Accenture: Budget Overruns Could Cost Trillions

By Rob Starr, Content Manager, Big4.com

Accenture (NYSE: ACN) research shows  that delays and budget overruns on much-needed capital projects for the oil and gas and utility industries could cost companies in those industries trillions of dollars in lost investments.

As part of the research, Accenture surveyed 61 energy executives from 21 countries who have responsibility for capital projects of at least US$1 billion. Using conservative assumptions based on its research, Accenture estimated that the potential overspend across the whole capital budget of the energy industries could be approximately 13 percent, which translates to US$5 trillion overspend on the US$38 trillion IEA forecast for global investments.

The International Energy Agency (IEA) forecasts that the energy industry will spend nearly US$38 trillion globally on investments for global energy projects through 2035, chiefly to maintain existing assets such as pipelines and electric grids and to build new assets. Accenture offers recommendations for improved upfront planning, developing and retaining talent, and improving the transition from the construction phase to an operating asset.

These include Risk management. Risks typically are not isolated; an issue in one area of a project often affects other areas, which is why having extensive cross-functional input is crucial. Organizations need a rigorous approach to assessing risks—at the project and portfolio levels—as well as robust processes for monitoring and mitigating them. As well, Data and analytics was another area needing scrutiny : Companies must have the capabilities to collect data at all levels and then leverage advanced analytics to gain insight from that data.  At a basic level this includes comparing estimates on past projects, reviewing variances, and identifying causes of the variances to avoid repeating them.