Better supplier engagement could prevent $5 trillion overspend

16 July 2012

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16 July 2012 | Kamalpreet Badasha

Improved supplier collaboration and better risk management could help energy companies avoid spending $5 trillion (£3.2 trillion) too much on capital projects.

Research by Accenture’s Innovation Center for Energy and Utilities estimated energy and utilities companies will overspend by approximately 13 per cent on global capital projects which equates to around $5 trillion (£3.2 trillion).

This is based on an International Energy Agency forecast $38 trillion (£24.4 trillion) will be spent through to 2035 on capital projects for new assets, as well as for the maintenance of existing pipelines and electricity grids.

Working with suppliers at the planning stages will prevent project delays, which was cited as a problem by 32 per cent of survey respondents. The major challenge cited by the 49 per cent of the 61 energy executives polled was regulatory requirements.

The report’s recommendations also included monitoring and mitigating risks, as well as using data analysis to compare estimates on past projects and identifying costs variances. A quarter of respondents said workforce and skills unavailability prevented projects beginning on time.

“Companies can improve their success in delivering capital projects by broadening their focus of project management beyond engineering and procurement to include human capital strategy, stakeholder and supplier relations, and defining and measuring success," said Jean-Marc Ollagnier, group chief executive of Accenture's resources operating group.

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