Weak risk management capabilities

The ability to determine, assess and mitigate risk is one of the most critical aspects of effective project execution. Organizations often find

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Operational levers for excellence in project execution

Despite these evolving challenges, a number of companies operating in the infrastructure and capital projects value chain continue to grow aggressively by successfully completing complex projects in geographically dispersed locations. In this section, we identify key operational levers to achieve excellence in project execution.

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Operational levers critical to achieving excellence in project execution

We asked interviewees to identify the key operational levers that have helped them achieve excellence in project execution (see Figure 4). They identified robust project management mechanisms, effective contractor management and capability development as the most important operational levers.

Figure 4. Mapping operational levers. Robust project management mechanisms Effective contractor management Capability development Cost-effective procurement Effective risk management Useful information technology tools Early involvement of operations team Strong forecasting capabilities Appropriate technical tie-ups Low priority
(voted by 60% or more interviewees as an operational lever with low level of importance)

High priority
(voted by 60% or more interviewees as an operational lever with high level of importance)

Medium priority

Robust project management mechanisms

Having robust project management mechanisms in place was identified as the most important operational lever for successfully executing projects. The establishment of a project management office (PMO) was recognized as an effective way to help achieve project excellence through close project monitoring and independent reviews. Establishing a PMO facilitated in highlighting and mitigating risks in a timely manner.

Key requirements for a successful PMO

Active involvement of all stakeholders Senior management involvement in reviewing and acting on problem areas Use of industry-standard program management tools Identification of all project dependencies, including procurement, logistics and contractors Ability to proactively identify bottlenecks and act on them

Perspective from a market leader

With the support of a PMO, a large oil company was able to identify logistics as an area where it could save significant costs. The PMO effectively linked high logistics spend and heavy detention and demurrage charges paid in the first phase to poor planning, documentation and tracking. To streamline processes, the PMO suggested that the company also employ a fourth-party logistics (4PL) partner. Implementing the recommendations of the PMO, the multinational saved almost onethird of its projected logistics cost.

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Effective contractor management

Contractor management processes were identified as the second most important operational lever. Contractors may lag in their abilities and compliance, and may need training for basic administrative and technical skills and safety awareness. Executives interviewed believe that addressing these deficits can work wonders for the project, especially in the area of schedule and cost control.

Key requirements for effective contractor management

Subcontractor categorization based on type of service provided Database with qualification and evaluation criteria Development of standardized cost sheets to facilitate factbased negotiations Creation of a mechanism to share risks in a more balanced manner with contractors and subcontractors Development of a network of preferred contractors

Perspective from a market leader

Managing contractors was increasingly becoming a key problem for a large EPC company. Problems included the identification and selection of capable subcontractors, screening of workers deployed by the contractors, monitoring of subcontractor productivity, and avoiding rate escalations. The EPC company developed and rolled out a standard operating procedure for subcontractor management. A category database of around 70 capable subcontractors was created with the support of project personnel and market intelligence. A centralized subcontracting management cell, owning the subcontracting process was institutionalized. The company has been able to reduce its time overruns on projects by more than one-third as a result of making its contractor management processes more efficient.

Capability development
The third most important lever is capability development. For around two-thirds of interviewees, capability development is about not only developing more project managers and a skilled workforce, but also nurturing design, equipment and other technological capabilities of the organization to provide the most competitive solution to the client. Creating capabilities has helped project owners and EPC companies to be less dependent on contractors to deliver projects of smaller sizes. In addition, it has helped them develop a group of confident project managers, willing to take informed risks and to make their projects less susceptible to the tight availability of outside skills.

Key requirements for development of robust inhouse capabilities

Leadership capable of arriving at a long-term view of market growth and corresponding requirements Organizational culture supporting problem-solving innovations A robust IT-based knowledge network to facilitate exchange of knowledge

Perspective from a market leader

One of the largest EPC companies in Asia has achieved its present status by constantly focusing on creating in-house capabilities. During the last three decades, this EPC-operator invested in building and upgrading in-house engineering R&D and manufacturing capabilities, along with alliances with major technology licensors. In the early 1980s, it acquired the appetite to execute medium-scale turnkey projects. It invested in building

robust in-house project management capabilities. As the 1990s unfolded, the operator invested in gaining access to proprietary engineering technology through strategic alliances to leverage investments in the oil and gas, power, cement and steel sectors. It consciously invested in creating Indias first state-of-the-art fabrication facility for large-scale industrial structures. This enabled it to participate in large-scale turnkey projects undertaken in India and in foreign locations. The EPC-operator continues to focus on bolstering its project management talent pool, capabilities to manage multiple stakeholders, and is expanding its global fabrication capacity. As a result, the EPC-operator is uniquely positioned to provide value to its clients across different geographies globally.

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Accentures framework: Building blocks to high performance

During interviews, it became increasingly evident that business leaders in the infrastructure and capital projects sector are steadily steering their organizations to become what Accenture calls high-performance businesses. While some businesses have become adept at implementing a wellconceived business strategy to survive and thrive across economic cycles and sustainably outperform peers, many are taking concerted steps to steadily move ahead on this path. In this section, we examine a framework that can help organizations achieve high performance in commissioning physical infrastructure and capital projects.

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From our perspective, sustaining high performance in infrastructure and capital projects will require business leaders to think beyond removing bottlenecks in the organization and the system. Moreover, as they expand their footprint across sectors and geographies, business leaders cannot allow the future of their enterprises to be shaped by actions hinged only to the development of organization-wide capabilitiesthey must also factor in cultural issues. Accenture has developed a proprietary framework (see Figure 5) addressing all these dimensions. This framework, capturing the essence of evolving business dynamics in India, is based on our High Performance Business research (which covers more than 6,000 companies) as well as insights gathered during various interviews. The three essential building blocks of our framework are:

Market focus and positioning decisions regarding where and when to compete. Distinctive capabilitieshardto-replicate capabilities that define how businesses compete. Performance culturecommon mindsets relating to culture, leadership, and the workforce.

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Decoding building blocks of high performance in the context of infrastructure and capital projects ecosystem
Market focus and positioning is key to becoming a high-performance business. High performers have a remarkable clarity on which markets to be in and how to position themselves in relevant markets. They are always found where the market action is. Highperformance businesses build their presence across markets by systematically analyzing the impact of key variables on various aspects of project execution. Typically in the context of infrastructure and capital projects, high-performance businesses are seen to diversify in key segments across various verticals. They leverage diversification to draw key lessons in the area of project execution and focus on positioning themselves up the value chain in markets of interest. Without the support of distinctive capabilities, the market focus and positioning of high-performance businesses would be hard to sustain. Accenture identifies three distinctive capabilities for organizations to achieve high performance through excellence in project execution (see Figure 5). Most important is retaining and empowering talent to build a cadre of experienced project managers and a skilled workforce. The ability to innovate and localize helps companies provide unique value-added solutions and facilitate the adoption of problem-solving methods developed in other projects or infrastructure areas. Fostering a collaborative ecosystem to minimize risks and reduce the probability of contract breaches the third capabilityis equally important. We discuss these in detail in the following section. At the base of the framework are the organizational imperatives that sustain high performance over the long termwhat Accenture refers to as performance anatomy or performance culture. We have identified six actions that organizations can take to nurture a mindset for developing distinctive capabilities (see Figure 5). These six actions are discussed in greater detail on pages 34-35. We also believe that an overarching enabling environment bridging talent deficits, streamlining regulatory procedures and helping settle disputes in a time-bound manner is critical for achieving high performance. Accenture has developed a point of view on some of the key action points that government, financial institutions and businesses can implement collaboratively in these areas. These are discussed in greater detail on pages 36-38, Creating an enabling environment.

Figure 5. Accentures proprietary framework, based on the High Performance Business research.
Market focus and positioning

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

Distinctive capabilities

Empowered talent pool

Institutionalize unique ways of retaining and empowering 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 to facilitate adoption of solutions and business models being practiced in other projects or other verticals toward providing unique solutions to customers

Collaborative ecosystem
Focus on treating subcontractors and on-site workforce as collaborators by clearly articulating their roles and responsibilities, leading to a reduction in contract breaches and painful litigation

Develop the right capabilities - and act on them

Performance culture (Performance anatomy)

Empower project managers 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

Enabling environment
Creating talent pools through collaboration Streamlining bidding and regulatory processes Creating mechanisms to resolve disputes in a time-bound manner

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Market focus and positioning

The decision to work on specific projects is intrinsic to the core strategy of a company and is best guided by the companys long-term vision and strategic fit. While it is too ambitious to recommend specific markets to focus on, the following are strategic insights from Accenture on how market focus and positioning is helping companies achieve excellence in project execution and become high-performance businesses.

Select projects through careful analysis Large players, specifically in the areas of cement and steel and oil and gas, have started employing sophisticated tools to analyze the impact of regulatory delays, rehabilitation of project-affected persons, escalation of raw material costs, contractual delays on cash flows and internal rate-of-return (IRR) calculations. Interestingly, many of these tools continue to be developed and sharpened by in-house teams. With the help of such analysis, companies ensure that they are focused on the right projects, with the right size, in the right geography. To enhance their capacities of in-house teams in this area, some organizations also have stepped up their level of collaboration with academic institutions. Leverage relative diversification High performers focus on relative diversification and continue to maintain a strong foothold across a portfolio of segments in different infrastructure and capital project
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verticals. These companies leverage diversification to excel in project execution. They identify actions responsible for successful project execution in one vertical and find ways of copying them while executing projects across other verticals. It also helps develop robust relationships that can be leveraged to efficiently execute projects in other growth markets. One of Indias largest engineering and construction companies keen to leverage its shallow-water pipeline experience in the area of offshore projects has executed a memorandum of understanding with a shipyard to develop a fabrication facility for offshore platforms, rigs and vessels for petrochemicals and refineries. Constantly move up the value chain Senior leadership in high-performance businesses is focused on making their organizations move up the value chain. One of the largest EPCs has consistently utilized this strategy to be the first to enter markets for highly advanced infrastructure

and capital projects. On entering these markets, the EPC has created benchmarks that are very difficult for competitors to emulate in various aspects of project execution thereby making it number one in these specialized-verticals. Similarly, a large infrastructure company is rapidly expanding its capabilities into offering fee-based O&M services by capitalizing on its experience across many infrastructure projects.

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Distinctive capabilities
Because distinctive capabilities are hard to replicate, they enable a company to develop offerings of unique value to their customers. It is only with these capabilities that industries can make the best use of their growth levers to achieve excellence in project execution. Accenture has identified three distinctive capabilities that organizations must nurture in order to emerge as high-performance businesses.

Empowered talent pool

Over the past two decades, the flow of talent into the infrastructure and capital projects industries has suffered due to the availability of more lucrative career options in other sectors. As noted by one of the leading minds in the industry, the situation has improved of late due to the reverse brain-drain from the United States and the Middle East. Businesses across the infrastructure and capital projects value chain must invest in developing mechanisms internal and external to their organizations to retain and empower talent. The industry must focus on identifying leading practices evolved in other sectors, such as software, to ensure that quality talent is developed and made available in a timely manner. High-performance businesses are already on the move. Project managers and project planners capable of simultaneously visualizing projects

and their various moving parts are being lured by incentive-based salary structures that compete with the best across the entire services industry. One successful infrastructure and real estate company is actively bridging talent gaps by attracting the right talent from outside the real estate sector. This company has been able to bring in the design head of an electronics giant to run its design and engineering wing. The executives leading the companys marketing and investor relations and the human resources team have been hired from a highly reputable global media giant. The senior leadership at the real estate company conducts orientation courses for these executives to bring them up to speed on the realty and housing sector. The PMO has become a vehicle to create career destinations for retaining experienced project managers. In one of the largest oil companies in India, highly talented project managers are being given senior positions within the PMO, and are vested with more authority and a larger oversight role.

Concerted efforts are being taken by high-performance businesses to nurture specific project management skills within their junior project management workforce through short-term courses. One of the countrys oldest construction companies follows the classroomat-site system to deliver skills to its on-site workforce. It has converted every project site into a training laboratory wherein the expert and experienced employees train people working under them at the job site.

If we do not invest in talent now, we will lose the game.

Managing director of a privatesector oil refinery

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Case study: Bharat Oman Refineries Ltd.

Bharat Oman Refineries Ltd. (BORL), a company promoted by Bharat Petroleum Corporation Limited (BPCL), is setting up a 6 MMTPA grassroots refinery at Bina, in the district of Sagar, Madhya Pradesh, along with a crude supply system. To attract and retain the right talent on this project, BORL offers suitable candidates a combination of a competitive and transparent benefits package and a flexible and friendly work environment. Senior leadership at BORL continues to push its project staff to go the extra mile professionally. Moreover, the senior leadership has unequivocally expressed its commitment to allow for innovation failures in regard to new-to-themarket solutions. Empowered to innovate, engineers and project managers are utilizing the results

from their past experience to solve problems, which have led to faster completion of critical phases of the project. The contribution of on-site teams is appreciated and rewarded by leadership at BORL. As a result, the workforce at Bina continues to be motivated to perform and derives immense professional satisfaction. BORL has proactively started creating a world-class social infrastructure around the project site, displaying its willingness to invest in the future of its workforce and their families at Bina. BORL has provided stateof-the-art infrastructure to reputable educational and health institutions toward creating a modern school and hospital at Bina. Most importantly, before collaborating with these institutions, BORL worked out a plan with them to run the institutions professionally and make them revenue-neutral for BORL.

BORL also has initiated a program to find suitable positions for spouses of its employees in institutions supporting the project at Bina. These measures not only are creating the right incentives for project managers and engineers to shift to Bina with their families, but also are helping to raise the infrastructure profile of Bina, thus earning the trust and support of the local populace.

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Innovation and localization

Innovation and localization are emerging as key distinctive capabilities being developed by market leaders to complete complex and challenging projects on schedule. Technology is increasingly becoming the fulcrum that enables companies to achieve their goals more competitively and effectively. The ability to localize technology facilitates the adoption of solutions and business models being practiced in other projects or infrastructure areas. Localization of technological tools also helps in implementing better front-end engineering design (FEED) processes, thereby providing businesses a better perspective on the possible risks associated with management of costs and time. A large rail infrastructure operator is introducing cost-effective and maintenance-free rail track technology, currently implemented in the European Union, for the Delhi Airport Express Link, by sufficiently modifying it to Indian conditions. This technology will help reduce maintenance costs of tracks and carriages substantively and will provide high-speed, comfortable and safe travel to commuters. A large, publicly listed civil contractor has built a web-based monitoring system that seamlessly ties into the enterprise resource planning (ERP) platform of the organization. This has helped the contractor automate the critical processes of estimation, contract management, inspection, and facilities, which has saved resources and helped enhance accuracy in decision-making. Interestingly, technology localization stimulates innovation aimed at smoothly and efficiently integrating standardized designs and business simulations locally. For example, high-performance businesses have developed innovative processes of preconfiguring product machine-tool process routings in SAP to conform to exact country operating methods. While doing so, these companies
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strive to arrive at an optimal mix between what to standardize and what to localize, and then explore how this mix can be efficiently scaled across various projects. High-performance businesses also are investing heavily in developing capabilities to innovate and localize. The motivation is to stay ahead of the curve and provide value-added solutions to clients. One of the largest power transmission EPC companies recently announced the launch of the world's largest tower testing station in India. This state-of-theart facility will facilitate validation of the largest towers ever designed for India's futuristic extra high voltage energy network. Costing more than Rs 400 million (US$10 million) the test station also is the most advanced using cutting edge technology, controls and systems.

Investing in innovation is investing in the future.

Executive director of a large power transmission EPC company

Case study: KEC International

KEC International is one of the largest power transmission EPC companies globally. It is the infrastructure EPC business arm of the Rs. 160 billion (US$3.75 billion) RPG Group. KEC International Ltd. utilizes its global scale and project management experience toward identifying the leading practices that can be taken to a particular geography and suitably modifies and innovates around it to suit the project requirements of the client. KEC International has mastered the art of innovating as the process unfolds, with the help of its superior talent and technology pool. Armed with such a capability, KEC International was able to implement bold and innovative measures while installing a 35 km-long 400 kV overhead D/C line to ensure smooth facilitation

of the United Arab Emirates first ever Formula-1 Grand Prix event. Provided with very little time to install this D/C line, KEC took calculated risks and cleared manufacturing of towers, procured relevant items and services without waiting for formal approvals for the entire project. Shortages were addressed innovatively. A different but efficient piling methodology was adopted to deploy additional piling rigs to overcome deficits in piling equipments. KEC International leveraged its longterm presence in the United Arab Emirates and addressed a number of operational and technical issues (such as right of way and route configurations) proactively. By drawing resources within its organization and from other stakeholders at the right time, KEC was able to efficiently utilize talent, technology and experience to its advantage during various stages of project execution and completed installation of the D/C line on time.

In one of its other projects in Saudi Arabia, KEC was required to cross six 230 kV energized lines in a single span for the construction of an overhead D/C transmission line. The client expressed an inability to arrange outages on any of the lines as switching off any of the single lines would have jeopardized the stability of the power systems of the region and would have severely impacted the power grid. KEC used innovative techniques and carried out hot-line stringing. KEC used guns to throw ropes across lines and also put to use its state-of-the-art, preassembled rider poles and cranes. In so doing, KEC saved manpower costs and avoided resource idling.

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Collaborative ecosystem
Different parties in a project have different priorities, often leading to an inherent conflict of interest among speed, cost and quality. While managing collaborations is not new to businesses operating in infrastructure and capital projects, the growing financial outlays, multiplicity of partners and increasing technical and regulatory complexities demand new approaches and solutions to building and retaining trust across stakeholders. For asset owners and EPCs, it is important to treat stakeholders such as government, contractors, subcontractors and on-site labor as collaborators, enabling them to appreciate the risks associated with the project and securing their buy-in through key aspects of the project. Trusted collaborations based on clear articulation of roles and responsibilities and cultural integration help minimize risk and reduce the probability of contract breaches and painful litigation. Interesting collaborative formats are being used in the Indian market. The Alliance Contracting model, which has been successfully practiced in territories such as Australia, is now being introduced for projects in India. Alliance facilitates the linking together of client, contractor and supply chain players, helping them to share risks, create the right incentives to engineer value and build mutually beneficial relationships. The model allows the asset owner to focus on core business as well as strategy issues, while at the same time reducing operational costs. In an era of public-private partnerships, trust-based collaborations with public agencies based on honesty and integrity can help companies acquire critical assets and factors of production at price points that can be game changing. High-performance businesses in India have found unique ways to create such trust-based relationships. For example, a large petroleum company leveraged its foray into the biofuels sector to acquire ailing but strategically important public assets in one of
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the Indian states. Injection of capital in these assets helped resuscitate growth in the region. For the business, the gains were multifold they also earned the respect of the administration and people, so much so that the administration awarded a strategically located piece of land to the company for their next project. With the goal of aligning expectations between itself and stakeholders in a changing business environment, a large Indian EPC company organizes a quarterly conclave involving the participation of senior leadership from its subsidiaries, various India and global stakeholders, and vendors. Most important, trusted collaborations are critical across teams within the organization. Challenges experienced during the project and technical glitches on project sites need to be communicated across teams linked with the project, and in a timely manner. A large asset owner company encourages its employees to use its robust IT network for sharing such information on a real-time basis, wherever possible. Such a process has improved relationships across various teamsand workable solutions to problems have emerged from unexpected quarters.

We have built trust in the organizations DNA. So our employees exhibit it with whoever they collaborate.
Chief strategist of one of the fastest-growing EPC companies in India

Case study: Tata Realty and Infrastructure Ltd. (TRIL)

TRIL Infopark Ltd., an SPV of TRIL, is setting up the Rs 3.6 billion (US$780 million) IT and ITES SEZ including service apartments, retail and residential components along with a convention center in Chennai. Dubbed the "Ramanujan IT City" after the legendary mathematician, the project at Taramani, on the IT corridor, will have a 3,250,000 sq. ft. IT space. It is planned to have a gold-rated green building. In order to facilitate timely commissioning of the project, TRIL is undertaking the implementation of this project under the Alliance Contracting framework, an approach that has been utilized probably for the first time in the history of modern construction in India.

TRIL has signed a Project Alliance Agreement (PAA) with their contractors, architects, engineers and consultants. The salient features of the PAA between TRIL and other contracting parties are: Project implementation by way of creating a virtual companyAlliance 1stin which each participant company deputes its best resource as employees of Alliance 1st. The members of Alliance 1st work toward completing the project within the jointly agreed target cost (TOC) and within the agreed milestones. Also, there are few other key responsibility areas and key partner initiatives, such as safety and quality for reviewing performance of the alliance. If the actual costs go beyond/ fall within the TOC, then the pain (loss)/gain (profit) is shared among the participants.

The participants agree not to blame each other and not to litigate. All disagreements/ disputes are discussed and resolved between the participants until there is unanimous agreement. The Alliance 1st is a virtual company and is managed by the Alliance management team (representatives of all companies), headed by the Alliance manager (akin to the CEO) and governed by the project alliance board (PAB). PAB comprises senior representatives of individual participant companies. By embracing such an approach, TRIL believes it can save up to 5 percent of the anticipated construction cost. Interestingly, Alliance 1st has already achieved a significant milestone5.3 million man hours clocked in May 2010, without any lost time due to injuries on site.

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Performance culture
The following six actions can help organizations create the mindsets required to nurture distinctive capabilities. Many of these actions remind us to go back to the basics and some organizations are already heading in that direction.

Empower project managers

Executing projects exactly as planned holds more optimism than reality. On the ground, project engineers often have to make hard choices to achieve their project objectives. It is critical to empower project managers to make decisions on issues relevant to the project and implement them in a timely manner. One of the fastest-growing engineering construction companies follows a work culture wherein the onsite engineers and project managers are empowered to arrive at local decisions relevant to the project and act upon them. Engineers can get in touch with the project directors and regional managers directly. Instituting such a process across all of its projects has enabled the company to empower its project managers to arrive at and implement tough decisions.

Inject innovation culture into the organizations DNA

Project owners and EPC companies are increasingly recognizing the worth of creating a culture of innovation in their companies. Innovations in this sector are not necessarily about products, but rather about ways to solve a construction problem or to arrive at more cost-effective ways to achieve a particular task. Innovation needs to be a practice in these organizations, and leadership needs to invest in the same in a concerted manner. At a large EPC operator in India, teams of highly trained and talented engineers across projects are brought together at a central location to provide input critical to various aspects of products and services utilized during project execution. The senior leadership in this company is committed to building a strong R&D tradition to create a pool of innovators that can provide advanced technical support to its engineering and operating divisions.

Foster a best-in-class operating environment

Safety is among the most crucial aspects in infrastructure companies, and also is a key business requirement today. It is important to weave safety holistically into the project execution process as it is linked with all functions, such as methods, technology, training and development. Injecting the culture of safety within a workforce from various backgrounds across a project that is interstate in character is challenging. On the Ramanujan IT City project, TRIL ensures that on-site labor is brought on to the construction site in wellmaintained buses and is provided with simple yet healthy food. The company ensures that the premises where the workforce resides are well-ventilated and clean with comfortable bunk beds. This has helped to not only retain labor, but also improve their productivity and reduce absenteeism.

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Create a roadmap for effective career progression

This particularly applies to companies that are project owners. When the project is completed, the personnel involved in the project are often at a loss, as the company may be unable to provide opportunities for actively engaging these people. Such experienced talent either moves to other companies in the process of setting up new projects or are compelled to move into other lines of business. Businesses must carefully plan the career paths of project personnel and invest adequately in building systems and structures that position such talent in meaningful roles after the project is commissioned. A joint venture oil refinery is trying to institute a mechanism to plan a career roadmap for its project talent. The objective is to use the experience of the project teams across the project life cycle, to treat them as an asset, to incentivize them to mentor others, and to keep them involved in the project after it is commissioned to help support maintenance and enhanced operability. The leadership expects that such efforts will help in creating trustworthy and dignified teams of project professionals.

due to the fear of penalties. A correct set of incentives needs to be put in place to facilitate the documentation and sharing of project experiences. For example, a large Indian EPC does not penalize or fire managers who make errors in assumptions related to costing, but instead utilizes these scenarios to make the individual and the team learn from the outcomes.

Leverage IT to improve productivity across collaborators

IT can help businesses create a virtual environment for collaboration in which all partnering entities can be integrated on one platform. This can result in improved overall capital project delivery, efficiency, asset operability and cost control through enhanced data and information transparency. Better integration and integrity of engineering and project systems can also be achieved. To overcome the inefficiencies of the traditional ERP system, one of the largest EPC operators in India has implemented an in-house, portalbased enterprise system providing a solid backbone to project execution. Complete job details from concept to implementation and completion are automatically uploaded onto the system and are available across all teams linked to projects. This has helped bring together different phases of construction cyclesdesign, development, tendering/bidding, budgets, and planning/scheduling.

Nurture a learning environment

High-performance businesses also are using IT to launch in-house e-learning platforms. To sustain its growth momentum, a large steel maker from India has launched an e-learning management system. This system offers full-fledged learning experience to its employees by utilizing an IT interface to fully or partially deliver trainings. The interface allows learners to monitor various aspects of their learning, such as pace and scores. Documentation is critical to sharing project experiences across the workforce. Sharing how one avoided near-misses or learned from a failure at a particular stage of the project can avoid replication of errors across projects of the same type and across sectors. Project managers generally do not document failures and near-misses

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Creating an enabling environment

The mammoth investments being made by the government, industry and financial agencies clearly exhibit that there is too much at stake to risk failure. All stakeholders stand to gain tremendously, if they can create an enabling environment aimed at strengthening project execution. The following discussion examines the actions industry can collaboratively take with governments and educational institutions to support the effective development of national infrastructure.

Creating talent pools through collaboration

Indian businesses have started to address talent deficits at the bottom rung of the talent spectrum by working collaboratively with state governments and educational institutes to create skilled pools of welders, masons, carpenters, technicians and junior engineers. A number of project owners and EPC companies have already started putting into place institutional mechanisms to create a skilled workforce pool that can be tapped by industry at large. Accenture also is at the forefront of such efforts. We support the development of 10 multilingual training modules and their deployment in two pilot centers impacting 4,000 workers. Beneficiaries for the project are selected from the database of more than 5,800 micro and small entrepreneurs and informal workers registered with LabourNeta

social initiative professionally run by a nongovernmental organization. Workers are trained in multiple areas to make them capable of handling an array of additional jobs in the construction industry. China presents a classic example of how government can be an active player in sustainably creating the executive talent required to grow its capital and infrastructure projects. (See The Chinese talent juggernaut on page 37).

India across the country. 3. The Skills Initiative in the Eleventh Five-Year Plan provides a unique opportunity for industry and labor departments in various states to drive sustained initiatives, whereby a number of unemployed youth can acquire the skills required in the construction of infrastructure and capital projects. 4. To achieve higher scale in its skills endeavor, industry should explore opportunities to share interactive and e-learning packages with major universities, private and public educational institutions, and other technical seats of learning over a highspeed National Knowledge Grid being developed by the Government of India.

Moving ahead
1. Taking a page from the Chinese experience, industryin collaboration with the Ministry of Educationshould consider the creation of centers for project management excellence to impart the necessary skills to existing middle-level engineers. 2. Toward ensuring a flow of innovative talent into the industry, businesses should proactively finance new departments in the innovation universities being set up by the Government of

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The Chinese talent juggernaut

The Ministry of Construction (MOC) is playing a leading role in promoting project management in China. The MOC launched a number of reform programs in 1984, aiming to raise the efficiency and effectiveness of the state-owned construction enterprises and the construction industry as a whole. One of the issues that the reform programs addressed was closely related to the implementation of project management techniques by the enterprisesseparating field operations from management. In November 1987, the State Planning Commission instructed 15 selected engineering enterprises to apply project management techniques to their operations. Encouraged by their success, many other enterprises followed suit. The Construction Project Management Committee (CPMC) was formed under the China Construction Industry Association in 1994. Under the auspices of the MOC, a series of training programs were designed and offered to project managers and other members of project management teams. By the end of 1995, the MOC had accredited 140 educational institutions or training centers as project management training providers. During the same period, 321,983 project managers took the training courses, and 297,774 of them were certified by the MOC. More than 600,000 project managers in total are certified by the MOC. The World Bank offered a number of training programs in Beijing, Dalian, and Shanghai, aimed at improving the project management capability of China. In July 1994, IBRD made an Institutional Development Facility (IDF) grant in the amount of US$478,000 to China for the development of project management training capability, and the establishment of an institutional framework for such training. China contributed 33 percent of the total cost of US$757,650. Immediately after the training program, a training network was formed with five major universities in Beijing, Tianjin, Shanghai and Xian, aimed at training project managers and specialists throughout the country on a regular basis. The Project Management Center of Tsinghua University further expanded into the Institute for International Engineering Project Management of Tsinghua University in April 2000.
Source: Project Management in China; Lu, You Jie and Wang, Shou Qing; South East Asia Construction; Sept/Oct 2004.

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Streamlining bidding and regulatory processes

Bidding, land acquisition and acquiring regulatory clearances are the three areas involving maximum touch points between industry and government departments. Lack of uniformity in norms with regard to the inclusion of information in bid documents creates negative incentives for companies to follow informal methods to reduce information asymmetry. It also enhances the transactions cost for the industry and unnecessarily heightens an element of risk associated with the project.

Moving ahead
1. Tender documents for publicprivate-partnerships (PPP) and EPC projects for the same sector must be issued by the government departments using a single template based on established international norms. The tender document should specify deviations from the template in the form of a separate note included as a part of the document. 2. Governments and industry should collaboratively work out a norm for the percentage of land acquisition, which is to be completed before issuing a tender for PPP projects or in the context of projects for which services of EPC companies are sought.

3. Risks associated with land acquisition should be shared through a mechanism that transfers the burden of risk to those who are best suited to bear it. For example, governments should not pass the burden of land acquisition on the EPC in the context of a PPP project, especially if the former is better positioned to bear the same. 4. A detailed plan should be in place for managing the resettlement of the affected population and working closely with them to help ensure their requirements and needs are adequately handled. Having social anthropologists and social planners as part of the project team to manage these issues can help to address potential problems.

Creating mechanisms to resolve disputes in a timely manner

Disputes during project execution complicate the relationship between project owners and the contractor. Delays associated with resolving administrative hurdles and disputes reduce stakeholder interests in the project by adding to the transaction costs and may lead to the transfer of risks in an arbitrary manner. Moreover, delays in dispute resolution lead to time and cost overruns, making the project unviable for the asset owner.

Moving ahead
1. Industry and government need to establish a high-powered, fast-track administrative tribunal dedicated to resolving administrative disputes associated with the implementation of capital projects over and above a certain investment threshold.

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Closing words
It is clear from this snapshot that players across the infrastructure and capital projects value chain are wellpositioned to achieve and sustain growth. Organizations that are bold enough to experimentand that are committed to delivering excellence in project executionwill continue to gain a considerable advantage in the years to come. Over the next decade, infrastructure development is expected to be a source of continued economic growth. Companies that start engaging in this opportunity now can establish a footprint in this growing market and, at the same time, help create the Indian economy of the future. To make the best use of these opportunities, businesses need to make serious investments in developing a collaborative ecosystem, empowering their talent pool and injecting innovation and localization into their core strategy. Perhaps the most significant challenge they now face is creating the culture and mindsets required to achieve excellence in project execution, while increasing scale and reach. To unleash growth opportunities, commitment is required not only from businesses, but also from government and other stakeholders. All stakeholders stand to gain tremendously, if they can act together quickly and efficiently. Each stakeholder has a unique set of capacities and mandates that can often be enhanced or extended through effective collaboration with others. The net result will substantially improve future prospects, while generating economic growth for companies and stakeholders alike. It remains to be seen which organizations will seize these opportunities, transform them into profitable outcomes and ultimately achieve high performance.

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Contacts
Sanjay Dawar Deputy leadmanagement consulting, India, and managing partnersupply chain management, Asia Pacific sanjay.dawar@accenture.com Sandeep Biswas Managing partnerAccenture Resources, India sandeep.biswas@accenture.com

Contributors
Accenture Institute of High Performance, India

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About the Institute for High Performance

The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accentures extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high-performance businesses.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with more than 190,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.

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