Download - Project Delays & Overruns Study - KPMG
INFRASTRUCTURE
Study on project schedule
and cost overruns
Expedite infrastructure projects
Foreword
Foreword from PMI India
Today, India is one of the leading outsourcing hubs in
the world. However, the world judges us not just by
the talent we have to offer, but also on the basis of our
infrastructure capabilities. India has set an ambitious
target of investing USD 1 trillion in infrastructure during
the Twelfth Five Year Plan period. Given this factor,
infrastructure development has been a key focus area
in every Indian state more so in the recent past. At the
center as well, big budgets have been allocated for
infrastructure development in every Five Year plan.
However, the country has consistently fallen short of
meeting such targets over the last few years. These
projects have been invariably riddled with issues of time
BOE�DPTU�PWFSSVOT��8JUI�UIF�PCKFDUJWF�PG�ěOEJOH�PVU�UIF�reasons for such schedule and cost overruns, Ministry
of Statistics and Programme implementation (MoSPI)
recommended PMI to conduct a Study, in consultation
with KPMG to highlight the major reasons for the time
and cost overruns across major sectors in infrastructure
projects. The projects surveyed in this report are from
nine sectors in the Infrastructure space viz. Power,
Petroleum, Coal, Steel, Railways, Roads & Highways,
Civil Aviation, Ports & Shipping, and Telecom.
It is a known fact that a large number of infrastructure
projects in India have been delayed due to regulatory
clearances, environmental issues and problems
pertaining to land acquisition. Also, there are challenges
in the tendering phase that affect viability of projects
thus delaying implementation, construction phase is
beset with over-runs and disputes and last but not the
least; provider skills are weak all across the value chain.
Given the critical role of infrastructure in ensuring a
sustained growth trajectory for India, it is imperative
that we identify the core issues affecting completion of
infrastructure projects in India and chalk out initiatives
that need to be acted upon in short term as well as long
term. This report attempts to identify these pertinent
issues and also brings out how professional project
management practices can bring about a positive
change in the completion of projects on time and within
budget.
Almost 79% of our respondents felt that the
infrastructure sector faces an acute shortage of skilled
project managers. This absence of project managers
with the requisite skill sets has emerged as the major
cause for time and cost overruns. Young graduates
today are being lured away be other seemingly lucrative
opportunities and project management education and
training is not yet getting the priority it requires.
Though organizations are realizing the growing need
for structured project management, many are looking
at short term training programs to enhance the skill sets
of their project teams. However, the situation warrants a
more serious approach. The survey reveals that by 2022
Indian infrastructure sector is likely to have a shortage of
around 3 million project professionals including project
managers, civil engineers, planners, surveyors, safety
professionals, etc.
The government too realizes the urgency of meeting
this skill dearth. In the Twelfth Five Year Plan, the
government has plans to focus on improving the project
management skills across country to get better returns
from public investment in infrastructure and also in
the social sectors. Project management, with a view to
deliver on time and within cost, is a learnable capability
that can be institutionalized in India. There is therefore,
a pressing need for industry and academia to realize
UIJT�HSPXJOH�OFFE��0SHBOJ[BUJPOT�UIBU�FNQMPZ�RVBMJěFE�project managers must encourage and support their
professional growth. In addition, organizations must
TUBSU�JOTJTUJOH�PO�IJSJOH�RVBMJěFE�QSPKFDU�NBOBHFST��5IJT�will provide academia the impetus required to introduce
project management into their curriculum.
Project management is the imperative for India’s growth
story and we believe, the way forward is for industry
and academia to work in tandem on this course to reach
the country’s goal of being ranked as an economic
superpower and a developed nation.
Raj Kalady
Managing Director
PMI India
Infrastructure plays a paramount role in the economic
growth of a country. Infrastructure investments in India
IBWF�CFFO�HSPXJOH�PO�B�DPOTJTUFOU�CBTJT��*O�FBDI�ěWF�year plan, the government sets an ambitious target
XIJDI�JT�IJHIFS�UIBO�UIF�QSFWJPVT�POF���5IF���UI�ěWF�ZFBS�QMBO�BMTP�QSPNJTFT�TJHOJěDBOU�JOWFTUNFOU�JO�infrastructure sector to bridge the huge infrastructure
EFěDJU��5IF�QMBO�JT�UP�EPVCMF�UIF�TQFOEJOH�UP�64%���trillion through 2016-17 with 50 percent of the funding
to be met by private sector. Although, the sector is
considered to be a key driver of economic growth, time
and cost overruns threaten to limit the sector’s potential
UP�IFMQ�BDIJFWF�UIF�EFTJSFE�HSPXUI�BOE�FOTVSF�FGěDJFOU�capital expenditure.
To understand the reasons for time and cost overruns
KPMG initiated the PMI-KPMG study on the request of
MoSPI to analyze the reasons for schedule and cost
overruns across various infrastructural projects running
across the country. The study was undertaken after
surveying key stakeholders in the infrastructure sector
and analyzing several key projects and comparing them
with best practices available globally.
It deliberates on both the external reasons for delays,
which are beyond the control of implementing agencies
and internal reasons, which can curtailed at the project
level with proper planning and project management.
The study also dwells on the proposed actions to be
taken for expediting infrastructure projects in India.
8F�IPQF�UIBU�BMM�TUBLFIPMEFST�ěOE�UIJT�SFQPSU�NFBOJOHGVM�in its bid to highlight the reasons for overrun in the
infrastructure projects and possible recommendations.
Neeraj Bansal
Partner, Real Estate and Constructions
KPMG in India
Foreword from KPMG in India
Table of ContentsExecutive Summary 01
Reasons for Schedule Overruns 07
Reasons for Cost Overruns 23
Sector-wise Impact of Factor on
Cost and Schedule Overruns 33
Mitigation Strategies -
&OTVSJOH�&GěDJFOU�1SPKFDU�%FMJWFSZ�� ��
Project Management –
Proven Method for Successful Delivery 47
Resource Shortage –
Plaguing The Growth of the Sector 51
Recommendations – Next Steps 59
Case Studies – A Deep Dive Into Projects 69
Global Insights – Learning From Global Projects 93
Sectors Overview –
Understanding Infrastructure Sector in India 99
1BSUJDJQBOU�1SPěMF�BOE�4UVEZ�.FUIPEPMPHZ��� ���
Appendix 123
01SE
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1 | Study on Project Schedule and Cost Overruns
Executive Summary
The KPMG in India - PMI study 2012 was initiated
on the request of MoSPI, highlights the major
reasons for schedule and cost overruns across
major sector’s infrastructure projects. While
some projects are impacted due to external
factors which are beyond the control of the
implementing agencies such as land acquisition,
regulatory approvals, etc., majority of projects
are delayed by factors which can be controlled
at the project level through proper planning and
project management. The study also highlights
the severe skill shortage and the growing
EFNBOE�TVQQMZ�HBQ�GPS�RVBMJěFE�DPOTUSVDUJPO�professionals affecting the infrastructure sector
in India. Project owners feel this is a long-
term issue which not only makes the projects
more expensive and risky, but also results in
compromise on quality as well as timelines.
Study on Project Schedule and Cost Overruns | 2
Infrastructure plays a paramount role
in the economic growth of a country.
Infrastructure investments in India have
been growing on a consistent basis. In
FBDI�ěWF�ZFBS�QMBO �UIF�(PWFSONFOU�TFUT�an ambitious target which is higher than
UIF�QSFWJPVT�POF��"MUIPVHI �UIF�TFDUPS�JT�considered to be a key driver of economic
HSPXUI �UJNF�BOE�DPTU�PWFSSVOT�UISFBUFO�to limit the sector’s potential to help
achieve the desired growth and ensure
FGěDJFOU�DBQJUBM�FYQFOEJUVSF��
Dearth of skilled project managers
IBT�UIF�HSFBUFTU�JOĜVFODF�PO�QSPKFDU�delivery
Shortage of skilled project managers
emerges as the root cause for time and
cost overruns in a project lifecycle. It has
CFFO�PCTFSWFE�UIBU�UIF�JOĜPX�PG�UBMFOU�in the infrastructure sector has been
declining – as resources are going for
BMUFSOBUJWF �NPSF�MVDSBUJWF�PQUJPOT��5IJT�concern is felt across various stages
of project lifecycle. 79 percent of the
respondents agree that the sector faces
shortage of skilled project managers with
UIF�QSFSFRVJTJUF�TLJMM�TFU �XIJDI�SFTVMUT�JO�time/schedule overruns.
0OF�PG�UIF�SFBTPOT�GPS�JOFGěDJFOU�QSPKFDU�delivery is the paucity of skilled project
managers in the infrastructure sector.
5IJT�EFDMJOF�JO�UIF�JOĜPX�PG�UBMFOU�JO�UIF�sector has emerged as the embryonic
cause for time and cost overruns in
the project life cycle. Resources are
CFJOH�TFFO�UP�EFĜFDU�BXBZ�GSPN�UIF�JOGSBTUSVDUVSF�TFDUPS�UPXBSET�BMUFSOBUJWF �more lucrative options.
5IJT�HSPXJOH�DPODFSO�XIJDI�IBT�CFFO�GFMU�across various stages of the project life
cycle has been supported by 79 percent
of the respondents that advocate the
same belief of managers lacking the
QFSRVJTJUF�TLJMM�TFU��5IJT�JOTVGěDJFODZ�further leads to issues such as prolonged
ěOBMJ[BUJPO�PG�EFTJHO �TDPQF�DSFFQ�BOE�contractual disputes.
3 | Study on Project Schedule and Cost Overruns
Reasons for project time overruns across project lifecycle
Stages External issues Internal issues
Pre-planning y Delay in regulatory approvals y Unavailability/delayed availability of funds y Land/site handover
y Lack of project managers/commercial managers with adequate planning skills
y -BDL�PG�-JBTJPOJOH�0GěDFS�1MBOOJOH�&OHJOFFS y Lack of cost managers y -BDL�PG�TBGFUZ�PGěDFST�FOWJPSONFOUBM�QSBDUJUJPOFST
Planning and design y Lack of strong R&R policies y Ineffective procurement planning y Design/scope change y Delay in regulatory approvals y Delay in decision making
y Lack of planning engineer/commercial managers y -BDL�PG�MJBTJPO�PGěDFS�PS�QMBOOJOH�FOHJOFFS y -BDL�PG�.&1�FOHJOFFST
&YFDVUJPO�BOE�monitoring
y Weak/ineffective project planning & monitoring y Contractual disputes y Unavailability/delayed availabiilty of funds y Lack of strong R&R policies y Delay land/site handover
y Lack of project managers/site managers/planning engineers/quantity supervisors
y Lack of awareness modern equipment & technology
y -BDL�PG�MJBTPO�PGěDFS�BOE�DPNNFSDJBM�PGěDFST
Closure and handover
y Pre-commissioning teething troubles y Contractual disputes
y -BDL�PG�DPNNJTTJPOJOH �QSPKFDU�BOE�TJUF�NBOBHFST �audit and total quality management professionals
Lack of requisite skill set as a major
cause of concern is also supported by
,1.(�*OUFSOBUJPOBMijT�(MPCBM�$POTUSVDUJPO�Survey 2012. About 45 percent of the
"TJB�1BDJěD�"41"$�SFTQPOEFOUT�XFSF�less apprehensive about unfavorable
economic prospects as compared
UP�UIF�TLJMMT�TIPSUBHFT�BOE�JOĜBUJPO�BT�B�DPOUJOVJOH�XPSSZ��5IF�TVSWFZ�highlighted that while emerging markets
like India represent a big opportunity
for engineering and construction
DPNQBOJFT �UIFTF�NBSLFUT�BSF�GSFRVFOUMZ�accompanied by a high degree of
VODFSUBJOUZ��"T�QFS�,1.(�*OUFSOBUJPOBMijT�(MPCBM�$POTUSVDUJPO�4VSWFZ �BCPVU����percent of the respondents considered
UIBU�JO�"41"$ �BDDFTT�UP�BQQSPQSJBUF�skilled resources as the single biggest
DPODFSO �GPMMPXFE�CZ�QPMJUJDBM�SJTLT�BOE�cultural differences.
5IF�SFTQPOEFOUT�IBWF�BEPQUFE�SFTPVSDF�planning and monitoring strategies to
JNQSPWF�FGěDJFODZ�BOE�VUJMJ[BUJPO�PG�UIF�SFTPVSDFT��)PXFWFS �UIFSF�JT�TUJMM�B�transcendental need for improvements
in the quality of project management
USBJOJOH�CFJOH�PGGFSFE�CPUI�FYUFSOBMMZ�and internally. Structured and improved
USBJOJOH�QSPHSBNT�XFSF�JEFOUJěFE�CZ�respondents as a long term solution for
building professional capabilities and
enhancing skill sets.
About 72 percent of the respondents
consider internal training programs such
as developing in-house Project Academy
/ ‘Center of Project Management
&YDFMMFODFij�GPS�USBJOJOH�BOE�DFSUJGZJOH�project managers as the pertinent step
to enhance the quality of talent available
in the near future. Other factors such as
MBOE�TJUF�IBOEPWFS �EFMBZ�JO�SFHVMBUPSZ�BQQSPWBMT �GSFRVFOU�EFTJHO�DIBOHFT �TDPQF�DSFFQ �DPOUSBDUVBM�EJTQVUFT�FUD� �also result in schedule overruns.
Cost overruns are fuelled by frequent
changes in design and weak
procurement planning, which can be
mitigated by adequate training and
coaching of project managers
About 67 percent of the respondents
feel that weak procurement planning
and frequent changes in design have a
huge impact on project cost overruns.
5IFTF�JTTVFT�SFTVMU�JO�JOFGGFDUJWF�QSPKFDU�QMBOOJOH�BOE�EFTJHOJOH��5IF�TVSWFZ�respondents agreed that these issues
have a high impact on the project cost but
can be mitigated by effective training and
coaching of the project managers.
5IF�TVSWFZ�BMTP�JEFOUJěFE�UIBU�companies today have a high-level
of awareness towards the need for
QSPKFDU�NBOBHFNFOU�BT�BO�PSHBOJ[BUJPO�XJEF�QSPDFTT��)PXFWFS �FGGFDUJWF�implementation of project management
BT�BO�PSHBOJ[BUJPOBM�QSPDFTT�JT�ZFU�UP�CF�SFBMJ[FE�CZ�UIF�NBKPSJUZ�
Study on Project Schedule and Cost Overruns | 4
Source: KPMG in India - PMI Survey on cost and schedule overrun, 2012
Lack of highly skilled professionals becomes critical to address
5IF�TVSWFZ�TVHHFTUT�UIBU�UIFSF�JT�B�EFBSUI�PG�NBOQPXFS�BDSPTT�DBUFHPSJFT��IPXFWFS �non-availability of highly-skilled professionals can have an adverse impact on the
QSPKFDU�EFMJWFSZ�BOE�DPTU��#Z����� �*OEJBO�JOGSBTUSVDUVSF�TFDUPS�JT�FYQFDUFE�UP�IBWF�B�shortage of around three million1�QSPKFDU�QSPGFTTJPOBMT�JODMVEJOH�QSPKFDU�NBOBHFST �DJWJM�FOHJOFFST �QMBOOFST �TVSWFZPST �TBGFUZ�QSPGFTTJPOBMT �FUD���)FODF �JU�JT�JNQFSBUJWF�UP�increase investment in training and mentoring to develop the requisite skill set in the
QSPGFTTJPOBMT �EFQMPZFE�BDSPTT�WBSJPVT�EFQBSUNFOUT�
'VSUIFS �UP�NFFU�UIF�JODSFNFOUBM�EFNBOE�PG�QSPKFDU�QSPGFTTJPOBMT �JU�JT�JNQPSUBOU�to introduce project management in the
DVSSJDVMVN�PG�FOHJOFFSJOH �NBOBHFNFOU�BOE�PUIFS�UFDIOJDBM�JOTUJUVUFT��.PSFPWFS �UIF�(PWFSONFOU�TIPVME�QMBZ�B�NPSF�QSPBDUJWF�SPMF�CZ�SFDPHOJ[JOH�QSPKFDU�NBOBHFNFOU �WPDBUJPOBM�PS�TLJMM�USBJOJOH�institutes as a part of the main stream
education. In many of the advanced
JOEVTUSJBM�DPVOUSJFT �WPDBUJPOBM�USBJOJOH�is considered at par with university
FEVDBUJPO��)PXFWFS �UIJT�JT�OPU�UIF�DBTF�JO�*OEJB��"T�B�SFTVMU �WPDBUJPOBM�USBJOJOH�is not sought after by the bright and
ambitious students. One of the primary
reasons is that these institutes cannot
offer a ‘degree’ – which seems to be
a critical requirement for any further
formal education in India and across the
globe. It is important to understand the
manpower and skill requirements of the
industries before we begin our reforms
JO�UIF�WPDBUJPOBM�USBJOJOH�BSFB��5IF�SBQJEMZ�growing Indian needs trained manpower
OPX�NPSF�UIBO�FWFS��5IFSF�BSF�NVMUJQMF�TFDUPST �(PWFSONFOU�PSHBOJ[BUJPOT �support institutions that need manpower
to support them.
5IF�JOUSPEVDUJPO�PG�QSPKFDU�NBOBHFNFOU�curriculum in main stream education is
SBQJEMZ�CFDPNJOH�HMPCBM��*OEJB�JT�FYQFDUFE�UP�CFOFěU�JNNFOTFMZ�CZ�BEPQUJOH�HMPCBM�standards and allowing globally renowned
institutes to set up training centers in
*OEJB��*O�UIF�TIPSU�SVO �JU�XJMM�IFMQ�TPNF�PG�the best global construction companies
UP�XPSL�FGěDJFOUMZ�BOE�FGGFDUJWFMZ�JO�India and contribute to the richness of
XPSLGPSDF�JO�*OEJB��*O�UIF�MPOH�SVO �JU�XJMM�help the Indian labor to be world-class and
claim higher salaries and wages.
5 | Study on Project Schedule and Cost Overruns
1 KPMG in India Analysis
1SPKFDU�NBOBHFNFOU�IFMQT�JO�FGěDJFOU�project delivery
5IF�JOEVTUSZ�IBT�TUBSUFE�BDDFQUJOH�UIF�1SPKFDU�.BOBHFNFOU�0GěDF�1.0�concept for independent reporting and
FOTVSJOH�QSPKFDU�NBOBHFNFOU�FYDFMMFODF��About 86 percent of the respondents
agree that PMO could be an effective way
of monitoring projects. Project teams that
have adopted PMO feel that it helps in
ensuring successful implementation of
projects through deployment of project
management best practices. PMO also
IFMQT�JO�QSPBDUJWF�SJTL�JEFOUJěDBUJPO�and provides adequate guidance and
information for timely decision-making.
5IF�(PWFSONFOU�IBT�BMTP�SFBMJ[FE�UIF�importance of project management
DBQBCJMJUJFT��*O�UIF�5XFMGUI�'JWF�:FBS�1MBO �UIF�(PWFSONFOU�IBT�QMBOT�UP�GPDVT�on improving the project management
skills across country to get better returns
from public investment in infrastructure
and also in the social sectors2. Project
NBOBHFNFOU �XJUI�B�WJFX�UP�EFMJWFS�PO�UJNF�BOE�XJUIJO�DPTU �JT�B�MFBSOBCMF�DBQBCJMJUZ�UIBU�DBO�CF�JOTUJUVUJPOBMJ[FE�JO�India.
Proposed action points for expediting
infrastructure projects in India
5IF�GPMMPXJOH�BDUJPOT�QPJOUT�once implemented could help in
debottlenecking infrastructure
projects and help ensure timely project
implementation within the stipulated
CVEHFUT��5IFTF�TUFQT�JODMVEF�
ľ� &TUBCMJTIJOH�B�UISFF�UJFS�QSPKFDU�QSPHSBN�NBOBHFNFOU�PGěDF�1.0�structure throughout the country to
monitor infrastructure projects
ľ� 0QUJNJ[JOH�UIF�QSPDFEVSFT�GPS�transparent bidding criteria
ľ� %FWFMPQJOH��BO�FGěDBDJPVT�EJTQVUF�settlement mechanism
ľ� 'PSNVMJ[JOH�QSPKFDU�NBOBHFNFOU�USBJOJOH�GPS�QSPGFTTJPOBMT�
- Further strengthening India’s
7PDBUJPOBM�&EVDBUJPO�BOE�5SBJOJOH�program to impart project
management knowledge to
XPSLJOH�PGěDJBMT�IBWJOH�WBSJFE�FYQFSJFODF�
- Foster collaboration and
cooperation with educational
institutes to counter the
JOTVGěDJFODZ�TIPSUBHF�QBVDJUZ�PG�professionals well equipped to
handle infrastructure projects
- &ODPVSBHJOH�GVSUIFS�EFWFMPQNFOU�of in-house academies and
structured training programs
ľ� Introducing a single window clearance
mechanism to make the regulatory
approval process more effective
ľ� "EPQUJOH�B�VOJěFE�VOBNCJHVPVT�transparent transport policy for
movement of project materials
FTQFDJBMMZ�UIF�0%$T�PWFSTJ[FE�EJNFOTJPOFE�DPOTJHONFOUT��'VSUIFS �EFTJHOJOH�BO�FGěDJFOU�USBOTQPSU�BOE�logistics system to enable faster
project implementation throughout
the country.
ľ� .BOBHJOH�BOE�TIBSJOH�UIF�FYIBVTUJWF�MJTU�PG�FNQBOFMMFE�WFOEPST�FRVJQQFE�XJUI�QSPKFDU�NBOBHFNFOU�EJTDJQMJOF�XJUI�HJBOU�(PWFSONFOU�PSHBOJ[BUJPOT�and PSUs on their respective internet
websites
ľ� Promoting balanced Public Private
1BSUOFSTIJQ�111�JO�*OGSBTUSVDUVSF�sector for faster implementation of
projects
ľ� Promoting joint evaluation of project
design by project owners and
contractors for value engineering.
Study on Project Schedule and Cost Overruns | 6
2 “An approach to the 12th Five year plan”, Planning Commission, October 2011, p12
02SE
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7 | Study on Project Schedule and Cost Overruns
Reasons for schedule overruns
Majority of infrastructure projects in India are
affected by time overruns. These overruns vary
GSPN�B�GFX�NPOUIT�UP�BT�IJHI�BT�ěWF�PS�NPSF�years, placing the project viability at risk. Survey
SFTQPOEFOUT�JEFOUJěFE�UIF�CPUUMFOFDLT�XIJDI�affect their projects and the challenges they
face in conquering them. These bottlenecks, as
enlisted below, are divided into two phases – (i)
pre-execution phase and (ii) execution and closing
phase.
Study on Project Schedule and Cost Overruns | 8
Delays in land acquisition and site handover is the primary reason for schedule PWFSSVOT�JO�QSF�FYFDVUJPO�QIBTF"DDPSEJOH�UP�HMPCBM�MFBEJOH�QSBDUJDFT �MBOE�BDRVJTJUJPO�TIPVME�CF�DPNQMFUF�CFGPSF�B�QSPKFDU�JT�UFOEFSFE��*O�*OEJB �QSPKFDUT�BSF�PGUFO�BXBSEFE�XJUI�POMZ�QBSUJBM�BDRVJTJUJPO�PG�land by project owners. Delay in subsequent land acquisition and inadequacy in project
planning considering the impact of deferred land acquisition is possibly the single
MBSHFTU�GBDUPS�DBVTJOH�QSPKFDU�EFMBZT��5IJT�GBDU�JT�BMTP�DPNQMFNFOUFE�CZ�UIF�TVSWFZ�SFTVMUT �XIFSF����QFSDFOU�PG�UIF�SFTQPOEFOUT�BHSFF�UIBU�MBOE�TJUF�IBOEPWFS�JT�UIF�NBJO�reason for project delays.
Delays in land acquisition are driven by several factors. One of the prime factors for
UIFTF�EFMBZT�JT�UIF�SFTJTUBODF�CZ�UIF�MPDBM�DPNNVOJUZ��5IJT�SFTJTUBODF�JT�PO�BDDPVOU�of poor compensation and the undervalued market price of land – leading to many
EJTQVUFT�XJUI�UIF�MPDBM�DPNNVOJUZ��"DDPSEJOH�UP�UIF�FYJTUJOH�QPMJDZ �UIF�DPNQFOTBUJPO�PGGFSFE�JT�PO�UIF�CBTJT�PG�UIF�WBMVF�PG�BHSJDVMUVSBM�MBOE �XIFSFBT �QPTU�DPOTUSVDUJPO�UIF�project land value often appreciates considerably where in the incumbent owner does
not have any share.
Reasons for schedule overruns in the pre-execution phase
82%
respondents feel that delays in land acquisition lead to project schedule overruns.
Exhibit 1: Reason for project schedule delay in pre-execution phase
Source: KPMG in India - PMI Survey on cost and schedule overrun, 2012
9 | Study on Project Schedule and Cost Overruns
In view of the projects being affected
by resistance from local community and
TPDJBM�PSHBOJ[BUJPOT �UIF�SJTL�PG�EFMBZT�IBT�HSPXO�NBOZ�GPMET�JO�QBTU�ZFBST��)PXFWFS �the survey observed that project planning
and mitigation strategies have not been
reengineered to accommodate the global
leading practices to undo the effect of
such initial delays during the course of
project.
*O�BEEJUJPO �MBDL�PG�DMBSJUZ�PO�3FTFUUMFNFOU���3FIBCJMJUBUJPO�3�3�SFMBUFE�JTTVFT�adversely affect the sentiments of people
about the project. Land acquisition leads
to displacement and unemployment.
'VSUIFSNPSF �MBOE�BDRVJTJUJPO�PGUFO�SFRVJSFT�DVUUJOH�PG�USFFT�EFGPSFTUBUJPO�GPS�TQBDF�DSFBUJPO �EFTUSVDUJPO�PG�XBUFS�CPEJFT �FUD��XIJDI�MFBET�UP�TPJM�FSPTJPO�and land degradation affecting the local
environment and the lifestyle of people.
"MTP �JG�UIF�BDRVJSFE�MBOE�GBMMT�VOEFS�UIF�DBUFHPSZ�PG�IFSJUBHF�TJUF �GPSFTU�SFTFSWF�PS�XJME�MJGF�TBODUVBSZ �JU�GBDFT�stiff resistance from social activists and
locals alike. Land acquisition issues are
TQSFBE�BDSPTT�TFDUPST��'PS�JOTUBODF �JO�TUFFM�TFDUPS �POF�PG�UIF�MBSHFTU�'PSFJHO�%JSFDU�*OWFTUNFOU�'%*�QSPKFDU�JO�0SJTTB�has been stalled due to people’s agitation
against the land acquisition1. Locals fear
UIBU�PODF�UIF�GPSFTU�MBOE�JT�BDRVJSFE �UIFZ�will lose their agro-based sustainable
livelihood.
5IF�MBOE�BDRVJTJUJPO�QSPCMFN�JT�NPSF�pronounced in transportation sector
such as Highway-Roads and Railway
QSPKFDUT �XJUI����QFSDFOU�SFTQPOEFOUT�PG�this sector agree that their projects are
BGGFDUFE�CZ�MBOE�BDRVJTJUJPO��'PS�FYBNQMF �for a new rail line project in the State of
"TTBN �MBOE�GPS�UIF�ěSTU�QIBTF�PG�UIF�project was to be acquired by October
������)PXFWFS �EVF�UP�EFMBZT�JO�JOJUJBUJOH�the land acquisition process and inter-
4UBUF�EJTQVUFT �UIF�MBOE�XBT�SF�TDIFEVMFE�UP�CF�BDRVJSFE�CZ�+BOVBSZ�������4JNJMBSMZ �one of the most prestigious projects in
SPBE�TFDUPS�XBT�EFMBZFE�CZ�BSPVOE�TJY�years due to the land acquisition issues.
5IF�QSPKFDU�XIJDI�XBT�TUBSUFE�JO������with scheduled completion date of
December 20042 got completed only in
January 2012�.
In this particular project, 70 percent of the land was already acquired before the start of the project. Acquiring the remaining 30 percent took additional 6 months, leading to an overall project delay.
General Manager,Civil Aviation Sector
Transport & Logistics and Energy sector are the worst affected by land acquisition issues.
Exhibit 2: Sectors impacted by land acquisitions
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 10
1 Posco’s Orissa project hangs in balance, The Hindu, 21 June 20122 Golden Quadrilateral project may miss deadline, The Hindu, January 07, 20033 Govt declares Golden Quadrilateral complete, Indian Express, dated January 7, 2012
*O�DBTF�PG�CSPXOěFME�PS�FYQBOTJPO�QSPKFDUT �JU�IBT�CFFO�PCTFSWFE�UIBU�MBOE�BDRVJTJUJPO�QSPCMFNT�BSF�MPX��)PXFWFS �JO�TPNF�DBTFT �JTTVFT�SFMBUFE�UP�NBLJOH�the site ready for handover to contractors
for construction without hampering the
FYJTUJOH�QMBOU�PQFSBUJPO�QPTFT�B�NBKPS�challenge for the owners. Creating space
for installing additional equipment within
UIF�FYJTUJOH�TJUF�SFRVJSFT�EFNPMJUJPO�PS�shifting of some units to other locations.
Considering that a majority of operational
TJUFT�BSF�DPOHFTUFE �JU�DPOTUSBJOUT�NPWFNFOU�PG�MBCPS �FRVJQNFOU�BOE�material within the construction site
thereby effecting the contractor
QSPEVDUJWJUZ��"MTP �XIJMF�VOEFSUBLJOH�FYQBOTJPO�QSPKFDUT �JU�JT�JNQPSUBOU�UP�FOTVSF�UIBU�FYJTUJOH�PQFSBUJPOT�PG�TJUF�BSF�OPU�EJTUVSCFE��5IJT�SFRVJSFT�BEEJUJPOBM�QMBOOJOH�FGGPSUT �BT�PWFSMPPLJOH�TVDI�activities in the planning phase may leads
to potential delays in project completion.
Considering the geographical and
environmental limitations associated
with projects and the resistance they
ESBX�GSPN�WBSJPVT�TUBLFIPMEFST �FGGFDUJWF�stakeholder management has come
up as the basic underlying requirement
of mitigation plans across the sectors.
5IF�TVSWFZ�PCTFSWFE�UIBU�POMZ�B�GFX�agencies had adopted stakeholder
assessment and periodic review of it as a
QBSU�PG�UIFJS�NJUJHBUJPO�TUSBUFHZ��(MPCBMMZ �IPXFWFS �TUBLFIPMEFS�NBOBHFNFOU�JT�BO�inseparable part of project management
and monitoring practices.
During the interaction with Projects
.BOBHFST�0XOFST �JU�XBT�OPUFE�UIBU�JO�NBKPSJUZ�QSPKFDUT �MBOE�BDRVJTJUJPO�and regulatory approvals do not have a
EFěOFE�UJNFMJOF��5IF�BCTFODF�PG�BOZ�EFěOFE�UJNF�GSBNF�GPS�UIFTF�BDUJWJUJFT�has an impact on subsequent project
plans resulting in unaccounted delays in
project delivery.
Manifold regulatory approvals from several agencies leading to delay in construction 5IF�DPNQMFYJUZ�BOE�TJ[F�PG�JOGSBTUSVDUVSF�projects being undertaken in India has
increased substantially during the last
EFDBEF��"T�B�SFTVMU �UIF�SFHVMBUPSZ�frameworks related to infrastructure
projects have also witnessed a
TJHOJěDBOU�USBOTGPSNBUJPO��"WFSBHF�JOGSBTUSVDUVSF�QSPKFDUT�CFJOH�FYFDVUFE�in the country cost to the tune of INR
600 crore with duration of eight to ten
years4. Considering such large scale
NBHOJUVEFT �UIFTF�JOGSBTUSVDUVSF�QSPKFDUT�SFRVJSF�BO�FYQMJDJU�DPOTJEFSBUJPO�PG�UIF�regulatory issues during the planning
stage to avoid any delays during the
JNQMFNFOUBUJPO�TUBHF��'PS�UJNFMZ�BDUJPO �project developers should ensure early
JEFOUJěDBUJPO�PG�UIF�SFRVJSFE�SFHVMBUPSZ�compliances and the corresponding
QSPDFEVSBM�EJGěDVMUJFT�BTTPDJBUFE�XJUI�JU��5IJT�DPVME�IFMQ�JO�EFUFDUJPO�BOE�prevention of cost and schedule overruns
with better control on projects.
While the regulatory approvals related
UP�QSPKFDU�ěOBODJOH �UFDIOPMPHZ�collaborations and foreign investments
have become fast track in the recent
ZFBST �UIF�TDFOBSJP�IBT�CFDPNF�USJDLJFS�for issues related to land acquisitions
BOE�FOWJSPONFOUBM�DMFBSBODFT��(FOFSBMMZ �FYUFOTJWF�FOWJSPONFOUBM�BQQSPWBMT�BSF�mandatory at the start of the project
JUTFMG��)PXFWFS �UIFTF�DMFBSBODFT�DBO�be challenged through public interest
litigations which could lead to project
FYFDVUJPO�EFMBZT��"U�UJNFT �OPO�(PWFSONFOU�PSHBOJ[BUJPOT�DIBMMFOHF�UIF�environment clearances through direct
BDUJWJTN�BOE�QSPUFTUT �DSFBUJOH�IVSEMFT�GPS�QSPKFDU�FYFDVUJPO��"�HMPCBM�TUFFM�major’s project in Orissa is a striking
FYBNQMF�PG�QSPKFDU�EFMBZ�PO�BDDPVOU�PG�FOWJSPONFOUBM�BQQSPWBMT��5IF�TUFFM�NBKPS�signed a Memorandum of Understanding
.P6�XJUI�UIF�0SJTTB�(PWFSONFOU�JO������UP�DPOTUSVDU�B����.51"�TUFFM�QMBOU�JO�UIF�4UBUF�XJUI�B�'%*�PG�*/3��� ����DSPSF��4JODF�UIFO �UIF�QSPKFDU�IBT�CFFO�entangled in legal and environmental
clearances. After a review of two and a
IBMG�ZFBST �UIF�.JOJTUSZ�PG�&OWJSPONFOU�BOE�'PSFTUT�HBWF�B�ěOBM�BQQSPWBM�UP�UIF�QSPKFDU�JO�+BOVBSZ��������.FBOXIJMF �UIF�QSPKFDU�.P6�FYQJSFE�JO�+VOF�������5IF�TUFFM�NJMM�DPOTUSVDUJPO�QSPKFDU �XIJDI�involves one of the largest FDI deal in
*OEJB �IBT�BMSFBEZ�XJUOFTTFE�B�EFMBZ�PG�seven years5.
62%
respondents feel that delay in regulatory approvals lead to project schedule overrun.
11 | Study on Project Schedule and Cost Overruns
4 MoSPI, January 2012 Flash Report; KPMG in India Analysis5 Posco’s Orissa project hangs in balance, The Hindu, 21 June 2012
Another issue that leads to delays in
regulatory approvals is the multiplicity
PG�BQQSPWBM�SFRVJSFNFOUT�GSPN�$FOUSBM �4UBUF�BOE�MPDBM�(PWFSONFOU��0GUFO �UIF�regulatory authorities at the Central
and the State levels lack coordination
leading to standoffs on critical approvals.
'VSUIFSNPSF �JO�B�EJWFSTF�BOE�NVMUJ�(PWFSONFOU�DPVOUSZ�MJLF�*OEJB �UIFSF�JT�often a State-wise disparity in granting
BQQSPWBMT�QFSUBJOJOH�UP�MBOE�BDRVJTJUJPOT �3�3 �FUD��5IFTF�BSF�DPNQPVOEFE�CZ�other issues as inadequate support in
TIJGUJOH�PG�VUJMJUJFT�GPS�DPOTUSVDUJPO��5IFSF�is often a recurring delay in securing
regulatory approvals from governing
bodies and various ministries. For
FYBNQMF �JOBCJMJUZ�UP�TFDVSF�GPSFTU�approvals for tree cutting required for
B�IJHIXBZ�FYQBOTJPO�QSPKFDU�MFE�UP�TVCTUBOUJBM�QSPKFDU�EFMBZT��4JNJMBSMZ �B�major highway project faced a delay
of around one year due to delay in
FYFDVUJOH�UIF�4UBUF�TVQQPSU�BHSFFNFOU�towards shifting the utilities to make way
for construction. In many cases even
BGUFS�TFDVSJOH�DMFBSBODFT �JU�IBT�CFFO�observed the time taken for activities
such as tree cutting is often prolonged to
BT�NVDI�BT����NPOUIT �QSJNBSJMZ�EVF�UP�resistance from local communities.
"MUIPVHI �NBKPSJUZ�PG�BQQSPWBMT�BSF�consistent across all infrastructural
QSPKFDUT �TVDI�BT�BQQSPWBM�GSPN�.JOJTUSZ�PG�'PSFTU�BOE�&OWJSPONFOU �1VCMJD�*OWFTUNFOU�#PBSE �FUD� �UIFSF�BSF�DFSUBJO�TFDUPS�TQFDJěD�PS�QSPKFDU�TQFDJěD�requirements. Securing these approvals
PGUFO�SFRVJSFT�BEEJUJPOBM�UJNF��5IF�3PBE�sector is a case in point. In addition to
BCPWF�NFOUJPOFE�BQQSPWBMT �BEEJUJPOBM�clearances need to be obtained from
UIF�.JOJTUSZ�PG�3PBE�5SBOTQPSU�BOE�)JHIXBZT �1VCMJD�8PSLT�%FQBSUNFOU �$FOUSBM�1PMMVUJPO�$POUSPM�#PBSE �/BUJPOBM�Highways Authority of India etc. As most
PG�UIFTF�BQQSPWBMT�EPOijU�IBWF�B�EFěOFE�UJNFMJOF �UIFZ�JNQBDU�PWFSBMM�QSPKFDU�schedule.
62 percent of respondents feel that delay
in regulatory approvals leads to project
schedule overruns. Our interaction
with the project owners suggests that
HSFFOěFME�QSPKFDUT�BSF�NPSF�QSPOF�UP�be delayed on account of regulatory
EFMBZT�JO�DPNQBSJTPO�UP�BO�FYQBOTJPO�QSPKFDU��"NPOH�UIF�CSPBE�TFDUPST �BT�QFS�UIF�TVSWFZ�SFTVMUT �NFUBMT�BOE�NJOJOH�JT�XPSTU�JNQBDUFE����QFSDFOU�PG�UIF�SFTQPOEFOUT�BHSFF�BOE�UFMFDPN�TFDUPS�JT�MFBTU�JNQBDUFE�OPOF�PG�UIF�SFTQPOEFOUT�BHSFF�EVF�UP�EFMBZ�JO�HFUUJOH�SFHVMBUPSZ�approvals.
80 percent of respondent opined that metals and mining is the worst affected sector due to delay in regulatory approvals.
Taking clearances from various authorities is a time consuming process; often there is lack of team work among different Government departments.
Managing Director, Power Transmission Company
Exhibit 3: Sectors impacted on account of delay in regulatory approvals
Source: : KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 12
Poor program management resulting in ineffective co-ordination with other projects and schedule delay -BSHF�JOGSBTUSVDUVSF�QSPKFDUT �CFJOH�QBSU�PG�MBSHF�TDBMF�EFWFMPQNFOUBM�QSPHSBN �require co-ordination with several other
projects. Delay in either of the projects
DPVME�TJHOJěDBOUMZ�JNQBDU�UIF�QSPKFDU�delivery of other associated projects
and eventually the entire program. For
FYBNQMF �B�QPXFS�USBOTNJTTJPO�QSPKFDU�of around INR 600 crore is delayed by
almost two years due to delay in power
HFOFSBUJPO�QSPKFDU �GSPN�XIJDI�UIJT�transmission line is to source electricity6.
5IJT�GBDU�JT�BMTP�FNQIBTJ[FE�CZ�PVS�survey with around 41 percent of the
respondents agreeing that ineffective
program management results in schedule
overruns due to inter-dependencies
BNPOH�QSPKFDUT�GPSXBSE�BOE�CBDLXBSE�MJOLBHFT��
Inadequate co-ordination between
projects is primarily due to the lack
of detailed time and risk planning at
UIF�QSPKFDU�DPODFQUVBMJ[BUJPO�TUBHF��5IF�QSPKFDU�NBOBHFST�BSF�OPU�BCMF�UP�completely foresee the synergies and the
risks among various projects leading to
PWFSSVOT��5IVT�JU�JT�JNQPSUBOU�UP�JNQSPWF�the project management capabilities in
UIF�DPVOUSZ�GPS�FGěDJFOU�QSPKFDU�EFMJWFSZ��
41%
respondents feel that relationship with other projects lead to project schedule overrun.
KPMG in India’s point of view
5IF�QMBOOJOH�QIBTF�PG�QSPKFDUT�BQQFBST�to be largely affected by the factors
generating from land acquisition and
SFHVMBUPSZ�BQQSPWBMT��)PXFWFS �UIFTF�FYUFSOBM�GBDUPST�MFBEJOH�UP�MBQTFT�JO�project delivery are primarily due to
JOTVGěDJFOU�NJUJHBUJPOT�BEPQUFE�UP�PWFSDPNF�UIFN��5IF�QSPKFDU�UFBNT�NVTU�take these activities into account while
considering the time cycle for the project
completion.
(JWFO�UIF�USFOE�PG�HSPXJOH�TJ[F�BOE�DPNQMFYJUZ�PG�QSPKFDUT�XJUI�UJNF �UIF�increase in number of stakeholders
and affected sections is inevitable. Also
the growing concern and stronger
measures for protection and restoration
of environment have added to the
efforts required by project management
PSHBOJ[BUJPOT��5IFTF�FYUFSOBM�GBDUPST�can be mitigated by timely actions given
that the strong and periodic information
system is established to provide the
necessary information.
Although the factors affecting the
project timelines primarily appear to be
BTTPDJBUFE�XJUI�FYUFSOBM�GBDUPST �UIF�underlying reason behind them remains
UIF�EFMBZFE�PS�OPO�JEFOUJěDBUJPO�PG�QSF�requisites to overcome these factors. In
UIF�BCTFODF�PG�BEFRVBUF�JEFOUJěDBUJPO�PG�UIFTF�EFQFOEFODJFT �UIF�QSPKFDUT�VTVBMMZ�MBOE�JO�USPVCMF�BU�UIF�TUBSU�JUTFMG �XIJDI�in turn manifests into delayed project
delivery or higher cost at completion.
13 | Study on Project Schedule and Cost Overruns
6 Based on one-to-one discussion with the survey respondent
Bridging the Urban Housing Shortage in India | 14
*OTVGěDJFOU�NBOBHFNFOU�PG�1SPKFDU�EFTJHO�TDPQF�DIBOHF�JT�XJEFMZ�QSFWBMFOU�JO�the infrastructure sector
Most infrastructure projects are victims of change in project design and scope which
often lead to project delays. Poor project planning coupled with lack of attention to
details leads to prolonged discussions between project owners and contractors/
WFOEPST��5IJT�PGUFO�MFBET�UP�QSPKFDU�EFMBZ�EFTQJUF�UIF�XFMM�JOUFOUJPOFE�FGGPSUT�UP�SFTUPSF�UP�PSJHJOBM�TDIFEVMF��5IF�DPOUSJCVUJPO�PG�UIF�NBSLFU�DPOEJUJPOT�SFRVJSJOH�B�SFWJTJPO�JO�UIF�project scope is generally low if a project has been planned well.
Reasons for schedule overrun in execution and closing phase
Exhibit 4: Reasons for project schedule delay in execution and closing phase
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 14
0GUFO �QSPKFDU�PXOFST���DPOTVMUBOUT�BWPJE�PS�EF�FNQIBTJ[F�DSJUJDBM�QSPKFDU�QMBOOJOH�SFRVJTJUFT�TVDI�BT�ěFME�investigation and topographical surveys.
Inappropriate assessment of geological
and topographical factors can lead to
VOFYQFDUFE�CBSSJFST�CPUI�OBUVSBM�BOE�NBO�NBEF�EVSJOH�UIF�QSPKFDU�FYFDVUJPO�TUBHF �XIJDI�JO�UVSO�NBZ�DBMM�GPS�DIBOHFT�JO�QSPKFDU�TDPQF��&WFO�B�TNBMM�DIBOHF�JO�UIF�QSPKFDU�TDPQF�EVSJOH�UIF�FYFDVUJPO�stage can lead to disputes related to
regulatory approvals and construction
DPOUSBDUT �XIJDI�DPVME�GVSUIFS�SFTVMU�JO�schedule overruns.
Schedule overruns on account of changes
in the project design and scope during
UIF�FYFDVUJPO�TUBHF�BSF�B�DPNNPO�feature in large public sector projects
JOWPMWJOH�TFHNFOUT�TVDI�BT�QFUSPMFVN �civil aviation and road construction.
'PS�JOTUBODF �JO�UIF�QFUSPMFVN�TFDUPS �B�(SFFOěFME�SFěOFSZ�JO�0SJTTB�JT�BO�FYBNQMF�PG�TDIFEVMF�PWFSSVOT�EVF�UP�DIBOHFT�JO�UIF�QSPKFDU�QMBO��5IF�PSJHJOBM�QMBO�JODMVEFE�DPOTUSVDUJPO�PG�B�SFěOFSZ�DVN�QFUSPDIFNJDBM�DPNQMFY�XJUI�B�DBQBDJUZ�PG����.51"�BU�BO�FTUJNBUFE�DPTU�PG�*/3�� ����DSPSF �XIJDI�XBT�projected for completion by 2010-11.
%VF�UP�QSPMPOHFE�EFMBZT �UIF�QSPKFDU�PXOFS �B�4UBUF�PXOFE�0JM�$PNQBOZ �
later decided to split the construction
JOUP�UXP�QIBTFT�XJUI�UIF�ěSTU�QIBTF�JOWPMWJOH�UIF�DPOTUSVDUJPO�PG�UIF�SFěOFSZ�BMPOF��5IF�QSPKFDU�DPTU�IBT�JODSFBTFE�UP�BCPVU�*/3��� ����DSPSF�XJUI�UIF�FYQFDUFE�DPNQMFUJPO�PG�UIF�ěSTU�QIBTF�JO��2������BT�BHBJOTU�UIF�PSJHJOBM�QMBO�PG�commissioning in 20107.
79%
respondents feel that change in project scope/design leads to project schedule overruns in the execution phase.
Respondents from the road construction
segment reported that very often the
original project scope is considerably
PWFSTJ[FE�BT�DPNQBSFE�UP�UIF�BDUVBM�requirement to support a probable
JODSFBTF�JO�UIF�USBGěD�WPMVNF��5FOEFST�ĜPBUFE�GPS�TVDI�PWFSTJ[F�QSPKFDUT�PGUFO�EP�OPU�ěOE�CJEEFST�MFBEJOH�UP�TDPQF�SFWJTJPOT��'VSUIFS �JOEVTUSZ�CPEZ�'*$$*�has suggested to reduce road sector
QSPKFDU�TJ[FT�UP�CFUXFFO�*/3�����DSPSF�BOE�*/3�� ����DSPSF�TP�BT�UP�BUUSBDU�NPSF�bidders8��4NBMM�TJ[F�QSPKFDUT�XPVME�BUUSBDU�UIF�JOUFSFTU�PG�TNBMM�BOE�NFEJVN�TJ[F�companies in the bidding.
79 percent respondents agree that
change in project scope leads to schedule
PWFSSVOT��'VSUIFS �GSPN�RVBMJUBUJWF�EJTDVTTJPOT�JU�JT�BMTP�JEFOUJěFE�UIBU�TUFFM �civil aviation and telecom sectors are
more prone to delays because of scope
change vis-à-vis sectors such as ports and
TIJQQJOH �DPBM�FUD��
In view of the fast growing requirements
GPS�IJHIFS�DBQBDJUZ�QSPKFDUT �UIF�DIBOHFT�have turned out to be the necessary
FWJM�JO�QSPKFDU�NBOBHFNFOU��)PXFWFS �
UIF�DIBOHFT �JG�NBOBHFE�XFMM �DBO�CF�converted to advantage of the owners.
'VSUIFS�GSPN�UIF�TVSWFZ �JU�JT�FWJEFOU�UIBU�JO�NPTU�PSHBOJ[BUJPO�FGěDJFOU�BOE�effective implementation of change
NBOBHFNFOU�JT�NJTTJOH�JO�UIF�FYJTUJOH�project management frameworks in use
BU�WBSJPVT�JOGSBTUSVDUVSF�QSPKFDUT��4JODF �the scope change cannot be done away
XJUI �FGGFDUJWF�NBOBHFNFOU�PG�DIBOHF�should be adopted to overcome the
impact of these changes on time and cost
budget of the projects. Inclusion of change management is required for effectively managing changes in project scope.
Exhibit 5: Criticality of design/scope change across sectors
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
15 | Study on Project Schedule and Cost Overruns
6 Based on one-to-one discussion with the survey respondent7 IOC’s Paradip refinery behind schedule; may complete in 2013 Q1, The Economic Times, 11 August 2011
8 NHAI urged to prune project sizes to attract more bidders, Business Line, 31 August 2012
(i) Inadequate supply of project
management professional
5IF�EFBSUI�PG�RVBMJěFE�XIJUF�DPMMBS�professionals in India is a key challenge
for the infrastructure industry. Alternative
career options in lucrative industries such
BT�JOGPSNBUJPO�UFDIOPMPHZ�BOE�ěOBODJBM�services have become a more attractive
proposition for the fresh engineering
UBMFOU�JO�UIF�DPVOUSZ��5IF�TJUVBUJPO�JT�FYQFDUFE�UP�BHHSBWBUF�GVSUIFS�BT�UIF�current education system is unable to
deliver the required number of specialists
across the project management value
DIBJO��*O�BEEJUJPO �UIFSF�JT�B�TIPSUBHF�PG�FYQFSJFODFE�FOHJOFFST�XJUI�UIF�EFTJSFE�project management skill sets to take
VQ�MBSHFS�SPMFT��'VSUIFSNPSF �*OEJBijT�vocational training curriculum needs to be
further strengthened and based on global
standards9.
Survey respondents also agreed that
the sector is facing a severe shortage of
QSPGFTTJPOBMT��5IF�EFNBOE�GPS�QSPKFDU�BOE�TJUF�NBOBHFST �FOWJSPONFOUBM�QSBDUJUJPOFST �TBGFUZ�PGěDFST�FUD�FYDFFET�TVQQMZ �MFBEJOH�UP�TVC�PQUJNBM�MFWFM�PG�project management.
5P�NFFU�UIF�UBMFOU�DSVODI�GPS�IJHIMZ�DSJUJDBM�KPCT �NBOZ�DPNQBOJFT�BSF�OPX�IJSJOH�GPSFJHO�QSPGFTTJPOBMT��5IFTF�QSPGFTTJPOBM�IBWF�UP�GVMěMM�TFWFSBM�formalities before coming to India
which is a time consuming process and
generally comes at a higher cost.
Project managers, environmental QSBDUJUJPOFST�BOE�TBGFUZ�PGěDFST�BSF�top three resources – infrastructure
industry is facing a shortage.
Availability of resources for JOGSBTUSVDUVSF�TFDUPS�JT�JOTVGěDJFOU
Exhibit 6: Ranking of resources in terms of their shortage in the industry
Note: Percentage of respondents who felt that the industry is currently facing a shortages of these resources
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 16
9 Power Projects in India: Implementation Challenges and Opportunities, Focus 2015 by Raajeev B. Batra
(ii) Limited availability of skilled
labor
5IF�HSPXUI�PG�TLJMMFE�BOE�TFNJ�TLJMMFE�manpower in India has not kept pace
with the growth in infrastructure projects.
5IJT�GBDU�JT�TVQQPSUFE�CZ�8PSME�#BOLijT�report according to which the Indian
SPBE�DPOTUSVDUJPO�JOEVTUSZ�JT�FYQFDUFE�UP�face a labor shortage of 18-28 percent if
the country grows at a medium rate and
a shortage of 55-60 percent if we see
high growth.10 6OBWBJMBCJMJUZ�PG�XFMEFST �DBSQFOUFST �NBTPOT �USBJOFE�XPSLFST�PGUFO�JNQBDU�QSPKFDU�QSPHSFTT��5IF�survey respondents also acknowledge
UIBU�DFOUSBM�BOE�4UBUF�(PWFSONFOU�SVO�employment schemes such as National
3VSBM�&NQMPZNFOU�(VBSBOUFF�"DU�/3&(" �+BXBIBSMBM�/FISV�/BUJPOBM�6SCBO�3FOFXBM�.JTTJPO�+//63. �etc have created enough employment
opportunities for laborers in their local
BSFBT �NJOJNJ[JOH�UIF�OFFE�GPS�UIFN�to travel to the project sites in search
PG�MJWFMJIPPE��5IJT�IBT�DPOTUSBJOFE�UIF�availability of skilled labor for some
projects/States.
Another issue impacting the progress of
infrastructure projects across industries
is the low productivity of labor due
to socio-cultural-political reasons. For
JOTUBODF �XPSL�JT�PGUFO�IBMUFE�JO�/BYBMJUF�BGGFDUFE�BSFBT��0UIFS�JTTVFT �TVDI�BT�FYUFOEFE�IPMJEBZ�TFBTPOT �VO�SFMJBCJMJUZ�PG�OPO�MPDBM�MBCPS�J�F���MBCPS�GSPN�PUIFS�4UBUFT �GSFRVFOU�TUSJLFT�CZ�XPSLFST �etc. adversely affect productivity at
construction sites and impact the project
TDIFEVMF��5IFTF�SJTLT�BSF�VTVBMMZ�OPU�QMBOOFE�EVSJOH�UIF�QMBOOJOH�QIBTF �CVU�have an impact on project delivery.
55 percent of respondents opine that
non-availability of skilled labor is a major
BSFB�PG�DPODFSO��"T�QFS�PVS�TVSWFZ �NFUBMT�and mining sector is worst affected by the
shortage of labor.
Lack of availability of skilled labor is an issue. Unresponsiveness, strikes and extended holidays further hamper the timely project execution.
General ManagerPower Generation Company
Exhibit 7: Criticality of lack of availability of skilled labor across sectors
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
17 | Study on Project Schedule and Cost Overruns
10 World Bank; World Bank’s medium growth scenario is based on the vision documents of the states and the country; and High growth scenario incorporates the massive investments in national highways and rural roads announced by GOI.
(iii) Shortage of good equipment
suppliers and contractors
Infrastructure projects especially
in power sector are hampered due
to lack of good contractors and
FRVJQNFOU�TVQQMJFST�JO�UIF�DPVOUSZ��5IF�infrastructure projects in the country are
growing at a faster pace than the capacity
BEEJUJPOT�CZ�FRVJQNFOU�TVQQMJFST��5IJT�has created a wide gap between the
demand and supply leading to delays
in completion of projects due to non
availability of key project equipments. For
JOTUBODF �POF�PG�UIF�MBSHFTU�4UBUF�PXOFE�power generation company has rolled
out several new projects with equipment
supply orders to yet another State owned
and country’s one of the largest power
equipment manufacturer. Many of these
projects are facing potential delays on
account of inability of the equipment
manufacturer to meet the supply orders
as per schedule. India’s inability to meet
power generation capacity addition
UBSHFUT�GPS�UIF�5FOUI�'JWF�:FBS�1MBO�IBT�been mainly attributed to non availability
PG�DSJUJDBM�QPXFS�FRVJQNFOU��5IF�EFNBOE�GPS�DPSF�DPNQPOFOUT�PG�CPJMFST �UVSCJOFT�BOE�HFOFSBUPST�IBT�FYDFFEFE�UIF�TVQQMZ�JO�UIF�MBTU�GFX�ZFBST��"EEJUJPOBMMZ �WBSJPVT�projects in the power sector are also
facing shortage of balance of plant
equipment such as coal handling and ash
handling systems.
Apart from the manufactured
FRVJQNFOUT �JOGSBTUSVDUVSF�QSPKFDUT�BSF�also facing hurdles due to shortage of
DPOTUSVDUJPO�FRVJQNFOUT�DSBOFT �GPSLMJGU�USVDLT �MPSSZ�MPBEFST�FUD�BOE�DPOTUSVDUJPO�NBUFSJBM�TUFFM �DFNFOU�FUD��
5P�NBLF�VQ�GPS�QSPKFDU�EFMBZT�EVF�UP�MBDL�PG�SFMJBCMF�FRVJQNFOU�TVQQMJFST�JO�*OEJB �PXOFST�DPVME�FYQMPSF�UXP�PQUJPOT��5IF�ěSTU�POF�JT�UP�JNQPSU�FRVJQNFOU�GSPN�PUIFS�DPVOUSJFT �XIJDI�XPVME�ESJWF�VQ�QSPKFDU�DPTUT��"MUFSOBUJWFMZ �UIFZ�DPVME�TPVSDF�JOFYQFOTJWF�FRVJQNFOU�BOE�run the high risk of inferior quality of
equipment.
India is also facing a shortage of
good engineering procurement and
DPOTUSVDUJPO�&1$�DPOUSBDUPST�UIBU�BSF�DBQBCMF�PG�FYFDVUJOH�DPNQMFY�JOGSBTUSVDUVSF�QSPKFDUT��5IFSF�BSF�few companies in India with desired
FYQFSJFODF�PG�FYFDVUJOH�MBSHF�BOE�DPNQMFY�JOGSBTUSVDUVSF�QSPKFDUT��Availability of these contractors is a
challenge as their order books are already
PWFSCPPLFE��'PS�JOTUBODF �UIF�PSEFS�CPPL�PG�POF�PG�UIF�MBSHFTU�&1$�DPOUSBDUPS�JO�India is overbooked by four times its
current capacity11.
*OFGěDJFOU�DPOUSBDUT�NBOBHFNFOU�resulting in contractual disputes and
Industrial relation and law problems
slowing down project progress
A common bottleneck in project
FYFDVUJPO�JT�EJTQVUFT�CFUXFFO�QSPKFDU�owners and contractors. Contracts
management is a major area of
improvement for large infrastructure
projects in India. 55 percent of the
respondents opined that contractual
disputes between project owners and
contractors act as a major deterrent in
UJNFMZ�EFMJWFSZ�PG�QSPKFDUT��5IF�EJTQVUFT�arise on variety of reasons such as
RVBOUJUZ�WBSJBUJPOT �SBUFT�GPS�JODSFNFOUBM�XPSLT �VOEFSTUBOEJOH�PO�QBZNFOU�UFSNT�BOE�QBZNFOU�UJNFMJOFT �FUD��'PS�FYBNQMF �one of the prestigious road sector project
contracts encountered a high number
of legal issues. Of the total contracts
BXBSEFE �OFBSMZ����QFSDFOU�XFSF�VOEFS�dispute12��4JNJMBSMZ �SFTPMVUJPO�PG�JOEVTUSJBM�relation and law problems require
(PWFSONFOU�PS�DPVSU�JOUFSWFOUJPO�XIJDI�is a tedious and time consuming process.
*O�UIF�TVSWFZ �SFTQPOEFOUT�HBWF�FRVBM�XFJHIUBHF�UP�CPUI�UIFTF�GBDUPST �XJUI����percent of the respondents agreeing that
these factors impact project delivery.
Ineffective Project Monitoring
A key concern during the project initiation
BOE�FYFDVUJPO�QIBTF�JT�JOFGGFDUJWF�QSPKFDU�planning and monitoring practices and
techniques being employed by owner
BT�XFMM�BT�DPOUSBDUPS�PSHBOJ[BUJPOT��5IF�inadequate planning results in non-
JEFOUJěDBUJPO�PG�DSJUJDBM�BDUJWJUJFT�BOE�concerns while the result of ineffective
QSPKFDU�NPOJUPSJOH �NBOJGFTUT�JO�GPSN�PG�delay in decision making due to lack of
desirable information at the right time.
As per our discussion with various
QSPKFDU�PXOFST �TVC�TUBOEBSE�QSPKFDU�management is basically a result of
shortage in acquisition of talent who are
conversant with the latest information
technology tools and applications for
project management.
There is lack of good equipment manufacturers in the country leading to heavy dependence on few players.
Executive DirectorSteel Manufacturing Company
Study on Project Schedule and Cost Overruns | 18
11 Based on one-to-one discussion with the survey respondent12 Report on Construction in India 2011, India Infrastructure
Lack of Integration Management
in project planning resulting in
coordination issues delaying the
projects
Large infrastructure projects by the virtue
of their impact and scale involve multiple
BHFODJFT�GPS�FYFDVUJPO�PG�UIF�QSPKFDU��*O�TVDI�B�TDFOBSJP �UIF�DPPSEJOBUJPO�between various agencies becomes
a critical factor for successful project
EFMJWFSZ��5IF�MBDL�PG�DPPSEJOBUJPO�JT�usually a resultant of poor integration
during the planning phase. 50 percent
of the respondents Stated coordination
issues with project team or vendors as
one of the primary reasons for delay in
projects.
Other factors
Other bottlenecks such as pre-
commissioning teething troubles are
HFOFSBMMZ�JEFOUJěFE�CZ�UIF�QSPKFDU�management teams and corrective
BDUJPOT�BSF�UBLFO��)PXFWFS �UIFSF�BSF�some factors whose probability of
PDDVSSFODF�JT�MFTT �CVU�JG�UIFZ�PDDVS�UIFZ�IBWF�TJHOJěDBOU�JNQBDU�PO�UIF�PWFSBMM�QSPKFDU�EFMJWFSZ��(FPMPHJDBM�TVSQSJTFT�tops this list with 76 percent of the
respondents feels that this has high to
moderate impact on schedule overruns.
Exhibit 8: Extent of impact on project schedule in execution and closing phase
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
19 | Study on Project Schedule and Cost Overruns
Study on Project Schedule and Cost Overruns | 20
5IF�TVSWFZ�SFTVMU�IJHIMJHIUT�UIF�EJGGFSFODF�CFUXFFO�DFOUSBM�(PWFSONFOU�projects managed by public sector units
146T�TVDI�BT�/51$�BOE�$*- �BOE�non-PSUs such as Railways and NHAI.
Although most factors—such as design/
TDPQF�DIBOHF �DPOUSBDUVBM�EJTQVUFT �JOEVTUSJBM�SFMBUJPOT �MBX�QSPCMFNT �FUD�Ĺhave more or less the same impact on
QSPKFDU�FYFDVUJPO�JSSFTQFDUJWF�PG�UIF�NBOBHJOH�BHFODZ �B�GFX�GBDUPST�DBO�BGGFDU�UIF�FYFDVUJPO�PUIFSXJTF��'PS�FYBNQMF �VOBWBJMBCJMJUZ�PG�GVOET�JT�B�NBKPS�bottleneck for non-PSU projects with 44
percent of respondents agreeing that
QSPKFDUT�BSF�EFMBZFE�EVF�UP�UIJT �XIFSFBT�POMZ�ěWF�QFSDFOU�PG�146�SFTQPOEFOUT�opined that this has an impact on project
EFMJWFSZ��5IF�SFBTPO�GPS�UIJT�WBSJBUJPO�could be that PSUs have internal funds
for their projects and they don’t depend
PO�UIF�(PWFSONFOU�HSBOU�GPS�GVOET��'VSUIFS �146T�BSF�FNQPXFSFE�UP�UBLF�investment decisions up to certain limit
EFQFOEJOH�VQPO�UIFJS�TUBUVT�.BIBSBUOB�/BWSBUOB�.JOJSBUOB�XJUIPVU�TFFLJOH�UIF�(PWFSONFOU�BQQSPWBM��5IF�MJNJU�JT�*/3������DSPSF�GPS�.BIBSBUOB �*/3������DSPSF�GPS�/BWSBUOB �BOE�*/3�����DSPSF�GPS�.JOJSBUOB�DBUFHPSZ���BOE�*/3�����crore for Miniratna category II status .
"EEJUJPOBMMZ �JU�IBT�CFFO�PCTFSWFE�UIBU�146T�IBWF�NPSF�ĜFYJCJMJUZ�BOE�BVUPOPNZ�in decision making as compared with
OPO�146T��0O�UIF�PUIFS�IBOE �JNQBDU�PG�inadequate availability of skilled resources
is more prominent for PSU’s projects.
"SPVOE����QFSDFOU�PG�146�SFTQPOEFOUT�agreeing that projects are delayed due
UP�TIPSUBHF�PG�TLJMMFE�MBCPVS �XIFSFBT�
only 44 percent of non-PSU respondents
opined that this has an impact on project
delivery. In the recent years PSU’s
IBWF�CFFO�FYQBOEJOH�UIFJS�PQFSBUJPOT�aggressively and competing with private
sector for talent.
Factors impacting PSU’s and non-PSU’s project schedule
Exhibit 9: Reasons for project schedule overrun for non-PSU and PSU projects
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
21 | Study on Project Schedule and Cost Overruns
KPMG in India’s point of view
1SPKFDUT�JO�UIF�FYFDVUJPO�BOE�DMPTVSF�phase are affected by non availability of
GVOET �SFTPVSDFT�BOE�EFMBZ�JO�EFMJWFSZ�PG�QSFDFEJOH�BDUJWJUJFT��*O�BEEJUJPO �NVMUJQMF�changes in the scope and design of
projects push project delivery timelines.
)PXFWFS �UIFTF�GBDUPST�QPJOU�UP�UIF�JOTVGěDJFOU�NPOJUPSJOH�BOE�JOFGěDJFOU�project change management in case of
infrastructure projects in the country.
'VSUIFSNPSF �MBDL�PG�LOPXMFEHF�BOE�application of tools and techniques
for seamless integration of different
functions of project/program among the
project management professionals often
lead to delays.
"T�IJHIMJHIUFE�JO�UIF�TVSWFZ �UIF�DPVOUSZijT�infrastructure sector lags behind
its foreign counterparts in terms of
knowledge and understanding of latest
technologies in engineering as well as
QSPKFDU�NBOBHFNFOU �XIJDI�SFTVMUT�JO�slow progress of infrastructure projects.
Study on Project Schedule and Cost Overruns | 22
03SE
CT
ION
23 | Study on Project Schedule and Cost Overruns
Reasons for cost overruns
Cost revisions and cost overruns are common
across infrastructure projects. According
to MoSPI, infrastructure projects in central
Government sector costing INR 150 crore and
above, are currently experiencing cumulative
cost overruns of 16.9 percent1 of their planned
cost. Our survey makes an attempt to identify
the key factors, experienced by project owners,
resulting in cost overruns in a project from the pre
execution stage until the close out phase.
Study on Project Schedule and Cost Overruns | 24
1 MoSPI flash report, dated January 2012
4DPQF�DSFFQ�BOE�JOBEFRVBUF�%FUBJMFE�1SPKFDU�3FQPSU�%13�BSF�QSJNBSZ�GBDUPST�impacting cost overruns
*OGSBTUSVDUVSF�QSPKFDUT�FYFDVUFE�CZ�4UBUF�PXOFE�BHFODJFT�VTVBMMZ�JOWPMWF�B�MBSHF�OVNCFS�PG�TUBLFIPMEFST��*U�IBT�CFFO�PCTFSWFE�UIBU�JO�TFWFSBM�QSPKFDUT �BMM�GVODUJPOBM�UFBNT�XFSF�OPU�JOWPMWFE�JO�UIF�DPODFQUVBMJ[BUJPO�TUBHF��5IJT�SFTVMUT�JO�JOBEFRVBUF�assessment of the risks and mutual interdependencies that projects could face in the
FYFDVUJPO�TUBHF��5IF�EFTJSFE�MFWFM�PG�DPMMBCPSBUJPO�CFUXFFO�UIF�QSPKFDU�PXOFST�BOE�UIF�DPOUSBDUPST�BMTP�BQQFBST�UP�CF�MBDLJOH��$POTFRVFOUMZ �QSPKFDUT�GBDF�EFWJBUJPOT�JO�TDPQF �which affect the delivery both in terms of time schedule as well as budgeted cost.
.PSFPWFS �JO�DBTF�PG�(PWFSONFOU�JOGSBTUSVDUVSF�QSPKFDUT �UIF�JUFN�SBUF�DPOUSBDU�TZTUFN�JT�UIF�QSFWBMFOU�NPEFM�VTFE�GPS�BMMPUNFOU�PG�DPOUSBDUT��6OEFS�UIJT�NPEFM �EFUBJMFE�drawing and designing of the projects at the time of award of contract is not mandatory.
"T�B�SFTVMU �EJWFSHFODF�GSPN�UIF�PSJHJOBM�FTUJNBUJPO�JT�RVJUF�DPNNPO�EVSJOH�QSPKFDU�FYFDVUJPO���PGUFO�MFBEJOH�UP�DPTU�FTDBMBUJPOT�
*O�NBKPSJUZ�PG�QSPKFDUT �TDPQF�DSFFQ�BOE�JOBEFRVBUF�%13T�BSJTFT�EVF�UP�MBDL�PG�IPMJTUJD�QMBOOJOH�BOE�MJNJUFE�BCJMJUZ�PG�QSPKFDU�NBOBHFST�UP�BTTFTT�BMM�QPUFOUJBM�SJTLT��BOE�DPVME�be easily mitigated by putting an effective project management system in place and
providing training to project managers.
Reasons for Cost overruns in pre-execution phase
70%
respondents agree that scope creep leads to project cost overruns in the pre-execution phase.
67%
respondents agree that inadequate DPRs lead to project cost overruns in the pre-execution phase.
Exhibit 10: Reasons for cost overruns in pre-execution phase
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
25 | Study on Project Schedule and Cost Overruns
71%
respondents feel high cost of environmental safeguards has high to medium probability of affecting the project cost.
Cost overrun due to inadequate DPRs is
QSFWBMFOU�BDSPTT�TFDUPST�����QFSDFOU�PG�energy and transport and logistics sector
respondents agree that inadequate DPRs
lead to cost overruns in their respective
sectors.
With increasing importance of FOWJSPONFOUBM�TBGFHVBSET �QSPKFDUT�require additional budgets
As Indian regulatory agencies tighten
their noose by bringing in additional
FOWJSPONFOUBM�SFHVMBUJPOT �JOGSBTUSVDUVSF�project owners need to ensure project
compliance with stringent safety and
environment standards. Adhering to
the evolving environment and safety
standards leads to additional costs.
5IF�QSPBDUJWF�BQQSPBDI�PG�.JOJTUSZ�PG�&OWJSPONFOU�BOE�'PSFTU�.P&'�JO�recent years has forced project owners
to include environmental safeguards
JO�UIFJS�QSPKFDU�QMBOT��.PSFPWFS �BT�environmental policies in the country
BSF�DPOTUBOUMZ�FWPMWJOH �BO�VOEFS�construction project might need to
comply with these standards midway
UISPVHI�UIF�FYFDVUJPO�TUBHF��"T�B�SFTVMU �the project can face cost escalations in
PSEFS�UP�DPNQMZ�XJUI�UIF�BQQSPWFE�EFTJHO �UFDIOPMPHZ �NBUFSJBM�FUD�
8IJMF ����QFSDFOU�SFTQPOEFOUT�BHSFF�that the high cost of the environmental
TBGFHVBSET�MFBET�UP�QSPKFDU�DPTU�PWFSSVOT �71 percent assign a high to medium
probability of project cost overruns due to
this reason.
Exhibit 11: Criticality of inadequate DPR’s across sectors
Exhibit 12: Probability of reasons affecting project cost overruns in pre-execution phase
Telecom sector doesn’t experienced cost overruns for the surveyed projects
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 26
27 | Bridging the Urban Housing Shortage in India
Material price escalation beyond projections is the primary reason for cost PWFSSVOT�EVSJOH�FYFDVUJPO.BUFSJBM�QSJDF�FTDBMBUJPO�JT�B�CVTJOFTT�SJTL�GBDFE�CZ�BMM�DPOUSBDUPST��*O�SFDFOU�ZFBST �DPTUT�PG�LFZ�JOQVUT�TVDI�BT�JSPO�BOE�TUFFM �DFNFOU �CJUVNFO �DPODSFUF �DSVEF�PJM �FUD��IBWF�ĜVDUVBUFE�TIBSQMZ��5IF�SJTL�PG�NBUFSJBM�DPTU�ĜVDUVBUJPO�JT�JOIFSFOU�JO�JOGSBTUSVDUVSF�QSPKFDUT �BOE�UP�TPNF�FYUFOU�JT�UBLFO�JOUP�DPOTJEFSBUJPO�JO�PWFSBMM�QSPKFDU�DPTU�FTUJNBUFT��)PXFWFS �UIF�WPMBUJMJUZ�JO�NBUFSJBM�QSJDFT�NBLFT�GPSFDBTUJOH�B�DIBMMFOHJOH�FYFSDJTF�BOE�MFBET�UP�JOBDDVSBUF�GPSFDBTUT��'VSUIFSNPSF �UIF�DPTU�FTUJNBUF�BTTVNFT�UIF�QSPKFDU�DPNQMFUJPO�BT�QFS�UIF�TDIFEVMF�BOE�EPFT�OPU�BDDPVOU�GPS�JOĜBUJPO�CFZPOE�UIF�TDIFEVMF�EBUF��5IVT �BOZ�EFMBZ�JO�QSPKFDU�DPNQMFUJPO�NBLFT�UIF�JOJUJBM�DPTU�estimates obsolete leading to cost overruns.
Reasons for cost overruns in execution phase
Construction material prices have increased several folds in last few years, impacting the project cost estimates.
General Manager,Civil Aviation Sector
Exhibit 13: Reasons for project cost overruns in execution and closing phase
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
27 | Study on Project Schedule and Cost Overruns
93%
respondents feel material price escalations beyond projections lead to cost overruns.
67%
respondents feel material costs are highly susceptible to escalations.
2VJUF�PGUFO �BO�JODSFBTF�JO�NBUFSJBM�DPTU�over the agreed percentage leads to
dispute between project owners and
DPOUSBDUPST��'PS�FYBNQMF �UIF�EJTQVUF�between one of the India’s largest State
owned power generation company and
its initial equipment supplier on price
FTDBMBUJPOT�PWFS����QFSDFOU�EFMBZFE�B�UISFF�VOJU�� ����.8�QSPKFDU�JO�#JIBS�CZ�two years2.
.BOZ�B�UJNFT �UIF�WBSJBCMFT�VTFE�GPS�DPTU�estimation during project cost scheduling
are not adequate to cover all aspects
PG�QSPKFDU�DPTUT��"T�B�SFTVMU �WBSJPVT�cost items that are necessary for the
project budget estimation remain either
VOJEFOUJěFE�PS�JOBEFRVBUFMZ�EFěOFE�at the planning stage and lead to cost
overruns at a later stage. Project teams
OFFE�UP�CF�FYUFOTJWFMZ�FYQFSJFODFE�TIPVME�IBWF�DPTUJOH�QFSTPOOFM�FOHJOFFST�BOE�BEFRVBUFMZ�FRVJQQFE�XJUI�TDJFOUJěD�UPPMT�BOE�UFDIOJRVFT�UP�EFWFMPQ�a realistic budget estimate for the project.
'VSUIFS �UIF�TVSWFZ�JEFOUJěFE�UIBU�CVJMEJOH�material cost is most susceptible to
escalation followed by labor or manpower
cost. 67 percent respondents feel that
input materials are most susceptible
to suffer an escalation. While only
19 percent respondents opine that
Contractor/sub contractor costs are highly
TVTDFQUJCMF ����QFSDFOU�PG�SFTQPOEFOUT�felt that manufactured equipment cost
have a high susceptibility for escalation.
Exhibit 14: Cost elements’ susceptibility to increase
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 28
2 “Contract disputes delay NTPC’s Barh project”, Livemint, 1 May 2008
Poor connectivity to project site
Infrastructure projects located in
remote locations have poor transport
DPOOFDUJWJUZ��-BDL�PG�FGěDJFOU�transportation and logistics infrastructure
BEET�UP�UIF�QSPKFDU�DPTU��'PS�FYBNQMF �B�project located in a hilly terrain with no
DPOOFDUJWJUZ�UP�SBJMXBZT �EFQFOET�IFBWJMZ�on roads for its raw material supplies.
5SBOTQPSUBUJPO�UISPVHI�SPBET�JT�NPSF�UJNF�consuming and costlier in comparison to
SBJMXBZT �MFBEJOH�UP�PWFSBMM�DPTU�PWFSSVOT�BOE�QSPKFDU�EFMBZT��5IJT�JT�TVQQPSUFE�CZ�UIF�TVSWFZ�SFTVMUT �BT����QFSDFOU�respondents felt that poor connectivity
to project site has high to medium
probability of impacting the project cost.
'VSUIFS �UIF�XFBUIFS�DPOEJUJPOT�BU�UIF�project site can also have an additional
impact on project schedule and cost. In
FYUSFNF�DPME�PS�IFBU �XPSLFST�DBOOPU�XPSL�PVUTJEF�GPS�FYUFOEFE�QFSJPET�PG�UJNF �BGGFDUJOH�UIFJS�QSPEVDUJWJUZ �MFBEJOH�to delays. Stormy weather can also affect
XPSL�TDIFEVMF�GPS�EBZT �EFQFOEJOH�PO�UIF�TFWFSJUZ�PG�UIF�TUPSNT��'PS�JOTUBODF �B�hydroelectric power project of a leading
hydro power company in Leh district
of Jammu & Kashmir has reported an
additional delay of 9 months due to highly
inclement weather conditions of Leh and
Ladhakh�.
.PSFPWFS �UIF�DPNQFOTBUJPO�GPS�XPSLJOH�under harsh conditions tends to be higher.
In an isolated region workers may face
QSPCMFNT�TVDI�BT�JOĜBUFE�DPTU�PG�MJWJOH �lack of after-work activities to take part in
BOE�MBDL�PG�CBTJD�GBDJMJUJFT�MJLF�SPBEXBZT �VUJMJUJFT �NFEJDBM�TUBGG �FEVDBUJPOBM�GBDJMJUJFT�BOE�TFSWJDFT��5P�PGGTFU�UIFTF�conditions workers demand higher
DPNQFOTBUJPO �MFBEJOH�UP�BEEJUJPOBM�DPTU�requirements.
Inadequate availability of skilled resources
"T�EJTDVTTFE�JO�UIF�QSFWJPVT�TFDUJPO �adequate availability of skilled resources
BU�BMM�MFWFMT�PG�B�QSPKFDU�PSHBOJ[BUJPO�appeared as critical factor for success
of project. Owing to the additional
employment support schemes
JOUSPEVDFE�CZ�UIF�(PWFSONFOU�BOE�the locally available employment
PQQPSUVOJUJFT �BWBJMBCJMJUZ�PG�TLJMMFE�workforce for construction works has
CFDPNF�FWFO�NPSF�EJGěDVMU�
Apart from the direct manpower required
GPS�DPOTUSVDUJPO �TLJMMFE�BOE�FYQFSJFODFE�project management personnel are
SBSF�BTTFUT�GPS�BO�PSHBOJ[BUJPO��5IVT �UP�SFUBJO�FYJTUJOH�XPSL�GPSDF�BOE�BUUSBDU�OFX�UBMFOU �DPNQBOJFT�OFFE�UP�QBZ�IJHI�compensations leading to cost overruns.
74%
respondents feel that location and connectivity of project site has high to medium probability of affecting the project cost.
Exhibit 15: Probability of reasons affecting project cost overruns in execution and closing phase
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
29 | Study on Project Schedule and Cost Overruns
3 306 Flash report on central sector projects, MoSPI, April 2011
Other factors impacting project costs
Other factors such as weak procurement
QMBOOJOH �XSPOH�PS�QPPS�TFMFDUJPO�PG�technology etc. adversely impacts the
project costs. During procurement
QMBOOJOH �DPNQBOJFT�EPOijU�QBZ�TVGěDJFOU�heed to the elements of material cost
DPNQPOFOUT�TVDI�BT�MPHJTUJDT �TUPSBHF�BOE�FDPOPNJFT�PG�TDBMF��5IJT�MFBET�UP�JOFGěDJFOU�NBUFSJBM�QSPDVSFNFOU��'VSUIFS �tenders are placed on a need basis.
)FODF �DPNQBOJFT�BSF�VOBCMF�UP�MFWFSBHF�on the quantitative advantages of low cost
or building long-term relationship with
suppliers by placing bulk orders.
*O�DFSUBJO�DBTFT �JOBEFRVBUF�BTTFTTNFOU�of the suitability of the procured
equipments and materials to the work
site results in repetition of the entire
procurement process resulting in further
UJNF�BOE�DPTU�FTDBMBUJPOT��5IF�FOEFBWPS�to adopt the best available technology
also results in frequent changes in
the procurement process leading to
increased cost and time.
5IPVHI�UIFTF�GBDUPST�IBWF�TVCTUBOUJBM�JNQBDU�PO�PWFSBMM�QSPKFDU�DPTU �UIFTF�could be easily controllable with well
established project management
techniques.
5IF�PXOFSTIJQ�PG�UIF�QSPKFDU�FYFDVUJOH�BHFODZ�IBT�TPNF�impact on the schedule overrun and the cost overrun.
*ODSFNFOUBM�ěOBODJBM�DPTU�JT�BO�JNQPSUBOU�GBDUPS �DPOUSJCVUJOH�to project cost overrun. It has been observed that PSUs borrow
money from bank/lenders at market-determined interest rates
to fund their projects whereas non-PSU projects are primarily
GVOEFE�CZ�UIF�(PWFSONFOU��5IJT�IBT�BO�JNQBDU�PO�UIFJS�DPTU�PG�delivering the project. 88 percent of PSU respondents agree
UIBU�JODSFNFOUBM�ěOBODJBM�DPTU�JT�B�SFBTPO�GPS�DPTU�PWFSSVO�whereas only 56 percent of non-PSU respondents echoed the
TFOUJNFOU��'VSUIFS �XFBL�QSPDVSFNFOU�IBT�NPSF�JNQBDU�PO�146�QSPKFDUT�WJT�½�WJT�OPO�146�QSPKFDUT �IJHIMJHIUJOH�UIF�OFFE�for better procurement management of PSU projects. Other
GBDUPST�TVDI�BT�NBUFSJBM�QSJDF�FTDBMBUJPO�CFZPOE�QSPKFDUJPOT �JOBEFRVBUF�BWBJMBCJMJUZ�PG�TLJMMFE�SFTPVSDFT �DPOUSBDUVBM�EJTQVUF�FUD� �IBWF�NPSF�PS�MFTT�UIF�TBNF�JNQBDU�PO�QSPKFDU�DPTU�PWFSSVO��
Factors impacting PSU’s and non-PSU’s project cost
Exhibit 16: Reasons for project cost overrun for non-PSU and PSU projects
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 30
KPMG in India’s point of view
5IF�HSPXJOH�EFNBOE�GPS�JOGSBTUSVDUVSF�JO�the country has been consuming a major
QJF�PG�UIF�VOJPO�CVEHFU��'PS�B�MPOH�QFSJPE �project funding had been in the domain
PG�UIF�QVCMJD�TFDUPS�CVU�JO�SFDFOU�UJNFT �private players have also ventured into
UIF�JOGSBTUSVDUVSF�TFDUPS��5IF�TJ[F�PG�UIF�DBQJUBM�FYQFOEJUVSF�JO�QSPKFDUT�IBT�HSPXO�CZ�MFBQT�BOE�CPVOE �XIJDI�IBT�NBEF�the need for cost control even more
DSJUJDBM��)PXFWFS �DVSSFOUMZ�QSPKFDUT�BSF�facing huge cost overruns due to multiple
reasons ranging from delayed approvals
to scope creep and shortage of project
professionals to price escalations and
contractual disputes.
Although uncontrollable factors such
BT�ěOBODJOH�DPTU �GPSFJHO�FYDIBOHF�ĜVDUVBUJPOT �FUD�IBWF�B�IVHF�JNQBDU�PO�UIF�QSPKFDU�DPTUT �UIFSF�BSF�PUIFS�GBDUPST�that need to be addressed with-in time to
BWPJE�DPTU�PWFSSVOT��1SPKFDU�PSHBOJ[BUJPOT�have repeatedly failed to address the
issues related to contracts administration
BOE�UJNFMZ�QSPDVSFNFOU �XIJDI�JG�IBOEMFE�FGGFDUJWFMZ �DBO�IFMQ�JO�SFEVDJOH�UIF�DPTUT�substantially.
"U�UJNFT �QSPKFDU�DPTU�FTUJNBUFT�BSF�IJHIMZ�VOSFBMJTUJD��"T�B�SFTVMU �UIF�BDUVBM�FYQFOEJUVSF�JODVSSFE�JT�TJHOJěDBOUMZ�IJHIFS�UIBO�UIF�QMBOOFE�WBMVF��"MUIPVHI �JO�DFSUBJO�TJUVBUJPOT �UIF�BEEJUJPOBM�
FYQFOEJUVSF�NJHIU�CF�VODPOUSPMMBCMF �B�realistic estimate can go a long way in
providing accurate and timely information
to relevant authorities to take more
JOGPSNFE�EFDJTJPOT��5IF�ĜBXFE�FTUJNBUFT�are usually due to the lack of information
GPS�FTUJNBUJPO�BOE�UIF�MBDL�PG�FYQPTVSF�UP�TVDI�IVHF�QSPKFDUT��5IVT �JU�JT�JNQPSUBOU�that planning and implementing agencies
TIPVME�IBWF�RVBMJěFE�DPTU�FOHJOFFST�BOE�QSPKFDU�QSPGFTTJPOBMT�XJUI�FYQFSUJTF�PG�QSPKFDU�NBOBHFNFOU�UPPMT �UFDIOJRVFT�BOE�QSBDUJDFT �GPS�FGěDJFOU�QSPKFDU�EFMJWFSZ�
31 | Study on Project Schedule and Cost Overruns
Study on Project Schedule and Cost Overruns | 32
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33 | Study on Project Schedule and Cost Overruns
Sector-wise impact of factors on cost and schedule overruns
The aforementioned factors have a varying
degree of impact on the project delivery from
one sector to another. For example, coal sector
is more sensitive to regulatory approvals, as
NBKPSJUZ�PG�UIF�DPBM�ěFMET�GBMM�VOEFS�GPSFTU�BSFB�and it takes around 3-5 years for acquiring all
requisite forest and environmental clearances.
On the other hand, telecom projects are least
impacted on account of regulatory approvals.
Similarly, scope creeps are common in airport
infrastructure projects mainly due to the need
to accommodate allied services (such as
immigration, custom, etc). Following section
provides sector-wise analysis of how various
factors affect the schedule and cost overruns.
Study on Project Schedule and Cost Overruns | 34
35 | Study on Project Schedule and Cost Overruns
Reasons for schedule overrun across sectors
Human resources Petroleum Power Coal Steel Civil Avia-tion Railways Roads &
HighwaysPort &
shippingTelecommu-
nication
Land/site handover 3 5 4 3 5 4 5 5 3
Delay in regulatory approvals 2 4 5 3 2 4 4 3 2
(FPMPHJDBM�TVSQSJTFT 4 4 5 3 3 2 2 3 2
Relationship with other projects 2 2 2 5 3 3 4 3 3
Ineffective procurement planning 2 2 2 3 2 2 4 3 2
Design/scope change 4 4 4 5 5 4 4 2 5
Weak/ineffective project monitoring 2 2 2 3 2 2 4 3 2
Inadequate availability of skilled resources 2 4 5 5 2 3 4 2 3
Contractual disputes 2 4 4 5 5 2 4 2 2
Lack of awareness of modern equipment 2 3 2 5 2 2 2 2 2
5!Very high impact 4!High impact 3!Moderate impact 2!Low impact
Source:�,1.(�JO�*OEJB��1.*�TVSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVOT �����
Study on Project Schedule and Cost Overruns | 36
Reasons for cost overrun across sectors
Human resources Petroleum Power Coal Steel Civil Avia-tion Railways Roads &
HighwaysPort & ship-
ping
Scope creep 4 4 2 5 5 3 5 2
Design change/iterations 4 4 4 5 5 4 5 3
High cost of environmental safeguards 2 3 4 5 5 2 2 3
Acquisition of land at market price 3 4 2 3 3 2 5 2
Inadequate DPR 4 4 2 5 3 4 5 3
Weak procurement planning 4 4 4 5 2 2 4 2
Material price escalations beyond projections 4 5 5 5 5 4 5 5
Poor selection of consultant 3 2 2 5 3 2 4 3
Location and connectivity of project site 5 4 4 3 5 3 4 3
*ODSFNFOUBM�ěOBODJOH�DPTU 5 5 5 3 3 2 4 5
5!Very high impact 4!High impact 3!Moderate impact 2!Low impact
Note:�5IF�UFMFDPN�TFDUPS�EPFT�OPU�FYQFSJFODF�DPTU�PWFSSVOT�GPS�UIF�TVSWFZFE�QSPKFDUT�Source:�,1.(�JO�*OEJB��1.*�TVSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVOT �����
05SE
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37 | Study on Project Schedule and Cost Overruns
Mitigation strategies – Helping FOTVSF�FGěDJFOU�project delivery
The successful delivery of projects is affected by
a wide variety of internal and external factors.
Although, both internal as well as external
factors impact the delivery of project, internal
factors remain an area of concern by virtue of
them being controllable. To deliver projects
on time and within budget and scope, global
infrastructure companies use formalized project
management practices and take supportive
steps for the developing the competency in
this area. Additionally, with increasing project
size and complexity, many companies have
institutionalized the use of standard methods
for project and risk management. Also, various
nations have showed an increased willingness to
invest in training and development for project and
program management staff.
Study on Project Schedule and Cost Overruns | 38
In view of the shortage of in-house
QSPKFDU�NBOBHFNFOU�QSPGFTTJPOBMT �*OEJBO�PSHBOJ[BUJPOT�IBWF�XJEFMZ�BEPQUFE�UIF�SPVUF�PG�IBWJOH�FYUFSOBM�JOEFQFOEFOU�1SPKFDU�.BOBHFNFOU�0GěDF�1.0��1SPKFDU�NBOBHFNFOU�PGěDF�1.0�JT�a relatively new concept in India and is
being widely used by Indian companies.1
)PXFWFS �PVS�EJTDVTTJPO�XJUI�UIF�project managers highlighted that due
UP�UIF�TIPSUBHF�PG�RVBMJěFE�QSPKFDU�NBOBHFNFOU�QSPGFTTJPOBMT �UIF�1.0T�are not able to function to the desired
level of capability.
"QBSU�GSPN�FTUBCMJTIJOH�1.0 �GPDVTFE�Risk Management has been widely
adopted and welcomed as a key measure
of mitigation against project overruns. A
comprehensive and detailed risk planning
and monitoring establishment ensures
prior detection and timely alerts on
changing response of various risks.
In addition to adoption of global best
practices of establishing PMO and risk
NBOBHFNFOU�TFU�VQ �SFTQPOEFOUT�BDSPTT�UIF�TFDUPST�IBWF�FYQSFTTFE�UIF�OFFE�for improvement in project planning and
monitoring capabilities along with better
risk management as areas requiring
immediate attention for improved project
delivery.
'VSUIFSNPSF �QFSJPEJD�NPOJUPSJOH�PG�projects and training of project staff for
better understanding and knowledge of
project management practices such as
DPOUSBDUT�NBOBHFNFOU �QSPDVSFNFOU�NBOBHFNFOU �WBMVF�FOHJOFFSJOH�EVSJOH�EFTJHO �FUD��IBWF�CFFO�JEFOUJěFE�BT�UIF�most effective measures for successful
project delivery.
1SPKFDU�.BOBHFNFOU�0GěDF�1.0�is an effective way for monitoring projects
4FUUJOH�VQ�B�1.0 �DPOTJTUJOH�PG�FYQFSJFODFE�NBOBHFST�BOE�TVCKFDU�NBUUFS�TQFDJBMJTU�PG�UIF�DPNQBOZ �IFMQ�JO�UJNFMZ�JEFOUJěDBUJPO�PG�JTTVFT�SFMBUFE�to cost and schedule overrun and allow
companies to take corrective actions
JO�UJNF��5IF�1.0�BMTP�TFSWFT�BT�BO�independent body directly reporting to
the Board of Directors about the progress
of project and supports oversight on
the projects. It drives successful
JNQMFNFOUBUJPO�PG�QSPKFDUT �UISPVHI�implementation of leading project
NBOBHFNFOU�QSPDFTTFT �QSPUFDUJOH�project against risks and ensuring
adequate guidance and information for
timely decision-making. Implementing a
PMO could help in achieving the following
QSPKFDU�PCKFDUJWFT��
Reduced cycle time and delivery
costs:�5IF�1.0�FTUBCMJTIFT�BOE�EFQMPZT�standard set of project management
QSPDFTTFT�BOE�UFNQMBUFT �XIJDI�enables project managers with an
established and tested module for better
management and monitoring of projects.
5IFTF�SFVTBCMF�QSPKFDU�NBOBHFNFOU�components help projects to engage
BMM�UIF�GVODUJPOT�JO�B�NPSF�PSHBOJ[FE�BOE�FGěDJFOU�NBOOFS�XJUI�NVDI�MFTT�FGGPSU��5IF�TUBOEBSE�BQQSPBDI�SFEVDFT�the learning time for the project team
while adapting to the limitations and
uniqueness of a project.
Improved quality of project
deliverables:�5IF�1.0 �CZ�WJSUVF�PG�TUBOEBSE�HMPCBM�BQQSPBDI �EFQMPZT�international best practices used at
TJNJMBS�QSPKFDUT �UIVT �JNQSPWJOH�UIF�RVBMJUZ�PG�QSPKFDU�EFMJWFSBCMFT��"MTP �UIF�TUBOEBSEJ[BUJPO�PG�EFMJWFSBCMF�JO�MJOF�XJUI�
globally established standards improves
the acceptability of the deliverables
worldwide.
&BSMZ�JEFOUJěDBUJPO�PG�JTTVFT�BOE�SJTLT� 5IF�1.0�SFHVMBSMZ�BOE�JOEFQFOEFOUMZ�tracks the status of the projects and
JEFOUJěFT�CPUUMFOFDLT�BOE�SJTLT�UIBU�NBZ�JNQBDU�QSPKFDU�EFMJWFSZ��5IF�VTF�PG�established methodologies at regular
JOUFSWBMT�FOBCMFT�JEFOUJěDBUJPO�PG�JTTVFT�BOE�SJTLT�BTTPDJBUFE�XJUI�UIF�QSPKFDUT �enabling timely decision making by the
relevant authorities.
Improved accuracy of project
estimates: 5IF�1.0�UBLFT�B�IPMJTUJD�WJFX�of the potential risks and benchmarks
UIF�FYJTUJOH�QSPKFDU�DPTU�XJUI�TJNJMBS�QSPKFDUT �UIVT�JNQSPWJOH�UIF�BDDVSBDZ�PG�UIF�QSPKFDU�FTUJNBUF��"MTP �UIF�BWBJMBCJMJUZ�of the trained professionals reduces the
chances of errors in different estimations.
Improved people and resource
management:�5IF�1.0�QSPWJEFT�USBJOJOH�JOUFSOBM�PS�UISPVHI�WFOEPST�BOE�mentors managers to build core project
management competencies. In certain
TFU�VQT �UIF�1.0�BMTP�NBOBHFT�TIBSFE�resources between various projects
forming part of a common program
QSPWJEJOH�CFUUFS�FGěDJFODZ�BOE�VUJMJ[BUJPO�of these resources.
Re-use of knowledge and the ability to
leverage that knowledge on current /
future projects:�5IF�1.0�NBJOUBJOT�UIF�repository of key learning’s from a
project – pertaining to best practices
BT�XFMM�BT�JNQSPWFNFOU�BSFBT��5IFTF�learning are disseminated to all
DPODFSOFE�QFPQMF�JO�UIF�PSHBOJ[BUJPO�and applied to current/future projects
thus avoiding the risk of similar issues at
different projects.
Our company has a concept of Integrated Project Management (IPM), under which all departments related to a project directly report to the project Executive Director (ED). 'PS�FH��QSPKFDU�EFQBSUNFOU �ěOBODF�EFQBSUNFOU �QFSTPOOFM�EFQBSUNFOU �FUD��EJSFDUMZ�report to the project ED. This avoids bureaucratic delays within the organisation and facilitates faster decision making.
Executive Director,Steel Manufacturing Company
39 | Study on Project Schedule and Cost Overruns
1 PMI-KPMG study on drivers for success in infrastructure projects 2010 – Managing for change
*O�BEEJUJPO �B�1.0�UZQJDBMMZ�QFSGPSNT�UIF�GPMMPXJOH�GVODUJPOT�
y Monitor project performance
against the set targets and act as
an information center on project
progress
y Set-up and deploy standard
QSPDFTTFT �QSBDUJDFT�BOE�QSPDFEVSFT�for project implementation
y Mentor Project managers for future
project needs
y Provide consulting support on project
planning and implementation
y Conduct portfolio management
i.e. monitor inter project
JOUFSEFQFOEFODJFT �BVEJU�BOE�QSJPSJUJ[F�JOEJWJEVBM�QSPKFDUT �FUD��
5IF�JNQPSUBODF�PG�1.0�JT�EFNPOTUSBUFE�GSPN�PVS�TVSWFZ�SFTVMUT�BT�XFMM �XIFSFJO�86 percent of the respondents felt
the need for an independent PMO for
monitoring project and positively reacted
in its potential to manage cost and
schedule overruns.
PMO Role PMO Responsibilities
PMO ManagerPMO Management; Quality Management; Stakeholder Management
PlannerWork plan/ milestone Management;Scope management
CoordinatorProject Support: Scope, integration, change and resource management
Controller Financial Management
Program Administration Support
Project Support: General Administration
Project InformationInternal and external project communication (not change management)
Project Stream Lead
All typical PMO responsibilities for each of the work streams
&YIJCJU�����3FRVJSFNFOU�PG�QSPKFDU�NBOBHFNFOU�PGěDF�
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 40
Risk Management techniques are used by only 56 percent of the respondents
An effective risk management
includes the processes concerned
XJUI�DPOEVDUJOH�SJTL�QMBOOJOH �SJTL�JEFOUJěDBUJPO �BOBMZTJT �SFTQPOTFT �BOE�monitoring and control during the life
cycle of a project. Indian infrastructure
companies are yet to match their global
counterparts in developing a risk–aware
culture and a rigorous risk management
EJTDJQMJOF�XJUIJO�UIFJS�PSHBOJ[BUJPO��*O�PVS�TVSWFZ �POMZ����QFSDFOU�PG�UIF�respondents said that they have a
risk management process in place for
BDIJFWJOH�QSPKFDU�PCKFDUJWFT��'VSUIFSNPSF �our discussions with the project
managers suggest that many companies
BQQFBS�UP�CF�TIPSU�PG�B�IJIPMJTUJDij�BQQSPBDI �where the risk is fully integrated into
every aspect of the construction life cycle.
.PTU�PSHBOJ[BUJPOT�UBLJOH�QBSU�JO�TVSWFZ�TIPXFE�FOPVHI�DPOěEFODF�JO�UIFJS�FYJTUJOH�QSBDUJDFT �BT�NPSF�UIBO����QFSDFOU�PG�UIF�SFTQPOEFOUT �XIJDI�have established risk management
QSBDUJDFT �SBUFE�UIFJS�FYJTUJOH�QSBDUJDFT�BT�effective. Only 18 percent respondents
felt that there is a further scope of
improvement. Out of the entire gamut
PG�PSHBOJ[BUJPOT�TVSWFZFE �POMZ����percent opined that they have effective
risk management procedures in place.
5IF�QPPS�FGGFDUJWFOFTT�JO�QSBDUJDF�JT�further established by the fact that at
UIF�UJNF�PG�TVSWFZ�BSPVOE����QFSDFOU�PG�projects were running behind schedule
XJUI����QFSDFOU�XFSF�ESBXJOH�BEEJUJPOBM�FYQFOEJUVSF�BQBSU�GSPN�UIFJS�JOJUJBMMZ�planned budget2.
Exhibit 18: Usage of risk management techniques for identifying and monitoring risk
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Exhibit 19: Effectiveness of risk management practices
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
41 | Study on Project Schedule and Cost Overruns
2 315 Flash report on central sector projects, MoSPI, January 2012
Ineffective project planning and project monitoring is rated as UIF�NPTU�TJHOJěDBOU�SJTL�IBWJOH�maximum impact on project delivery
1SPKFDU�SJTL �VODFSUBJOUZ�BOE�TUBLFIPMEFS�JOĜVFODFT�BSF�UIF�IJHIFTU�BU�UIF�TUBSU�PG�a project and decrease gradually over a
QSPKFDUijT�MJGFDZDMF��5IVT �CFGPSF�UIF�QSPKFDU�UFBN�HFUT�JOUP�UIF�FYFDVUJPO�NPEF �JU�is of utmost importance to do a detailed
QMBOOJOH�GPS�BMM�QPUFOUJBM�SJTLT �TP�UIBU�UIF�project could be completed effectively
BOE�FGěDJFOUMZ�XJUI�BT�GFX�EFWJBUJPOT�BT�QPTTJCMF��5IF�JNQPSUBODF�PG�FGGFDUJWF�planning is even highlighted by the survey
results. 74 percent of the respondents
rated ineffective project planning and
QSPKFDU�NPOJUPSJOH�BT�NPTU�TJHOJěDBOU�factor impacting project schedule and
DPTU���*OFGGFDUJWF�SFTPVSDF�VUJMJ[BUJPO �OPO�DPNQMJBODF�XJUI�SFHVMBUPSZ�SFRVJSFNFOUT �VO�BWBJMBCJMJUZ�PG�QSPKFDU�NBOBHFST �FUD��are some other factors which could
BEWFSTFMZ�JNQBDU�QSPKFDU�EFMJWFSZ��5IFTF�risks could be easily manageable at the
project level through an independent and
objective risk management team that
conducts risk reviews periodically and
can put in place a mitigation plan that is
BDUJPOBCMF�XJUIJO�UIF�EFěOFE�UJNFMJOFT�
Improve risk management skills for successful project delivery
5IF�CJHHFTU�TJOHMF�GBDUPS�JEFOUJěFE�GPS�improving risk management in projects
is to enhance the risk management
TLJMMT�PG�QSPKFDU�NBOBHFST�����QFSDFOU�PG�the respondents believe that imparting
training to project team for identifying
BOE�BTTFTTJOH�SJTLT�DPVME�TJHOJěDBOUMZ�JNQSPWF�QSPKFDU�EFMJWFSZ��"EEJUJPOBMMZ �PVS�discussion with respondents highlighted
that majority of the project teams haven’t
received any formal project or risk
management training.
Developing project risk management
GSBNFXPSL �DPOEVDUJOH�JOEFQFOEFOU�reviews and developing risk management
reports are some other factors that could
positively impact the risk management in
projects.
Exhibit 20: Impact of risks on project delivery
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Exhibit 21: Strategies to enhance risk management in projects
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 42
Strategies to control schedule overrun
Periodic review and oversight is one of
the most commonly adopted strategy
UP�DPOUSPM�QSPKFDU�TDIFEVMF�EFMBZ��5IJT�JT�primarily because infrastructure projects
generally span over a long duration and
hence require regular progress review.
5IF�OBUVSF�PG�SJTL�JOWPMWFE�JO�TVDI�projects also keeps evolving constantly.
)FODF �QSPBDUJWF�SJTL�BTTFTTNFOU�JT�required at the various stages of the
QSPKFDU��*O�EPDJMF�TDFOBSJPT �QSPKFDU�owners and contractors only attempt
to avoid and overcome the type of risks
EFěOFE�CZ�UIF�NBOBHFNFOU�EVSJOH�UIF�planning stage. Such a risk management
process often leads to failures as the
risk managers do not pay attention to
the evolving circumstances and fail to
envision the bottlenecks that might
have to be encountered at a later stage.
5IVT �JU�JT�JNQPSUBOU�UP�SFWJFX�UIF�QSPKFDU�progress regularly.
*OUFSOBMMZ �QSPKFDU�NBOBHFST�OFFE�UP�maintain periodic risk management
reports to identify the probable project
SJTLT��"EEJUJPOBMMZ �QSPKFDU�NBOBHFST�DPVME�split the various stages of the project
into smaller components to track the
target achievement on a regular basis.
5IJT�XPVME�IFMQ�JO�JNQSPWJOH�SFTPVSDF�VUJMJ[BUJPO�UISPVHI�CFUUFS�QMBOOJOH�BOE�closer monitoring.
Project reviews by third parties is
another technique to review projects.
Independent reviews by third parties
provide an objective opinion on the
QSPKFDU�TDPQF �CVEHFU �UJNFMJOFT �EFTJHO �QSPDVSFNFOU �UFDIOPMPHZ�BOE�DPOUSBDUPS�TFMFDUJPO �FUD��'VSUIFS �UIJT�DPVME�IFMQ�in bringing new ideas and break short
sighted thinking.
Project plans also suffer due to lack of
PWFSTJHIU��'PS�JOTUBODF �NPEFSOJ[BUJPO�PG�an international airport in eastern India
required the demolition of an old building
which stationed critical facilities such
BT�QPXFS�IPVTF �BJS�DPOEJUJPOJOH�QMBOU�and generator room for the functioning
PG�UIF�FYJTUJOH�UFSNJOBM��5IF�QMBOOJOH�team unable to assess the criticality of
the building and hence did not suggest
an appropriate relocation of the facilities
IBSCPSFE�CZ�UIF�PME�CVJMEJOH��5IJT�MFE�UP�the delay in demolition of the old building
and affected the time schedule of the
project.
Project reports and project management
tools are rated as most effective tool
GPS�QSPKFDU�NPOJUPSJOH �GPMMPXFE�CZ�$&0�dashboard.
Exhibit 22: Commonly adopted strategies to control project schedule delays
Exhibit 23: Effectiveness of project monitoring tools
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
43 | Study on Project Schedule and Cost Overruns
Risk and reward program for project management teams/contractors are used occasionally
Risk and reward program for project
management teams and contractors
GPS�FYDFFEJOH�PS�NFFUJOH�UIF�UBSHFUT�are not common in comparison to other
NJUJHBUJPO�TUSBUFHJFT��*O�PVS�TVSWFZ ����percent respondents frequently used risk
and reward program as a measure for
controlling schedule overruns. Due to lack
PG�BO�BQQSPQSJBUF�JODFOUJWF�QSPHSBN �UIF�QSPKFDU�NBOBHFNFOU�UFBNT�BOE�FYUFSOBM�contractors and subcontractors are not
motivated enough to take interest beyond
UIFJS�EFěOFE�SFTQPOTJCJMJUZ�UP�NFFU�UIF�QSPKFDU�TDIFEVMF�BOE�DPTU��"U�UJNFT �the project management teams desist
from introducing innovative moves for
FGěDJFOUMZ�NFFUJOH�UIF�QSPKFDU�UJNFMJOF �BT�UIFZ�EP�OPU�ěOE�BOZ�EJSFDU�BEWBOUBHF�NPOFUBSZ�CFOFěUT�PS�BO�BQQSPQSJBUF�SFDPHOJUJPO�GPS�UIFNTFMWFT��
5P�NPUJWBUF�UIF�UFBNT �QSPKFDU�PXOFST�OFFE�UP�JODMVEF�B�DMFBSMZ�EFěOFE�SJTL�reward program in the project plan for
appropriately rewarding the project
team and the contractors for meeting
PS�FYDFFEJOH�UIF�UBSHFUT��'VSUIFS �UIF�risk-reward programmed should be
EFTJHOFE�JO�B�DMFBS�BOE�RVBOUJěBCMF�manner so that it motivates not only
the top level personnel of the project
FYFDVUJPO�UFBN�CVU�UIF�QFPQMF�JOWPMWFE�at all the levels of the team. Incentives
TVDI�BT�QFSGPSNBODF�CPOVT �FOSPMNFOU�UP�BEWBODF�USBJOJOH�QSPHSBNT �SFDPHOJUJPO�XJUIJO�UFBN �FUD��DPVME�IFMQ�JO�encouraging the project team to apply
innovative techniques for meeting the
UJNFMJOFT�JO�BO�FGěDJFOU�NBOOFS�
Study on Project Schedule and Cost Overruns | 44
Strategies to control cost
Due to the long gestation period of
JOGSBTUSVDUVSF�QSPKFDUT �QSPKFDU�PXOFST�include cost escalation clause as a part
of the contract agreement. 65 percent
of the respondents use this strategy to
DPOUSPM�QSPKFDU�DPTUT��'VSUIFS �EFWFMPQJOH�cost effective project designs and joint
evaluation of project design for value
engineering is also used frequently.
)PXFWFS �OPU�NBOZ�DPNQBOJFT�PQUJNJ[F�their procurement methods to manage
cost.
Project owners need to develop long
term relationship with the contractors
and sub-contractors so as to map their
performance over a period of time and
identify the better performers. Deploying
practices such as demand consolidation
of high spend categories across the
FOUJSF�DPNQBOZ �DFOUSBMJ[FE�TPVSDJOH �developing new vendor and preferred
relationships through long term contracts
can also help in lowering the project
DPTU��5PPMT�TVDI�BT�&31�BOE�PUIFS�*5�CBTFE�TZTUFNT�UIBU�IFMQ�JO�FGěDJFOUMZ�tracking the source of materials should
CF�QSPNPUFE��5IF�QSPKFDU�PXOFST�DPVME�also look to leverage supplies from low-
cost countries such as China and Russia
in cases where the domestic supplies are
not cost effective.
8F�IBWF�FOUFSFE�UIF�ěYFE�WBMVF�contract with the vendor, thus any cost increase is borne by the contractor.
General Manager,Telecom company
Exhibit 24: Strategies used to control project cost overruns
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
45 | Study on Project Schedule and Cost Overruns
Issues faced in adopting control strategies
(PWFSONFOU�QSPDFEVSFT�BOE�QPMJDJFT�BSF�SBUFE�BT�B�NBKPS�IJOESBODF�CZ�SFTQPOEFOUT�in adopting schedule control strategies. 86 percent of our survey respondents
suggest that they are unable to adopt controlling strategies on time due to stringent
(PWFSONFOU�QSPDFEVSFT��5IJT�JT�NBJOMZ�CFDBVTF�JO�B�(PWFSONFOU�TFU�VQ �EFWJBUJPO�from day to day operations requires an approval from higher authorities. Another
major reason highlighted in the survey in adopting the mitigation strategy is the
VOBWBJMBCJMJUZ�PG�TLJMMFE�SFTPVSDFT�UP�FYFDVUF�UIF�QSPKFDUT���"SPVOE�UISFF�GPVSUI�PG�UIF�SFTQPOEFOUT�GFFM�UIBU�MBDL�PG�BWBJMBCJMJUZ�PG�FYQFSJFODFE�WFOEPST�BOE�BSPVOE�IBMG�PG�UIF�UPUBM�SFTQPOEFOUT�BHSFF�UIBU�UIF�TIPSUBHF�PG�FYQFSJFODFE�EFTJHO�FOHJOFFST�BSF�NBKPS�CPUUMFOFDLT�JO�BEPQUJOH�UIF�NJUJHBUJPO�TUSBUFHJFT��'VSUIFS �PWFS����QFSDFOU�SFTQPOEFOUT�JOEJDBUFE�UIBU�UIFZ�GBDF�SFTJTUBODF�GSPN�DPOUSBDUPST�BOE�TVC�DPOUSBDUPST �JG�UIFZ�XBOU�UP�SFQMBDF�UIF�FYJTUJOH�QSPDFTTFT�XJUI�NPSF�FGěDJFOU�POFT�
Exhibit 25: Issues faced in adopting the schedule control strategies
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012
Study on Project Schedule and Cost Overruns | 46
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47 | Study on Project Schedule and Cost Overruns
Project management – Proven method for successful delivery
Challenges in capital projects have grown multi
folds in the last decade. First experiment at three
lane track capacity enhancement by railways,
set up of country’s largest thermal power plant,
construction of large hydro power plants initiating
one of the biggest planned human exodus,
development of one of the world’s largest airport
in shortest time, etc. have only added greater
emphasis on established project management
techniques and practices being adopted from
project inception till closure.
Study on Project Schedule and Cost Overruns | 48
5IF�SBUJPOBMF�GPS�1SPKFDU�.BOBHFNFOU�arises from the need to institute
DPOTJTUFOU�TUBOEBSET�BOE�NFUIPET �FMJNJOBUF�QSPKFDU�EFMBZT �DPSSFDU�QPPS�PS�JNQSPWF�QSPKFDU�QMBOOJOH�QSPDFTTFT �provide clarity on roles to ensure
authority is matched with responsibility
GPS�QSPKFDU�DPNQMFUJPO �BEWBODF�QSPKFDU�QFSGPSNBODF �SFNPWF�DPTU�PWFSSVOT�and contain costs. It thereby aims to
TFQBSBUF�QSPKFDU�QFSGPSNBODF�TVDDFTT���GBJMVSF�NFBTVSFT�GSPN�QSPKFDU�QSPHSFTT�NFFUJOH�UJNF�TDBMFT �DMFBSMZ�BHSFFE�NJMFTUPOFT �TFUUJOH�QBSBNFUFST�BU�UIF�FOE�PG�FBDI�QIBTF �FUD� �HVBSBOUFF�quality to project needs and augment
customer / coordinating agency
satisfaction.
Project Management encompasses
setting up and sustaining practices /
QSPDFEVSFT �QFSGPSNJOH�QSPKFDU�USBDLJOH�UP�SFQPSU�PO�QSPHSFTT �NPOJUPSJOH�JOUFS�project interdependencies for review
��QSJPSJUJ[BUJPO�PG�JOEJWJEVBM�QSPKFDUT �creating database for risk analysis and
building knowledge management
repository from lessons learnt. It
includes proposing consulting support
PO�QSPKFDUT �BOE�DPNNVOJDBUJOH�QSPKFDU�OFFET �TUBUVT�BEWBODFNFOU�UP�TFOJPS�management.
'VSUIFSNPSF �PGGFSJOH�USBJOJOH�UISPVHI�project skill development programs
and mentoring services to managers
BSF�JNQFSBUJWFT�GPS�SFBMJ[BUJPO�PG�future project needs. Provisioning of
training budget / level of investment
in professional training for employees
EVSJOH�UIF�QSPKFDU�QMBOOJOH�QSPDFTT �collaboration with educational
institutions / professional management
PSHBOJ[BUJPOT �QBSUJDJQBUJPO�JO�1SPKFDU�Management benchmarking forums are
crucial mechanisms to cultivate project
NBOBHFNFOU�FYQFSUJTF�JO�UIF�FNQMPZFFT��-FWFM�PG�JOWFTUNFOU �QSPKFDU�SJTLT �technical challenges along with sensitivity
in general public and political scenario
have not only induced the need for
objectivity / independent opinion / valued
VTF�PG�PVUTJEF�FYQFSUT�PO�QSPKFDU�TDPQF �CVEHFU �UJNFMJOFT �EFTJHO �QSPDVSFNFOU �UFDIOPMPHZ�BOE�DPOUSBDUPS�TFMFDUJPO �CVU�also on usage of assortment of project
NBOBHFNFOU�UPPMT �UFDIOJRVFT�BOE�CFTU�practices.
Absence of robust Project Management
DBQBCJMJUJFT�MFBE�UP�QSPKFDU�DPNQMFYJUJFT�OPU�CFJOH�BDDPVOUFE�GPS �JOBEFRVBUF�QMBOOJOH �TDIFEVMJOH�EFěDJFODJFT�relating to resource unavailability and or
NBUFSJBM�FTUJNBUJPO �DPOTUSVDUJPO�EFMBZT�resulting in disputes further leading to
considerable resource spending on heavy
MJUJHBUJPO�QSPDFTTFT �OPO�BEESFTTBM�UP�TUBGěOH�JTTVFT�MJNJUJOH�BHFODZijT�DPOUSBDU�PWFSTJHIU�DBQBCJMJUJFT��-BDL�PG�TVGěDJFOU�stress on planning and management tools
��UFDIOJRVFT�DBO�MFBE�UP��
y *OTVGěDJFOU�VOEFSTUBOEJOH�PG�MPDBM�environment
y Inaccurate forecasts on usage
QSPKFDUJPOT �EFNPHSBQIJD�USFOET �market conditions and imminent
technological bottlenecks
y Due diligence decisions and
ascertainment of risks / changes in
FYPHFOPVT�GBDUPST�OPU�QSFDFEJOH�decision making process
y Absence of new ideas being brought
in causing short sighted habits and
thinking.
49 | Study on Project Schedule and Cost Overruns
Study on Project Schedule and Cost Overruns | 50
07SE
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51 | Study on Project Schedule and Cost Overruns
Resource shortage – Plaguing the growth of the sector
The Indian Infrastructure sector plays an
important role in the India growth story servicing
the needs of the both public and private sectors.
The sector has a huge multiplier effect on the
growth of the economy. However, it faces
manpower challenges, which are detrimental to
the growth of the sector.
Study on Project Schedule and Cost Overruns | 52
5IF�TVSWFZ�BMTP�TVHHFTUT�UIBU�UIFSF�JT�a dearth of skilled manpower across
sectors and this shortage can have an
adverse impact on the delivery and
DPTU�PG�UIF�QSPKFDU��5IF�BWBJMBCJMJUZ�PG�skilled project managers is proving to
be challenge in the Indian Infrastructure
sector and this situation in likely to get
BHHSBWBUFE�JO�UIF�GVUVSF��'VSUIFSNPSF �even the current education system is
unable to deliver the required number
of specialists across the project
NBOBHFNFOU�WBMVF�DIBJO��*O�BEEJUJPO �UIFSF�JT�B�TIPSUBHF�PG�FYQFSJFODFE�engineers with the desired project
management skill sets to take up larger
roles.
"T�QFS�UIF�TVSWFZ ����QFSDFOU�PG�UIF�respondents feel that lack of project
NBOBHFST�JT�B�NBKPS�DBVTF�PG�DPODFSO �GPMMPXFE�CZ�&OWJSPONFOUBM�1SBDUJUJPOFST����QFSDFOU �4BGFUZ�0GěDFST����QFSDFOU�BOE�&OHJOFFST�BOE�"SDIJUFDUT����QFSDFOU��
'VSUIFS �UIF�FGGFDUT�PG�TLJMMT�TIPSUBHF�BSF�apparent across various sectors as well.
"T�QFS�UIF�TVSWFZ �BCPVU����QFSDFOU�PG�UIF�respondents in the energy sector feel that
lack of skilled project managers is a major
cause of concern.
Sector-wise shortage of skilled professional - A cause of concern across sectors
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012; KPMG in India analysis
53 | Study on Project Schedule and Cost Overruns
Lack of skilled project managers is the root cause for the time overruns in a project
-BUFMZ �JU�IBT�CFFO�PCTFSWFE�UIBU�UIF�JOĜPX�PG�UBMFOU�JO�UIF�JOGSBTUSVDUVSF�TFDUPS�IBT�CFFO�EFDMJOJOH�ĸ�BT�SFTPVSDFT�BSF�HPJOH�GPS�BMUFSOBUJWF�PQUJPOT �XIJDI�BSF�NPSF�MVDSBUJWF��5IJT�JTTVF�JT�GFMU�BDSPTT�WBSJPVT�TUBHFT�PG�QSPKFDU�MJGFDZDMF�GSPN�UIF�DPODFQUVBMJ[BUJPO�QSF�QMBOOJOH�UP�UIF�ěOBM�DMPTVSF�IBOEPWFS�TUBHF���
5IF�TVSWFZ�IBT�JEFOUJěFE�UIBU�UIF�CJHHFTU�SFBTPO�GPS�TDIFEVMF�BOE�UJNF�PWFSSVO�JT�UIF�MBDL�PG�TLJMMFE�QSPGFTTJPOBMT �XIJDI�SFTVMUT�JO�QSPCMFNT�TVDI�BT�QSPMPOHFE�ěOBMJ[BUJPO�PG�EFTJHO �TDPQF�DSFFQ �EFMBZ�JO�SFHVMBUPSZ�BQQSPWBMT�BOE�DPOUSBDUVBM�EJTQVUFT��
5IF�TVSWFZ�IBT�JOEJDBUFE�UIBU����QFSDFOU�PG�UIF�SFTQPOEFOUT�BHSFF�UIBU�UIF�TFDUPS�GBDFT�TIPSUBHF�PG�TLJMMFE�QSPKFDU�NBOBHFST�XJUI�SFRVJTJUF�TLJMM�TFU �XIJDI�BMTP�SFTVMUT�JO�UJNF�TDIFEVMF�PWFSSVO��5IF�MBDL�PG�SFRVJTJUF�TLJMM�TFU�BT�UIF�NBKPS�DBVTF�PG�DPODFSO�JT�BMTP�highlighted in the KPMG International’s Global Construction Survey 2012 indicates
that about 45 percent of the respondents in the ASPAC region are less pessimistic
BCPVU�FDPOPNJD�QSPTQFDUT�BOE�JOTUFBE�QPJOU�UP�TLJMMT�TIPSUBHFT�BOE�JOĜBUJPO�BT�B�continuing worry.
Lack of availability of skilled labour is an issue.
General Manager,Power Generation company
Sector-wise shortage of skilled professional - A cause of concern across sectors
Source: PMI-KPMG survey on cost and schedule overrun
Study on Project Schedule and Cost Overruns | 54
55 | Bridging the Urban Housing Shortage in India
Indian economy has been witnessing a huge spate of
infrastructural investments over the last few years and the trend
is bound to continue for the coming years as well. We have been
witnesses to the strong and sustained growth powered primarily
by investment in various infrastructure segments. Construction
is the second largest economic activity in India after agriculture
in terms of employment and has been growing at a pace
never seen before1��)PXFWFS �UIF�TFDUPS�BU�UIF�TBNF�UJNF�JT�BMTP�XJUOFTTFE�XJUI�TIPSUBHF�PG�TLJMMFE�XPSLGPSDF �XIJDI�JT�EFUSJNFOUBM�GPS�UIF�HSPXUI�PG�UIF�TFDUPS��5P�PWFSDPNF�UIJT�JTTVF �UIF�(PWFSONFOU�IBT�UP�QMBZ�B�NPSF�QSPBDUJWF�SPMF��*U�TIPVME�DPOTJEFS�SFDPHOJ[JOH�WPDBUJPOBM�PS�TLJMM�USBJOJOH�JOTUJUVUFT�BT�QBSU�of the main stream.
Demand for construction professionals is growing in India
5IF�JOGSBTUSVDUVSF�DPOTUSVDUJPO�TFDUPS�IBT�POF�PG�UIF�MBSHFTU�XPSLGPSDF�SFRVJSFNFOUT �BOE�UIJT�SFRVJSFNFOU�PG�TLJMMFE�NBOQPXFS�JT�FYQFDUFE�UP�JODSFBTF�DPOTJEFSJOH�UIF�HSPXUI�QSPKFDUJPOT��"T�QFS�UIF�5XFMGUI�'JWF�:FBS�1MBO �UIF�TQFOEJOH�PO�UIF�JOGSBTUSVDUVSF�TFDUPS�JT�FYQFDUFE�UP�JODSFBTF�UP�64%���USJMMJPO�GSPN�64%�����NJMMJPO�JO�UIF�&MFWFOUI�'JWF�:FBS�1MBO �SFTVMUJOH�UP�an increase in demand for the construction professionals across
the project management cycle.
'VSUIFS �UIF�EFNBOE�GPS�VOTLJMMFE �TFNJ�TLJMMFE �TVQQPSU�TUBGG�BOE�QSPGFTTJPOBMT�GPS�DPOTUSVDUJPO�JOEVTUSZ�JT�FYQFDUFE�UP�JODSFBTF�BU�B�$"(3�����QFSDFOU�EVSJOH���������UP����NJMMJPO�QFPQMF2.
Building Capabilities – Paramount to "DIJFWF�0QFSBUJPOBM�&GěDJFODJFT
Requirement of human resources for construction industry (‘000’s)
Human resources 2010 2022 - Forecasted
&OHJOFFST 928 ����
5FDIOJDJBOT�BOE�GPSFNBO 647 ����
Clerical ��� ����
Skilled workers ���� �����
Unskilled workers ����� 56960
Total 35000 92000
Source:�"QQSPBDI�QBQFS�GPS���UI�ěWF�ZFBS�QMBO �1MBOOJOH�$PNNJTTJPO �,1.(�JO�*OEJB�"OBMZTJT
1 MoSPI, January 2012 Flash Report2 “An approach to the 12th Five year plan”, Planning Commission, October 2011, p123
8JUI�UIF�JODSFBTJOH�QSPKFDU�DPNQMFYJUZ�BOE�VTBHF�PG�BEWBODFE�UFDIOPMPHZ �UIF�EFNBOE�GPS�RVBMJěFE�QSPGFTTJPOBMT�GPS�QSPKFDU�NBOBHFNFOU�BOE�DPOTUSVDUJPO�JT�FYQFDUFE�UP�JODSFBTF�BU�B�GBTUFS�SBUF�JO�DPNQBSJTPO�UP�PWFSBMM�MBCPS�EFNBOE���#Z����� �DPOTUSVDUJPO�industry would require between 4.6 – 5.2 million professional which is around four
UJNFT�PG�FYJTUJOH�BWBJMBCMF�QSPGFTTJPOBMT�.
While the supply of project professionals is not able to keep pace with the demand
Many infrastructure projects in India are suffering due to the
EFBSUI�PG�DPNQFUFOU�BOE�FYQFSJFODFE�QSPKFDU�NBOBHFST�BOE�project professionals. One of the reasons for this is the lack
of focus on project management courses in India’s education
TZTUFN��*OEJB�IBT�WFSZ�GFX�VOJWFSTJUJFT�MFTT�UIBO����UIBU�PGGFS�degree/diploma courses on project management in comparison
to China which has more than 100 universities offering different
courses in project management4. Further there are very few
institutions that offer courses on Infrastructure management.
5IF�DVSSJDVMVN�DPWFSFE�JO�UIFTF�DPVSTFT�GPDVTFT�PO�JOEVTUSZ�LOPXMFEHF �SFHVMBUPSZ�BTQFDUT�FUD� �CVU�UIFTF�DPVSTFT�EPOijU�provide detailed knowledge about the international standards
BOE�MFBEJOH�QSBDUJDFT�PG�1SPKFDU�.BOBHFNFOU��5IFSF�JT�OFFE�UP�introduce project management as a subject in engineering and
management courses.
Another reason is the number of students that could enroll
for civil engineering courses has not increased much in
DPNQBSJTPO�UP�PUIFS�FOHJOFFSJOH�TUSFBNT��'PS�JOTUBODF �JO����� �DJWJM�FOHJOFFSJOH�QSPHSBNT�IBE�UIF�DBQBDJUZ�UP�FOSPMM��� ����TUVEFOUT �XIJMF�DPNQVUFS�TDJFODF�BOE�JOGPSNBUJPO�UFDIOPMPHZ�EFQBSUNFOUT�DPVME�BDDFQU�POMZ��� �����#Z����� �DPNQVUFS�science and other information technology programs reached to
��� �����DJWJM�FOHJOFFSJOH�DMJNCFE�UP�POMZ��� ���5.
Demand of skilled construction professionals by the end of 2022 (in ‘000’s)
Professionals 2010 - Estimated 2022 – Forecasted
Project managers 70 �������
Civil engineers 815 ���������
Planners 50 �������
Surveyors 50 �������
Quality control professionals 100 �������
)4&�QSPGFTTJPOBMT 50 �������
Total 1135 4585-5190
Source:�/4%$���#VJMEJOH �$POTUSVDUJPO�BOE�3FBM�&TUBUF�4FSWJDFT�4FDUPS�������,1.(�JO�*OEJB�"OBMZTJT
Study on Project Schedule and Cost Overruns | 56
3 KPMG in India Analysis factoring the investment projections and distribution of human resources in infrastructure sector4 “India lagging China in project management”, The Economic Times, 18 June 20105 “A High-Tech Titan Plagued by Potholes”, The New York Times, 25 August 2010
5BCMF�CFMPX�HJWFT�UIF�QSPKFDUFE�TVQQMZ�PG�DPOTUSVDUJPO�QSPGFTTJPOBM�
"MUIPVHI �UIF�BCTPMVUF�OVNCFS�PG�workers employed across all categories
IBT�JODSFBTFE �UIF�TUSFOHUI�PG�UIF�TLJMMFE�workforce has been consistently going
EPXO��5IF�CFMPX�DIBSU�JMMVTUSBUFT�UIF�HBQ�between demand and supply of skilled
professionals impacting the project
EFMJWFSZ��#Z����� �*OEJB�JT�FYQFDUFE�UP�IBWF�B�TIPSUGBMM�PG�BSPVOE���NJMMJPO�QSPGFTTJPOBMT�XIJDI�JT�BQQSPYJNBUFMZ����percent of the total demand7��5IJT�EFDMJOF�in skilled workers proportion brings out
the need for skill development of the
workers employed in the industry.
Supply of skilled construction professionals by the end of 2022 (in ‘000’s)6
Professionals 2022 - Forecasted supply
Project managers 120
Civil engineers 1400
Planners 90
Surveyors 85
Quality control professionals 170
)4&�1SPGFTTJPOBMT 85
Total 1950
Source:�"QQSPBDI�QBQFS�GPS���UI�ěWF�ZFBS�QMBO �1MBOOJOH�$PNNJTTJPO��,1.(�JO�*OEJB�"OBMZTJT
Shortage of Project Professionals in 2022
Source: NSDC - Building, Construction and Real Estate Services Sector (2022); KPMG in India Analysis
57 | Study on Project Schedule and Cost Overruns
6 KPMG in India Analysis assuming number of students passing out each year and percentage of students joining the infrastructure industry 7 KPMG in India Analysis assuming number of students passing out each year and percentage of students joining the infrastructure industry
Hence building project management capability and maturity is priority for most organizations in India
Shortage of talent in the construction
sector is a long term problem and will
continue to push up project costs and
SJTLT��5IF�FEVDBUJPO�BOE�USBJOJOH�DBQBDJUZ�offered through various schemes
currently are clearly inadequate to meet
the demand of the large percentage
of unskilled workers in the Indian labor
NBSLFU��5IF�FEVDBUJPO�TZTUFN�JT�PGUFO�not delivering the required number of
TQFDJBMJTUT�BDSPTT�QSPKFDU�NBOBHFNFOU �FOHJOFFSJOH �TVSWFZJOH �DPOUSBDU�management and the skilled/semi-skilled
MBCPS��5IF���TU�SPVOE�PG�UIF�/440�BMTP�SFDPOěSNFE�UIBU�BDDPSEJOH�UP�XIJDI�more than 90 percent of our population
receives no vocational training8. So the
JNNJOFOU�OFFE�JT�UP�FYQBOE�UIF�SFBDI�
PG�USBJOJOH�QSPWJEFST �TFU�VQ�NPEFMT�BOE�institutes with the capability to scale.
5IF�JOEVTUSZ�OFFET�B�HFOVJOF�DPMMBCPSBUJPO�CFUXFFO�QSPKFDU�PXOFST �DPOUSBDUPST �(PWFSONFOUT�BOE�USBJOJOH�providers to attract more school leavers
BOE�HSBEVBUFT �UP�KPJO�JOGSBTUSVDUVSF�industry. Companies should also seek
to stay in touch with changing employee
aspirations. By encouraging diversity in
JUT�FNQMPZNFOU�QSBDUJDFT �BOE�CZ�PGGFSJOH�HSFBUFS�ĜFYJCJMJUZ�JO�XPSLJOH�IPVST �UIF�sector can reach out to a wider potential
audience that perhaps would not
previously have considered such a career.
*OWFTUNFOU�JO�FYJTUJOH�FNQMPZFFT�JT�BMTP�DSVDJBM�JO�PSEFS�UP�PGGFS�CFUUFS�EFěOFE�DBSFFS�TUSVDUVSFT �XJUI�B�HSFBUFS�GPDVT�on training and higher salaries where
possible.
We surveyed respondents on measures
that could be adopted to build the project
management capabilities among the
employees. Majority of the respondents
agreed that the following strategies are
effective means to overcome resource
TIPSUBHF�BOE�TLJMM�TFU�EFěDJFODJFT�
Meaningful steps would have to be taken
to support both the infrastructure and
DPOTUSVDUJPO�JOEVTUSZ �GPS�BDIJFWJOH�UIF�EFTJSFE�HSPXUI�PG�FDPOPNZ��5IF�LFZ�step would be to correct the internal
JNCBMBODFT �JOIFSFOU�UP�UIF�TFDUPS �to make the Construction industry
competitive and enable it to match the
growth of other sectors of the economy.
5IF�OFFE�PG�UIF�IPVS�JT�UP�DSFBUF�B�IJTLJMMFE�ecosystem’ with partnerships between
JOEVTUSZ�QMBZFST �USBJOJOH�PSHBOJ[BUJPOT�BOE�UIF�(PWFSONFOU�UP�FOTVSF�NVUVBM�support and enhancement of collective
CFOFěUT�
Strategies to overcome skill shortage Survey response
Very Effective Effective
Develop in-house Project Academy / ‘Center of Project .BOBHFNFOU�&YDFMMFODFij�GPS�USBJOJOH�BOE�DFSUJGZJOH�QSPKFDU�NBOBHFST�BOE�PUIFS�LFZ�QFPQMF�JOWPMWFE�JO�FYFDVUJOH�QSPKFDUT
��� ���
Develop structured training programs and succession plans to build strong professionals ��� ���
Propagate Infrastructure and allied sector as a lucrative employment option
��� ���
*ODSFBTF�JOWFTUNFOUT�JO�FYJTUJOH�FNQMPZFFT�XJUI�HSFBUFS�GPDVT�PO�USBJOJOH �ĜFYJCJMJUZ�JO�XPSLJOH�IPVST �CFODINBSLJOH�BOE�JODSFBTJOH�compensation
��� ���
*ODSFBTF�DPPQFSBUJPO�XJUI�&EVDBUJPOBM�*OTUJUVUFT�UP�TFU�VQ�TQFDJBM�BDBEFNJDT �FODPVSBHF�JOUFSOTIJQT�BOE�PGGFS�TDIPMBSTIJQT ��� ���
Source:�,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �����
Study on Project Schedule and Cost Overruns | 58
8 Case for Setting up Sector Skill Councils in India”, CII, p7
08SE
CT
ION
59 | Study on Project Schedule and Cost Overruns
Recommendations – Next steps
Based on the survey responses along with our
research and experience of project management’s
MFBEJOH�QSBDUJDFT �XF�IBWF�JEFOUJěFE����recommendations for Government, policy
makers and project owners that could help in
debottlenecking infrastructure projects and
improve project delivery in the country.
Study on Project Schedule and Cost Overruns | 60
5P�FYQFEJUF�JOGSBTUSVDUVSF�QSPKFDUT �UIFSF�is a need to develop an effective ‘single
XJOEPX�DMFBSBODFij�NFDIBOJTN��5IF�mechanism facilitates and streamlines
interaction with different regulatory
authorities and provides a single point
of contact for all permits and approvals
necessary for infrastructure projects.
5IJT�XJMM�IFMQ�JO�QSPNPUJOH�JOGSBTUSVDUVSBM�EFWFMPQNFOU�CZ�BMMPXJOH�TJNQMJěDBUJPO�PG�QSPDFTTFT �EPDVNFOUBUJPO �TDSFFOJOH �and clearances and increasing
transparency in the approval system.
)PXFWFS �UP�NBLF�UIJT�TVDDFTTGVM �JU�JT�JNQFSBUJWF�UIBU�JOTUJUVUJPOBMJ[BUJPO�PDDVST�BU�BMM�MFWFMT�PG�HPWFSOBODF�$FOUSBM �4UBUF �BOE�MPDBM�(PWFSONFOU��'VSUIFS �UIF�ěOBM�policy framework should be universally
BDDFQUFE�CZ�UIF�DFOUSF�BOE�UIF�4UBUFT �and amongst various States. Some
MFWFM�PG�ĜFYJCJMJUZ�BOE�DVTUPNJ[BUJPO�JT�BDDFQUBCMF�PO�B�DBTF�CZ�DBTF�CBTJT �CVU�it is important that the core policy should
OPU�CF�BMUFSFE��"MTP �B�UJNFMJOF�TIPVME�CF�BTTJHOFE�GPS�HJWJOH�UIF�ěOBM�OPE�UP�UIF�project. Institution failing to meet these
timelines should attract penalties.
(PWFSONFOU�DPVME�GPMMPX�B�UISFF�TUFQ�BQQSPBDI�UP�JOTUJUVUJPOBMJ[F�UIJT�
y $SFBUF�B�DIFDLMJTU�GPS�EJWFSTJěFE�approvals with a step-by-step
guide along with a list of required
EPDVNFOUT��5IJT�DIFDLMJTU�XPVME�BMTP�JODMVEF�UIF�MJTU�PG�DPODFSOFE�PGěDFTij�addresses and contact details.
y Open single service windows that
DFOUSBMJ[F�BQQMJDBUJPOT�BOE�GPSXBSE�them to relevant authorities to
NJOJNJ[F�UIF�OVNCFS�PG�QIZTJDBM�WJTJUT�and save time.
y 5SBOTGPSN�TJOHMF�BDDFTT�TFSWJDF�window into one stop agency that
processes applications internally
and has the authority to take
informed decisions by comprising
representatives of various approval
agencies at a central level.
"DDPSEJOH�UP�UIF�8PSME�#BOL�TUVEZ �India ranks at number 182 among 185
economies on the ease of obtaining
DPOTUSVDUJPO�QFSNJUT��5IF�GPMMPXJOH�UBCMF�illustrates India’s status versus other
countries on various aspects related to
construction permits.
$VSSFOUMZ �JO�*OEJB�PO�BO�BWFSBHF �any construction project requires
BQQSPYJNBUFMZ����QFSNJUT �XIJDI�UBLFT�almost 196 days to conclude. With the
introduction of “single window clearance”
NFDIBOJTN �UIJT�UJNFGSBNF�JT�FYQFDUFE�UP�SFEVDF�DPOTJEFSBCMZ��5IJT�ZFBS �5BJXBO�implemented a single window for pre-
construction approvals and made changes
to the rules applicable to construction
JOTQFDUJPOT��5IF�DIBOHFT�FMJNJOBUFE����QSPDFEVSFT�BOE����EBZT�GSPN�UIF�QSPDFTT�of dealing with construction permits1.
*O�*OEJB �TFWFSBM�4UBUFT�IBWF�TVDDFTTGVMMZ�implemented single window clearance
for industrial development—model
that can be replicated for infrastructure
TFDUPS��'PS�FYBNQMF �(VKBSBU�QSPWJEFT�single window clearance facility to
FOUSFQSFOFVST �TP�UIBU�UIFZ�DBO�HFU�clearances from various authorities under
one roof to set up industrial units in the
4UBUF��5IF�(PWFSONFOU�PG�(VKBSBU�IBT�introduced single Window clearance in
UIF�4UBUF�UISPVHI�*OEVTUSJBM�&YUFOTJPO�#VSFBV�J/%&95C��B�TJOHMF�QPJOU�DPOUBDU�PSHBOJ[BUJPO�JO�(VKBSBU2. Investors
can submit proposals online and avail
BQQSPWBMT�VOEFS�TJOHMF�XJOEPX��5IF�(PWFSONFOU�IBT�BMTP�CFFO�JOWFTUJOH�in upgrading technology infrastructure
to consolidate and streamline various
processes and stages related to smooth
granting of approvals.
01 Set up a single window clearance mechanism to simplify the regulatory approval process
Indicators India Brazil China Indonesia Japan Mexico Best performer globally (Global Ranking)
Dealing with Construction Permits SBOL
182 ��� 181 75 72 �� )POH�,POH��
1SPDFEVSFT�OVNCFS �� 17 28 �� 14 10 )POH�,POH��
5JNF�EBZT 196 469 270 158 ��� 69 4JOHBQPSF���
Source:�%PJOH�#VTJOFTT����� �8PSME�#BOL �0DUPCFS�����
61 | Study on Project Schedule and Cost Overruns
1 Doing Business 2013, World Bank, October 20122 http://www.indextb.com/destination-gujarat/formalities.aspx
5IFSF�BSF�UXP�DSJUJDBM�SFRVJSFNFOUT�GPS�implementing an effective single window
DMFBSBODF�
ľ� Empowerment: A single window
clearance agency would be able
to promote investment and
allow smooth implementation of
infrastructure projects. It is important
UP�TFOTJUJ[F�WBSJPVT�(PWFSONFOU�departments towards effective
functioning of such an agency
that ushers positive growth in the
infrastructure sector by providing all
regulatory approvals in a time bound
manner. Different authorities often
feel that they will eventually lose
their say in the clearance process
BOE�ěOBMMZ�UIFJS�DPOUSPM �JG�TVDI�FNQPXFSFE �DFOUSBMJ[FE �GSPOU�FOE�department emerges. Such an agency
needs to be safeguarded by senior
(PWFSONFOU�PGěDJBMT�BOE�BO�FGGFDUJWF�(PWFSONFOU�TVQQPSU�UP�GVODUJPO�smoothly.
ľ� Investment in technology:�5IFSF�is need to allot appropriate budget
for setting up and effectively
running single window operations.
*OWFTUNFOUT�JO�UFDIOPMPHZ�BOE�*5�infrastructure to access various
SFRVFTUT�UISPVHI�B�DFOUSBMJ[FE�EBUBCBTF�BSF�FYUSFNFMZ�JNQPSUBOU��
.BOZ�MFHBDZ�*5�JOGSBTUSVDUVSFT�FJUIFS�FYJTU�JO�TJMPT�PS�MBDL�UIF�TDBMBCJMJUZ�that such a project may require—they
need to be assessed for upgrades or
replacement.
5IF�(PWFSONFOU�DBO�JOTJTU�PO�MJTUJOH�of the requisite documents and
process guide to allow easy access to
information and smooth processing
PG�UIF�JOGSBTUSVDUVSF�QSPQPTBMT��5IFO �the approvals can be obtained through
a single access point that collects
JOGPSNBUJPO �DPOEVDUT�TDSFFOJOH �BOE�DMFBST�QSPQPTBMT �UIVT�FYQFEJUJOH�UIF�infrastructure projects in the country.
5IF�.P41*�JT�NPOJUPSJOH�UIF�QFSGPSNBODF�of central sector projects in 16 sectors
DPTUJOH�NPSF�UIBO�*/3�����DSPSF��5IF�current mechanism of monitoring
projects is at a broad level and doesn’t
focus on project de-bottlenecking to
avoid cost and schedule overruns.
5IFSF�JT�B�OFFE�UP�TFU�VQ�VQ�B�UISFF�UJFS�QSPKFDU�NBOBHFNFOU�PGěDF�JO�UIF�DPVOUSZ��
5IJT�1.0�XPVME�NPOJUPS�BOE�QSPWJEF�oversights at national level. All projects
BCPWF�B�DFSUBJO�UISFTIPME�MJNJU�TBZ�PWFS�*/3�����DSPSF�PS�UIF�QSPKFDUT�PG�/BUJPOBM�importance would fall under this structure.
Below is the structure and functions of
UIJT�1.0�BU�FBDI�MFWFM�
02 4FUVQ�B�UISFF�UJFS�QSPKFDU�QSPHSBN�NBOBHFNFOU�PGěDF�1.0�TUSVDUVSF�JO�UIF�country to monitor and de-bottleneck infrastructure projects
Three-tier structure for PMO
PMO Functions
1.0�BU�UIF�$FOUSF�.P41*
1. 'PSNVMBUJPO�BOE�SFWJFX�PG�QPMJDZ �TUBOEBSET�BOE�HVJEFMJOFT�PO�QSPKFDU�NBOBHFNFOU�2. $FOUSBMJ[FE�NPOJUPSJOH�PG�QSPKFDUT�JO�DP�PSEJOBUJPO�XJUI�4UBUF�1.0T�BOE�JNQMFNFOUJOH�BHFODJFT����.FOUPSJOH�PG�$FOUSBM�(PWFSONFOU�BHFODJFT�GPS�JNQSPWJOH�QSPKFDU�NBOBHFNFOU�QSPDFTTFT�BOE�EFBMJOH�XJUI�
FYDFQUJPOT�4. Country strategy for competence development.
PMOs in each State
1. $PPSEJOBUJPO�XJUI�4UBUF�(PWFSONFOU�BOE�JNQMFNFOUJOH�BHFODJFT�UP�SFTPMWF�JTTVFT�2. Reporting to PMO at the centre on the current status of projects.
���%FěOJOH�QSPDFTTFT�BU�4UBUF�MFWFM�GPS�QSPKFDU�SFMBUFE�DMFBSBODFT�4. 1SPKFDU�BENJOJTUSBUJPO�TVQQPSU�JODMVEJOH�GBDJMJUBUJPO�PG�QSPKFDU�XFC�TJUF �QSPKFDU�NBOBHFNFOU �TPGUXBSF�TVQQPSU �
QFSJPEJD�SFWJFXT �FUD�5. .FOUPSJOH�PG�4UBUF�(PWFSONFOU�BHFODJFT�GPS�JNQSPWJOH�QSPKFDU�NBOBHFNFOU�QSPDFTTFT�BOE�EFBMJOH�XJUI�FYDFQUJPOT�
PMOs in implementing agencies
1. Monitoring and reporting to State PMO on the current status of projects.
2. &TDBMBUJOH�JTTVFT�CFZPOE�UIFJS�PXO�QVSWJFX�UP�4UBUF�1.0�GPS�TPMVUJPOT�BU�4UBUF�BOE�DFOUSBM�MFWFM����Building project management capability at the site.
4. Identifying trained manpower requirements and arranging for training and competence development.
Source:�İ"�GSBNFXPSL�GPS�&GGFDUJWF�"EPQUJPO�PG�1SPKFDU�.BOBHFNFOU�JO�*OEJBı �'*$$* �.BZ�����
Study on Project Schedule and Cost Overruns | 62
.PTU�PG�UIF�(PWFSONFOU�QSPKFDUT�BSF�awarded through competitive bidding.
6OEFS�UIJT�NFDIBOJTN �UIF�DPNQBOJFT�UIBU�TBUJTGZ�RVBMJGZJOH�DSJUFSJB �JO�UFSNT�PG�UFDIOJDBM�DBQBCJMJUJFT �NJOJNVN�ZFBST�PG�FYQFSJFODF�BOE�TPVOE�ěOBODJBM�capabilities are eligible to bid for the
projects. Once the qualifying criteria
BSF�NFU �UIF�EFDJTJPO�PG�BXBSEJOH�UIF�project solely depends on the bid cost/
QSJDF�UBSJGG��)PXFWFS �NBKPSJUZ�PG�PVS�survey respondents are of the view
that awarding contracts in this manner
may not be healthy in the long term
from the perspective of project quality
BOE�WJBCJMJUZ��5IF�DPOUSBDUPS �JO�PSEFS�UP�SFNBJO�B�TUFQ�BIFBE�PG�UIFJS�DPNQFUJUPST �may not necessarily include all the cost
FMFNFOUT�BOE�RVPUF�BSUJěDJBMMZ�MPX�QSJDF��5IVT �UIFSF�JT�B�MJLFMJIPPE�UIBU�UIF�-��NBZ�compromise on quality and timeline by
deploying resources so as to be within
the quoted price.
0OF�BMUFSOBUJWF�UP�UIF�FYJTUJOH�CJEEJOH�QSPDFTT�-��DPVME�CF�UIF�BWFSBHF�CJE�NFUIPE��6OEFS�UIJT�NFUIPE �UIF�DPOUSBDU�is awarded to the contractor whose
CJE�TBUJTěFT�B�DFSUBJO�SFMBUJPOTIJQ�XJUI�UIF�BWFSBHF�PG�BMM�CJE�QSJDFT��5IF�CBTJD�BEWBOUBHF�PG�UIF�BWFSBHF�CJE�NFUIPE �GSPN�BO�PXOFSijT�QFSTQFDUJWF �JT�UIBU�JU�safeguards against signing a construction
contract for an unrealistically low bid
price that would almost certainly lead to
EJTQVUFT�EVSJOH�QSPKFDU�FYFDVUJPO�
Another alternative could be allowing the
project owners to negotiate with other
TVJUBCMF�CJEEFST�TBZ�-��BOE�-��BMPOH�XJUI�-��CJEEFS��5IJT�QSPDFTT�TIPVME�be conducted in a transparent manner
through reverse auctions. Under reserve
BVDUJPO �UIF�TVQQMJFST�CJE�POMJOF�BOE�BSF�BCMF�UP�TFF�UIF�DPNQFUJUPSijT�CJET �without knowing the identity of the
CJEEFS��5IJT�NFBOT�UIBU�TVQQMJFST�XJMM�instantly have an understanding of where
they stand in relation to other bidders.
3FWFSTF�BVDUJPOT�DPVME�PGGFS�(PWFSONFOU�TJHOJěDBOU�DPTU�TBWJOH�CFOFěUT �SFTVMU�JO�MPXFS�DZDMF�UJNFT �JODSFBTF�DPNQMJBODF �FOIBODF�USBOTQBSFODZ �JODSFBTF�DPMMBCPSBUJPO �CPPTU�TVQQMJFS�QBSUJDJQBUJPO �and provide feedback for participants.
*O�*OEJB �EJTQVUF�SFTPMVUJPO�UISPVHI�KVEJDJBSZ�JT�HFOFSBMMZ�B�UFEJPVT �MFOHUIZ�process and may take several years
UP�SFTPMWF��&WFO�UIPVHI �HMPCBMMZ �arbitration is a preferred mechanism
PG�EJTQVUF�SFTPMVUJPO��JO�*OEJB �UIF�arbitration mechanism is still evolving.
5IF�"SCJUSBUJPO�BOE�$PODJMJBUJPO�"DU �1996 was enacted to achieve the
UXJO�HPBMT�PG�JO�FYQFOTJWF�BOE�RVJDL�SFTPMVUJPO�PG�EJTQVUFT �CVU�UIF�HSPVOE�reality is far away from the target. One
of the underlying causes is that neither
the public nor the private sector in
India is enthusiastic about the idea of
"SCJUSBUJPO��5IJT�JT�NBJOMZ�EVF�UP�UIF�GBDU�that Arbitration awards are invariably
challenged in the court on account of
BNCJHVJUZ�BOE�MBDL�PG�FOGPSDFBCJMJUZ �BOE�UIFSF�JT�OP�ěYFE�UJNFMJOF�GPS�DPNQMFUJPO�of proceedings.�
A few initiatives that could improve the
EJTQVUF�SFTPMVUJPO�QSPDFTT�JO�*OEJB�
Strengthen existing arbitration laws:
5IFSF�JT�UIF�OFFE�UP�NPEJGZ�UIF�QSFTFOU�arbitration mechanism in a way that
makes it more effective and enforceable.
'VSUIFSNPSF �JOTUFBE�PG�IBWJOH�NVMUJQMF�BVUIPSJUJFT �POF�ěOBM�BQQFMMBUF�BVUIPSJUZ�such as an ‘Infrastructure Projects
5SJCVOBMij�OFFET�UP�CF�TFUĸVQ�GPS�settlement of these disputes.
Encourage institutional arbitration:
5IF�TFUUMFNFOU�PG�EJTQVUFT�UISPVHI�JOTUJUVUJPOBM�BSCJUSBUJPO �TVDI�BT�UIF�Construction Industry Arbitration Council
$*"$ �JT�CFUUFS�UIBO�BE�IPD�BSCJUSBUJPO��Institutional arbitration provides an
FTUBCMJTIFE�GPSNBU�XJUI�B�QSPWFO�SFDPSE �ensures impartial decision-making and
adherence to pre-established rules and
procedures.
Create Dispute Resolution Board (DRB)
to avoid disputes: DRBs are created
CZ�UIF�FYQSFTT�DPOTFOU�PG�UIF�FNQMPZFS�and the contractor to monitor the project
FYFDVUJPO�BU�WBSJPVT�TUBHFT�PG�DPNQMFUJPO��5IF�QSJNBSZ�GVODUJPO�PG�%3#T�JT�UP�monitor the progress of the project with
respect to contract requirements. In
case of any non compliance with respect
UP�UIF�DPOUSBDU �UIF�#PBSE�JNNFEJBUFMZ�interferes and suggests ways to resolve
the dispute.
However one of the ways to deal with
disputes is to avoid disputes. Many
disputes in the infrastructure sector could
be avoided if contract agreements are
NFUJDVMPVTMZ�ESBGUFE �UBLJOH�BMM�QSPCBCMF�costs and risks into consideration.
'VSUIFS �DMFBSMZ�EFěOJOH�UIF�SPMFT�BOE�responsibilities of all parties could help in
avoiding unnecessary misunderstandings.
03
04
Modify bidding criteria procedures
%FWFMPQ�SPCVTU�QSPDFTT�GPS�GBTU�BOE�FGěDJFOU�EJTQVUF�SFTPMVUJPO
63 | Study on Project Schedule and Cost Overruns
3 Arbitration and Conciliation Act 1996, Vakilno1 website, http://www.vakilno1.com/ bareacts/arbitandonciliation/ArbitrationandConciliationAct-1996.htm, accessed 15 December 2012
5IF�TVSWFZ�SFTVMUT�JOEJDBUF�UIBU�lack of project management skills in
professionals working on infrastructure
QSPKFDUT�JT�JNQBDUJOH�FGěDJFOU�QSPKFDU�delivery. Indian project managers have
acquired project management skills
QSJNBSJMZ�UISPVHI�QBTU�FYQFSJFODFT�BOE�QSPKFDU�FYQPTVSFT��"MUIPVHI �B�SJDI�JOEVTUSZ�FYQFSJFODF�IFMQT�JO�HBJOJOH�PWFSTJHIU �JO�UPEBZijT�SBQJEMZ�DIBOHJOH�XPSME�BOE�FWPMWJOH�UFDIOPMPHZ �UIFSF�JT�need to impart formal training to project
managers and regularly update their skills.
5SBJOJOH�XJMM�OPU�POMZ�IFMQ�NBOBHFST�JO�their day to day work but also equip them
to handle new challenges in the most
FGěDJFOU�XBZ��*O�PVS�QPJOU�PG�WJFX �UIJT�DPVME�CF�BDIJFWFE�JO�UISFF�XBZT�
Change curriculum to introduce
project management:�&EVDBUJPOBM�institutes in India are not giving much
importance to the project management
curriculum and in comparison to other
countries very few institutions in India
offer project management degree
QSPHSBNT��'PS�JOTUBODF �NPSF�UIBO�����JOTUJUVUFT�JO�$IJOB�PGGFS�DPVSTFT�TQFDJěD�UP�QSPKFDU�NBOBHFNFOU �XIFSFBT�UIJT�number is less than 104�JO�*OEJB��5IVT �
it is important to introduce project
management in the curriculum of
FOHJOFFSJOH �NBOBHFNFOU�BOE�PUIFS�UFDIOJDBM�JOTUJUVUFT��(PWFSONFOU�DBO�IFMQ�JO�FYQFEJUJOH�UIF�QSPDFTT�CZ�QVTIJOH�the project management courses in the
(PWFSONFOU�JOTUJUVUFT�PG�OBUJPOBM�SFQVUF��0ODF�UIFTF�JOTUJUVUFT�NBLF�UIF�DIBOHF �PUIFST�BDSPTT�UIF�DPVOUSZ�BSF�FYQFDUFE�UP�follow.
Cooperation between industry and
educational institutions:�5IFSF�JT�B�need for greater degree of collaboration
between the industry and educational
institutions so as to reduce the
demand supply gap for trained project
management professionals. Industry
can help educational institutions
UISPVHI�DBQJUBM �QBSUJDJQBUF�JO�DVSSJDVMVN�EFWFMPQNFOU �QSPWJEF�GBDVMUZ�GPS�JOEVTUSZ�JOUFSGBDF �BOE�IFMQ�JO�JOUFSOTIJQ�BOE�QMBDFNFOUT��0O�UIF�PUIFS�IBOE �educational institutes would not only
IFMQ�JO�ěMMJOH�UIF�JODSFNFOUBM�EFNBOE�for project management professionals
but can also help in enhancing the
QSPKFDU�NBOBHFNFOU�TLJMMT�PG�UIF�FYJTUJOH�XPSLGPSDF �CZ�DPOEVDUJOH�PO�UIF�KPC�training.
Build in house academy for the project
management training: Infrastructure
JOEVTUSZ�DPVME�BEPQU�UIF�NPEFM�PG�*5�companies to meet the shortage of
TLJMMFE�QSPGFTTJPOBMT��.BOZ�*5�DPNQBOJFT�have developed in-house academy for
training their employees on key skills
needed for their day to day work. Indian
infrastructure industry can look to
SFQMJDBUF�B�TJNJMBS�NPEFM �XIFSF�JO�IPVTF�training can be conducted for newly
SFDSVJUFE�BOE�FYJTUJOH�FNQMPZFFT�UP�enhance their professional competencies.
05 Institutionalize project management training for professionals
Study on Project Schedule and Cost Overruns | 64
4 “India lagging China in project management”, The Economic Times, 18 June 2010
5IPVHI�UIF�MBCPS�QSPEVDUJWJUZ�BOE�FEVDBUJPO�MFWFMT�BSF�SJTJOH �*OEJB�TUJMM�needs to improve the education and
USBJOJOH�RVBMJUZ �FTQFDJBMMZ�GPS�UIF�infrastructure sector. According to
8PSME�#BOL �UIF�WPDBUJPOBM�FEVDBUJPO�TUSFBN�JO�*OEJB�JT�RVJUF�TNBMM �FOSPMMJOH�MFTT�UIBO���QFSDFOU�PG�TUVEFOUT�BU�UIF�upper secondary level5��"MTP �7PDBUJPOBM�&EVDBUJPO�BOE�5SBJOJOH�7&5�TZTUFN�JT�not responding to the needs of the labor
NBSLFU �BT�MFTT�UIBO����QFSDFOU�PG�JUT�HSBEVBUFT�ěOE�FNQMPZNFOU6.
5P�DSFBUF�B�MBSHF�QPPM�PG�SFBEJMZ�FNQMPZBCMF�MBCPS�GPSDF �CPUI�(PWFSONFOU�and industry need to come together and
develop a mechanism to impart training
and develop skills.
Setting up of National Skill Development
$PSQPSBUJPO�/4%$ �B�1VCMJD�1SJWBUF�1BSUOFSTIJQ�111�OPO�QSPěU�PSHBOJ[BUJPO�to facilitate skill development in the
country is a step in right direction. NSDC
targets to enhance skills of 150 million
people by 20227��"MPOH�XJUI�UIJT �UIF�following two initiatives could help in
TPMWJOH�UIF�MBCPS�TDBSDJUZ�JO�UIF�DPVOUSZ�
Creating a National Board for
vocational education –�5IFSF�JT�B�OFFE�UP�EFWFMPQ�BO�PSHBOJ[BUJPO�UIBU�GPDVTFT�PO�WPDBUJPOBM�FEVDBUJPO��5IJT�PSHBOJ[BUJPO�should have the representation from
JOEVTUSZ �NJOJTUSZ �FEVDBUJPO�JOTUJUVUJPOT�BOE�/(0T�BOE�GPDVTFT�PO�
y developing a broad-based curriculum
for vocational education based on
TFDUPS�TQFDJěD�SFRVJSFNFOUT
y BXBSEJOH�EFHSFFT �EJQMPNBT�BOE�DFSUJěDBUFT�UP�TVDDFTTGVM�DBOEJEBUFT
y ensuring a close interaction between
industries and vocational institutes
y DSFBUJOH�B�MBSHF�QPPM�PG�RVBMJěFE�BOE�FGěDJFOU�GBDVMUZ�GPS�WPDBUJPOBM�DPVSTFT�
Developing skills of local people by
corporates –�'PS�FYBNQMF �XIJMF�UIF�land acquisition and regulatory approvals
QSPDFTTFT�BSF�JO�QSPHSFTT �DPNQBOJFT�could start imparting training to the local
people. So when the construction of
UIF�QSPKFDU�TUBSUT �UIFSF�JT�MBSHF�QPPM�of skilled people available locally. State
(PWFSONFOUT�DPVME�GBDJMJUBUF�UIJT�QSPDFTT�JO�UXP�XBZT��'JSTU �CZ�DSFBUJOH�BXBSFOFTT�among the local people about the
JNQPSUBODF�PG�CFJOH�TLJMMFE�BOE�TFDPOE �CZ�BMMPXJOH�DPNQBOJFT�UP�VTF�FYJTUJOH�JOGSBTUSVDUVSF�TVDI�BT�TDIPPM�QSFNJTFT�BGUFS�OPSNBM�TDIPPM�XPSLJOH�IPVST�UP�DPOEVDU�DMBTTFT�XPSLTIPQT��5IJT�BQQSPBDI�IBT�UIF�GPMMPXJOH�CFOFěUT�
y Creates large pool of locally available
skilled and employable people
y Less resistance from local people
GPS�MBOE�BDRVJTJUJPO �BT�UIFZ�XJMM�HFU�employment from this project
y 1SPWJEFT�BDDFTT�UP�MBCPS�GPSDF�CBTFE�PO�UIFJS�QFSGPSNBODF�XIJDI�DPVME�CF�developed further for plant operations.
06 Reform India’s Vocational Education and Training program to create a large pool of employable work force
65 | Study on Project Schedule and Cost Overruns
5 World Bank report on vocational education and training system in India6 World Bank report on vocational education and training system in India7 National Skill Development Mission, Press Information Bureau, 16 August 2010
07 %FWFMPQ�FGěDJFOU�USBOTQPSU�BOE�MPHJTUJDT�TZTUFN�JO�UIF�DPVOUSZ�UP� enable faster project implementation
5SBOTQPSU�JOGSBTUSVDUVSF�JO�UIF�DPVOUSZ �UIPVHI�JNQSPWJOH �JT�OPU�BCMF�UP�LFFQ�UIF�pace with increasing logistics demand.
5P�TVTUBJO�UIF�(%1�HSPXUI�SBUF�PG�����QFSDFOU�PWFS�UIF�OFYU�EFDBEF �UIFSF�is need to reform the India’s transport
and logistics sector. Our survey results
indicate that many projects suffer from
DPTU�BOE�TDIFEVMF�PWFSSVOT �EVF�UP�lack of good transport infrastructure
in the country. As mentioned by our
TVSWFZ�SFTQPOEFOUT �QPPS�IFBMUI�PG�SPBET �JOFGěDJFODZ�UP�DBSSZ�IFBWZ�MPBE �non availability of last mile connectivity
to project sites and high cost of
transportation are some of the factors
DSFBUJOH�IJOESBODFT�JO�TNPPUI�FYFDVUJPO�of the project.
Following steps could help in improving
the transport infrastructure in the
DPVOUSZ�
Expedite the construction of Dedicated
Freight Corridors (DFC) and create
new DFCs:��5IF�(PWFSONFOU�IBT�QMBOT�to increase the railways’ transportation
capacity by building high-speed and
high-capacity dedicated freight corridors.
5IFTF�DPSSJEPST�XPVME�GBDJMJUBUF�UIF�GBTUFS�NPWFNFOU�PG�GSFJHIU �FYQFDUFE�UP�reduce travel time by a third8 �FOBCMJOH�
B�TVCTUBOUJBMMZ�IJHIFS�MFWFM�PG�USBGěD�BOE�reduce transportation cost. Under phase
� �UIF�XPSL�PO�UXP�DPSSJEPST���8FTUFSO�%'$�BOE�&BTUFSO�%'$��TQBOOJOH�B�UPUBM�MFOHUI�PG�BCPVU������SPVUF�LN�JT�VOEFSXBZ���5IF�8FTUFSO�$PSSJEPS�XJMM�traverse the distance from Dadri to
.VNCBJ �QBTTJOH�UISPVHI�UIF�4UBUFT�PG�%FMIJ �)BSZBOB �3BKBTUIBO �(VKBSBU�BOE�.BIBSBTIUSB��XIJMF�UIF�&BTUFSO�$PSSJEPS�will start from Ludhiana in Punjab and
QBTT�UISPVHI�UIF�4UBUFT�PG�)BSZBOB �6UUBS�Pradesh and Bihar before terminating at
Dankuni in West Bengal9.
5P�QSPNPUF�JOWFTUNFOU�BOE�DBQJUBMJ[F�UIF�railway connectivity along the western
DPSSJEPS �(PWFSONFOU�JT�TFUUJOH�VQ�%FMIJ�.VNCBJ�*OEVTUSJBM�$PSSJEPS�%.*$ �a mega investment project of USD 90
CJMMJPO��6OEFS�UIJT�QSPKFDU �(PWFSONFOU�envisages to develop 9 Investment
3FHJPOT�XJUI�BSFB�TQSFBE�PG�BU�MFBTU�����TR��LN�BOE����*OEVTUSJBM�"SFBT�XJUI�BSFB�TQSFBE�PG�BU�MFBTU�����TR��LN��'PS�UIF�ěSTU�QIBTF ���JOWFTUNFOU�SFHJPOT�BOE���JOEVTUSJBM�BSFBT�BSF�TIPSUMJTUFE��5IFTF�regions are across the States of Uttar
1SBEFTI �)BSZBOB �3BKBTUIBO �(VKBSBU�BOE�Maharashtra10.
5IPVHI�UIFTF�JOJUJBUJWFT�BSF�JO�UIF�SJHIU�EJSFDUJPO �UIF�DVSSFOU�QSPHSFTT�PO�UIFTF�mega projects is way behind targets.
(PWFSONFOU�OFFE�UP�QSJPSJUJ[F�UIFTF�projects and take all possible steps to
remove bottlenecks for timely completion
PG�QSPKFDUT��'VSUIFS �(PWFSONFOU�DPVME�start planning for at least two additional
DFCs – Delhi-Chennai and Chennai-
Mumbai.
Increase national highway networks
and improve road maintenance
program:�*O�*OEJB �SPBET�BSF�UIF�QSJNBSZ�NPEF�PG�USBOTQPSU��5IFZ�DBSSZ�BSPVOE����percent of India’s total freight . For many
large infrastructure projects particularly
TJUVBUFE�JO�UIF�IJOUFSMBOE �SPBET�BSF�UIF�only transport mode for equipment and
construction material.11
5IFSF�JT�BO�VSHFOU�OFFE�UP�GPDVT�PO�VQHSBEJOH�BOE�CSPBEFOJOH�PG�FYJTUJOH�national highways and adding new
SPBET�VOEFS�IJHIXBZ�DBUFHPSZ��'VSUIFS �(PWFSONFOU�TIPVME�GPDVT�PO�DSFBUJOH�a systematic road maintenance plan
UP�JNQSPWF�SPBET�FGěDJFODZ �JODSFBTF�average speed and reduce transportation
cost.
Study on Project Schedule and Cost Overruns | 66
8 Freight corridor back on track, Times of India, dated November 16, 20119 Dedicated Freight Corridor Corporation of India (www.dfccil.org)10 Delhi Mumbai Industrial Corridor (www.dmic.co.in)11 India Transport Sector, World Bank
.BOZ�4UBUF�(PWFSONFOUT�BOE�departments maintain different
empanelled list of vendors for their
respective projects and services. For
JOGSBTUSVDUVSF�QSPKFDUT �XIFSF�NPTU�PG�UIF�RVBMJGZJOH�DSJUFSJB�BSF�TBNF �JU�XPVME�CF�BQQSPQSJBUF�UP�DSFBUF�BO�FYIBVTUJWF�list of empanelled vendors at central
(PWFSONFOU�MFWFM��5IJT�MJTU�XPVME�IBWF�information about the vendor credentials
TVDI�BT�UPUBM�ZFBS�PG�FYQFSJFODF �UZQF�BOE�WBMVF�PG�QSPKFDUT�FYFDVUFE �ěOBODJBM�DBQBCJMJUJFT �QBTU�QFSGPSNBODF�FUD��"EEJUJPOBMMZ �UIFSF�JT�OFFE�UP�JOUSPEVDF�the knowledge of project management
EJTDJQMJOF �BT�POF�PG�UIF�DSFEFOUJBMT�UP�ensure that vendor has the complete
knowledge of project management
UFDIOJRVFT�BOE�CFTU�QSBDUJDFT �5IF�information provided by the vendors
TIPVME�UIFO�CF�WFSJěFE�CZ�B�DFOUSBM�FOUJUZ�CFGPSF�SFHJTUFSJOH�UIFN�JO�UIF�MJTU���"MTP �there should be a provision of updating
UIJT�MJTU�QFSJPEJDBMMZ�TBZ�RVBSUFSMZ�PS�TFNJ�BOOVBMMZ�UP�JODMVEF�OFX�WFOEPST�BOE�removing the non-performing ones.
5IFSF�BSF�TFWFSBM�BEWBOUBHFT�PG�IBWJOH�BO�FNQBOFMMFE�MJTU�PG�WFOEPST�
y Create a large pool of registered
vendors to choose from across the
country
y Reduce time in awarding the
contracts as awarding a contract to
the empanelled list vendor doesn’t
require background check as the
vendor’s credentials are already
WFSJěFE�CZ�UIF�DFOUSBM�BHFODZ��5IJT�could save an average of 2-4 months
in awarding the contract
y Reduce possibility of forming
cartel by vendors as large number
of vendors would be available for a
particular work
y Pressurize vendors to excel in
projects as poor performance on a
single project could cost them the
delisting from the central empanelled
list.
5SBEJUJPOBMMZ �QSPKFDUT�GPS�EFWFMPQNFOU�PG�3PBET �"JSQPSUT �3BJMXBZT�BOE�Ports have been funded by State and
$FOUSBM�(PWFSONFOUT��)PXFWFS �EVF�UP�CVEHFUBSZ�DPOTUSBJOUT �UIF�(PWFSONFOUT�is looking at increased participation
from the private sector for transport
JOGSBTUSVDUVSF�QSPKFDUT��"MUIPVHI �UIF�1VCMJD�1SJWBUF�1BSUOFSTIJQ�111�NPEFM�IBT�FWPMWFE�JO�SFDFOU�UJNFT �QSJWBUF�investment has fallen short of the
UBSHFUT��'PS�JOTUBODF �BT�QFS�UIF�NJE�UFSN�BQQSBJTBM�PG�&MFWFOUI�'JWF�:FBS�1MBO �JO�road segment private sector invested
BSPVOE�*/3��� ����DSPSF�GSPN�"QSJM������UP�"VHVTU����� �XIJDI�XBT�XFMM�CFMPX�UIF�QMBOOFE��UBSHFU�PG�*/3��� ����DSPSF���Private road developers depend largely
on highway toll collections as a medium
UP�SFDPWFS�UIFJS�JOWFTUNFOUT��)PXFWFS �
toll collections in India are fraught with
challenges such as revenue leakages
which are proving to be a major deterrent
for private investment in roads.12
Following steps could help in promoting
PPP investment in the infrastructure
QSPKFDUT��
Create a detailed policy for
implementing PPP projects: 5IFSF�is need to create a detailed PPP policy
DMFBSMZ�EFěOJOH�UIF�TFDUPST�PQFO�UP�111T �the preferred scheme for each sector and
UIF�TVQQPSU�BWBJMBCMF�GSPN�(PWFSONFOU�BHFODJFT��'VSUIFS �UIJT�QPMJDZ�TIPVME�aim to bring more transparency in the
CJEEJOH�BOE�BXBSEJOH�QSPDFTTFT �XIJDI�XPVME�CPPTU�DPOěEFODF�BOE�JODSFBTF�participation of private investors in the
infrastructure sector.
Ensure adequate returns to private
players:�5BSJGGT�GPS�NPTU�PG�UIF�infrastructure projects are regulated and
QSJWBUF�QMBZFST�BSF�OPU�BMMPXFE�UP�ěY�PS�BEKVTU�UIFN��5P�IFMQ�FOTVSF�BEFRVBUF�returns to private players on their invested
DBQJUBM �UIFSF�JT�OFFE�UP�EF�SFHVMBUF�UBSJGGT�GPS�TQFDJěD�JOGSBTUSVDUVSF�TFDUPST�XJUI�necessary safeguards.
Develop long term debt market for
infrastructure projects: PPP design
and policy should provide adequate
QSPUFDUJPO�UP�EFCU�GVOEJOH �TP�UIBU�NPSF�BOE�NPSF�ěOBODJBM�JOTUJUVUJPO�XJMMJOH�to lend their money to PPP projects.
'VSUIFS �JNQSPWJOH�UIF�IFBMUI�PG�DPVOUSZijT�long–term bond market and promotion of
infrastructure bonds could result in better
participation from foreign investors.
08
09
Create an exhaustive list of empanelled vendor at Central level for infrastructure projects
Promote Public Private Partnership (PPP) in Infrastructure sector
67 | Study on Project Schedule and Cost Overruns
12 Mid-term appraisal of Eleventh Five Year Plan, Planning Commission
10 Promote joint evaluation of project design for value engineering
5IF�QSPKFDU�NBOBHFNFOU�UFBNT�lack value engineering approach
leaving minimal opportunities for
UIF�DPOUSBDUPST�UP�VUJMJ[F�BOZ�WBMVF�FOHJOFFSJOH�PQQPSUVOJUZ��.PSFPWFS �NPTU�contractors and companies lack adequate
PSHBOJ[BUJPOBM�TFU�VQ�UP�UBLF�BEWBOUBHF�PG�WBMVF�FOHJOFFSJOH�DPODFQUT��"MTP �UIF�FYJTUJOH�TZTUFN�PG�JUFN�SBUF�DPOUSBDUT�does not motivate the contractors
enough to employ value engineering
approach as they do not get any incentive
for the savings.
1SPKFDU�PXOFST �XIP�DPOUSPM�NPTU�PG�UIF�engineering decisions in projects based
PO�JUFN�SBUF�DPOUSBDUT �TIPVME�MPPL�UP�engage the contractors for joint evaluation
of project design. Contractors need to
set-up dedicated value engineering teams
DPNQSJTJOH�PG�FYQFSUT�XJUI�TJHOJěDBOU�FYQFSJFODF�JO�EFTJHO �FOHJOFFSJOH�BOE�QSPDVSFNFOU��5IF�QSPKFDU�PXOFST�BOE�the contractors should also attempt
to collaborate with global engineering
institutes and companies so as to employ
UIF�MBUFTU�EFTJHOJOH�FYQFSUJTF�JO�UIF�project.
Project owners and contractors should
DMFBSMZ�EFěOF�UIF�QFSGPSNBODF�JOEJDBUPST�GPS�NFBTVSJOH�UIF�FGěDJFODZ�PG�UIF�WBMVF�FOHJOFFSJOH�UFBN��*U�DPVME�CF �GPS�JOTUBODF �UIF�NFBTVSF�PG�UIF�QFSDFOUBHF�cost saving at the various stages of
project implementation. Based on the
performance of the value engineering
UFBN �UIFZ�TIPVME�CF�PGGFSFE�B�TIBSF�in the estimated cost saving or other
incentives to drive them for greater
adoption of value engineering concepts.
Study on Project Schedule and Cost Overruns | 68
09SE
CT
ION
69 | Study on Project Schedule and Cost Overruns
Case studies – A deep dive into projects
5P�VOEFSTUBOE�UIF�QSPKFDU�TQFDJěD�DIBMMFOHFT�exhaustively, we visited few project sites,
interviewed several people across levels
including project managers, contractors and
vendors, etc. To provide a holistic overview of
infrastructure industry, these projects have been
selected from different sectors, at different stage
of implementation and experiencing different
magnitude of schedule and cost overruns.
Study on Project Schedule and Cost Overruns | 70
y /51$ijT�MBSHFTU�UIFSNBM�QPXFS�TUBUJPO
y "OUJDJQBUFE�QSPKFDU�DPTU�JT�XJUIJO�UIF�CVEHFU�BOE�BQQSPYJNBUFMZ�UXP�NPOUIT�EFMBZ�JT�FYQFDUFE�JO�UIF�QSPKFDU�EFMJWFSZ
y 5IF�QSPKFDU�IBT�B�EFEJDBUFE�NPOJUPSJOH�BOE�SFQPSUJOH�UFBN�BU�TJUF��FOTVSJOH�immediate corrective actions in case of any slippages
y Delayed delivery of critical equipments and poor site connectivity are major reasons for project delay
y %BJMZ�NPOJUPSJOH�PG�DSJUJDBM�QBUI�QSPHSFTT �EJSFDU�QBZNFOU�UP�TVC�DPOUSBDUPST�BOE�increase use of railways for equipment transport are some techniques used by /51$�UP�EF�CPUUMFOFDL�UIF�QSPKFDU�
Introduction
7JOEIZBDIBM�QPXFS�QSPKFDU�JT�UIF�MBSHFTU�UIFSNBM�QPXFS�TUBUJPO�PG�/51$2 and is located
JO�4JEIJ�EJTUSJDU �.BEIZB�1SBEFTI��5IF�QMBOU�IBT�BO�FYJTUJOH�DBQBDJUZ�PG�� ����.8�UIFSNBM�XJUI���Y�����.8�BOE���Y�����.8�VOJUT��5IF�DPBM�JT�TPVSDFE�GSPN�OFBSCZ�/$-�NJOFT�BOE�USBOTQPSUFE�UISPVHI�.FSSZ�(P�3PVOE�.(3�USBOTQPSUBUJPO�TZTUFN����LNT�MFOHUI�XJUI�EPVCMF�USBDL�PXOFE�BOE�PQFSBUFE�CZ�/51$��/51$�JT�DVSSFOUMZ�FYFDVUJOH�B�CSPXO�ěFME�FYQBOTJPO�QSPKFDU�BU�7JOEIZBDIBM�QMBOU�XJUI�BEEJUJPO�PG���Y�����.8�UIFSNBM�QPXFS�QMBOUT��5IF�CPJMFS�UVSCJOF�HFOFSBUPS�#5(�DPOUSBDU�JT�HJWFO�UP�#)&-�XIJMF�#01�JT�CFJOH�FYFDVUFE�CZ�WBSJPVT�DPOUSBDUPST�JO�TQMJU�QBDLBHF�NPEF��
Current project status
Originally planned Anticipated/ Revised Overrun
Project completion date
October-2012 December-2012 2 Months
Project cost (INR Crore)
� ��� � ��� NIL
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
Following are the key details of project
Capacity under installation ��Y�����.8
Location 4JEIJ �.BEIZB�1SBEFTI
Coal source NCL mines
Water source%JTDIBSHF�DBOBM�PG�4JOHSBVMJ�4VQFS�5IFSNBM�1PXFS�Station
Investment approval ���+BOVBSZ�����
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �����
CASE STUDY 1 NTPC Vindhyachal Stage IV1
FACTS
71 | Study on Project Schedule and Cost Overruns
1 KPMG in India- PMI Survey on cost and schedule overrun, 20122 Coal Based Power Stations, NTPC Website, accessed 26 June 2012
5IF�QSPKFDU�FYFDVUJPO�BU�TJUF�JT�JO�GVMM�TXJOH��5IF�DPOUSBDUPST�IBWF�CFFO�NPCJMJ[FE�JO�GVMM�TUSFOHUI�BOE�NBUFSJBM�EFMJWFSZ�JT�BMTP�PO�HPJOH��5IF�QSPKFDU�JT�JO�JUT�MBTU�MFH�PG�FYFDVUJPO�where the systems are nearing completion.
5IF�QIZTJDBM�QSPHSFTT�PG�UIF�QSPKFDU�JT�MJUUMF�CFIJOE�JUT�PSJHJOBM�TDIFEVMF�BOE�JT�FYQFDUFE�UP�CF�EFMBZFE�CZ�BSPVOE�UXP�NPOUIT��)PXFWFS �HJWFO�UIF�DPNQMFYJUZ�BOE�TJ[F�PG�UIF�QSPKFDU �BOE�JG�XF�DPNQBSF�UIJT�QSPKFDU�XJUI�PUIFS�JOGSBTUSVDUVSF�QSPKFDUT�PG�TBNF�TDBMF�BDSPTT�TFDUPST �7JOEIZBDIBM�FYQBOTJPO�XPVME�CF�POF�PG�UIF�CFTU�NBOBHFE�QSPKFDUT��#FMPX�BSF�UIF�LFZ�NJMFTUPOFT�XJUI�UIFJS�PSJHJOBM�SFWJTFE�DPNQMFUJPO�EBUF�
5IF�BCPWF�FTUJNBUFE�EBUFT�BSF�QSPWJEFE�CZ�UIF�1�4�UFBN��8IJMF�UIF�QSPKFDU�UFBN�JT�PQUJNJTUJD�PG�BDIJFWJOH�TZODISPOJ[BUJPO�BT�QFS�TDIFEVMFE�EBUF �CBTFE�PO�UIF�QSPKFDU�TUBUVT�BU�UIF�UJNF�PG�TJUF�WJTJU�JO�%FDFNCFS����� �UIF�UBSHFU�BQQFBST�EJGěDVMU�UP�BDIJFWF��0O�'JOBODJBM�GSPOU �BDDPSEJOH�UP�1�4�)FBE �UIF�QSPKFDU�JT�XJUIJO�CVEHFU�BOE�OP�DPTU�PWFSSVOT�BSF�FYQFDUFE�
Sr. No.
Milestone
Unit 1 Unit 2
Plan (as per L2 schedule)
Original/Revised
expected completion
Actual/ex-pected delay (months)
Plan (as per L2 Schedule)
Original/Revised expected completion
Actual/ex-pected delay (months)
1#&4�CPJMFS�&SFDUJPO�TUBSU
Nov-09 Mar-10 5 Mar-10 Jun-10 �
2 #%-�#PJMFS�%SVN�-JGUJOH Apr-10 Jun-10 2 Aug-10 Jan-11 5
� )5�)ZESP�5FTU Mar-11 Jun-11 � Jul-11 Dec-11 5
4 �#-6�#PJMFS�-JHIU�6Q Sep-11 Nov-11 2 Jan-12 May-12 4
5 4#�4UFBN�#MPXJOH Nov-11 Jan-11 2 Mar-12 Jun-12 �
6$&4�$POEFOTFS�&SFDUJPO�4UBSU
Sep-10 Oct-10 1 Jan-11 Jun-11 5
7 5(&4�5(�&SFDUJPO�4UBSU Nov-10 Dec-10 1 Mar-11 Jul-11 4
8 5(#6�5VSCJOF�#PY�VQ Oct-11 Dec-11 2 Feb-12 Jun-12 4
9 5(0'� Dec-11 Jan-12 1 Apr-12 Jun-12 2
10 4ZODISPOJ[BUJPO Feb-12 Feb-12 - Jun-12 Aug-12 2
11 Full Load Mar-12 - Oct-12 -
/PUF��5IF�BCPWF�TUBUVT�JT�BT�PO�%FDFNCFS�������FYQFDUFE�UJNFMJOFT�NJHIU�IBWF�DIBOHFE
4PVSDF��1.*�,1.(�TVSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO��CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
Study on Project Schedule and Cost Overruns | 72
Project Monitoring & Reporting system in place at the project site
5IF�QSPKFDU�UFBN�IBT�B�EFEJDBUFE�monitoring and reporting team at site
VOEFS�)FBE�ĸ�1MBOOJOH���4ZTUFNT�1�4 �which reports directly in to the Project
1MBOOJOH���.POJUPSJOH�(SPVQ�11.(�BU�/51$�DPSQPSBUF��5IF�TUSVDUVSF�PG�Planning & Systems team is shown on
UIF�SJHIU�
5IF�1�4�UFBN�JOUFSBDUT�XJUI�QSPKFDU�UFBN�and contractors on daily basis to collect
information on project progress and
updates reports which are circulated to
/51$�)FBE�0GěDF �3FHJPOBM�PGěDFT�BOE�the project team. Following reports are
generated for the purpose of reporting
QSPKFDU�QSPHSFTT�
y Daily Progress Report (DPR):�5IF�DPR contains package-wise progress
as against monthly planned quantities.
5IF�SFQPSU�JT�HFOFSBUFE�CZ�SFTQFDUJWF�package engineers and submitted
UP�1�4�UFBN �XIJDI�DPNQJMFT�UIF�SFQPSU�GPS�DJSDVMBUJPO��5IF�%13�BMTP�has separate section for work done in
DSJUJDBM�QBDLBHFT �XIJDI�JT�BMTP�TFOU�UP�users via SMS.
y Weekly Progress Report (WPR):
WPR is package-wise report on
weekly work done as against monthly
QMBO��5IF�SFQPSU�DPOUBJOT�EFUBJMFE�information on work completed on
critical packages.
y Monthly Progress Report:�5IF�monthly progress report contains
detailed project status report
containing information on the project
QSPHSFTT �NJMFTUPOFT�DPNQMFUFE�BOE�UBSHFU�DPNQMFUJPO�GPS�UIF�QSPKFDU��5IJT�SFQPSU�JT�HFOFSBUFE�CZ�11.(�UFBN�JO�/51$�IFBE�PGěDF�
Reasons for project delay
While an enterprise-level risk
JEFOUJěDBUJPO�BOE�NBOBHFNFOU�FYFSDJTF�XBT�DPOEVDUFE�GPS�/51$ �GPSNBM�FYFSDJTF�GPS�QSPKFDU�MFWFM�SJTL�JEFOUJěDBUJPO�JT�OPU�carried out. No formal system of risk
QMBOOJOH �NJUJHBUJPO�BOE�NPOJUPSJOH�JT�JO�place at the project level. Following are
UIF�LFZ�SFBTPOT�SJTLT�GPS�QSPKFDU�EFMBZ �BT�JEFOUJěFE�CZ�UIF�QSPKFDU�UFBN�EVSJOH�POF�UP�POF�EJTDVTTJPO�
y Material Delivery from BHEL:
%FMBZFE�TVQQMZ�PG�#5(�NBUFSJBM�CZ�#)&-�IBT�CFFO�B�NBKPS�CPUUMFOFDL�in progress and resulted in delay of
critical milestones. Due to limited
NBOVGBDUVSJOH�DBQBDJUZ �#)&-�DPVME�not meet the supply schedule of
various concurrent projects under
FYFDVUJPO�CZ�/51$�BT�XFMM�BT�PUIFS�State utilities. Due to spurring
JOEVTUSJBM�BDUJWJUJFT �TFWFSBM�DPNQBOJFT�IBWF�BOOPVODFE�HSFFOěFME�BOE�CSPXOěFME�UIFSNBM�QPXFS�QMBOUT �leading to a wide gap in demand and
supply of power plant equipments.
'VSUIFS �#)&-�IBE�UP�EFQFOE�PO�MJNJUFE�BWBJMBCMF�WFOEPST�HMPCBMMZ �XIP�NBOVGBDUVSF�JOEVTUSJBM�DBTUJOHT �forging and piping materials for power
plant equipments. Due to heavy order
CPPLJOHT �WFOEPST�PG�#)&-�DPVME�OPU�honor their commitments in supplying
UIF�DSJUJDBM�SBX�NBUFSJBMT�UP�#)&-�and this in turn severely affected the
manufacturing and supply schedule.
5IJT�IBT�MFE�UP�TMJQQBHFT�JO�BDIJFWJOH�critical milestones and resulted in
EFMBZ�JO�VOJU�DPNNJTTJPOJOH��'VSUIFS �TJODF�(PWFSONFOU�JT�JOWPMWFE�GSPN�CPUI�TJEFT �/51$�DPVMEOijU�JNQPTF�QFOBMUZ�PO�#)&-��
y Site connectivity:�5IF�TJUF�JT�OPU�very well connected with major
DJUJFT �XIJDI�FYQPTFT�UIF�QSPKFDU�UP�logistics and transport related issues.
5IFSF�JT�IVHF�WFIJDVMBS�USBGěD�PO�UIF�roads connecting to the plant site
EVF�UP�QSPYJNJUZ�UP�/$-�NJOFT�BOE�PUIFS�JOEVTUSJBM�BSFB��5IVT�QPPS�SPBE�DPOOFDUJWJUZ�BOE�IFBWZ�USBGěD�MFBE�UP�longer transportation time affecting
the progress of the work.
y Contractor Default:�/51$�JT�FYFDVUJOH�UIF�QSPKFDU�CZ�TQJMU�QBDLBHF�mode and there are several small
and big contractors that are providing
material and services for the project.
5IFSF�JT�BMXBZT�B�SJTL�PG�EFGBVMU�CZ�one contractor that can lead to overall
EFMBZ�JO�QSPKFDU��5IFSF�IBWF�CFFO�JOTUBODFT�JO�QBTU�JO�/51$�QSPKFDU�where the contractors had backed out.
y Project Integration:�5IF�QSPKFDU�JT�CFJOH�FYFDVUFE�JO�TQMJU�QBDLBHF�NPEF�and hence the risk of integrating
QSPKFDU�BDUJWJUJFT�DPNFT�PO�/51$��Individual contractors will perform
their piece of work and will be
responsible for completing their
scope only. Any issues relating to
coordination between activities of two
contractors and ensuring performance
PG�UIF�QMBOU�BT�B�XIPMF�MJFT�XJUI�/51$�
DGM, P&S
Sr. Manager
Dy. Manager Dy. Manager Dy. Manager Sr. Engineer
Sr. Manager
73 | Study on Project Schedule and Cost Overruns
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �����
Measures taken by NTPC to de-bottleneck project
1. /51$�IFMQFE�UIFJS�DPOUSBDUPST�JO�FBTJOH�PVU�UIFJS�JOUFSOBM�DBTI�ĜPX�QPTJUJPOT��CZ�FJUIFS�NBLJOH�QBZNFOUT�directly to their sub-contractors or at
times giving them advance payments.
5IFTF�QBZNFOUT�BSF�TFUUMFE�BHBJOTU�the contractor bills and are helpful in
NBJOUBJO�UIF�DPOTUSVDUJPO�QBDF �UIVT�avoiding delays.
2. 5P�PWFSDPNF�MPHJTUJD�JTTVFT�SFMBUFE�UP�SPBE�USBOTQPSU �/51$�SFMJFE�PO�railways to transport its material.
'VSUIFS �UP�NBLF�SBJMXBZ�NPEF�FDPOPNJDBM �/51$�DPOTPMJEBUFE�UIF�supplies of its different contractors
BU�POF�QMBDF �TVGěDJFOU�GPS�B�GVMM�MPBE�USBJO��5IFTF�USBJOT�NBZ�FJUIFS�DPOUBJO�the requirements of one plant or
nearby multiple plants. If these trains
IBWF�TVQQMJFT�GPS�PUIFS�QMBOUT�BT�XFMM �it is then transported to designated
TJUF�FJUIFS�UISPVHI�SPBE�PS�SBJMXBZT�JG�UIFSF�JT�DPOOFDUJWJUZ�
���/51$�IBT�B�EFUBJMFE�QSPKFDU�monitoring and reporting system in
place. Projects are monitored at micro
MFWFM �FOBCMJOH�FBSMZ�JEFOUJěDBUJPO�PG�any slippage and ensuring immediate
corrective action.
Study on Project Schedule and Cost Overruns | 74
y 5IF�QSPKFDU�JOWPMWFT�DBQBDJUZ�FYQBOTJPO�PG�POF�PG�*OEJBijT�MBSHFTU�PQFO�DBTU�DPBM�mine
y -BUFTU�UFDIOPMPHJFT�TIPWFM�EVNQFS�DPNCJOBUJPO �TVSGBDF�NJOFST�BSF�EFQMPZFE�UP�SFNPWF�PWFSCVSEFO��5IFTF�UFDIOPMPHJFT�BSF�FOWJSPONFOU�GSJFOEMZ�BOE�NJOJ-NJ[F�SFRVJSFNFOUT�GPS�CMBTUJOH
y )JHI�DPTU�PG�MBOE�BDRVJTJUJPO �MBDL�PG�FYQFSJFODF�JO�BXBSEJOH�HMPCBM�DPOUSBDUT�and delay in getting regulatory approvals are major reasons for cost and time overruns
y 5P�FYQFEJUF�UIF�MBOE�BDRVJTJUJPO�BOE�SFHVMBUPSZ�BQQSPWBM�QSPDFTTFT �QSPKFDU�UFBN�has proactively prepared employment proposals and revised compensation ěHVSFT��'VSUIFS�UIF�UFBN�IBT�QSPQPTFE�UP�PVUTPVSDF�3�3�BDUJWJUJFT�
(FWSB�0QFO�$BTU�#MPDL�0$1�JT�MPDBUFE�JO�UIF�TPVUI�DFOUSBM�QBSU�PG�,PSCB�$PBMěFME�in Korba District of Chhattisgarh. It has an area of about 19 sq. km. and is the largest
open cast coal mine in India1��5IF�QSPKFDU�VOEFS�DPOTJEFSBUJPO�JT�UIF�DBQBDJUZ�FYQBOTJPO�QSPKFDU�GSPN�BO�FYJTUJOH����NJMMJPO�UPOOFT�QFS�ZFBS�NUQB�UP����NUQB�BOE�GVSUIFS�UP����NUQB��*OJUJBMMZ �XIFO�UIF�FYQBOTJPO�XBT�FOWJTBHFE�GSPN����NUQB�UP����NUQB �UIF�UBSHFU�DPNQMFUJPO�EBUF�GPS�UIJT�FYQBOTJPO�XBT�.BSDI�������#FGPSF�UIJT�FYQBOTJPO�DPVME�IBWF�CFFO�BDIJFWFE �BQQSPWBM�GPS�TVCTFRVFOU�FYQBOTJPO�GSPN����NUQB�UP����NUQB�XBT�SFDFJWFE�BOE�UIF�NJMFTUPOFT�XFSF�SFWJTFE�GPS�B�DPNQMFUJPO�EBUF�PG�.BSDI�������5IF�EFMBZT�UIBU�XFSF�BUUSJCVUBCMF�UP����NUQB�XFSF�CFJOH�BCTPSCFE�JO�UIF�FYQBOTJPO�GSPN����NUQB�UP����NUQB��5IVT �BT�QFS�UIF�DVSSFOU�QSPKFDU�QSPHSFTT �UIFSF�JT�OP�TDIFEVMF�EFMBZ��*O�UIJT�DBTF�TUVEZ �XF�IBWF�QSJNBSJMZ�GPDVTFE�PO�UIF����NUQB�FYQBOTJPO�QIBTF�
Following are the key details of project
Expansion capacity'SPN����NUQB�UP����NUQB�BOE�GSPN����NUQB�UP����mtpa
Location ,PSCB �$IIBUUJTHBSI
Land Requirement 4184.5 Ha
Investment approval Date+VMZ���������NUQB
+VOF���������NUQB
Project cost*/3�� ������DSPSF����NUQB
*/3�� ������DSPSF����NUQB
Target completion.BSDI���������NUQB
.BSDI���������NUQB
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
CASE STUDY 2 GEVRA Expansion OCP (SECL)
FACTS
75 | Study on Project Schedule and Cost Overruns
1 Mineral Resources of Korba, Official website of Korba district, http://korba.nic.in/ kwMines.htm
Background and current status
(FWSB�NJOF�QSPKFDU�SFQPSU�XBT�QSFQBSFE�CZ�$FOUSBM�.JOF�1MBOOJOH���%FTJHO�*OTUJUVUF�-JNJUFE�$.1%J�JO������XJUI�JOJUJBM�DBQBDJUZ�PG���NUQB��'JSTU�FYQBOTJPO�QMBO�XBT�QSFQBSFE�JO�.BSDI������GPS�BO�BOOVBM�QSPEVDUJPO�VQUP����NUQB��*O�������� �B�TDIFNF�for augmentation of production by 2 mtpa was prepared and sanctioned by Coal India
-JNJUFE�$*-�CPBSE����+VMZ�������*O����� �4&$-�HPU�UIF�BQQSPWBM�GPS�FYQBOEJOH�UIF�NJOF�DBQBDJUZ�GSPN����NUQB�UP����NUQB���0O����.BSDI����� �(FWSB�NJOF�QSPEVDFE���� ����UPOOFT�PG�DPBM �UIF�IJHIFTU�RVBOUJUZ�PG�DPBM�FWFS�QSPEVDFE�CZ�BOZ�NJOF�PS�DPBMěFME�JO�*OEJB�PO�B�TJOHMF�EBZ��*O����� �JU�XBT�EFDJEFE�UP�GVSUIFS�JODSFBTF�UIF�NJOF�DBQBDJUZ�GSPN����NUQB�UP����NUQB��
"T�PO�"QSJM����� �(FWSB�NJOF�IBT�UIF�NJOFBCMF�SFTFSWFT�PG��������.5 �XJUI�BO�FYQFDUFE�MJGF�PG����ZST�BOE�NBYJNVN�RVBSSZ�EFQUI�PG�����NFUFST��1SFTFOU�EFQUI�PG�XPSLJOHT�JT�BCPVU�����NFUFST�BHBJOTU�BO�VMUJNBUF�QMBOOFE�EFQUI�PG�����NFUFST �BT�QFS�TBODUJPOFE�QSPKFDU�SFQPSU�13��
Need for expansion from 25 mtpa to 35 mtpa
*O�.BZ����� �UIF�EFNBOE�PG�DPLJOH�DPBM�GPS�&MFWFOUI�1MBO�XBT�FTUJNBUFE�BU�����.5�XIFSFBT�JOEJHFOPVT�TVQQMZ�XBT�FTUJNBUFE�BU��������.5 �UIVT�MFBWJOH�B�TIPSUGBMM�PG�������.5��5P�NFFU�UIJT�EFěDJU �$*-�IBT�GPSNVMBUFE�BO�FNFSHFODZ�DPBM�QSPEVDUJPO�QMBO�BOE�(FWSB�0QFO�$BTU�XBT�JEFOUJěFE�BT�POF�PG�UIF�QSPKFDUT�JO�FNFSHFODZ�DPBM�production plan.
Gevra mine capacity expansion plan
Source: KPMG in India – PMI Survey on cost and schedule overrun, 2012; based on interaction with survey respondents
Study on Project Schedule and Cost Overruns | 76
Land Requirement
5IF�UPUBM�MBOE�SFRVJSFNFOU�JODMVEJOH�UIF�'PSFTU�-BOE�JO�4BGFUZ�[POF�GPS�&YQBOTJPO�UP����NUQB�BT�QFS�UIF�1SPKFDU�3FQPSU�13�XBT�� �������)B��5IF�MBOE�BDRVJSFE�BHBJOTU�UIF�13�JT�� ��������)B �UIVT�IBWJOH�B�TIPSUGBMM�PG�������)B��'VSUIFS �UIFSF�JT�B�QMBOOFE�DBQBDJUZ�FYQBOTJPO�UP����NUQB �GPS�XIJDI�������)B�PG�BEEJUJPOBM�MBOE�JT�SFRVJSFE��5IVT �UIF�UPUBM�MBOE�SFRVJSFNFOU�JT�� ������IB�PVU�PG�XIJDI�POMZ����QFSDFOU�JT�BDRVJSFE2��5IF�TVNNBSZ�PG�MBOE�SFRVJSFNFOUT�BSF�HJWFO�CFMPX��
Technology
(FWSB�PQFODBTU�QSPKFDU�JT�CFJOH�XPSLFE�CZ�PQFODBTU�NFUIPET�EFQMPZJOH�TIPWFM�EVNQFS�DPNCJOBUJPO�BOE�)&..�IFBWZ�FBSUI�NPWJOH�NBDIJOFSZ�DPOěHVSBUJPO��4VSGBDF�NJOFS�UFDIOPMPHZ�JT�VTFE �XIJDI�EPFT�OPU�SFRVJSF�ESJMMJOH �CMBTUJOH���DSVTIJOH�PG�DPBM��'VSUIFS �UIJT�UFDIOPMPHZ�QSPWJEFT�DPBM�PG�UIF�SFRVJSFE�TJ[FT��
5IJT�UFDIOPMPHZ�IBT�GPMMPXJOH�BEWBOUBHFT�BHBJOTU�UIF�DPOWFOUJPOBM�NFUIPE��
y &OWJSPONFOU�GSJFOEMZ�UFDIOPMPHZ
y Improvement in coal quality by selective mining
y Minimum manpower required for operating the machines
y &MJNJOBUJPO�PG�ESJMMJOH �CMBTUJOH�BOE�DSVTIJOH�QSPDFTTFT
y /P�EVTU�HFOFSBUJPO�EVSJOH�DPBM�DVUUJOH �BT�JO�CVJMU�XBUFS�TQSBZJOH�TZTUFN�TVQQSFTT�any dust which could be generated during coal cutting
y 1SPEVDUJPO�PG�����NN�TJ[F�DPBM
y .JOJNVN�DIBODF�PG�ěSF�JO�UIF�DPBM�GBDF�
77 | Study on Project Schedule and Cost Overruns
Note: - Values mentioned in green indicate that the land has been acquired.
2 As on Dec 31, 2011
Nature of contracts
"U�QSFTFOU �UIF�0WFSCVSEFO�0#�SFNPWBM�JT�EPOF�CZ�EFQBSUNFOUBM�-BCPS�4&$-�FNQMPZFE�XJUI�ESJMMJOH�BOE�CMBTUJOH�and using high capacity Shovel-Dumper
combination mechanism. At present
BQQSPYJNBUFMZ����QFSDFOU�PG�UIF�FYUSBDUJPO�JT�UISPVHI�TVSGBDF�NJOFS�BOE�balance is through conventional method
ESJMMJOH���CMBTUJOH�PG�$PBM�
Coal mining is subcontracted to
various contractors / vendors who are
SFTQPOTJCMF�GPS�FYUSBDUJOH�DPBM�VTJOH�TVSGBDF�NJOFS �MPBEJOH �USBOTQPSUJOH�UP�CHP & unloading of coal.
(MPCBM�UFOEFST�XFSF�ĜPBUFE�GPS�UIF�)&..ijT�&3�4IPWFM����$VN �%VNQFS�����5�����$VN�4IPWFM�XBT�QSPDVSFE�GPS�UIF�ěSTU�UJNF�CZ�4&$-�
Economic Valuation
According to initial project report dated
0DUPCFS����� �UIF�JODSFNFOUBM�DBQJUBM�SFRVJSFE�GPS�DBQBDJUZ�FYQBOTJPO�GSPN����NUQB�UP����NUQB�XBT�FTUJNBUFE�BU�*/3��������DSPSF��5IF�VQEBUFE�DBQJUBM�estimate for the project dated July 2007
was INR 780.12 crore. In September
���� �UIJT�DPTU�XBT�GVSUIFS�SFWJTFE�UP�*/3�� �������DSPSF��5IJT�JT�UIF�ěOBM�BQQSPWFE�DPTU�BOE�JT�BSPVOE����QFSDFOU�NPSF�UIBO�the actual estimates.
5IF�DBQJUBM�JOWFTUNFOU�PG�QMBOU�BOE�machinery for incremental 10 mtpa was
FTUJNBUFE�BU�*/3��������DSPSF��5IF�DBQJUBM�JOWFTUNFOU�PO�)&..�)FBWZ�.BDIJOFSZ�alone was estimated at INR 464.09 crore.
Milestone Status
#FMPX�JT�UIF�MJTU�PG�NBKPS�QSPKFDU�NJMFTUPOFT�XJUI�UIFJS�TDIFEVMF�DPNQMFUJPO�EBUF�
S. No. Milestone Description Target Date of Completion
1. /PUJěDBUJPO�PG�����)B�-BOE�V�T���J�PG�$#"�"DU July 2005
2. Final Forest Clearance of 100.01 Ha land August 2008
�� &OWJSPONFOUBM�$MFBSBODF June 2009
4. Commissioning of Workshop March 2011
5. Commissioning of Store March 2011
6. %PVCMJOH�PG�+VOBEJI�ĸ,PSCB�3BJMXBZ�5SBDL�PG�4JEJOH November 2006
7. $PNNJTTJPOJOH�PG��TU����$VN�4IPWFM�BMPOHXJUI�����5�%VNQFST January 2010
8. $PNNJTTJPOJOH�PG��OE����$VN�4IPWFM�BMPOHXJUI�����5�%VNQFS August 2010
9. Construction of Haul Road March 2011
10. Construction of Residential Building March 2012
11. $POTUSVDUJPO�PG��������,7�4VC�TUBUJPO March 2012
12. $PNNJTTJPOJOH�PG���,7�0�)�-JOF .BSDI������
��� 1IZTJDBM�QPTTFTTJPO�PG�5FOBODZ�-BOE�JO��TU�QIBTF December 2012
14. Augmentation of CHP including Silo .BSDI������
15. Installation and commissioning of In-pit coal transport system .BSDI������
��5FOEFSJOH�JT�JO�QSPDFTT��4DIFEVMFE�NPOUI�PG�'JOJTI�JT�UFOUBUJWF�"T�PO�+BOVBSZ�����
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
Study on Project Schedule and Cost Overruns | 78
Reasons for cost and schedule overruns
y Increase in land compensation due
to policy change:- In the project
SFQPSU �GPS�UIF�DPTU�FTUJNBUJPO�PG�MBOE�BDRVJTJUJPO �UIF�SBUF�PG�BHSJDVMUVSF�MBOE�was assumed as INR 7.00 Lakh per
)B��PS�*/3����� �MBLI�QFS�BDSF��5IJT�XBT�CBTFE�PO�UIF�4UBUF�(PWFSONFOU�DPNQFOTBUJPO�SBUF�PG�*/3��� ����QFS�acres. As per the revised Chhattisgarh
(B[FUUF�EBUFE�ĸ����.BSDI����� �the rate was increased to INR 8.00
-BLI�QFS�BDSF��5IVT �GPS�UFOBODZ�MBOE�PG���������)B �UIF�CVEHFU�DPTU�increased by over 180 percent from
INR 27.8 crore to INR 78.27 crore.
y Delay in Procurement of HEMM: -
5IF�&3�4IPWFM����$VN�XBT�UP�CF�QSPDVSFE�GPS�UIF�ěSTU�UJNF�JO�UIF�QSPKFDU �XIJDI�XBT�EPOF�VTJOH�UIF�(MPCBM�5FOEFS�QSPDFTT��*O�UIF�QSPKFDU�SFQPSU �UIF�UPUBM�UJNF�DPOTJEFSFE�GPS�UFOEFS�ěOBMJ[BUJPO�XBT�����ZFBST�BOE�B�period of one year for manufacturing
��TVQQMZ�PG�UIF�FRVJQNFOU��)PXFWFS �EVF�UP�MBDL�PG�FYQFSJFODF�JO�BXBSEJOH�the contracts through global
UFOEFS�QSPDFTT �UIF�BDUVBM�UJNF�UBLFO�GPS�UFOEFS�ěOBMJ[BUJPO�GSPN�SFWJTFE�TQFDJěDBUJPO�BOE�UFSNT�BOE�DPOEJUJPOT�UP�XPSL�PSEFS�JTTVF�XBT�BQQSPYJNBUFMZ������ZFBST�+BOVBSZ������UP�.BSDI����� �XIJDI�JT�B�EFMBZ�PG�BQQSPY����NPOUIT�GSPN�QMBOOFE�FTUJNBUFT��'VSUIFS �UIF�EFMJWFSJFT�PG�UIF�NBUFSJBM�XFSF�FYQFDUFE�UP�TUBSU�GSPN�"QSJM������POXBSET �JO�BDUVBM�JU�TUBSUFE�POMZ�GSPN�+BOVBSZ����� �XIJDI�JT�B�EFMBZ�PG�BQQSPY����NPOUIT�
y Procurement of specialized
equipment at a higher cost: - In the
13�PG����NUQB�UIF�DPTU�PG�&3�4IPWFM�42 cum was considered to be INR
�������DSPSF�GPS�GPVS�FRVJQNFOUT�J�F��*/3�������$SPSF�QFS�TIPWFM��5IF�actual cost of procurement for each
TIPWF�JT�BQQSPY��*/3����DSPSF �UIVT�
BMNPTU�BO�JODSFBTF�PG�BQQSPYJNBUFMZ�INR 41 crore per Shovel & increase of
BQQSPYJNBUFMZ�*/3�����DSPSF�JO�UPUBM��5IF�13�FTUJNBUF�GPS�UIF�)&..ijT�and other P&M were based mainly
on the standard price list of mining
FRVJQNFOU�QVCMJTIFE�CZ�$.1%*- �Ranchi.
y Delay in getting approvals from
State Government: - Approvals /
BTTJTUBODF�SFMBUFE�UP�-BOE�BDRVJTJUJPO �R&R etc. are pending with the State
(PWFSONFOU��5IFTF�BSF�BDUJOH�BT�bottlenecks / delay factors in physical
QPTTFTTJPO �BDRVJTJUJPO�BOE�PUIFS�QSPDFTTFT�SFMBUFE�UP�MBOE��5IF�QFOEJOH�JUFNT�BSF���
- Help to start with production from
BDRVJSFE�GPSFTU�MBOE �XIJDI�JT�the only land left under physical
possession.
- 'JOBMJ[BUJPO�PG�SF�IBCJMJUBUJPO�TJUF�BU�Utarda.
- Submission of Statement V &
VI of remaining villages under
acquisition.
y Delay in getting internal approvals
(SECL Board): - Many of the
BQQSPWBMT�BSF�QFOEJOH�BU�UIF�4&$-�DPSQPSBUF�MFWFM �XIJDI�IBWF�CFFO�TFOU�GSPN�UIF�1SPKFDU�4JUF��5IF�BQQSPWBMT�QFOEJOH�BSF��
- Proposal for employment of
another 5 Nos. eligible candidates
of land looser was submitted to
HQ for approval vide letter No. 90
dated 12 April 2011
- Compensation of houses and
EXFMMJOHT�PG����IPVTF�PXOFS�PG�Pondi village was submitted to HQ
for approval vide proposal no. 175
dated 14 June 2011
- Revised compensation of 172.719
Ha land of Pondi village was
submitted to HQ for approval vide
proposal no. 468 dated 11 July
2011
- Proposal for appointment of an
FYUFSOBM�DPOTVMUBOU�BT�BEWJTPS�UP�facilitated land acquisition.
5IF�QFOEJOH�BQQSPWBMT�BSF�BGGFDUJOH�UIF�acquisition of land.
y Ambiguity over R&R Policy: -
5IF�$*-�3�3�QPMJDZ�TUJQVMBUFT�employment to all the land losers
subject to availability of vacancies in
UIF�PSHBOJ[BUJPO��"EEJUJPOBMMZ �VOEFS�$MBVTF�JJ�PG�QPJOU�OVNCFS����QBHF�OP����PG�$*-�3�3�1PMJDZ������TUJQVMBUFT�that land losers who are not eligible
for employment shall be offered cash
compensation at the rate prescribed
JO�UIF�OFX�3�3�QPMJDZ�OPUJěFE�CZ�Ministry of Rural Development
.P3%��)PXFWFS �UIF�4UBUF�3�3�QPMJDZ�TQFDJěFT�DPNQFOTBUJPO�BOE�FNQMPZNFOU�UP�BMM��5IVT �UIFSF�JT�BO�ambiguity in company’s and State
3�3�QPMJDZ��5IVT �EFMBZ�JO�ěOBMJ[JOH�the employment and compensation is
affecting the land acquisition.
79 | Study on Project Schedule and Cost Overruns
Measures taken by SECL to debottleneck project
1. 'PS�FYQFEJUJOH�UIF�QSPHSFTT�PG�MBOE�BDRVJTJUJPO �UIF�(FWSB�UFBN�proactively prepared employment
QSPQPTBM �HPU�UIF�MJTU�BQQSPWFE�GSPN�the collector and obtained consent
PG�UIF�WJMMBHFST��"EEJUJPOBMMZ �SFWJTFE�DPNQFOTBUJPO�ěHVSFT�XFSF�QSFQBSFE�GPS�POF�PG�UIF�WJMMBHFT��"MTP �QSPKFDU�team proposed appointment of retired
%FQVUZ�$PMMFDUPS�GPS�FYQFEJUJOH�UIF�land acquisition process.
2. In the case of ambiguity over R&R
1PMJDZ �UIF�(FWSB�UFBN�QSPQPTFE�NPEBMJUJFT�JO�UIF�FYJTUJOH�$*-�3�3�QPMJDZ �TVDI�UIBU�UIF�JTTVF�DBO�CF�resolved as soon as possible.
���'PS�3FIBCJMJUBUJPO �BT�QFS�QSFWBJMJOH�QSBDUJDF �4UBUF�(PWFSONFOU�PO�UIF�request of the project owner allots
the land in the nearby area of the
QSPKFDU��5IF�MBOE�QSPWJEFE�CZ�UIF�(PWFSONFOU�IBT�UP�CF�EFWFMPQFE�with infrastructural facilities such
BT�TDIPPMT �IPVTFT �QBSLT�FUD��BOE�handed over to the affected families.
(FWSB�UFBN�GPSFTFFT�UIJT�BT�B�SJTL�BT�(PWFSONFOU�MBOE�JT�OPU�BWBJMBCMF�in nearby area of the project for
SFTFUUMFNFOU��5P�PWFSDPNF�UIJT�SJTL �(FWSB�UFBN�IBT�QSPQPTFE�UIBU�UIF�FOUJSF�BDUJWJUJFT�MBOE�BDRVJTJUJPO�BOE�EFWFMPQNFOU�PG�3FIBCJMJUBUJPO�may be outsourced or cash
compensation / monetary package in
lieu of resettlement plot and building
BTTJTUBODF�*/3�� �� ����QFS�GBNJMZ�BT�BMSFBEZ�BQQSPWFE�CZ�.$-�#PBSE�CF�provided.
Study on Project Schedule and Cost Overruns | 80
y 'JSTU�DPOUBJOFS�QSJWBUJ[BUJPO�QSPKFDU�BU�UIF�.VNCBJ�QPSU
y 1SPKFDU�JT�EFMBZFE�CZ�UISFF�ZFBST�BOE�BOUJDJQBUFE�QSPKFDU�DPTU�JT�FYQFDUFE�UP�increase by 40 percent from scheduled cost
y -BDL�PG�EFUBJMFE�QMBOOJOH �OPO�QFSGPSNBODF�PG�DPOUSBDUPS�BOE�QPPS�DPPSEJOBUJPO�between dredging and berth construction works leads to schedule and cost overrun.
.VNCBJ�1PSU�IBT�CFFO�UIF�QSJODJQBM�HBUFXBZ�UP�*OEJB �BT�JU�DBUFST�UP����QFSDFOU1 of the
DPVOUSZijT�TFB�CPSOF�USBEF�IBOEMFE�CZ�NBKPS�QPSUT�PG�UIF�DPVOUSZ��5IPVHI�USBEJUJPOBMMZ�EFTJHOFE�UP�IBOEMF�HFOFSBM�DBSHP �PWFS�UIF�ZFBST �UIF�QPSU�IBT�BEBQUFE�UP�DIBOHJOH�TIJQQJOH�USFOET�BOE�DBSHP�QBDLBHJOH�GSPN�CSFBL�CVML�UP�VOJUJ[BUJPO�QBMMFUJ[BUJPO�BOE�DPOUBJOFSJ[BUJPO��$POTUSVDUJPO�BOE�EFWFMPQNFOU�PG�UXP�PGGTIPSF�DPOUBJOFS�CFSUIT�BOE�UFSNJOBMT�JT�UIF�ěSTU�DPOUBJOFS�QSJWBUJ[BUJPO�QSPKFDU�BU�UIF�.VNCBJ�1PSU��5IF�QSPKFDU�JOWPMWFT�DPOTUSVDUJPO �ěOBODJOH �FRVJQQJOH �PQFSBUJPOT�BOE�NBOBHFNFOU�PG�UIF�PGGTIPSF�DPOUBJOFS�UFSNJOBM�JO�UIF�.VNCBJ�)BSCPS�PO�B�#VJME�0QFSBUF�5SBOTGFS�#05�CBTJT��5IF�QSPKFDU�JT�BXBSEFE�UP�*OEJSB�$POUBJOFS�5FSNJOBM�1WU��-UE�*$5 �XIJDI�JT�B�KPJOU�WFOUVSF�CFUXFFO�(BNNPO�*OGSBTUSVDUVSF�1SPKFDUT�-UE �(BNNPO�*OEJB�-UE�BOE�%SBHBEPT�41-�PG�4QBJO�GPS�B����ZFBS�DPODFTTJPO�QFSJPE�
Construction details
5IF�DPNQMFUF�DPOTUSVDUJPO�XPSL�JT�EJWJEFE�BNPOH�UXP�QBSUJFT��
y .VNCBJ�1PSU�5SVTU�.C15��.C15�XJMM�IBWF�UP�EP�UIF�DBQJUBM�ESFEHJOH�PG�UIF�EFTJHOFE�ESBGU�PG������NFUFST�BOE�ěMMJOH�PG�UIF�FYJTUJOH�1SJODFijT�BOE�7JDUPSJB�1�7�Dock basin areas up to +4.79m CD by dredging sand available near Dharamatar
DSFFL�BSFB �XJUIJO�UIF�.VNCBJ�QPSU�MJNJUT��.C15�IBT�BXBSEFE�UIJT�XPSL�DPOUSBDU�UP�M/s Jaisu Shipping Co.
y *OEJSB�$POUBJOFS�5FSNJOBM�*$5��.C15�IBT�TJHOFE�B�MJDFOTFE�BHSFFNFOU�XJUI�.�T�(BNNPO�*OEJB�$POTPSUJVN�GPS�UIF�DPOTUSVDUJPO�PG�0GGTIPSF�$POUBJOFS�5FSNJOBM�PO�#05�#BTJT��5IF�XPSL�JODMVEF�DPOTUSVDUJPO�BOE�PQFSBUJPO�PG�UXP�DPOUBJOFS�CFSUIT�PG�����NFUFST�FBDI�JODMVEJOH�BQQSPBDI�USFTUMFT �MBZJOH�PG�USBDLT�GPS�3BJM�$POUBJOFS�%FQPU�3$% �EFNPMJUJPO�PG�FYJTUJOH�TUSVDUVSFT�BU�1SJODFijT�BOE�7JDUPSJB�%PDLT�GPS�integrated development of the container yard and relocation of services.
Below are the major details of project
Capacity Addition 5XP�PGGTIPSF�DPOUBJOFS�UFSNJOBMT
Location .VNCBJ �.BIBSBTIUSB
Project Execution #05�CBTJT
Investment approval Date /PWFNCFS �����
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
CASE STUDY 3Construction of an Offshore Container
Terminal at Mumbai Port Trust
FACTS
81 | Study on Project Schedule and Cost Overruns
1 Introduction, Mumbai Port Trust, http://mumbaiport.gov.in/index2.asp?slid=34&sublin kid=10&langid=1, accessed 19 June 2012
Current project status
Originally planned Anticipated/ Revised Overrun
Project completion date
.C15 Dec 2010 .BS����� 28 Months
*$5 Dec 2010 %FD����� ���.POUIT
Project cost (INR Crore)
.C15 445 610 ���
*$5 � ��� � ��� ���
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
5IF�QSPKFDU�XBT�BQQSPWFE�JO�/PWFNCFS����� �XJUI�QMBOOFE�DPNQMFUJPO�EBUF�PG�%FDFNCFS�������)PXFWFS �CBTFE�PO�UIF�DVSSFOU�QSPHSFTT�QSPKFDU�JT�FYQFDUFE�UP�CF�DPNQMFUFE�CZ�%FDFNCFS����� �XJUI�B�EFMBZ�PG�BSPVOE����NPOUIT���0O�ěOBODJBM�GSPOU �QSPKFDU�DPTU�JT�FYQFDUFE�UP�JODSFBTF�CZ����QFSDFOU�GSPN�*/3�� ����DSPSF�UP�_*/3�� ����DSPSF��
Project Planning and current status
Agency Description Planned date Actual dateDelay in months
Percentage of work
completed
ICT
License Agreement signed between .VNCBJ�1PSU�5SVTU�BOE�.�T�*OEJSB�$POUBJOFS�5FSNJOBM�1WU��-UE�
Dec 2007 Dec 2007 - 100
Financial Closure June 2008 Nov 2008 5 100
Commencement of Construction Aug 2008 May 2009 9 100
Completion of civil works and commission-JOH�PG�UXP�CFSUIT�BU�*$5
Dec 2010 %FD����� �� 85
MbPT
Handing over the site for trestle Dec 2007 Dec 2007 - 100
Handing over already developed land at Princes and Victoria Dock of the Licensed QSFNJTFT�GPS�0$5
Dec 2007 In phases - 85
Completion of Capital dredging for the berth pocket and handing over to the Licensee for construction
Dec 2009 Apr 2012 28 100
Filling of Victoria Dock and handing over to the Licensee.
Dec 2009 Dec 2012 �� 85
Filing of Prince’s Dock and handing over to the Licensee
Dec 2009 Dec 2012 �� 85
Completion of Capital dredging for Approach $IBOOFM�BOE�5VSOJOH�$JSDMF�
Oct 2010 Mar 2012 17 55
-BZJOH�PG�3BJMXBZ�5SBDLT�GPS�3$% Dec 2010 .BS����� 28 5
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
Study on Project Schedule and Cost Overruns | 82
Project cost overrun
Agency DescriptionOriginal estimate
(INR crore)Actual/revised (INR
crore)Increase (%)
ICT
&1$�DPOUSBDU�GPS�DJWJM�XPSL�DPNQSJTJOH�DPOTUSVDUJPO�PG�USFTUMF �CFSUI �DPOUBJOFS�ZBSE���VUJMJUJFT
����� 589.6 ����
/PO�&1$�DPOUSBDU ���� 72.2 107.5
Mechanical equipments and electrical & Fire Fighting works
����� 450 67.7
.JTDFMMBOFPVT�ěYFE�BTTFUT�"$ �DPNQVUFST�FUD� 10.0 44.9 �����
BPS investments 15.0 25.0 66.7
Contingencies 41.2 20.8 ����
1SFMJNJOBSZ���QSFPQFSBUJWF�FYQFOTFT 76.0 86.7 14.1
Debt service reserve ���� 25.9 6.6
Interest during construction 108.8 114 4.8
Total 1,015.7 1,429.1 40.7
MbPT
Capital Dredging 279.4 468.2 67.6
Filling 78.0 ����� ����
Dock closure works ���� ����� ����
Rail tracks for RCD 9.2 16.0 74.7
Relocation of underground services 0.7 0.7 -
Navigational aids ��� 1.8 ����
&OWJSPONFOU�.BOBHFNFOU�1MBO 1.2 1.2 -
Total 444.9 610.0 37.1
Grand Total 1,460.6 2,039.1 39.6
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
83 | Study on Project Schedule and Cost Overruns
Reasons for schedule and cost overrun
y %FMBZ�JO�ěOBODJBM�DMPTVSF��As a part
PG�#05 �QSPKFDU�ěOBODJOH�IBE�UP�CF�arranged by private concessionaire.
Due to 2008 global recession banks
put stringent norms for project
ěOBODJOH��UIVT�EFMBZJOH�UIF�QSPDFTT�PG�ěOBODJBM�DMPTVSF�CZ�����NPOUIT�
y More dredging work than
estimated: Due to inaccurate
FTUJNBUFT�EVSJOH�QMBOOJOH�QIBTF �UIF�actual rock dredging quantity was
NVDI�NPSF�UIBO�FTUJNBUFE��'VSUIFS �the estimates prepared by the
consultant were inaccurate resulting
JOUP�NBKPS�WBSJBUJPO�JO�RVBOUJUJFT �leading to project schedule and cost
PWFSSVO��5IJT�JT�UIF�NBKPS�SFBTPO�which has cascading impact on the
overall project delivery.
y Slow mobilization by EPC
contractor:�&1$�$POUSBDU�XBT�TJHOFE�PO���%FDFNCFS�������IPXFWFS�UIF�actual work commenced only from
���.BZ����� �DBVTJOH�B�EFMBZ�PG���NPOUIT��5IF�EFMBZ�XBT�QSJNBSJMZ�PO�QBSU�PG�UIF�#05�PQFSBUPS�JO�ěOBMJ[BUJPO�PG�&1$�DPOUSBDU�
y Delay in project site handover:�5IF�project requires some work on the
FYJTUJOH�1SJODFijT�BOE�7JDUPSJB�1�7�%PDL��.C15�EFMBZFE�UIF�IBOEJOH�over of this area to the contractor by
��NPOUIT��5IJT�BMTP�MFE�UP�JODSFBTF�JO�DPTU �BT�SFTPVSDFT�XFSF�JEMF�EVSJOH�this period.
y Delay in awarding dredging work
contract: Delay in tendering process
occurred as the eligibility criteria were
SFWJTFE�CBTFE�PO�UIF�TUBOEBSEJ[BUJPO�DPNNJUUFFijT�SFDPNNFOEBUJPOT��5IF�offers received from the contractors
necessitated revision in cost
FTUJNBUFT �XIJDI�SFRVJSFT�BEEJUJPOBM�(PWFSONFOU�BQQSPWBM �MFBEJOH�UP�project delay.
y Delay in completing work by
dredging contractor: As per the
QSPWJTJPOT�PG�UIF�DPOUSBDU �UIF�DPOUSBDUPS�IBE�UP�DPNQMFUF���milestones i.e. dredging in berth
QPDLFU�CZ�0DUPCFS����� �ěMMJOH�PG�P&V Dock basins by June 2010 and
dredging in approach channel by
"QSJM�������)PXFWFS �UIF�DPOUSBDUPS�missed the targets leading to delay of
���NPOUIT��5IF�SFBTPOT�GPS�EFMBZT�JO�achieving these milestones were as
GPMMPXT�
- Accident of MSC Chitra in Mumbai
Harbor resulted in suspension of
soil dredging by 28 days
- Delay in deployment of dredgers in
time by the contractor
- 4MPX�QSPHSFTT�JO�ěMMJOH�XPSL�CZ�UIF�contractor
- Non-deployment of requisite
dredgers to meet the weekly
PVUQVU�TQFDJěFE�JO�UIF�DPOUSBDU�CZ�the contractor
y Lack of integrated project master
schedule:�5IF�QSPKFDU�JT�EJWJEFE�JOUP�two packages i.e. dredging and berth
DPOTUSVDUJPO��BOE�CPUI�UIFTF�BDUJWJUJFT�have individual project schedule.
5IFTF�TDIFEVMFT�BSF�OPU�JOUFHSBUFE�to make a single project schedule.
'VSUIFS �UIF�QSPKFDU�QSPHSFTT�JT�NPOJUPSFE�TFQBSBUFMZ �XJUI�BDDFTTJOH�UIF�JOUFSEFQFOEFODJFT�SJTL�CFUXFFO�UIFN��5IF�EFMBZ�JO�DPNQMFUJPO�PG�works by the dredging contractor
has resulted in delayed handing over
PG�UIF�BTTFUT�UP�UIF�#05�PQFSBUPS �leading to overall project delay.
y Delay in obtaining security
clearance:�5IF�TFDVSJUZ�DMFBSBODF�for the bidder was received after a
period of 18 months from the Central
(PWFSONFOU�
Measures taken by MbPT/ICT to de-bottleneck project
1. 5IF�*$5�IBT�WFSZ�FGěDJFOU�SFQPSUJOH�system for construction activities.
5IFSF�IBWF�OPU�CFFO�BOZ�NBKPS�EFMBZT�EVF�UP�FYFDVUJPO�PG�DPOTUSVDUJPO�BDUJWJUJFT �CVU�EVF�UP�EFMBZ�JO�IBOEPWFS�of construction site
2. 5IF�.C15�IBT�BQQPJOUFE�BO�independent engineer for design
BQQSPWBMT �RVBMJUZ�DPOUSPM�BOE�NPOJUPSJOH�QSPHSFTT�PG�UIF�#05�operator. Due of regular monitoring
UIFSF�XBT�OP�EFMBZ�GSPN�#05�PQFSBUPS�TJEF��)PXFWFS �TDPQF�PG�JOEFQFOEFOU�engineer’s work only focuses on
#05�PQFSBUPS�BOE�EPFT�OPU�JODMVEF�ESFEHJOH�BDUJWJUJFT �NBLJOH�JU�EJGěDVMU�to monitor interdependencies among
these two activities.
���5IF�FTUJNBUFT�GPS�ESFEHJOH�prepared by the consultants were
not appropriate leading to cost and
TDIFEVMF�PWFSSVOT��5IF�.C15�CPBSE�has instructed the HOD committee
DPNQSJTJOH�PG�$& �'"�$"0�BOE�%$�UP�suggest appropriate action against the
consultant for the lapse.
4. In lieu of non-compliance of the
DPOUSBDU�EFQMPZJOH�SFRVJTJUF�ESFEHFST��BOE�EFMBZ�JO�DPNQMFUJPO�PG�UIF�XPSL�.C15�CPBSE�IBT�SFDPWFSFE�/3����DSPSFT����QFSDFOU�MJRVJEBUFE�EBNBHFT�GSPN�UIF�DPOUSBDUPS�
5. .C15�BQQPJOUFE�BO�JOEFQFOEFOU�engineer and project management
consultants to submit monthly
progress reports of the project.
6. 5P�IBWF�TNPPUI�FYFDVUJPO�PG�QSPKFDU�XPSLT�.C15�FOTVSFE�UP�JODMVEF�all infrastructure works like Capital
ESFEHJOH �3$%�FUD��JO�UIF�-JDFOTFFijT�scope of work.
7. 5P�NJOJNJ[F�UIF�JNQBDU�PG�EFMBZ�PG�one activity into other i.e. dredging
BOE�CFSUI�DPOTUSVDUJPO �JOEFQFOEFOU�&OHJOFFS�XBT�BQQPJOUFE�UP�NPOJUPS�interdependencies of works by
.C15�BOE�#05�PQFSBUPS�BOE�1SPKFDU�
.BOBHFNFOU�$POTVMUBOU�1.$�XBT�NPOJUPSJOH�.C15�DPNQPOFOU�PG�XPSL�
Study on Project Schedule and Cost Overruns | 84
y 5IF�QSPKFDU�UBSHFUFE�UP�JNQSPWF�UIF�SFěOFSZ�NBSHJOT �CZ�FOIBODJOH�UIF�QSPEVD-UJPO�PG�WBMVF�BEEFE�QSPEVDUT�TVDI�BT�.4�BOE�-1(
y Project was delayed by one year and three months years and completed within the budgeted cost
y $IBOHF�JO�QSPKFDU�TDPQF �EFMBZ�JO�FRVJQNFOU�TVQQMZ�GSPN�WFOEPST�BOE�TIPSUBHF�of skilled manpower are some factors that leads to schedule and cost overrun
y 5P�FYQFEJUF�UIF�QSPKFDU�EFMJWFSZ �)1$-ijT�TFOJPS�NBOBHFNFOU�XBT�JOWPMWFE�JO�negotiation with vendors.
.VNCBJ�SFěOFSZ�JT�PXOFE�CZ�)JOEVTUBO�1FUSPMFVN�$PSQPSBUJPO�-JNJUFE�)1$-�BOE�IBT�B�DBQBDJUZ�PG�����NJMMJPO�NFUSJD�UPOOFT�QFS�BOOVN�..51"��5IF�QSPKFDU�VOEFS�DPOTJEFSBUJPO�FOWJTBHFE�UIF�TFUUJOH�VQ�PG�B�OFX�HSBTT�SPPU�'MVJEJ[FE�$BUBMZUJD�$SBDLJOH�6OJU�'$$6�XJUI�B�DBQBDJUZ�PG�������..51"�BU�.VNCBJ�SFěOFSZ��5IJT�QSPKFDU�IBT�IFMQFE�SFěOFSZ�UP�QSPEVDF�IJHI�WBMVF�EJTUJMMBUF�QSPEVDUT�TVDI�BT�-1(�BOE�.4 �UIVT�BDIJFWJOH�IJHIFS�SFěOFSZ�NBSHJOT�
Project Description
5IF�1SPKFDU�FOWJTBHFE�TFUUJOH�VQ�PG�B�HSBTT�SPPU�TFDPOEBSZ�VOJU�JO�BO�FYJTUJOH�SFěOFSZ��5IF�GBDJMJUJFT�JODPSQPSBUFE�UIF�601�'$$�5FDIOPMPHZ�GPS�IJHI�DPOWFSTJPO�XJUI�BEWBODFE�DPNCVTUPS�SFHFOFSBUPS�GFBUVSF�BOE�JOUFHSBUJPO�PG�UIF�'MVF�(BT�4DSVCCJOH�6OJU�'(46�XJUI�#FMDP�5FDIOPMPHZ��5IF�OFX�'$$6�QSPKFDU�XBT�WFSZ�DPNQMFY�XJUI�����TZTUFNT�TQSFBE�BDSPTT�UIF�SFěOFSZ��5IF�QSPKFDU�IBE�GPMMPXJOH�NBKPS�GBDJMJUJFT�
y FCCU Feed Section consisting of feed Pre-heaters & Furnace
y 3FBDUPS�ĸ�3FHFOFSBUJPO�TFDUJPO�DPOTJTUJOH�PG�DBUBMZTU�DJSDVMBUJPO�DJSDVJU �DBUBMZTU�IBOEMJOH�TFDUJPO �ĜVF�HBT�DPPMJOH�DJSDVJU
y .BJO�'SBDUJPOBUPS�BOE�(BT�$PODFOUSBUJPO�6OJU�($6
y 'MVF�(BT�TDSVCCJOH�TFDUJPO�'(46
y Fuel gas treating section
y "TTPDJBUFE�VUJMJUJFT �%JTUSJCVUFE�DPOUSPM�TZTUFN�%$4 �TVCTUBUJPO�SFRVJSFE�GPS�QBSBMMFM�PQFSBUJPO�PG�OFX�'$$6�XJUI�FYJTUJOH�'$$6�
Following are the key details of project
Capacity under installation '$$6�XJUI�B�DBQBDJUZ�PG�������..51"
Location .VNCBJ �.BIBSBTIUSB
Contract Type&OHJOFFSJOH�1SPDVSFNFOU�$POTUSVDUJPO�.BOBHF-NFOU�&1$.
Investment approval March 2007
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
CASE STUDY 4 Installation of FCCU at Mumbai Refinery
FACTS
85 | Study on Project Schedule and Cost Overruns
Project Planning and current status
Originally planned Anticipated/ Revised Overrun
Project completion date
September-2009 December-2010 15 Months
Project cost (INR Crore)
900.47 900.47 NIL
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
5IF�QSPKFDU�XBT�BQQSPWFE�PO����.BSDI����� �XJUI�QMBOOFE�DPNQMFUJPO�EBUF�PG����4FQUFNCFS�������)PXFWFS �UIF�QSPKFDU�HPU�EFMBZFE�CZ����NPOUIT�BOE�DPNNJTTJPOFE�PO����%FDFNCFS�������0O�ěOBODJBM�GSPOU �UIF�QSPKFDU�XBT�DPNQMFUFE�XJUIJO�UIF�allocated budget. Following are the major milestones planned with their actual
DPNQMFUJPO�EBUF�
Project Planning and current status
Milestone Description Planned Date Actual DateDelay
(in months)
Process
Issue of equipment data sheets 16 August 2007 16 November 2007 ���
Issue of P & ID's & line list for engineer-ing
17 September 2007 26 December 2007 ���
Issue of complete process package - FCCU
01 October 2007 26 December 2007 2.9
Issue of P & ID's & line list for utility distribution
15 October 2007 05 February 2008 ���
Prepare and issue P&ID's and line list for utilities/offsites
���+BOVBSZ����� 01 February 2008 ���
Engineering
1SFQBSF�BOE�ěOBMJ[F�FRVJQNFOU�MBZPVU 01 October 2007 29 November 2007 2
1SFQBSF�QSFMJNJOBSZ�QJQJOH�.50�DPN-QMFUF
���+BOVBSZ����� ���+VOF����� 5
1SFQBSF�%$4�1,( 29 February 2008 11 April 2008 1.4
$PNQMFUF�NPEFMJOH �("%�BOE�*40T 01 September 2008 10 November 2009 14.5
1SFQBSF�ěOBM�QJQJOH�.50 15 October 2008 18 September 2009 ����
Prepare main air blower 01 October 2007 26 December 2007 2.9
Prepare fractionator column 04 October 2007 06 November 2007 1.1
Ordering
Issue LOI for main air blower 01 February 2008 29 April 2008 2.9
Issue LOI for fraction Column 05 February 2008 08 February 2008 -
*TTVF�-0*�GPS�IFBU�FYDIBOHFST 19 February 2008 02 April 2008 1.4
Issue LOI for vessels 04 March 2008 ���+VMZ����� 5
Issue LOI for DCS ���+VOF����� 24 October 2008 ���
Issue LOI for Burner ���.BZ����� 14 October 2008 4.5
Study on Project Schedule and Cost Overruns | 86
Milestone Description Planned Date Actual DateDelay
(in months)
Manufacturing and Delivery
Manufacturing and delivery at site - Flue gas cooler
���0DUPCFS����� 09 April 2009 ���
Manufacturing and delivery at site - 2VFODI�5PXFS
20 January 2009 04 September 2010 19.7
Delivery at site - Slurry Pumps 06 February 2009 25 September 2010 19.9
Manufacturing and delivery at site - Wet gas compressor
27 February 2009 ���"QSJM����� 14.0
Manufacturing and delivery at site - Fractionator Column
04 April 2009 ���4FQUFNCFS����� 6.0
Manufacturing and delivery at site – DCS 29 April 2009 ���"VHVTU����� ���
Delivery at site – Burner 01 April 2009 22 October 2009 6.8
Manufacturing and delivery at site - Main air blower
01 June 2009 ���'FCSVBSZ����� -
Construction
3FNPWBM�PG�FYJTUJOH�GBDJMJUJFT�BOE�BSFB�clearance
���%FDFNCFS����� 19 August 2008 7.7
$PNQMFUJPO�PG�ĜVF�HBT�DPPMFS�XPSLT ���+BOVBSZ����� 15 March 2010 ����
Civil work for sub-station complete 29 April 2009 25 March 2010 11
Installation of wet gas compressor ���+VOF����� 06 May 2009 -
Fabrication & erection of heater 29 July 2009 10 June 2010 10.5
Installation of DCS ���+VMZ����� 15 September 2009 1.5
Completion of scrubbing unit work ���+VMZ����� 16 December 2010 16.8
&SFDUJPO�PG�SFBDUPS�SFHFOFSBUPS 05 August 2009 ���.BSDI����� -
Complete electrical and instrumentation work
29 September 2009 15 December 2010 14.7
Mechanical completion 29 September 2009 16 December 2010 14.8
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
87 | Study on Project Schedule and Cost Overruns
Reasons for Schedule Delay
Change in Project Scope: Due to lack of
QSPQFS�QMBOOJOH�BOE�FYUFSOBM�GBDUPST �UIF�project scope was changed during the
FYFDVUJPO�QIBTF�MFBEJOH�UP�EFMBZT��5IF�project scope was changed on following
GSPOUT�
y "T�QFS�UIF�PSJHJOBM�QMBO �UIF�JNQMFNFOUBUJPO�PG�'(46�GBDJMJUJFT�XBT�UP�CF�EPOF�UISPVHI�-VNQ�4VN�5VSO�,FZ�-45,�NPEF��)PXFWFS �EVF�UP�QPPS�SFTQPOTF�UP�-45,�QVCMJD�UFOEFS�GPS�'(46�156�DBVTUJD�GBDJMJUJFT �UIF�DPOUSBDU�XBT�DPOWFSUFE�UP�&1$.�NPEF��*O�PSJHJOBM�-45,�NPEF �UIF�'(46�JNQMFNFOUBUJPO�TDIFEVMF�XBT�GPS����NPOUIT �CVU�JO�DPOWFOUJPOBM�NPEF �&OHJOFFST�*OEJB�-JNJUFE�&*-�estimated 24 months
y A number of improvement measures
were initiated during the course of
the project implementation including
ĸ�SFMPDBUJOH�PG�DBVTUJD�GBDJMJUJFT �implementation of catalyst cooler
GBDJMJUJFT �TUBOEBSEJ[BUJPO�PG�'(46�156�DBVTUJD�GBDJMJUJFT �TUSFBNMJOJOH�PG�PGGTJUF�QJQJOH�BOE�DBCMF�USFODIFT �which were not planned in original
project plan.
Delay from vendors and contractors:
Many of the critical equipment supplies
were delayed from the contractors and
WFOEPST�TJEF��4QFDJěDBMMZ �GPMMPXJOH�equipments were delayed affecting the
PWFSBMM�QSPKFDU�EFMJWFSZ�
y Delay of 15 months in delivery of
"VYJMJBSZ�.BJO�"JS�#MPXFS�XJUI�SFTQFDU�to project schedule
y Delay of 14 months in delivery of the
'MVF�(BT�4DSVCCFS�.JE�TFDUJPO�CZ�.�T�BHPV
y %FMBZ�PG���NPOUIT�CZ�&*-�JO�BDIJFWJOH�80 percent detailed engineering
milestone and delay of 15 to 16
months with respect to critical
&OHJOFFSJOH�NJMFTUPOFT�XJUI�cascading impact on procurement and
construction
y Deliveries of balance lose items for
."#���"."#���8($�XBT�EFMBZFE�CZ�
.�T�#)&-�UP�/PWFNCFS�����
y Completion of Catalyst Cooler
GBDJMJUJFT�CZ�.�T�-�5�FYUFOEFE�CFZPOE�November 2010.
Delay in shifting of existing facilities:
4JODF�JU�XBT�B�CSPXOěFME�QSPKFDU �JU�SFRVJSFE�TIJGUJOH�PG�FYJTUJOH�GBDJMJUJFT�UP�make site ready for construction. Delay
JO�TIJGUJOH�FYJTUJOH�GBDJMJUJFT�BOE�TJUF�IBOEPWFS �MFE�UP�QSPKFDU�TDIFEVMF�PWFSSVO
Other factors: Other factors which were
not considered during project planning
MFBEJOH�UP�QSPKFDU�EFMBZT�XFSF�
y &YUFOEFE�BOE�TFWFSF�NPOTPPO�conditions from July to September
���� �TFWFSFMZ�IBNQFSFE�TJUF�activities
y Shortage of skilled manpower such
as piping engineers at the contractor
side.
Measures taken by HPCL to debottleneck project
1. One of the reasons for schedule
overrun was delay from vendors
BOE�DPOUSBDUPST��5P�FYQFEJUF�UIF�QSPHSFTT�PO�UIJT�GSPOU �)1$-�TFOJPS�management and project team
initiated a series interactions with
senior management of equipment
TVQQMJFST�BOE�DPOUSBDUPST�#)&- �&*-�BOE�#)17 �UP�VOEFSTUBOE�the challenges and decide on the
corrective measures.
2. HPCL project progress was closely
monitored by the project team and the
critical issues were escalated to the
UPQ�NBOBHFNFOU�PG�)1$-��"U�UJNFT �the issues were even escalated to the
NJOJTUSZ�UP�FYQFEJUF�UIF�QSPHSFTT�
���'PS�FYQFEJUJOH�TJUF�DPOTUSVDUJPO�BOE�UP�MJNJU�UIF�JNQBDU�PG�EFMBZT �B�TFSJFT�of recovery plans and innovative
measures were implemented. For
FYBNQMF �DPOUSPM�PG�ESBXJOHT�XBT�TIJGUFE�GSPN�IFBE�PGěDF�UP�TJUF�PGěDF�so that drawings were released on
priority basis in line with the sequence
PG�FYFDVUJPO�
Study on Project Schedule and Cost Overruns | 88
y $BQBDJUZ�FYQBOTJPO�QSPKFDU�GSPN�����NJMMJPO�UP����NJMMJPO�QBTTFOHFST�BOOVBMMZ
y "OUJDJQBUFE�QSPKFDU�DPTU�JT����QFSDFOU�IJHIFS�UIBO�CVEHFUFE�DPTU�BOE�BQQSPYJ-NBUFMZ�POF�ZFBS�BOE�UXP�NPOUIT�EFMBZ�JT�FYQFDUFE�JO�UIF�QSPKFDU�EFMJWFSZ
y %FMBZ�JO�IBOEJOH�PWFS�PG�DPOTUSVDUJPO�TJUF�UP�DPOUSBDUPS �JOFGGFDUJWF�%13T�BOE�EFMBZ�JO�HFUUJOH�BQQSPWBM�GSPN�(PWFSONFOU�PO�SFWJTFE�DPTU�FTUJNBUFT�BSF�TPNF�critical factors that leads to schedule overruns.
CASE STUDY 5
/FUBKJ�4VCIBT�$IBOESB�#PTF�*OUFSOBUJPOBM�/4$#*�BJSQPSU�JT�TJUVBUFE�JO�,PMLBUB �8FTU�#FOHBM��'SPN�"QSJM������UP�.BSDI����� �JU�XBT�UIF�ěGUI�CVTJFTU�BJSQPSU�JO�UIF�DPVOUSZ�JO�UFSNT�PG�PWFSBMM�QBTTFOHFS�USBGěD1 �BOE�OJOUI�CVTJFTU�JO�UFSNT�PG�JOUFSOBUJPOBM�QBTTFOHFS�USBGěD��5IF�FYQBOTJPO�BOE�NPEFSOJ[BUJPO�QSPKFDU�JT�UBSHFUFE�UP�JODSFBTF�UIF�FYJTUJOH�BJSQPSU�DBQBDJUZ�GSPN�����NJMMJPO�UP����NJMMJPO�QBTTFOHFST�BOOVBMMZ��5IF�TDPQF�PG�XPSL�JODMVEFT�DPOTUSVDUJPO�PG�UXP�ěWF�TUPSJFE�4UBUF�PG�UIF�BSU�JOUFSDPOOFDUFE�EPNFTUJD�BOE�JOUFSOBUJPOBM�UFSNJOBMT �B�QBSL�DVN�XBUFS�CPEZ�BOE�B�SJHIU�UVSO�ĜZPWFS�EFEJDBUFEMZ�DPOOFDUJOH�7*1�3PBE�UP�UIF�BJSQPSU��5IF�UFSNJOBMT�XJMM�IBWF�DBS�QBSLJOH�GBDJMJUZ �IPUFMT �GPPE�DPVSUT �BOE�EVUZ�GSFF�TIPQT�FUD��5IF�QSPKFDU�IBT�CFFO�BXBSEFE�UP�*5%��*5%$FN�+7 �B�DPOTPSUJVN�PG�*UBMJBO�5IBJ�%FWFMPQNFOU�1VCMJD�$PNQBOZ�-JNJUFE�BOE�*5%�$FNFOUBUJPO�India Limited.
Following are the key details of project
Capacity expansionFrom 9.6 million passengers to 20 million passen-gers annually
Location ,PMLBUB �8FTU�#FOHBM
Investment approval date August 2008
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
Expansion and Modernization of NSCBI
Airport
FACTS
Project Planning and current status
Originally planned Anticipated/ Revised Overrun
Project completion date
August 2011 October 2012 14 Months
Project cost (INR Crore)
1942.5 ���� ���
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�respondents
5IF�QSPKFDU�XBT�BQQSPWFE�PO���"VHVTU����� �XJUI�QMBOOFE�DPNQMFUJPO�EBUF�PG���"VHVTU�������)PXFWFS �UIF�QSPKFDU�HPU�EFMBZFE�CZ����NPOUIT�BOE�OPX�FYQFDUFE�UP�CF�DPNNJTTJPOFE�JO�0DUPCFS�������0O�ěOBODJBM�GSPOU �UIF�QSPKFDU�DPTU�JT�FYQFDUFE�UP�JODSFBTF�CZ����QFSDFOU�GSPN�*/3�� ������DSPSF�UP�*/3�� ����DSPSF�
89 | Study on Project Schedule and Cost Overruns
1 Traffic News, Airport Authority of India; KPMG in India Analysis
Project Milestones
#FMPX�BSF�UIF�NBKPS�NJMFTUPOFT�GPS�/4$#*�"JSQPSU�BT�PO�"VHVTU�������5IFTF�EFUBJMT�BSF�QSPWJEFE�XJUI�UIF�TVSWFZ�RVFTUJPOOBJSF�
Task Name Start DateActual/Expected Finish Date
Construction of Integrated Passenger Terminal Building (NSCBI, Kolkata) November 2008 March 2012
5FSNJOBM�#VJMEJOH November 2008 March 2012
(FOFSBM�3FRVJSFNFOU November 2008 March 2012
$POTUSVDUJPO�*OGPSNBUJPO�$MJFOU�%FMJWFSBCMF November 2008 February 2010
Preliminaries November 2008 September 2011
Earthwork March 2009 July 2011
International Terminal May 2009 December 2010
&YDBWBUJPO May 2009 March 2010
8BUFSQSPPěOH�#BTFNFOU November 2009 December 2010
Domestic Terminal March 2009 July 2011
&YDBWBUJPO March 2009 July 2010
8BUFSQSPPěOH October 2009 July 2011
Structure October 2009 September 2011
RC Superstructure October 2009 September 2011
International Terminal October 2009 September 2011
Arrival Lower Level October 2009 November 2010
Arrival Upper Level January 2010 January 2011
Departure Lower Level April 2010 March 2011
Departure Upper Level January 2011 September 2011
Steel Structures May 2009 September 2011
Domestic February 2010 September 2011
International May 2009 September 2011
3PPěOH December 2010 December 2011
Façade February 2011 October 2011
Road Work May 2009 December 2011
Wood Work April 2010 December 2011
%PNFTUJD�5FSNJOBM April 2010 November 2011
*OUFSOBUJPOBM�5FSNJOBM September 2010 December 2011
Internal Finishing April 2010 December 2011
%PNFTUJD�5FSNJOBM September 2010 December 2011
*OUFSOBUJPOBM�5FSNJOBM April 2010 December 2011
Car Park November 2009 July 2011
RCC Floor Slab November 2009 December 2010
RCC Middle Level July 2010 April 2011
3$$�5PQ�-FWFM August 2010 July 2011
Study on Project Schedule and Cost Overruns | 90
Task Name Start DateActual/Expected Finish Date
External Finishing August 2010 December 2011
MES Work August 2010 December 2011
1PXFS�4VQQMZ���%(�4FUT August 2010 November 2011
&MFWBUPST���&TDBMBUPST April 2011 December 2011
Fire Fighting November 2010 December 2011
HVAC October 2010 December 2011
*OUFSOBM���&YUFSOBM�&MFDUSJěDBUJPO November 2010 November 2011
1MVNCJOH �4BOJUBSZ �%SBJOBHF �8BUFS�4VQQMZ November 2010 December 2011
5FTUJOH���$PNNJTTJPOJOH�PG�.&1�4ZTUFNT July 2011 September 2011
/PUF��5IF�BCPWF�TUBUVT�BT�PO�"VHVTU�������FYQFDUFE�UJNFMJOFT�NJHIU�IBWF�DIBOHFE
4PVSDF��,1.(�JO�*OEJB�ĸ�1.*�4VSWFZ�PO�DPTU�BOE�TDIFEVMF�PWFSSVO �������CBTFE�PO�JOUFSBDUJPO�XJUI�TVSWFZ�SFTQPOEFOUT
Reasons for Schedule and Cost Overruns
Delay in handing over of the site: At the
UJNF�PG�BXBSE�PG�DPOUSBDU �POMZ����QFSDFOU�of land was handed over to the contractor.
5IF�SFNBJOJOH�MBOE�XBT�IBOEFE�PWFS�JO�QBSUT��TP�UIBU�FYJTUJOH�BJSQPSU�PQFSBUJPOT�TIPVME�OPU�CF�JOUFSSVQUFE��'VSUIFS �delay in required removal or demolition
PG�FYJTUJOH�TUSVDUVSF �MFE�UP�TDIFEVMF�overrun.
Inaccurate DPRs and ineffective
planning:�5IF�QSPKFDU�QMBO�EJE�OPU�GPDVT�on the relocation of critical facilities such
BT�XBUFS�SFTFSWPJS �QPXFS�IPVTF �BJS�conditioning plant and generator room
which were stationed in an old building
and needed to be demolished under
UIF�FYQBOTJPO�QSPKFDU�QMBO��"T�B�SFTVMU �the demolition of the old structure was
EFMBZFE �MFBEJOH�UP�BO�PWFSBMM�QSPKFDU�EFMBZ
Shortage of land at construction site
for stacking of construction materials:
y 5IF�TJUF�PG�*OUFHSBUFE�1BTTFOHFS�5FSNJOBM�#VJMEJOH�JT�WFSZ�DMPTF�UP�UIF�FYJTUJOH�PQFSBUJPOBM�GBDJMJUJFT�J�F��BQSPO �domestic terminal building and other
allied structures due to which no land
contiguous to the work site could
be handed over to the contractor for
stacking of construction materials and
fabrication / structural steel works
constitutes a major part of the job.
5IFTF�NBUFSJBMT�JODMVEJOH�GBCSJDBUFE�steel structure were stacked in non-
contiguous and scattered sites around
the Airport premises causing logistics
problem and delay in fabrication work.
y Delay in completing security clearance
GPS�EVNQJOH�PG�FYDBWBUFE�NBUFSJBM�inside operational area
Pending revised budget approval
from PIB, leading to delay in awarding
packages: Due to cost escalation of
DPOTUSVDUJPO�NBUFSJBM �UIF�CVEHFU�DPTU�was overrun by 20 percent. A revised
cost estimate was submitted to Public
*OWFTUNFOU�#PBSE�1*# �GPS�XIJDI�approval is awaited2. Due to budget
constraint there is delay in awarding the
contracts.
Delay in obtaining approvals: NSCBI
Airport received late approval from State
(PWFSONFOU�GPS�7*1�ĜZPWFS�BOE�UIFSF�XBT�a delay in removal of encroachments by
State municipality.
‘Work-to-rule’ agitation: Protest from
"JSQPSUT�"VUIPSJUZ�PG�*OEJBijT�""*�JOUFSOBUJPOBM�BJSQPSUT�EJWJTJPO�*"%�FOHJOFFST�BOE�FNQMPZFFT �XIJDI�IBE�taken around 60 engineers off the
PWFSUJNF�SPTUFS �TMPXFE�EPXO�UIF�QSPKFDU�QSPHSFTT��5IJT�BHJUBUJPO�JT�POF�PG�UIF�major reasons for pushing the project
completion date from March 2012 to
October 2012.
Measures taken by AAI to debottleneck project
1. Chairman of AAI was himself involved
and had meetings with the leaders
of protesting employees. It was only
after his assurance agitation was
suspended.
2. Along with in-house Project
Monitoring & Quality Assurance
1.2"�DFMM �""*�IBT�BQQPJOUFE�BO�independent consultant to ensure the
quality of construction work.
91 | Study on Project Schedule and Cost Overruns
2 As on September 2011
Bridging the Urban Housing Shortage in India | 92
Common risks and suggestive NFBTVSFT�BDSPTT�ěWF�DBTF�TUVEJFT"T�PCTFSWFE�JO�UIF�BCPWF�DBTF�TUVEJFT �there are common factors impacting the
project delivery across these projects
whereas the risk are peculiar to each
QSPKFDU��'VSUIFS �XF�IBWF�TFFO�DPNQBOJFT�adopt different approaches to overcome
PS�NJOJNJ[F�UIF�JNQBDU�PG�EFMBZT�PO�UIF�overall project completion. Based on our
FYQFSJFODF�PG�DBTF�TUVEJFT �CFMPX�BSF�few suggestions that can be addressed
by project owners to help rule out key
DPODFSOT��
�&YIBVTUJWF�SJTL�JEFOUJěDBUJPO�BU�the planning stage
8IJMF�BOBMZ[JOH�UIF�QSPKFDUT �XF�JEFOUJěFE�UIBU�NPTU�DPNQBOJFT�EPOijU�conduct detailed risk assessment at the
QMBOOJOH�TUBHF��&BDI�QSPKFDU�IBT�TPNF�TQFDJěD�SJTLT�SFMBUFE�UP�UIF�TVSSPVOEJOH�FOWJSPONFOU �DPOUSBDUPST�BOE�MPDBM�stake holders that could impact project
DPNQMFUJPO��'PS�FYBNQMF �7JOEIZBDIBM�project has risks around timely supply
from equipment supplier and NSCBI
airport has risk related to constructing a
QSPKFDU�BU�BO�PQFSBUJPOBM�TJUF��5IVT �UIFSF�is need to do a very detailed analysis of all
QPTTJCMF�SJTLT��'VSUIFS �UIFTF�SJTLT�OFFE�UP�be formally documented and monitored
BU�FBDI�TUBHF�PG�QSPKFDU�FYFDVUJPO�
Holistic view of regulatory approvals
Majority of projects faced hindrances in
HFUUJOH�TUBUVUPSZ�BQQSPWBMT��5IFSF�JT�B�need to include approvals process and
UJNFMJOFT�JO�UIF�QSPKFDU�QMBO�XJUI�TQFDJěD�timelines. Any deviation in achieving
these timelines should have a suitable
NJUJHBUJPO�QMBO �GPS�UJNFMZ�DPNQMFUJPO�PG�QSPKFDU��'VSUIFS �GSPN�(PWFSONFOU�side there is a need to make approval
and clearance processes smooth by
introducing innovative measures such as
single window clearance.
Develop Integrated Project Delivery Schedule
.PTU�QSPKFDUT�BSF�CFJOH�FYFDVUFE�CZ�TQMJU�QBDLBHF�NPEF �JO�XIJDI�NVMUJQMF�contractors are carrying out different
TDPQF��'VSUIFS �FBDI�DPOUSBDUPS�TVCNJUUFE�its own schedule which is generally
not integrated to make a single project
TDIFEVMF��5IF�NPOJUPSJOH�JT�DBSSJFE�PVU�based on individual schedules. In this
TZTUFN�JG�POF�DPOUSBDUPS�JT�EFMBZJOH �UIF�effect will not be seen on activities of
PUIFS�DPOUSBDUPST��5IVT �UP�NPOJUPS�UIF�QSPKFDU�XJUI�NVMUJQMF�DPOUSBDUPST �JU�JT�WFSZ�important to have one a single integrated
project schedule encompassing the
TDPQF�PG�BMM�DPOUSBDUPST��"EEJUJPOBMMZ �UIJT�schedule has to be updated frequently to
monitor overall project status.
Build power partnership with vendors
Delay in getting equipments from
suppliers/contractors is another reason
which impacts the project delivery.
Building a long term relationship with
vendors could help in timely delivery of
FRVJQNFOUT��'VSUIFS �KPJOU�FWBMVBUJPO�of project by project owners and the
DPOUSBDUPST �DBO�IFMQ�JO�JEFOUJGZJOH�UIF�bottlenecks and taking corrective actions.
*O�DBTF�PG�)1$- �UJNFMZ�JOWPMWFNFOU�PG�TFOJPS�NBOBHFNFOU�PG�CPUI�QBSUJFT�)1$-�BOE�DPOUSBDUPS �IBE�IFMQFE�JO�JEFOUJGZJOH�the concerns and they mutually agree on
the corrective actions.
Enhance monitoring agency (PMO) to monitor the progress and bottlenecks on regular basis
Most companies have an in-house
system of monitoring project progress.
)PXFWFS �TFUUJOH�VQ�B�DFOUSBMJ[FE�JOEFQFOEFOU�NPOJUPSJOH�BHFODZ�1.0�could help in monitoring the project
progress and identifying bottlenecks in an
FGěDJFOU�NBOOFS��'VSUIFS �UIJT�XPVME�BDU�as an interface between project site and
DPSQPSBUF�PGěDF �FOIBODJOH�UIF�QSPKFDU�delivery.
Buy-in from execution team on project schedule
5IF�QSPKFDU�TDIFEVMF�JT�PGUFO�QSFQBSFE�CZ�UIF�DPSQPSBUF�PGěDF�BOE�HJWFO�UP�UIF�QSPKFDU�UFBN�GPS�FYFDVUJPO��5IF�TDIFEVMF�JT�OPU�QSFQBSFE�CZ�UBLJOH�JO�UP�DPOěEFODF�BMM�UIF�FYFDVUJOH�BHFODJFT�TVDI�BT�FOHJOFFSJOH �QSPDVSFNFOU�BOE�FYFDVUJPO�UFBNT��5IJT�DSFBUFT�JTTVFT�BSPVOE�accountability of the timelines given in the
TDIFEVMF��5IF�QSPKFDU�TDIFEVMF�IBT�UP�CF�signed off by all agencies after agreeing to
the timelines given for their activities.
Study on Project Schedule and Cost Overruns | 92
10SE
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93 | Study on Project Schedule and Cost Overruns
Global insights — Learning from global projects
Although building infrastructure projects is a
global challenge today, the sector is expected to
experience an unprecedented level of investment
and expansion in infrastructure around the world.
An estimated USD 40 trillion of investment would
be needed by 2050 to sustain the global growth1.
To understand the infrastructure challenges
and how industry is preparing to overcome
them, KPMG International conducts ‘Global
$POTUSVDUJPO�4VSWFZij �XIJDI�SFĜFDUT�UIF�DPODFSOT�and views of the world’s leading engineering
and construction companies. This survey also
highlights that while the intensity of some issues
is same across the globe, others have more
impact in a particular region or country.
Study on Project Schedule and Cost Overruns | 94
1 KPMG International’s publication — “Insight – The global infrastructure magazine”, November 2010
Challenges of global construction industry
Project delays and cost overruns is a
global phenomenon and India is no
FYDFQUJPO��%VF�UP�EJGGFSFODF�JO�UIF�TPDJP�FDPOPNJD�BOE�QPMJUJDBM�NBUVSJUZ�MFWFMT �UIF�VOEFSMZJOH�DBVTFT�BOE�UIFSFGPSF �UIF�remedies differ from country to country.
%FTJHO�DSFFQ �QPPSMZ�EFěOFE�TDPQF�BOE�lack of approvals have been regarded
as the main causes of delays across the
globe. Contractual disputes also impact
the project schedule although none of the
global construction survey respondents
from the Americas region cited this as
B�DPODFSO �XIJDI�DPVME�JOEJDBUF�UIBU�contracts are tied down more tightly in
this region.
Skill shortage is another issue impacting
the implementation of infrastructure
projects. 84 percent2 of the respondents
felt that the construction industry is not
doing enough to tackle skills shortages.
"MTP �UIF�JOEVTUSZ�JT�NBLJOH�FYUFOTJWF�VTF�PG�GPSFJHO�MBCPS�PO�QSPKFDUT �XIJDI�is both a reaction to local shortfalls and
a natural consequence of the increased
mobility of people.
'VSUIFS �EVF�UP�JODSFBTJOH�DPODFSOT�GPS�DMFBO�FOWJSPONFOU �TVTUBJOBCMF�construction is very high on the agenda
of project owners. Nearly all surveyed
companies have an environmental
QPMJDZ�JO�QMBDF �XJUI�UIF�#PBSE�UBLJOH�responsibility in over two-thirds of cases.
5IPVHI�TVTUBJOBCJMJUZ�JT�QFSDFJWFE�BT�B�DPNQMJBODF�CVSEFO �TVSQSJTJOHMZ�NPTU����QFSDFOU�CFMJFWF�JU�XJMM�BDUVBMMZ�JODSFBTF�QSPěUBCJMJUZ��$PNQBOJFT�DPVME�CFOFěU�CZ�presenting a green image to stakeholders
ĸ�QBSUJDVMBSMZ�DVTUPNFST �UIF�MPDBM�DPNNVOJUZ�BOE�FNQMPZFFT��5IF�TVSWFZ�respondents agree that there are multiple
CFOFěUT�PG�TVTUBJOBCMF�DPOTUSVDUJPO��)PXFWFS �TPNF�SFTQPOEFOUT�EP�OPU�IBWF�a management system to set appropriate
key performance indicators to measure
sustainable performance. Inability to
deliver sustainable infrastructure projects
can have dire consequences for the
developer’s reputation.
Reasons for schedule delay globally
Reasons for cost overrun globally
Note: Respondents could answer more than one option
Source: Global Construction Survey 2008, KPMG International
Note: Respondents could answer more than one option
Source: Global Construction Survey 2008, KPMG International
95 | Study on Project Schedule and Cost Overruns
2 Global Construction Survey 2008, KPMG International
Leading practices followed in the construction industry
Sophisticated approach to risk
management - With growing
VODFSUBJOUJFT�JO�UIF�HMPCBM�NBSLFU �SJTL�management is emerging as one of the
key imperatives for project management.
Leading companies of the world
apply ‘holistic’ approach where risk is fully
integrated into every aspect of the project
life cycle. Rigorous analysis is done at the
planning and bidding stages as part of
BO�FWPMWJOH�SJTL�DVMUVSF��'VSUIFS �QSPKFDU�owners consider and evaluate factors
that may have a direct or indirect impact
on the project such as macro-economic
DPOEJUJPO �UBY�TUSVDUVSF �FOWJSPONFOUBM�QPMJDZ �BOE�DSFEJU�BWBJMBCJMJUZ�
%VSJOH�QSPKFDU�FYFDVUJPO �B�NFDIBOJTN�is put in place to seek a more objective
review of projects by dedicated risk
QSPGFTTJPOBMT �PGUFO�PO�B�RVBSUFSMZ�CBTJT��
"DDPSEJOH�UP�,1.(�*OUFSOBUJPOBMijT�(MPCBM�$POTUSVDUJPO�4VSWFZ����� ����QFSDFOU��of the respondents believed that their
systems and controls were fairly or very
TPQIJTUJDBUFE �SFĜFDUJOH�JODSFBTJOH�investment in risk management over a
number of years.
Preferred partnership with suppliers -
(MPCBMMZ �NPTU�PG�UIF�DPNQBOJFT�IBWF�formal or informal partnering agreements
XJUI�DPOUSBDUPST �WFOEPST�BOE�TVQQMJFST��"DDPSEJOH�UP�,1.(�*OUFSOBUJPOBMijT�(MPCBM�$POTUSVDUJPO�4VSWFZ����� �PWFS�90 percent of respondents had some
preferred partnerships with their
contractors and suppliers . Preferred
partnerships not only helped companies
to get reduced prices but also guaranteed
SFTPVSDFT�UP�DBSSZ�PVU�UIF�XPSL�POTJUF �gain priority attention for critical projects
and reduce contractual claims.
Talent management -�5P�PWFSDPNF�SFTPVSDF�TIPSUBHF �UBMFOU�NBOBHFNFOU�is one of the top agenda for infrastructure
DPNQBOJFT��5P�EFWFMPQ�BOE�SFUBJO�B�IJHI�RVBMJUZ�FNQMPZFF�CBTF �DPNQBOJFT�BSF�OVSUVSJOH�UBMFOU�JO�LFZ�QPTJUJPOT �JOWFTUJOH�JO�OFDFTTBSZ�USBJOJOH �BOE�SFUBJOJOH�UIF�best people during adverse conditions.
'VSUIFS �UP�BUUSBDU�GSFTI�UBMFOU�JO�UIF�JOEVTUSZ �TPNF�QSBDUJDBM�NFBTVSFT�BSF�VOEFSUBLFO�JODMVEJOH�CFUUFS�USBJOJOH �HSFBUFS�DPPQFSBUJPO�XJUI�VOJWFSTJUJFT �BOE�an improved salary and career structure.
We’re entering into more strategic partnerships and joint ventures when executing larger projects, in order to spread the risk and leverage key strengths
Survey respondent, United StatesGlobal Construction survey 2009,
KPMG International
We try to identify key staff early and give them job rotation and training opportunities.
Survey respondent, Europe, Middle East and Africa region
Global Construction survey 2009, KPMG International
Study on Project Schedule and Cost Overruns | 96
Cost escalation management: In
a world where costs are constantly
JODSFBTJOH �HSFBUFS�FGěDJFODZ�JT�UIF�LFZ�UP�DPOUSPM�UIF�QSPKFDU�DPTU�PWFSSVOT��5P�DSFBUF�B�MPXFS�DPTU�PQFSBUJPO �DPNQBOJFT�are carefully managing all elements of the
TVQQMZ�DIBJO �BOE�GPDVTJOH�PO�JODSFBTJOH�their productivity. Companies employ a
variety of techniques to manage rising
DPTUT �XJUI�VTBHF�TQSFBE�GBJSMZ�FWFOMZ�BDSPTT�MPOH�UFSN�TVQQMZ�BHSFFNFOUT �FBSMZ�QSPDVSFNFOU �QSF�QVSDIBTJOH�PG�WPMBUJMF�NBUFSJBMT �QBTTJOH�SJTLT�UP�the supply chain and hedging vital
commodities.
Contract clauses: Due to uncertainty
JO�UIF�DPTU�PG�LFZ�NBUFSJBM �DPNQBOJFT�are increasingly using contract clauses
UIBU�TQFDJěDBMMZ�BEESFTT�JOĜBUJPO��.PTU�companies choose to be transparent
by referring to publicly available cost
indices in their contracts. According to
,1.(�*OUFSOBUJPOBMijT�(MPCBM�$POTUSVDUJPO�4VSWFZ����� ����QFSDFOU�PG�SFTQPOEFOUT�claim to practice this for the majority of
UIFJS�QSPKFDUT��5IJT�QSBDUJDF�JT�GPVOE�UP�CF�UIF�NPTU�DPNNPO�JO�&VSPQF �.JEEMF�&BTU�BOE�"GSJDB �XJUI�SFMBUJWFMZ�MJUUMF�TVDI�BDUJWJUZ�JO�"TJB�1BDJěD��)PXFWFS �these types of contracts are preferred
CZ�DPOUSBDUPST �XIFSFBT�OPU�BMM�QSPKFDU�owners are willing to share these risks by
agreeing to contract clauses that cover
rising costs. KPMG in India’s point of view
Majority of reasons that lead to project cost and schedule overruns in India are not
NVDI�EJGGFSFOU�GSPN�BOZXIFSF�FMTF�JO�UIF�XPSME��)PXFWFS �UIF�UFDIOJRVFT�VTFE�CZ�(PWFSONFOU�BOE�JOEVTUSZ�UP�PWFSDPNF�UIFTF�CPUUMFOFDLT�BSF�EJGGFSFOU��'BTUFS�SFHVMBUPSZ�BQQSPWBMT �EFUBJMFE�QSPKFDU�QMBOOJOH �DPOUJOVPVT�QSPKFDU�NPOJUPSJOH�BOE�JODMVTJWF�SJTL�NBOBHFNFOU �DPVME�NBLF�*OEJB�DPNQBSBCMF�UP�BOZ�PUIFS�DPVOUSZ�JO�UIF�world in terms of project delivery.
Reasons for schedule delay globally
Note: Respondents could answer more than one option
Source: Global Construction Survey 2008, KPMG International
97 | Study on Project Schedule and Cost Overruns
Study on Project Schedule and Cost Overruns | 98
11SE
CT
ION
99 | Study on Project Schedule and Cost Overruns
Sector snippets
Study on Project Schedule and Cost Overruns | 100
Petroleum
y India’s demand for oil & gas is continuously increasing, though the indigenous production is almost stagnant, leading to increasing imports
y Major sector players are ONGC, IOCL, BPCL, HPCL, OIL, GAIL, RIL, Essar1
y 4MPX�QBDF�PG�FYQMPSBUJPO�BDUJWJUJFT �NBUVSJOH�PJM���HBT�ěFMET�BOE�controlled price regime are some of the key challenges.
Sector Overview
y India is the fourth largest consumer of
FOFSHZ��0JM���(BT�TFDUPS�DPOUSJCVUFT�around 40 percent in India’s primary
energy consumption2.
y 0JM�DPOTUJUVUFT�BSPVOE����QFSDFOU�PG�*OEJBijT�UPUBM�JNQPSUT���������.
y "T�PG�.BSDI����� �*OEJB�IBT����SFěOFSJFT�XJUI�B�UPUBM�DBQBDJUZ�PG�����.51"4.
y 'SPN���������UP�������� �QSPEVDUJPO�PG�DSVEF�PJM�IBT�HSPXO�BU�B�$"(3�PG�����QFSDFOU�GSPN�BSPVOE������NJMMJPO�UPOOFT�UP������NJMMJPO�UPOOFT��%VSJOH�the same period the production of
natural gas has increased at 6.7
QFSDFOU�Q�B�GSPN������#$.�UP������BCM5.
y 'SPN���������UP�������� �consumption of petroleum products
increased at 4.6 percent p.a and gas
DPOTVNQUJPO�BU�����QFSDFOU�Q�B�5
Petroleum products and natural gas consumption
Source: Historic consumption of petroleum products and natural gas, Petroleum planning and analysis cell (PPAC), accessed June 2013
101 | Study on Project Schedule and Cost Overruns
1 India Oil & Gas sector competitive landscape, BMI, 11 December 2012 2 BP statistical review of world energy 2012, June 20123 Handbook of Statistics on Indian Economy, Reserve Bank of India, June 20134 Installed Refinery Capacity, PPAC, accessed June 20135 Historic production of petroleum products and natural gas, (PPAC), accessed June 2013
Five year plans performance
Oil and gas is one of the few sectors
XIJDI�NPTUMZ�FYDFFE�UIF�JOWFTUNFOU�UBSHFUT�MBJE�PVU�JO�ěWF�ZFBST�QMBOT��'PS�JOTUBODF �JO�5FOUI�'JWF�:FBS�1MBO �UIF�BDUVBM�FYQFOEJUVSF�XBT�����QFSDFOU�PG�QMBOOFE�PVUMBZ�BU�*/3�� �� ����DSPSF��4JNJMBSMZ �EVSJOH�UIF�NJE�UFSN�BQQSBJTBM�PG�FMFWFOUI�QMBO �(PWFSONFOU�IBE�SFWJTFE�JUT�QMBOOFE�PVUMBZ�UP�*/3�� �� ����DSPSF�GSPN�*/3�� �� ����DSPSF �B����QFSDFOU�JODSFBTF�JO�QMBOOFE�FYQFOEJUVSF��5IJT�JT�mainly because of aggressive investment
QMBOT�CZ�PJM�BOE�HBT�DPNQBOJFT��5IF�BDUVBM�FYQFOEJUVSF�EVSJOH�UIF�ěSTU�UXP�ZFBST�BOE���NPOUIT�PG�&MFWFOUI�1MBO�VQ�UP�"VHVTU������XBT�*/3�� �� �������DSPSF�XIJDI�JT�������QFS�DFOU�PG�UIF�QMBO�approved outlay6.
Key Challenges
1. Slow pace of exploration activities:
*O�*OEJB �BSPVOE����QFSDFOU�PG�BDSFBHF�TUJMM�GBMMT�VOEFS�QPPSMZ�FYQMPSFE�UP�VOFYQMPSFE�SFHJPO7��"MTP �FWFO�BGUFS�EJTDPWFSJOH�PJM�HBT �EFWFMPQNFOU�BOE�QSPEVDUJPO�PG�ěFMET�UBLF�NVDI�MPOHFS�time.
2. .BUVSJOH�0JM�(BT�ěFMET� Most of the
QSPEVDJOH�ěFMET�IBWF�NBUVSFE�BOE�are witnessing a declining production.
.VNCBJ�IJHI�BOE�(VKBSBU�BSF�UZQJDBM�FYBNQMFT�PG�TVDI�ěFMET��"MTP �*NQSPWFE���&OIBODFE�0JM�3FDPWFSZ�*03�&03�QSPHSBNT�JNQMFNFOUFE�CZ�0/($�XFSF�VOBCMF�UP�BSSFTU�UIF�decline.
3. Underutilization of existing natural
gas infrastructure: Natural gas
QJQFMJOF�BOE�$JUZ�(BT�%JTUSJCVUJPO�$(%�JOGSBTUSVDUVSF�MBJE�EPXO�CZ�DPNQBOJFT�NJHIU�CF�VOEFS�VUJMJ[FE�primarily due to constrained domestic
supply of natural gas.
4. Risk of natural gas infrastructure
not being laid down: Due to low
FOUSZ�CBSSJFS �OPO�TFSJPVT�QMBZFST�IBWF�entered in to the business and now
they might not lay the gas pipelines.
Further some new companies that
have entered in the gas business
don’t have requisite capabilities to lay
infrastructure.
Emerging Trends
1. Exploration activities:�5P�QSPNPUF�investment in upstream activities
(PWFSONFOU�IBT�MBVODIFE�/FX�&YQMPSBUJPO�-JDFOTJOH�1PMJDZ�/&-1��*O�UIF�ěSTU�FJHIU�SPVOET�PG�/&-1�TQBOOJOH���������� �1SPEVDUJPO�4IBSJOH�$POUSBDUT�14$T�GPS�����FYQMPSBUJPO�CMPDLT�IBWF�CFFO�TJHOFE��/&-1�*9�SFDFJWFE����CJET�GPS���� blocks .6
2. Unconventional sources: India
has huge potential to develop
unconventional sources of
hydrocarbon including Shale gas and
$#.��5IF�(PWFSONFOU�PG�*OEJB�JT�QMBOOJOH�UP�MBVODI�UIF�ěSTU�SPVOE�PG�CJEEJOH�GPS�TIBMF�HBT�JO�UIF�5XFMGUI�Five Plan8
3. Fuel prices: Petrol prices have
been decontrolled with effect from
June 2010 and there are plans to
decontrol diesel prices as well.
$VSSFOUMZ �(PWFSONFOU�JT�XPSLJOH�on a mechanism of direct transfer of
TVCTJEZ�GPS�LFSPTFOF�BOE�-1(�9
Planned expenditure vs Actual expenditure
* XI plan actual expenditure is only up to August 2009
Source: Planning commission
Study on Project Schedule and Cost Overruns | 102
6 Seventh to Eleventh Five Year Plans, Planning Commission7 Directorate General of Hydrocarbon (DGH)8 India to launch shale gas exploration bid during 12th Plan, Indian Express, dated 22
November, 20119 Poor consumers may get cash subsidy on LPG, kerosene and fertilizers, Economic
Times, 6 July 2011
Power
y With substantial addition in power generation capacity, peak power EFěDJU�IBT�EFDSFBTFE�JO�UIF�SFDFOU�ZFBST
y Major sector players are NTPC, NHPC, PGCIL, PTC, Tata power, Lanco Power1
y Slow pace of project execution, shortage of power equipments, delays in land acquisition and regulatory approvals are some of the key challenges.
Sector Overview
y India’s power demand and supply
is continuously increasing. During
��������UP�������� �QFBL�FMFDUSJDJUZ�EFNBOE�IBT�JODSFBTFE�BU�B�$"(3�PG�����QFSDFOU�BOE�TVQQMZ�BU�B�$"(3�PG�����QFSDFOU2.
y "T�PO����"QSJM����� �UIF�UPUBM�JOTUBMMFE�capacity for power generation was
BCPVU�����(8��"SPVOE����QFSDFOU�PG�UIJT�DPNFT�GSPN�DPBM ����QFSDFOU�GSPN�IZESP ���QFSDFOU�GSPN�HBT�and the remaining 15 percent is
DPOUSJCVUFE�CZ�OVDMFBS �EJFTFM�BOE�other renewable sources of energy�.
Peak power demand supply in India
Source: Power Scenario at a Glance, Central Electric Authority, 2013
103 | Study on Project Schedule and Cost Overruns
1 India power sector competitive landscape, BMI, 4 January 20132 “Power Scenario at a Glance”, Central Electric Authrotiy, June 20133 “Installed Generation Capacity”, Central Electric Authority, April 2013
Five year plans performance
5IF�QFSGPSNBODF�PG�QPXFS�TFDUPS�JO�ěWF�ZFBS�QMBOT�JT�NPTUMZ�MPXFS�UIBO�UIF�QMBOOFE�UBSHFU��)JTUPSJDBMMZ �BMM�UISFF�TFDUPST�ĸ�DFOUSBM �4UBUF�BOE�QSJWBUF�ĸ�IBWF�fallen short of achieving the planned
UBSHFUT��'PS�JOTUBODF �/JOUI�BOE�5FOUI�'JWF�:FBS�1MBO�CBSFMZ�NBOBHFE�UP�BDIJFWF�half of the planned capacity addition.
)PXFWFS �UIF�QSPTQFDUT�PG�&MFWFOUI�1MBO�look better and according to mid-term
BQQSBJTBM �PG�JU�JT�FYQFDUFE�UP�BDIJFWF�around 80 percent of the targeted
capacity addition.
"MTP �GPS�FWFSZ�ěWF�ZFBS�QMBO�UIF�DBQBDJUZ�addition targets are much higher from
the previous year achievement. For
FYBNQMF �&MFWFOUI�'JWF�:FBS�1MBO�UBSHFU�is around four times then the actual
capacity additions achieved in tenth plan.
Participation from the private sector is
also increasing mainly due to favorable
(PWFSONFOU�QPMJDJFT�BOE�QPXFS�TFDUPS�reforms.
Key Challenges
1. Delay in project execution: India
has been failing to meet the capacity
BEEJUJPO�UBSHFUT�CZ�TJHOJěDBOU�NBSHJOT��'PS�UIF�&MFWFOUI�'JWF�:FBS�1MBO �POMZ�around 70 percent4 of the planned
target capacity addition was met.
2. Shortage of fuel availability: Power
TFDUPS�JT�GBDJOH�TJHOJěDBOU�DIBMMFOHFT�in securing fuel supply primarily due
to lack of good quality domestic
DPBM �FYQFOTJWF�JNQPSUFE�DPBM�BOE�limitation in domestic gas supply.
3. Delay in land acquisition and
environment clearances: Absence of
single window clearance mechanism
results in delay in acquiring land
BOE�PUIFS�FOWJSPONFOU�DMFBSBODFT �thus leading to a prolonged pre-
development cycle.
4. Shortage of power equipment:
5IF�EFNBOE�PG�QPXFS�FRVJQNFOU�FYDFFET�UIF�TVQQMZ�QSJNBSJMZ�GPS�UIF�DPSF�DPNQPOFOUT�PG�#PJMFST �5VSCJOFT�BOE�(FOFSBUPST��5IF�QSJNBSJMZ�SFBTPO�for this mismatch is the equipment
manufacturers were unable to keep
pace with increasing generation
capacity.
Emerging Trends
1. Power Reforms: (PWFSONFOU�IBT�taken several steps to promote
investment and private sector
participation in the sector. Some of
the major reforms that have been
JNQMFNFOUFE�PWFS�UIF�ZFBST�JODMVEF��5IF�&MFDUSJDJUZ�"DU����� �VOCVOEMJOH�PG�4&#T �UBY�CFOFěUT �"DDFMFSBUFE�Power Development and Reform
1SPHSBN�"1%31�GPS�EJTUSJCVUJPO �QFSNJTTJPO�GPS�USBEJOH�PG�QPXFS �FUD��5IFTF�EFWFMPQNFOUT�IBWF�HJWFO�rise to new opportunities for power
players especially in the power
generation space.
2. Increased private sector
participation: As a result of favorable
(PWFSONFOU�QPMJDJFT�BOE�JOJUJBUJWFT �there have been a plethora of new
projects announced by the private
TFDUPS�DPNQBOJFT��5IF�TIBSF�PG�private sector in total electricity
generation has grown rapidly from
MFTT�UIBO����QFSDFOU�JO�UIF�5FOUI�1MBO�UP�BSPVOE����QFSDFOU�EVSJOH�UIF�&MFWFOUI�1MBO��5IJT�TIBSF�FYQFDUFE�to further increase to 50-60 percent
EVSJOH�UIF�5XFMGUI�QMBO5.
3. Promotion of renewable energy
for power generation:�(PWFSONFOU�is promoting renewable energy for
power generation to meet the dual
challenges of energy security and
DMJNBUF�DIBOHF��*OEJB�IBT�TJHOJěDBOU�potential for solar energy and to tap
this potential the Jawaharlal Nehru
/BUJPOBM�4PMBS�.JTTJPO�+//4.�XBT�MBVODIFE�JO�������5IF�NJTTJPO�UBSHFUT��� ����.8�PG�TPMBS�QPXFS�CZ�����6.
Planned target vs actual achievement
Source: Power Scenario at a Glance, Central Electric Authority, 2012
Study on Project Schedule and Cost Overruns | 104
4 Mid-term appraisal of Eleventh Five Year Plan, Planning Commission5 Tenth and Eleventh Five Year Plan, Planning
Commission6 PM launches Jawaharlal Nehru National Solar Mission
– Solar India, Press Information Bureau, 11 January 2010
Coal
y %SJWFO�CZ�TJHOJěDBOU�JODSFBTF�JO�EFNBOE�GSPN�QPXFS�BOE�TUFFM�sectors, the gap between the demand and supply of coal is widening
y Major sector players are CIL, SCCL1
y Slow pace of exploration, lack of evacuation infrastructure and environmental concerns are some of the key challenges.
Sector Overview
y India is the third largest producer
PG�DPBM�JO�UIF�XPSME �BDDPVOUJOH�GPS�about 5.6 percent of the total global
production2.
y "SPVOE����QFSDFOU�PG�*OEJBijT�BOOVBM�primary energy consumption is
sourced through coal�.
y "T�PG�"QSJM����� �*OEJBijT�UPUBM�recoverable coal reserves stood at
������CJMMJPO�UPOOFT�CU�PG�XIJDI�about 118 bt are proved reserves4.
y 5IF�QPXFS�TFHNFOU�JT�UIF�MBSHFTU�consumer of coal in India accounting
for about 75 percent of the total
coal consumption1. Other segments
JODMVEF�TUFFM �DFNFOU �SBJMXBZT�BOE�GFSUJMJ[FS�JOEVTUSZ�
Coal production and consumption
Source: Ministry of Coal
105 | Study on Project Schedule and Cost Overruns
1 India mining sector competitive landscape, BMI, 26 October 20122 BP Statistical Review 2012, June 20123 Ministry of Coal4 Ministry of Coal
Five year plans performance
5JMM�UIF�FOE�PG�&JHIUI�'JWF�:FBS�1MBO �DPBM�sector was able to achieve the planned
FYQFOEJUVSF�UBSHFUT��)PXFWFS �UIF�QFSGPSNBODF�PG�SFDFOUMZ�DPODMVEFE�ěWF�year plans has been disappointing. For
JOTUBODF �JO�/JOUI�BOE�5FOUI�'JWF�:FBS�1MBOT �UIF�BDUVBM�FYQFOEJUVSF�BHBJOTU�UIF�QMBOOFE�PVUMBZ�XBT�BCPVU����QFSDFOU�*/3��� ����DSPSF�BOE����QFSDFOU�*/3��� ����DSPSF�SFTQFDUJWFMZ��%VSJOH�UIF�NJE�UFSN�BQQSBJTBM�PG�FMFWFOUI�QMBO �(PWFSONFOU�has revised its planned outlay of INR
�� ����DSPSF�UP�*/3��� ����DSPSF �B�EFDMJOF�PG�BCPVU����QFSDFOU��5IF�NBJO�reason behind this is the monopolistic
role of the State owned players in the
Indian coal sector5.
Key Challenges
1. Slow pace of exploration activities:
Of the total recoverable coal
SFTFSWFT �BCPVU����QFSDFOU�BSF�JO�UIF�‘indicated and the inferred’ category6.
5IJT�SFĜFDUT�TMVHHJTIOFTT�JO�UIF�FYQMPSBUJPO�EPNBJO�JO�UIF�*OEJBO�DPBM�sector.
2. Socio-environment issues:
4JHOJěDBOU�QPSUJPOT�PG�UIF�*OEJBijT�coal reserves lie in the forest areas
JOGFTUFE�CZ�OBYBMT��-BOE�BDRVJTJUJPO�in such sensitive areas poses a
NBKPS�DIBMMFOHF�GPS�UIF�TFDUPS��"MTP �environmental clearance and forest
clearance processes for project
implementation is generally slow.
3. Lack of Competition:�5IF�*OEJBO�DPBM�sector is predominantly monopolistic
JO�OBUVSF �MBSHFMZ�DPOUSPMMFE�CZ�$PBM�India and other State owned miners.
.PSFPWFS �UIFSF�JT�BO�BCTFODF�PG�BO�independent regulator in this sector.
4. Inadequate evacuation
infrastructure: Coal sector primarily
depends on rail evacuation for off-take
and delivery of coal stocks. With
TJHOJěDBOUMZ�HSPXJOH�EFNBOE �UIF�evacuation infrastructure needs to be
FOIBODFE�GPS�TVTUBJOJOH�BO�FGěDJFOU�transportation.
5. Environmental concerns:
6OTDJFOUJěD�NJOJOH�PG�DPBM�JO�*OEJB�has led to a number of environmental
QSPCMFNT�JO�UIF�QBTU��5IFSF�JT�B�dominance of open cast mining
techniques in India as the production
from using such techniques can start
in short span of time.
Emerging Trends
1. Captive mining for coal: Captive
mining for coal is gradually increasing
JO�UIF�DPVOUSZ��"T�PG�.BSDI����� �����coal blocks with reserves of 45.89
billion tonnes have been allocated for
DBQUJWF�NJOJOH����1SJWBUF�DPNQBOJFT �whose involvement in the country’s
DPBM�TFDUPS�JT�MJNJUFE�UP�KPJOU�WFOUVSFT �have been allocated 100 blocks with
SFTFSWFT�PG�������CJMMJPO�UPOOFT7.
2. Efforts for technology
enhancement: Indian coal miners are
JODSFBTJOH�UIFJS�3�%�FYQFOEJUVSFT�in an attempt to enhance technology
and ensure productivity gains. Indian
players are also warming up to
collaborate with the foreign partners
GPS�JNQMFNFOUBUJPO�PG�DPNQMFY�projects in the sector.
3. Widening demand-supply gap:
5IF�EFNBOE�GPS�DPBM�JO�*OEJB�JT�SBQJEMZ�increasing mainly driven by the new
QSPKFDUT�JO�UIF�QPXFS�TFDUPS �XIFSFBT�indigenous production is not able to
JODSFBTF�XJUI�TBNF�QSPQPSUJPO��5IJT�has created a demand supply gap
JO�UIF�DPVOUSZ�BOE�UP�NFFU�UIJT�HBQ �India has been increasingly importing
DPBM��*O�����ĸ�� �UIF�DPVOUSZ�JNQPSUFE������NJMMJPO�UPOT�PG�DPBM�JODMVEJOH�UIFSNBM�BOE�DPLJOH�DPBM �SFĜFDUJOH�B�44 percent increase over imports of
68.9 million tons in 2010–118.
Planned expenditure vs Actual expenditure
* XI plan actual expenditure is only up to August 2009
Source: Planning commission
Study on Project Schedule and Cost Overruns | 106
5 Seventh to Eleventh Five Year Plans, Planning Commission6 Ministry of coal7 2011 India Energy Handbook8 Coal Imports, Press Information Bureau,14 May 2012
Steel
y India has surplus iron production and is a net exporter of steel
y Major sector players are SAIL, TISCO, JSW, Essar1
y Hindrances in land acquisition, depleting iron ore reserves and shortage of raw materials are some of the key challenges.
Sector Overview
y India has become fourth largest
producer of crude steel in the world
BOE�JT�FYQFDUFE�UP�CFDPNF�UIF�second largest producer by 20152.
y &YQPSU�PG�ěOJTIFE�TUFFM�EVSJOH���������TUPPE�BU������NJMMJPO�UPOOFT�XIJMF�JNQPSUT�EVSJOH���������TUPPE�BU������million tonnes�.
y Although the per capital steel use has
JODSFBTFE�GSPN����LH�JO���������UP����kg in 2010-11� �JU�JT�TJHOJěDBOUMZ�MPXFS�compared to the world average of
about 215 kg�.
y 5IF�DPOTUSVDUJPO�BOE�JOGSBTUSVDUVSF�segment was the largest consumer
PG�ěOJTIFE�TUFFM �BDDPVOUJOH�GPS�BCPVU�61 percent of the total consumption4.
Other major segments include
manufacturing and automobile
industry.
Finished steel production and consumption
Source: Annual report 2011-12, Ministry of Steel
107 | Study on Project Schedule and Cost Overruns
1 India Metal sector competitive landscape, BMI, 25 May 2012 2 Annual Report 2011-12, Ministry of Steel3 Ministry of Steel4 IBEF Report
Five year plans performance
After achieving only 40 percent and 44
percent of the planned outlay during
/JOUI�BOE�5FOUI�'JWF�:FBST�1MBOT �the steel sector has posted a strong
SFDPWFSZ�EVSJOH�UIF�FMFWFOUI�QMBO��5JMM�%FDFNCFS����� �UIF�TFDUPS�IBT�BMSFBEZ�achieved about 80 percent of the planned
FYQFOEJUVSF�GPS�UIF�FMFWFOUI�QMBO���5IF�main reason behind this is the aggressive
spending by the steel companies for
DBQBDJUZ�FYQBOTJPO�QSPKFDUT5.
Key Challenges
1. Hindrances in land acquisitions:
Land acquisition is a sensitive issue
in India. Land acquisition approvals
often take a long time in the country
SFTVMUJOH�JO�QSPKFDU�EFMBZT��.PSFPWFS �the environmental clearances also
generally take longer than stipulated
time in the country.
2. Shortage of raw materials:�5IF�steel manufacturers often face the
shortage of raw materials especially
coal and natural gas in India. India is
an importer of high grade coking coal
which is a major feedstock for the
steel sector.
3. Depleting iron ore resources: India
has limited resources of iron ore.
Moreover the iron ore resources are
depleting fast in the country.
4. Lack of adequate infrastructure:
While the coking coal is imported
JOUP�*OEJB�UISPVHI�QPSUT �NPTU�PG�the steel manufacturing plants are
MPDBUFE�JOMBOE��)FODF �UIF�TUFFM�NBOVGBDUVSFST�IBWF�UP�CFBS�FYUSB�burden in their transportation costs.
Emerging Trends
1. #SPXOěFME�FYQBOTJPO�QSPKFDUT� In
view of the surge in steel demand in
UIF�DPVOUSZ �B�OVNCFS�PG�CSPXOěFME�projects have been initiated in the
recent past to increase the production
DBQBDJUZ��5IF�EPNFTUJD�EFNBOE�GPS�TUFFM�JT�FYQFDUFE�UP�JODSFBTF�BU�an annual average rate of over 10
percent till 2014 and would require
B�TJHOJěDBOU�JODSFBTF�JO�UIF�FYJTUJOH�production capacity6.
2. Efforts for technology
enhancement: Indian steel
manufacturers are warming up to the
application of advance technologies
TVDI�BT�IJHI�UPQ�QSFTTVSF �IJHI�CMBTU�UFNQFSBUVSF�BOE�QVMWFSJ[FE�DPBM�injection in the production processes.
Both public and private sector players
are also increasing their R&D budget
with focus on introduction of advance
technologies.
3. Mergers and acquisitions:�5IF�Indian steel industry has witnessed
a number of major merger and
acquisition deals in the recent past.
"QBSU�GSPN�UIF�EPNFTUJD�EFBMT �UIF�TFDUPS�BMTP�XJUOFTTFE�TJHOJěDBOU�B�OVNCFS�PG�DSPTT�CPSEFS�CPUI�JOCPVOE�BOE�PVUCPVOE�EFBMT�
Planned expenditure vs Actual expenditure
* XI plan expenditure during April 2007-December 2010
Source: Planning commission
Study on Project Schedule and Cost Overruns | 108
5 Seventh to Eleventh Five Year Plans, Planning Commission6 IBEF Report
Ports
y 4IBSF�PG�OPO�NBKPS�QPSUT�JO�UPUBM�USBGěD�IBT�SJTFO�TIBSQMZ�GSPN����percent in 2005-06 to 40 percent in 2011-12
y Major sector players are Government authorities, Adani Group, DP world, APM Terminal1
y Slow pace of development, lack of integrated approach and highly congested ports are some of the key challenges.
Sector Overview
y India’s port sector handles about 95
percent of India’s total international
cargo by volume and about 70 percent
by value2.
y 0WFS�UIF�MBTU�TFWFSBM�ZFBST �UIF�SPMF�of major ports has been reducing in
growth terms when compared to non-
NBKPS�QPSUT��5IF�USBGěD�BU�NBKPS�QPSUT�IBT�CFFO�HSPXJOH�BU�$"(3�PG�BSPVOE�����QFSDFOU�EVSJOH���������UP���������while that at non-major ports has been
HSPXJOH�BU�$"(3�PG������QFSDFOU�ĸ�B�difference of over 10 percent�.
y 5IF�(PWFSONFOUijT�.BSJUJNF�"HFOEB�2020 aims to increase the psort
DBQBDJUZ�UP�PWFS�� ����NJMMJPO�UPOOFT�CZ�':�����BHBJOTU�UIF�FYQFDUFE�USBGěD�PG�BCPVU�� ����NJMMJPO�UPOOFT�CZ�then4��5IJT�JT�MJLFMZ�UP�CSJOH�EPXO�UIF�DVSSFOU�BWFSBHF�VUJMJ[BUJPO�MFWFM�PG�PWFS�90 percent to about 80 percent5 �UIVT �reducing port congestion.
5SBGěD�BU�*OEJBO�QPSUT
Source: Indian Ports Association, Crisil, KPMG in India analysis
109 | Study on Project Schedule and Cost Overruns
1 India port sector,BMI, accessed 4January 2013 2 India in Business, Ministry of External Affairs3 Indian Ports Association, Crisil; KPMG in India analysis4 Ministry of Shipping’s Maritime Agenda 2010-205 Indian Ports Association, Crisil; Maritime Agenda 2010-20; KPMG in India analysis
Five year plans performance
5IF�QFSGPSNBODF�PG�UIF�QPSU�TFDUPS�JO�UFSNT�PG�UIF�ěWF�ZFBS�QMBOT�IBT�CFFO�B�NJYFE�CBH��BNPOH�UIF�MBTU���ěWF�ZFBS�QMBOT �POMZ���QMBOT�XJUOFTTFE�NPSF�PG�BDUVBM�FYQFOEJUVSF�UIBO�XIBU�XBT�FBSMJFS�BMMPDBUFE��5IF�TDFOBSJP�JO�SFTU�PG�UIF���plans was critically unfavourable with
BDUVBM�FYQFOEJUVSF�CFJOH�BT�MPX�BT�KVTU����QFSDFOU�PG�UIF�UBSHFU�JO�/JOUI�QMBO���'VSUIFS �EVSJOH�UIF�NJE�UFSN�BQQSBJTBM�PG�UIF�&MFWFOUI�1MBO �UIF�JOWFTUNFOU�target in the port sector is reduced to INR
�� ����DSPSF�XIJDI�JT�MFTT�UIBO�IBMG�PG�UIF�PSJHJOBM�QSPKFDUJPO�PG�*/3��� ����DSPSF6.
Key Challenges
1. Delay in Infrastructure
development: It has been observed
that of the 276 port projects
envisaged under National Maritime
%FWFMPQNFOU�1SPHSBNNF�������� �POMZ����DPVME�CF�DPNQMFUFE�UJMM�ěTDBM�����7��5IVT�SFTVMUJOH�B�EFMBZ�JO�development of port projects
2. Lack of integrated approach:
Standalone initiatives by various
ministries results in lack of master
plan approach for development of
mega projects.
3. Over port utilization levels:�*O�*OEJB �UIF�QPSU�VUJMJ[BUJPO�JT�BQQSPYJNBUFMZ�90 percent as against the global
TUBOEBSET�PG�������QFSDFOU��5IVT�SFTVMUJOH �JO�IJHI�DPOHFTUJPO�BOE�turnaround time and hampering global
competitiveness of most of Indian
major ports.
Emerging Trends
1. Capacity addition: 5IF�DBQBDJUZ�BU�CPUI�UIF�&BTUFSO�BOE�8FTUFSO�.BKPS�1PSUT�IBT�JODSFBTFE�BU�B�$"(3�PG�����QFSDFOU�EVSJOH�':���':��8.
2. Change in International trade
pattern: -BUFMZ �*OEJB�IBT�TIJGUFE�its trade pattern from traditional
dominance of the US and Western
&VSPQF�UP�GPDVTJOH�PO�&BTU�BOE�"TJB�1BDJěD�SFHJPOT��*U�IBT�CFFO�PCTFSWFE�UIBU�UIF�TIBSF�PG�$IJOB�JODMVEJOH�)POH�,POH�BOE�GFX�FDPOPNJFT�"VTUSBMJB �*OEPOFTJB�BOE�3FQVCMJD�PG�,PSFB�JO�*OEJBijT�UPUBM�USBEF�IBT�BMNPTU�EPVCMFE�EVSJOH�':���':�� �XIJMF�UIF�share of developed markets such as
UIF�64 �(FSNBOZ �'SBODF�BOE�UIF�6,�either remained same or decreased
to half of their respective levels during
the same period9.
3. Changes in Cargo Handling: 5IF�Indian maritime sector has been
witnessing the following major
DIBOHFT�JO�DBSHP�IBOEMJOH�
y In terms of overall cargo handled in
UPOOFT �UIF�USBEJUJPOBM�EPNJOBODF�of eastern major ports has been
overtaken by western major ports.
%VSJOH�':���':���UIF�USBGěD�handled at western major ports
IBWF�JODSFBTFE�BU�B�$"(3�PG�����QFSDFOU �XIJMF�UIF�USBGěD�IBOEMFE�BU�eastern major ports increased at a
$"(3�����QFSDFOU�10
y 8JUIJO�UIFTF�PWFSBMM�DBSHP�USFOET �UIF�DPOUBJOFS�USBGěD �IPXFWFS �has been witnessing a different
growth story. In terms of absolute
USBGěD�NJMMJPO�UPOOFT �DPOUBJOFS�USBGěD�JT�FTUJNBUFE�UP�BDDPVOU�GPS�BQQSPYJNBUFMZ����QFSDFOU�JO�':������PG�UIF�PWFSBMM�DPNNPEJUZ�pie of around 885 million tonnes.
5IJT�TIBSF�JT�FYQFDUFE�UP�JODSFBTF�UP����QFSDFOU�CZ�':������PG�UIF�UPUBM�QSPKFDUFE�QJF�PG�� ����NJMMJPO�tonnes6.
Planned expenditure vs Actual expenditure
��9*�QMBO�BDUVBM�FYQFOEJUVSF�JT�POMZ�GPS�ěSTU�UXP�ZFBST ���������BOE���������
Source: Planning commission
Study on Project Schedule and Cost Overruns | 110
6 Seventh to Eleventh Five Year Plans, Planning Commission7 Crisil research8 Crisil research; KPMG in India analysis9 Ministry of Commerce, KPMG in India analysis10 Indian Ports Association, Crisil, KPMG in India analysis
Railways
y Railways is the principle mode of transportation for freight and passengers
y Indian Railways enjoys a near monopoly position in the country
y Highly congested network and frequent Government interventions are some of the key challenges.
Sector Overview
y 5IF�OVNCFS�PG�QBTTFOHFST�NPWFE�IBT�been increasing from about 6.2 billion
JO���������UP�����CJMMJPO�JO�������� �HSPXJOH�BU�$"(3�PG�����QFSDFOU1.
y 5IF�GSFJHIU�NPWFNFOU�IBT�CFFO�increasing from 728 million tonnes
JO���������UP�� ����NJMMJPO�UPOOFT�JO�������� �HSPXJOH�BU�$"(3�PG�����percent1.
y Coal is the leading commodity
transported through railways and
in 2010-11 its share in total rail
freight is around 46 percent2. Other
DPNNPEJUJFT�JODMVEF�TUFFM �GFSUJMJ[FST �DFNFOU �FUD�
y 5IF�SBJMXBZ�JT�QMBOOJOH�UP�BEE��� ����kms of new lines in the period 2010-
2020�.
Rail freight and passenger movement
Source: Ministry of Railways
111 | Study on Project Schedule and Cost Overruns
1 Ministry of Railways, KPMG in India analysis2 Crisil research; KPMG in India analysis3 Indian railways, web search
Five year plans performance
5IF�JOWFTUNFOU�UBSHFU�BDIJFWFNFOUT�in the railways sectors have been very
CMFBL�JO�UIF�QBTU�ěWF�ZFBS�QMBOT��*O�UIF�5FOUI�QMBO�UIF�QFSDFOUBHF�BDIJFWFNFOU�IBT�EFDSFBTFE�UP����QFSDFOU�GSPN�����percent in the Seventh Plan. In the
NJE�UFSN�BQQSBJTBM�PG�UIF�&MFWFOUI�1MBO�UIF�UPUBM�FYQFOEJUVSF�UBSHFU�JT�SFEVDFE�UP�*/3�� �� ����DSPSF�XIJDI�JT������QFS�cent lower than the earlier projection of
*/3�� �� ����DSPSF��#PUI�$FOUSBM�TFDUPS�and private investments are below the
PSJHJOBM�QSPKFDUJPOT��*O�5XFMGUI�1MBO �UIF�investment envisaged in railways is INR
��� ����DSPSFT4.
Key Challenges
1. Infrastructure challenges: Railway
JOGSBTUSVDUVSF�JT�IJHIMZ�DPOHFTUFE �especially in areas that are critical
GSPN�GSFJHIU�QFSTQFDUJWF��5IPVHI�USBGěD�NBOBHFNFOU�JT�HSBEVBMMZ�CFJOH�VQEBUFE �B�MBSHF�DIVOL�PG�UIF�OFUXPSL�is not modern yet.
2. Lack of reliable freight
transportation services: Lack
of tracks dedicated to freight
transportation and low priority
accorded to freight trains vis-à-vis to
passenger trains have been resulting
in rail being usually considered as
slow and unreliable transportation
PQUJPO��5IJT�IBT�OFHBUJWFMZ�JNQBDUFE�the competitiveness of railways.
3. Regulatory challenges: Increasingly
frequent interventions by Indian
railways in determining pricing
GPS�DPOUBJOFSJ[FE�SBJM�TFSWJDFT�IBT�hindered the business potential that
private players have been envisioning
JO�UIF�MBTU�����ZFBST��4JNJMBS�IBT�been the case with private investors.
5IPVHI�B�OVNCFS�PG�PQQPSUVOJUJFT�GPS�QSJWBUF�JOWFTUPST�FYJTU�XJUIJO�UIF�XJEFS�BSFB�PG�GSFJHIU�DBSSJBHF �UIF�policy governing private participation
is still evolving.
Emerging Trends
1. Role of PPP: With the entry of private
QMBZFST�JO�DPOUBJOFSJ[FE�GSFJHIU�NPWFNFOU�CZ�SBJM �UIF�JODSFBTFE�competitiveness among public versus
QSJWBUF�QMBZFS �BT�XFMM�XJUIJO�UIF�private players is gradually resulting in
competitive offering to end users.
2. Focus on metro rail: While currently
very few cities such as Delhi and
,PMLBUB�CPBTU�PG�NFUSP�SBJM�BWBJMBCJMJUZ �PWFS����DJUJFT�JODMVEJOH�#BOHBMPSF �.VNCBJ �$IFOOBJ �"INFEBCBE �Hyderabad and Lucknow are currently
FOWJTJPOJOH�EFWFMPQNFOU�PG�NFUSP�SBJM �UIF�QSPKFDUT�CFJOH�FJUIFS�JO�QMBOOJOH �EFTJHOJOH�PS�FYFDVUJPO�TUBHFT5.
3. *ODSFBTFE�GPDVT�PO�GSFJHIU�TQFDJěD�infrastructure: Keeping an eye on the
GVUVSF �UIF�(PWFSONFOU�JT�EFWFMPQJOH�two Dedicated Freight Corridors
%'$T�TQBOOJOH�PWFS�� ����LNT �FYQFDUFE�UP�CF�DPNQMFUFE�CZ�����6. In
UFSNT�PG�FYQFDUFE�OPO�DPOUBJOFSJ[FE�USBGěD�BMPOH�UIF�8FTUFSO�BOE�&BTUFSO�%'$T �BCPVU������NJMMJPO�UPOT�BOOVBMMZ�JT�FYQFDUFE�UP�CF�DBSSJFE�CZ�UIF�UXP�%'$T�JO����������UIJT�USBGěD�JT�FYQFDUFE�UP�JODSFBTF�UP�BCPVU�����million tons annually by 2021-227.
Planned expenditure vs Actual expenditure
��9*�QMBO�BDUVBM�FYQFOEJUVSF�JT�POMZ�GPS�ěSTU�UXP�ZFBST ���������BOE���������
Source: Planning commission
Study on Project Schedule and Cost Overruns | 112
4 Seventh to Twelfth Five Year Plans, Planning Commission5 Indian railways, city metro authorities, web search6 Ministry of Railways, web search7 DFC website, KPMG in India Analysis
Civil Aviation
y $JWJM�BWJBUJPO�JO�*OEJB�IBT�XJUOFTTFE�TJHOJěDBOU�HSPXUI�JO�SFDFOU�ZFBST�CPUI�JO�UFSNT�PG�QBTTFOHFS�BOE�GSFJHIU�USBGěD
y Major airport developers are AAI, GVK, GMR1
y High capital requirements, increasing security concerns, lack of skilled manpower are some of the key challenges.
Sector Overview
y 5IF�DJWJM�BWJBUJPO�TFDUPS�JO�*OEJB�IBT�been playing an increasingly critical
role in the overall scheme of air-based
NPWFNFOU �CF�JU�GSFJHIU�USBOTQPSUBUJPO�or passenger movement.
y 5IF�GSFJHIU�IBT�CFFO�HSPXJOH�GSPN�����million tonnes in 2006-07 to about 2.2
NJMMJPO�UPOOFT�JO���������$"(3������QFSDFOU �UIF�OVNCFS�PG�QBTTFOHFST�has increased from about 96 million
to 159 million during the same period
$"(3������QFSDFOU2.
y 5IF�NBKPS�DPOTUJUVFOUT�PG�UIF�CVML�GSFJHIU�BSF�UFMFDPN���*5�QSPEVDUT �QIBSNBDFVUJDBMT �IJ�WBMVF�HBSNFOUT�accessories and perishable items.
y Changes in regulatory space have
CFFO�PGGFSJOH�OFX�PQQPSUVOJUJFT��the currently discussed policy
guidelines on allowing foreign carriers
UP�UBLF�FRVJUZ�JO�*OEJBO�BJSMJOFT �JG�JNQMFNFOUFE �XPVME�PQFO�VQ�B�plethora of investment opportunities.
Air freight and passenger movement
Source: CRISIL, AAI, KPMG in India analysis
113 | Study on Project Schedule and Cost Overruns
1 India airport sector, BMI, accessed 3 January 20132 Crisil, Airports Authority of India, KPMG in India analysis
Five year plans performance
5IF�DJWJM�BWJBUJPO�TFDUPS�JO�*OEJB�JT�UIF�only segment within transportation
infrastructure that has witnessed
DPOTJTUFOUMZ�FYDFMMFOU�QFSGPSNBODF�JO�UFSNT�PG�BDUVBM�QMBOOFE�FYQFOEJUVSF�versus the planned allocation. With the
POMZ�FYDFQUJPO�PG�UIF�/JOUI�1MBO �BMM�PG�UIF�MBTU���ěWF�ZFBS�QMBOT�IBWF�TFFO�UIF�BDUVBM�FYQFOEJUVSF�CFJOH�NPSF�UIBO�XIBU�XBT�envisaged at the commencement of the
QMBO �UIJT�CFJOH�EFTQJUF�UIF�GBDU�UIBU�UIF�allocation has been increasing manifold in
BCTPMVUF�UFSNT��'PS�JOTUBODF �UIF�QMBOOFE�allocation increased from less than INR
� ����DSPSF�JO�UIF�4FWFOUI�1MBO�UP�PWFS�*/3��� ����DSPSF�JO�UIF�&MFWFOUI�1MBO��*O�UIF�5XFMGUI�1MBO �TIBSF�PG�QSJWBUF�TFDUPS�JT�FYQFDUFE�UP�CF�BSPVOE����QFSDFOU�PG�total investment in airport infrastructure.
8JUI�TFWFSBM�(SFFOěFME�BOE�#SPXOěFME�QSPKFDUT�JO�QSPHSFTT �TVDI�BO�FYQFOEJUVSF�TDFOBSJP�JT�BMPOH�FYQFDUFE�MJOFT�.
Key Challenges
1. Lack of skilled professionals:
Shortage of skilled manpower in
TQFDJBMJ[FE�TVC�TFDUPST�TVDI�BT�NBJOUFOBODF �SFQBJS�BOE�PWFSIBVM�.30�QPTFT�B�DIBMMFOHF�XJUIJO�UIF�civil aviation sector.
2. Financial constraints: With
JODSFBTJOH�MFWFM�PG�TFDVSJUZ�UISFBU �there is a need for latest technologies
and infrastructure at the airports
BOE�SFMBUFE�TFU�VQT��5IVT �DSFBUJOH�ěOBODJBM�QSFTTVSF�PO�UIF�TFDUPS��
3. Infrastructural constraints: Civil
aviation operations being asset-
JOUFOTJWF�BOE�FYQFOTJWF �LFFQJOH�the capital cost under control is an
immense challenge. Lack of long
UFSN�������ZFBS�WJFX�FOTVSJOH�additional land availability for further
MBSHF�FYQBOTJPOT�NBZ�OFHBUJWFMZ�impact the prospects of civil aviation
infrastructure as demand grows
BOE�DJUJFT�FYQBOE��5IF�JTTVF�PG�land acquisition and environmental
concerns are likely to become all the
more critical in the years ahead.
Emerging Trends
1. Increase in infrastructure
investments:�5P�PWFSDPNF�UIF�SJTJOH�USBGěD �JOGSBTUSVDUVSF�DPNQBOJFT�BSF�FYQFDUFE�UP�JOWFTU�*/3�����CJMMJPO�PWFS�UIF�OFYU�ěWF�ZFBST��"MNPTU����percent of the investments would be
BJNFE�BU�JOGSBTUSVDUVSF�FYQBOTJPO�BOE�NPEFSOJ[BUJPO�PG�NFUSP�BJSQPSUT4 .
2. *ODSFBTF�JO�USBGěD�BU�OPO�NFUSP�airports:�"JSMJOFTij�SPVUF�EJWFSTJěDBUJPO�UP�NFFU�SPVUF�ĸ�EJTQFSTBM�HVJEFMJOFT �JT�MJLFMZ�UP�JODSFBTF�UIF�USBGěD�BU�OPO�NFUSP�BJSQPSUT��5IFTF�HVJEFMJOFT�SFRVJSF�BJSMJOFT�UP�EFEJDBUF�B�ěYFE�percentage of their services to routes
DPWFSJOH�OPO�NFUSP�BJSQPSUT��'VSUIFS �a surge in leisure and medical tourism
JT�FYQFDUFE�UP�JODSFBTF�USBGěD�BU�OPO�NFUSP�BJSQPSUT�BT�DBSSJFST�FYQBOE�internationally and provide direct
connectivity to non-metro tourist
DFOUFST���"MTP �JODSFBTF�JO�CVTJOFTT�USBWFM�XJMM�BMTP�TVQQPSU�USBGěD�HSPXUI�
3. Increase in Other Growth Avenues:
Opportunities in general aviation
DIPQQFST �CVTJOFTT�KFUT �DIBSUFS�TFSWJDFT�BSF�BMTP�MJLFMZ�UP�JODSFBTF�at a fast pace with growing bottom-
line of corporate and high net worth
individuals.
Planned expenditure vs Actual expenditure
��9*�QMBO�BDUVBM�FYQFOEJUVSF�JT�POMZ�GPS�ěSTU�UXP�ZFBST ���������BOE���������
Source: Planning commission
Study on Project Schedule and Cost Overruns | 114
3 Seventh to Twelfth Five Year Plans, Planning Commission4 Airport Authority of India, Crisil Research
Roads
y With expansion of highways and rural roads, the demand for road freight has increased
y Major players in road construction sector are NHAI, L&T, Reliance1
y Delays in project execution and sub-optimal infrastructure for maintaining roads are some of the key challenges.
Sector Overview
y 5IF�SPBE�TFDUPS�GPSNT�UIF�CBDLCPOF�PG�EPNFTUJD�JOGSBTUSVDUVSF�JO�*OEJB �given that the share of highways
in domestic freight movement has
jumped from a low of 11 percent of
82 million tonnes in 1950-51 to 61
QFSDFOU�PG�� ����NJMMJPO�UPOOFT�JO�2007-082.
y *O�UIF�SFDFOU�ZFBST �SPBE�GSFJHIU�IBT�been growing from 621 btkm in 2005-
���UP�����CULN�JO���������BU�B�$"(3�PG�����QFSDFOU�.
y While the National Highways
constitute a meager 2 percent of the
PWFSBMM�SPBE�OFUXPSL �UIFZ�DBSSZ�DMPTF�to about 40 percent of the total road
freight4��5IJT�IJHIMJHIUT�UIF�QSFTTVSF�PO�*OEJBijT�IJHIXBZ�JOGSBTUSVDUVSF �UIVT�underlining the need for constant
maintenance and addition of new
highways.
y 4UBUFT�PG�3BKBTUIBO �.BEIZB�1SBEFTI �,BSOBUBLB �(VKBSBU�BOE�.BIBSBTIUSB�are taking several majors measures
to promote private participation in
construction/maintenance of State
roads.
Road freight
Source: CRISIL, KPMG in India analysis
115 | Study on Project Schedule and Cost Overruns
1 India road sector, BMI, accessed 4 January 2013 2 IDBI Capital’s Railways Sector report 2010, KPMG in India Analysis3 Crisil, KPMG in India Analysis4 KPMG in India’s report — ‘Adding Wheels’
Five year plans performance
5IF�QFSGPSNBODF�PG�UIF�SPBE�TFDUPS�XJUI�SFTQFDU�UP�UIF�ěWF�ZFBS�QMBOT�IBT�CFFO�ĜVDUVBUJOH��BNPOH�UIF�MBTU���ěWF�ZFBS�QMBOT �XIJMF�JOJUJBM�GFX�QMBOT�TBX�BDUVBM�FYQFOEJUVSF�NPSF�UIBO�XIBU�XBT�QMBOOFE �this trend got reversed in the last latest
UIF�/JOUI�BOE�5FOUI�QMBOT��/PUBCMF�JT�the fact that planned investment in
UIF�&MFWFOUI�1MBO�BT�FOWJTBHFE�BU�UIF�beginning of the plan was over INR
� �� ����DSPSF�ĸ�BMNPTU����UJNFT�PG�what was planned for the Seventh plan.
)PXFWFS �EVSJOH�NJE�UFSN�BQQSBJTBM�UIJT�UBSHFU�JT�TJHOJěDBOUMZ�SFEVDFE�UP�*/3�� �� ����DSPSF�B����QFSDFOU�EFDMJOF�from original projections5��5IF�EFDMJOF�in investment is due to a shortfall in the
award of road projects by NHAI during
UIF�ěSTU�UISFF�ZFBST�PG�UIF�QMBO�
Key Challenges
1. Delay in execution of projects:
Persistent issues in land acquisition
and environmental clearance have
CFFO�DBVTJOH�FYFDVUJPO�EFMBZT�JO�majority of cash contract project.
Average time overrun has been about
22 months6.
2. Sub-optimal infrastructure: Factors
such as lack of timely and quality
NBJOUFOBODF�PG�SPBE�JOGSBTUSVDUVSF �integrated-cum-automated toll
DPMMFDUJPO�NFDIBOJTN �USBGěD�congestions and frequent violation
PG�SVMFT�TVDI�BT�NBYJNVN�XFJHIU�UP�be carried by a truck result in sub-
optimal road infrastructure and freight
USBOTQPSUBUJPO��5IJT�JO�UVSO�SFTVMUT�JO�reduced average speed of trucks and
other commercial vehicles.
Emerging Trends
1. Focus on development of
expressways:�5IF�TFDUPS�JT�witnessing increased focus on
DPOTUSVDUJPO�PG�FYQSFTTXBZT�JO�BO�attempt to provide dedicated road
connectivity between near-placed
important cities. A total of around
�� ����LN�PG�(SFFOěFME�OBUJPOBM�FYQSFTTXBZT�JT�QMBOOFE�UJMM������7
2. Increase in opportunities: Most
of the projects under Phase III
BQQSPYJNBUFMZ�� ����LN�PG�UIF�National Highway Development
1SPHSBN�BSF�FYQFDUFE�UP�CF�BXBSEFE�PO�#VJME�0QFSBUF�5SBOTGFS�#05�CBTJT�during 2010-156.
3. Increasing demand for extensive
road network: Increasing demand
in tier 2 cities is creating multiple
consumption hubs instead of the
conventional ‘demand islands’ in
TFMFDU�NFUSPQPMJUBO�DJUJFT �UIVT�resulting in the need for improved
BOE�FGěDJFOU�SPBE�USBOTQPSUBUJPO��"EEJUJPOBMMZ �UIF�VQUSFOE�JO�PSHBOJ[FE�retailing is increasing the need for last
mile reach which is feasible only via
FYUFOTJWF�SPBE�OFUXPSLT��5IJT�IBT�been driving the development of State
and rural roads.
Planned expenditure vs Actual expenditure
��9*�QMBO�BDUVBM�FYQFOEJUVSF�JT�POMZ�GPS�ěSTU�UXP�ZFBST ���������BOE���������
Source: Planning commission
Study on Project Schedule and Cost Overruns | 116
5 Seventh to Twelfth Five Year Plans, Planning Commission6 CRISIL Report on Road Sector, 20107 Seventh to Eleventh Five Year Plans, Planning Commission
Telecom
y *OEJBO�IBT�XJUOFTTFE�TJHOJěDBOU�HSPXUI�JO�UFMFDPN�TVCTDSJCFS�CBTF �though the average revenue per user (ARPU) remains at a low level compared to global average
y Major sector players are BSNL, MTNL, Airtel, Vodafone, Idea1
y High competition, infrastructure bottlenecks and Government regulations are some of the key challenges.
Sector Overview
y 5IF�*OEJBO�UFMFDPNNVOJDBUJPOT�market has continued to show
consistent growth with total
subscribers reaching more than 898
NJMMJPO�CZ�.BSDI�����2
y Wireless subscribers contribute more
than 867 million with a tele-density of
more than 70 percent2
y Urban wireless market is reaching
saturation with a tele-density of more
UIBO�����QFSDFOU �IPXFWFS�SVSBM�market has lot of potential with a tele-
density of 40 percent only2
y Indian telecom service revenues are
FYQFDUFE�UP�SFBDI�*/3� ����CJMMJPO�CZ�':���GSPN�*/3� ����GSPN���������.
Telecom subscriber base
Source: DOT - Annual Report, 2010-2011; Economic Intelligence Unit, 2012
117 | Study on Project Schedule and Cost Overruns
1 India telecommunication sector competitive landscape, BMI, 18 December 20122 Telecom Subscription Data, TRAI, March 20133 Telecom outlook, Crisil Research, April 2013
Five year plans performance
5IF�HSPXUI�JO�UFMFDPN�TFDUPS�IBT�CFFO�phenomenal and this sector mostly
outperforms its investment targets as
MBJE�PVU�JO�ěWF�ZFBST�QMBOT��&WFO�EVSJOH�UIF�NJE�UFSN�BQQSBJTBM�PG�UIF�&MFWFOUI�QMBO �(PWFSONFOU�SFWJTFE�JU�FYQFOEJUVSF�UBSHFU�UP�*/3�� �� ����DSPSF�XIJDI�JT����QFSDFOU�IJHIFS�UIBO�UIF�BDUVBM�UBSHFU�PG�*/3�� �� ����DSPSF��5IJT�PWFS�achievement is due to a 60 percent higher
level of investment by the private sector
as compared to the original projections4.
Competition in this sector has been quite
JOUFOTF �SFTVMUJOH�JO�CFOFěUT�BDDSVJOH�to the economy and the users through
improved quality of service at lower costs.
Key Challenges
1. Intense Competition: Presence of
���PQFSBUPST�IBT�MFE�UP�QSJDF�XBST �resulting in very low ARPU levels.
7PJDF�"316�DPOUJOVFT�UP�EFDMJOF �BGGFDUJOH�UIF�QSPěUBCJMJUZ�PG�UIF�players.
2. Regulation: Delay in revision of
QPMJDJFT�QFSUBJOJOH�UP�TQFDUSVN �MJDFOTJOH�BOE�.�" �IBT�MFE�UP�uncertainty in the sector.
3. Infrastructure Bottleneck: Network
DBQBDJUZ�JT�OFBSJOH�TBUVSBUJPO��network infrastructures in rural areas
remain limited.
4. Low Broadband Subscriber base:
Despite huge investments in the
JOGSBTUSVDUVSF �UIF�JOUFSOFU�BOE�broadband subscriptions remains very
MPX�BU�������NJMMJPO�BOE�������NJMMJPO�BT�PG�%FDFNCFS����� �SFTQFDUJWFMZ �compared to the target of 40 million
and 20 million by 20105.
Emerging Trends
1. �(�XJMM�CF�B�HSPXUI�ESJWFS�JO�UIF�NFEJVN�UFSN��JODSFNFOUBM��(�SFWFOVF�JT�FYQFDUFE�UP�DPOTUJUVUF�����QFSDFOU�PG�NPCJMF�SFWFOVF�CZ�':�� �contributing to ARPU uplift6.
2. Mobile Number Portability has
SFDFOUMZ�CFFO�JNQMFNFOUFE� �JU�JT�FYQFDUFE�UP�BDDFMFSBUF�FYDFMMFODF�JO�service quality.
���$"1&9�JT�MJLFMZ�UP�EFDMJOF�JO�UIF�short term on account of the high
�(�TQFDUSVN�DIBSHFT�QBJE�CZ�UIF�telecom players as well as the
SFMBUJWFMZ�TMPXFS�USBGěD�HSPXUI�JO�UIF�XJSFMFTT�TFHNFOU��5IJT�EFDMJOF�in investment is not likely to stunt
growth with leading operators having
UIF�SFRVJTJUF��(�UFDIOPMPHZ�JO�QMBDF�
4. 5FMFDPN�QMBZFST�JO�*OEJB�IBT�SFDFOUMZ�started the price war over tablets and
PUIFS�NPCJMF�TNBSU�QIPOFT �XIJDI�JT�FYQFDUFE�UP�JODSFBTF�UIF�VQUBLF�PG��(�services and hence the data services.
Planned expenditure vs Actual expenditure
��9*�QMBO�BDUVBM�FYQFOEJUVSF�JT�POMZ�GPS�ěSTU�UXP�ZFBST ���������BOE���������
Source: Planning commission
Study on Project Schedule and Cost Overruns | 118
4 Seventh to Eleventh Five Year Plans, Planning Commission5 Performance Indicator Report , TRAI, December 20116 India Strategy, Motilal Oswal, January 2011
13SE
CT
ION
119 | Study on Project Schedule and Cost Overruns
Participant QSPěMF�BOE�TUVEZ�methodology
Study on Project Schedule and Cost Overruns | 120
Survey responses were gathered through a face-to-face interview followed by a detailed questionnaire
XJUI�TFOJPS�QFSTPOOFM�PG����QVCMJD�TFDUPS�QSPKFDUT�GSPN�MFBEJOH�DPNQBOJFT�JO�JOGSBTUSVDUVSF�TQBDF �CFUXFFO�4FQUFNCFS������BOE�+BOVBSZ�������5IF�QSPKFDUT�BSF�GSPN�OJOF�TFDUPST�ĸ�1PXFS �1FUSPMFVN �$PBM �4UFFM �3BJMXBZT �3PBE�BOE�)JHIXBZT �$JWJM�"WJBUJPO �1PSUT�BOE�4IJQQJOH �BOE�5FMFDPN�
5IF�JOUFSWJFXT�XFSF�DPOEVDUFE�CZ�TFOJPS�SFQSFTFOUBUJWFT�PG�,1.(�JO�*OEJB�TQFDJBMJ[JOH�JO�UIF�JOGSBTUSVDUVSF�JOEVTUSZ �XJUI�UIF�RVFTUJPOT�SFĜFDUJOH�DVSSFOU�BOE�POHPJOH�DPODFSOT�FYQSFTTFE�CZ�UIF�industry and clients.
Percentage of respondents across sectors
Project Capital cost (INR Crore)
121 | Study on Project Schedule and Cost Overruns
Project duration (years)
Participant’s company turnover (INR crore)
Study on Project Schedule and Cost Overruns | 122
12SE
CT
ION
123 | Study on Project Schedule and Cost Overruns
Appendix
Study on Project Schedule and Cost Overruns | 124
Road trasport and highway have maximum number of ongoing projects
Source: MOSPI, December 2012 Flash Report
125 | Study on Project Schedule and Cost Overruns
Summary of Projects - Sector Wise
Sectoral break up of on-going infrastructure projects in India
Source: MOSPI, December 2012 Flash Report
Value Wise breakup for all ongoing projects
Power sector projects have highest value
Study on Project Schedule and Cost Overruns | 126
Source: Crisil
Average Monthly prices of Steel Billet 2000-2011
Steel Prices has triple in last 10 years
Sr. No. SectorNumber of
Projects
Projects with Schedule over-
run
Original Cost (in Rs.
Crore)
Anticipated cost ( in Rs. Crore)
Cost overrun percentage
1 Atomic Energy 5 3 41,548 47,832 15
2 Civil Aviation 6 2 5,474 6,063 11
3 Coal 51 21 36,057 37,511 4
4 Fertilisers 3 0 4,066 4,066 0
5 Steel 17 10 65,286 71,443 9
6 Petrochemical 1 0 5,461 8,920 63
7 Petroleum 73 34 1,77,448 1,88,692 6
8 Power 99 52 2,27,823 2,43,653 7
9 Railways 126 35 61,394 1,48,132 141
10 Road Transport & Highways 146 85 94,418 96,357 2
11 Shipping & Ports 20 6 15,908 18,175 14
12 Telecommunications 14 8 5,965 5,906 -1
13 Urban Development 4 1 44,245 49,518 12
14 Water Resources 1 1 543 1,187 119
Source: MOSPI, December 2012 Flash Report
Sector level Schedule and Cost overruns
Steel Price Trends
127 | Study on Project Schedule and Cost Overruns
South India has highest cement prices
Source: Embay cement report
Cement Price Trends
Monthly Cement Price trends
Source: BP Statistical Review, 2012
India Primary Energy Demand
India Energy demand is growing at a CAGR of 7.9 percent
India Energy Demand
Study on Project Schedule and Cost Overruns | 128
Coal has more than 50 percent share in India’s total primary energy consumption
Source: BP Statistical Review, 2012
Primary Energy Consumption by fuel
Source: MOSPI, December 2012 Flash Reports
Railways Sector: Project schedule and cost overun trends
.PTU�PG�UIF�SBJMXBZT�TFDUPS�QSPKFDUT�EP�OPU�IBWF�ěYFE�EBUF�PG�DPNNJTTJPOJOH
Railways
129 | Study on Project Schedule and Cost Overruns
Railways sector break up of 44 delayed projects in December 2012
Source: MOSPI, December 2012 Flash Report
Railway Sector: No of projects delayed (in months)
Source: Statistical Summary, Indian Railways
3BJMXBZ�4FDUPS��%JTUSJCVUJPO�PG�QFTTBOHFS�5SBGěD
3BJMXBZ�QBTTFOHFS�USBGěD�JT�HSPXJOH�BU�B�$"(3�PG�����QFSDFOU�Q�B
Study on Project Schedule and Cost Overruns | 130
Source: MOSPI, December 2012 Flash Reports
Power Sector: Project schedule and cost overun trends
Around 50 percent of the power sector projects are delayed
Power Sector
Railways Rolling Stock
Sr. No. Year 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
1 Stem locos 43 44 43 42 43 43
2 Diesel Locos 4,816 4,843 4,963 5,022 5,137 5,197
3 Electric Locos 3,294 3,443 3,586 3,825 4,033 4,309
4 Passenger carriages 38,855 40,696 42,079 43,526 45,048 46,688
5 EMU/DMU/DHMU 6,454 6,641 6,984 7,487 8,053 8,617
6 Rail cars 41 38 38 37 34 34
7 Other coaching vehicles 5,905 6,180 5,985 6,477 6,500 6,560
8 Wagons 2,07,723 2,04,034 2,12,835 2,20,549 2,29,997 2,39,321
Source: MOSPI, December 2012 Flash Report
131 | Study on Project Schedule and Cost Overruns
Power sector break up of 52 delayed project in December 2012
Source: MOSPI, December 2012 Flash Report
Power Sector: No of projects delayed (in months)
Source: CEA
Breakup of installed electricity capacity source wise (as on 30 January, 2013)
57 percent of installed electricity generation capacity is coal-based
Study on Project Schedule and Cost Overruns | 132
Source: CEA
Peak Power Demand Supply in India
*OEJB�IBT�QFBL�QPXFS�EFěDJU�PG�BCPVU���QFSDFOU
133 | Study on Project Schedule and Cost Overruns
State-wise estimated Average rate of electricity (updated up to March 2010)
State
Domestic 1KW
(1000KWh/Month)
Domestic 10KW
(1000KWh/Month)
Commercial 2KW
(3000KWh/Month)
Commercial 30KW
(4500KWh/Month)
Agriculture 2HP
(4500KWh/Month)
Agriculture 10HP
(2000KWh/Month)
Andhra Pradesh 238.5 492.25 593.5 623.83 33.75 29.75
Assam 340 475 558.33 564.18 271.19 373.65
Bihar 243.8 395.38 515.87 U 500.08 124.00 U 124.00 U
140.45 - 166.07 R - 74.00 R 74.00 R
Chattishgarh 187.4 368.9 403.35 460.2 110 110
Gujarat 437.83 617.83 U 660.66 703.72 55 55
353.83 526.53 R - - - -
Haryana 367.4 463.44 481 481 25 25
H. P. 221.45 307.71 486 488.88 210.38 204.88
J & K 129.86 234.93 242.4 380.07 61 61
Jharkhand 161 180 436.67 U 436.67 52 52
107 - 136.33 R - -
Karnataka 292.43 570.52 D 688.63 D 710.68 D 0 0
292.43 527.47 E 683.38 E 705.43 E
281.93 507.52 F 639.63 F 656.78 E
Kerala 187 517.61 775.83 952.17 73.74 73.74
Madhya Pradesh 386.2 592.24 U 601.04 602.69 217.5
374.8 555.85 R 541.75 543.24 247.5
Maharashtra 277.94 598.72 530.88 781.58 133.44 133.44
Orissa 135.2 286 384.8 452.75 102 102
Punjab 320.2 483.22 550.1 550.1 0 0
Rajasthan 417.5 392.75 U 556.67 555.78 126.5 116.5
390.25 358.53 R - - - -
Tamilnadu 120 269.5 602 608.53 0 0
Uttarpradesh 369 393.00 U 505.67 U 505.67 U 224.00 U 224.00 U
124 124.00 R 232.33 R 232.33 R 91.50 R 91.50 R
Uttarakhand 230 216.5 375 436.76 85.00 U 85.00 U
West Bengal 272.59 556.06 U 471.41 U 645.99 U 164.15 162.19
Ar. Pradesh 345 345 410 410 265 265
Goa 138 232.5 383 429.67 118 118
Chadigarh 179 304 387 387 165 165
Delhi NDMC 159.6 329.7 463.4 526.4 - -
Source: CEA Annual Report, 2010-11
Study on Project Schedule and Cost Overruns | 134
Around 45 percent of the petroleum sector projects are delayed
Source: MOSPI, December 2012 Flash Reports
Petroleum Sector: Project schedule and cost overun trends
Source: MOSPI, December 2012 Flash Report
Petroleum Sector: No of projects delayed (in months)
Petroleum sector break up of 39 delayed projects in December 2012
Petroleum Sector
135 | Study on Project Schedule and Cost Overruns
*OEJB�3FěOFSZ�$BQBDJUZ
Company LocationCapacity (mtpa)
01.04.2013
IOC Digboi 0.7
Guwahati 1.0
Barauni 6.0
Baroda 13.7
Haldia 7.5
Mathura 8.0
Panipat 15.0
CPCL Chennai 10.50
Narimanam 1.0
BRPL Bongaigaon 2.4
Total - IOC 65.8
BPCL Mumbai 12.0
KRL Cochin 9.5
NRL Numaligarh 3.0
Total - BPCL 24.5
HPCL Mumbai 6.5
Vizag 8.3
HMEL, GGSR 9.0
Total - HPCL 23.8
MRPL Mangalore 15.0
RIL Jamnagar 33.0
RIL (SEZ) Jamnagar 27.0
ONGC Tatipaka 0.1
Essar Oil Vadinar 20.0
BORL Bina 6.0
Total 215.1
Source: PPAC Note : Capacity as on April 2013
Petroleum Products for 2011-2012 (MTPA)
Distillates Product Production Consumption Imports Exports
Light distillates LPG 9.6 15.4 5.0 0.2
MS 27.2 15.0 0.7 14.3
Naphtha 18.8 11.2 1.9 10.2
Sub Total 55.6 41.5 7.5 24.7
Middle distillates SKO 8.0 8.2 0.6 0.0
ATF 10.1 5.5 0.0 4.6
HSD 82.8 64.8 1.1 19.9
Sub Total 100.9 78.5 1.7 24.5
Heavy distillates FO/LSHS 19.4 9.2 0.9 7.9
Bitumen 4.6 4.6 0.1 0.0
Others 23.4 14.1 4.7 3.1
Sub Total 47.4 27.9 5.7 11.0
Total 203.9 148.0 14.9 60.2
Source:PPAC
One-third of coal sector projects are delayed
Source: MOSPI, December 2012 Flash Reports
Coal Sector: Project schedule and cost overun trends
Source: MOSPI, December 2012 Flash Report
Coal Sector: No of projects delayed (in months)
Coal sector break up of 21 delayed projects in December 2012
Coal Sector
Study on Project Schedule and Cost Overruns | 136
137 | Study on Project Schedule and Cost Overruns
Coal production and consumption have grown at a CAGR of 4.9 percent and
8.6 percent respectively
Source: Annual Report, Ministry of Coal
Coal Sector: Production and Consumption
Source: Annual Report, Ministry of Coal
Coal Imports Trends
Coal imports are increasing at a CAGR of 18.6 percent
Majority of India’s coal reserves are non-coking coal
Source: Ministry of Coal
Coal Sector: Coal Reserves by type as on April, 2012
Source: MOSPI, December 2012 Flash Reports
Steel Sector: Project schedule and cost overrun trends
Cost overrun has decreased in steel sector
Steel Sector
Study on Project Schedule and Cost Overruns | 138
Steel sector break up of 10 delayed projects in December 2012
Source: MOSPI, December 2012 Flash Report
Steel Sector: No of projects delayed (in months)
Source: Annual Report 2012-13, Ministry of Steel
Crude Steel Production, Capacity and Capacity Utilization
Steel capacity utilization is consistently high at 85-90 percent
139 | Study on Project Schedule and Cost Overruns
Steel imports are increasing and exports are decreasing
Source: Annual Report 2011-12, Ministry of Steel
Export Import Trends for Finished Steel
Source: MOSPI, December 2012 Flash Reports
Telecom Sector: Project schedule and cost overun trends
In last year several telecom projects were completed
Telecom Sector
Study on Project Schedule and Cost Overruns | 140
Telecom sector break up of 8 delayed projects in January 2012
Source: MOSPI, December 2012 Flash Report
Telecom Sector: No of projects delayed (in months)
Source: Department of Telecom
Wireless ARPU
Wireless ARPU have stabilized in last few years
141 | Study on Project Schedule and Cost Overruns
Subscriber base and teledensity has started declining
Source: Department of Telecom
Total Subcriber base and Teledensity
Source: TRAI; Crisil
Internet and Broadband User
Internet users are increasing at a CAGR of 19 percent p.a
Study on Project Schedule and Cost Overruns | 142
Shipping & Port Sector
Data revenue‘s share in the total revenue is increasing
Source: Department of Telecom
Data Revenues as % of Total revenues
Source: MOSPI, December 2012 Flash Reports
Shipping & Port Sector: Project schedule and cost overun trends
Around 40 percent of shipping and port sector projects are delayed
143 | Study on Project Schedule and Cost Overruns
Shipping & port sector break up of 7 delayed projects in December 2012
Source: MOSPI, December 2012 Flash Report
Shipping & Port Sector: No of projects delayed (in months)
$BSHP�5SBGěD�BU�.BKPS�1PSUT�$PNNPEJUZ�8JTF�GPS�UIF�ZFBS��������
(‘000 tonnes) POL Iron ore*Fertilizers Coal Container
Others TotalFinished Raw Thermal Coking Tonnage TEUs
Kolkata 700 158 64 29 - 37 6,957 463 3,855 11,800
Haldia 6,196 1,715 109 278 1,976 4,502 2,869 137 10,439 28,084
Paradip 16,466 1,834 142 4,004 21,394 4,912 171 13 7,629 56,552
Visakhapatnam 15,021 12,279 2,018 565 2,951 6,820 4,554 248 14,752 58,960
Ennore 1,124 - - - 14,240 685 - - 1,836 17,885
Chennai 13,425 52 190 231 - - 29,708 1,539 9,798 53,404
Tuticorin 792 - 487 564 6,661 - 9,372 479 10,384 28,260
Cochin 13,896 - 22 331 28 - 4,607 326 961 19,845
New Mangalore 24,301 2,616 519 17 2,553 4,357 692 48 1,981 37,036
Mormugao 823 7,421 78 0 768 6,605 213 20 1,785 17,693
Mumbai 34,784 - 156 356 4,210 - 829 58 17,702 58,037
JNPT 4,286 - - - - - 57,909 4,259 2,306 64,501
Kandla 54,355 1,006 3,678 946 4,064 374 1,934 118 27,265 93,622
Total 186,169 27,081 7,463 7,321 58,845 28,292 119,815 7,708 110,693 545,679
Note: Notes: POL: Petroleum, oil and lubricants; TEU: Twenty-foot equivalent unit; JNPT: Jawaharlal Nehru Port Trust
Source:IPA, CRISIL
Study on Project Schedule and Cost Overruns | 144
Capacity at Major Ports
(million tonnes) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Kolkata 12.6 13.4 14.6 15.8 15.8 16.4 16.4 17.1
Haldia 42.2 43.5 46.7 46.7 46.7 50.7 50.7 50.8
Paradip 51.4 56.0 56.0 71.0 76.5 76.5 76.5 106.3
Visakhapatnam 55.0 58.5 61.2 62.2 62.2 64.9 72.9 67.3
Ennore 48.8 50.0 53.4 55.8 69.4 79.7 79.7 83.2
Chennai 13.0 13.0 13.0 16.0 16.0 31.0 31.0 31.0
Tuticorin 20.6 20.6 20.8 22.8 22.8 27.0 33.3 33.3
Cochin 19.4 20.2 28.4 28.4 29.9 41.0 41.0 44.7
New Mangalore 38.0 41.3 43.5 44.2 44.2 45.6 51.0 69.0
Mormugao 29.5 30.0 33.1 33.1 37.1 41.9 41.9 41.9
Mumabi 43.8 44.7 44.7 43.7 43.7 44.5 44.5 44.5
JNPT 36.1 52.4 54.3 58.0 58.0 64.0 64.0 64.0
Kandla 46.0 61.3 63.5 77.3 77.2 86.9 86.9 91.2
Total 456.2 504.8 533.0 574.9 599.4 670.1 689.8 744.3
Source:IPA , CRISIL
5SBGěD�PG�7FTTFMT�BU�7BSJPVT�1PSUT�$BUFHPSZ�XJTF������������
(Nos.) Dry Bulk Liquid Bulk Break Bulk Containers Others* Total
Kolkata 60 239 319 577 27 1,222
Haldia 761 853 57 291 - 1,962
Paradip 904 317 75 30 16 1,342
Visakhapatnam 1,147 715 219 351 38 2,470
Ennore 241 92 - - 52 385
Chennai 223 507 524# 789 - 1,519
Tuticorin 425 226 430 365 46 1,492
Cochin 50 359 37 389 547 1,382
New Mangalore 206 693 157 80 19 1,155
Mormugao 547 153 37 48 - 785
Mumabi 333 1,102 568 14 40 2,057
JNPT 66 445 45 2,233 127 2,916
Kandla 715 1,318 456 225 - 2,714
All Ports 5,678 7,019 2,924 5,392 912 21,401
Source:IPA , CRISIL
145 | Study on Project Schedule and Cost Overruns
Over the year, schedule overrun in road sector projects has decreased
Source: MOSPI, December 2012 Flash Reports
Road Transport & Highway Sector: Project schedule and cost overrun trends
Source: MOSPI, December 2012 Flash Report
Road Transport & Highway Sector: No of projects delayed (in months)
Road sector break up of 86 delayed projects in December 2012
Roads and Highways
Study on Project Schedule and Cost Overruns | 146
State-wise Road length in relation to area and population
StatesTotla Roald
Length (kms)
Road Length
Per 1,000 sq kms of area per 1,000 of population
Andhra Pradesh 3,45,012 1,254.4 4.2
Arunachal Pradesh 16,494 197.0 13.8
Assam 2,30,334 2,936.5 7.8
Bihar 1,20,127 1,275.7 1.3
Chhattisgarh 74,434 550.6 3.2
Goa 10,569 2,854.9 6.6
Gujarat 1,46,630 748.0 2.6
Haryana 29,726 672.4 1.2
Himachal Pradesh 36,298 652.0 5.5
Jammu & Kashmir 22,323 100.5 2.0
Jharkhand 17,531 219.9 0.6
Karnataka 2,55,454 1,331.9 4.4
Kerala 2,04,757 5,268.7 6.1
Madhya Pradesh 1,65,740 537.7 2.4
Maharashtra 2,23,322 725.8 2.1
Manipur 16,502 739.1 7.0
Meghalaya 9,839 438.7 3.9
Mizoram 6,158 292.1 6.4
Nagaland 22,304 1,345.3 10.3
Orissa 2,15,404 1,383.4 5.4
Punjab 45,178 897.1 1.7
Rajasthan 1,71,479 501.1 2.7
Sikkim 1,873 264.0 3.2
Tamil Nadu 1,81,213 1,393.3 2.7
Tripura 31,733 3,026.2 9.1
Uttar Pradesh 2,84,673 1,181.6 1.5
Uttarakhand 41,041 767.4 4.3
West Bengal 2,11,770 2,386.1 2.4
Source: MOSPI ,MORTH
Capacity of National Highways
Width of carriageway
National Highways length (2007-08)
National Highways length (2008-09)
National Highways length (2009-10)
National Highways length (2010-11)
National Highways length (2011-12)
(km) (per cent) (km) (per cent) (km) (per cent) (km) (per cent) (km) (per cent)
> Four - lane 9,325 14.0 12,053 17.1 16,314 23.0 16,187 22.8 17,700 24.7
Two - lane 39,079 58.5 37,646 53.4 36,886 52.0 36,995 52.2 38,536 53.7
One - lane 18,350 27.5 20,849 29.6 17,734 25.0 17,752 25.0 15,536 21.6
Total 66,754 100.0 70,548 100.0 70,934 100.0 70,934 100.0 71,772 100.0
Source: MOSPI ,MORTH
Road Network in India as in year 2011-2012
Road NetworkLength
(Kilometers)
Percentage of Toatal
Length 5SBGěD
National Highway 71,772 1.7 40
State Highway 154,522 3.840
Major and other District Roads 266,058 6.5
Rural roads 3,617,240 88 20
Total 4,109,592 100 100
Source: MOSPI ,MORTH
147 | Study on Project Schedule and Cost Overruns
50 percent of the civil aviation projects are delayed in December 2012
Source: MOSPI, December 2012 Flash Reports
Civil Aviation Sector: Project schedule and cost overrun trends
Source: MOSPI, December 2012 Flash Report
Civil Sector: No of projects delayed (in months)
Civil aviation sector break up of 3 delayed projects in December 2012
Civil Aviation
Study on Project Schedule and Cost Overruns | 148
Domestic freight (tonnes)
Airports 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Metro Airports
MUMBAI 1,52,159 1,59,724 1,51,328 1,74,184 1,99,831 190288
DELHI 1,16,027 1,30,904 1,28,332 1,63,913 2,09,113 200525
CHENNAI 42,969 41,918 52,806 71,246 93,336 84730
BANGALORE 67,642 70,011 58,310 71,893 87,515 83256
KOLKATA 47,144 49,989 47,305 70,168 84,861 81703
HYDERABAD 22,934 27,119 24,580 30,164 36,390 34472
Total 4,48,875 4,79,665 4,62,661 5,81,568 7,11,046 6,74,974
Non - metro Airports
AHMEDABAD 16,868 12,739 11,018 15,060 19964 15,060
GOA 4,181 3,289 3,460 4,247 4016 4,247
TRIVANDRUM 1,413 1,415 1,442 1,540 1449 1,540
CALICUT 602 363 368 282 191 282
GUWAHATI 1,919 1,642 5,276 8,520 7761 8,520
AMRITSAR 111 376 2,290 161 89 2,299
SRINAGAR 1,918 1,501 1,815 2,016 2361 2,016
JAIPUR 2,539 2,142 5,763 8,177 6475 8,177
NAGPUR 4,058 3,773 4,717 9,145 4588 9,145
COCHIN 6,166 5,934 7,857 8,610 8533 8,610
PUNE 9,983 11,653 17,845 27,828 24134 27,828
COIMBATORE 3,617 4,616 6,285 6,637 7281 6,637
LUCKNOW 1,653 1,873 3,407 3,492 3690 3,492
MANGALORE 410 311 382 305 267 305
VARANASI 352 315 363 422 356 422
PATNA 1,768 1,957 1,928 3,279 3425 3,279
TRICHURAPALLI 12 20 25 0 0 -
VADODARA 1,962 2,198 1,745 2,099 2282 2,099
JAMMU 1,167 1,094 1,157 1,371 1265 1,371
INDORE 3,378 4,952 5,301 5,380 4734 5,380
VISAKHAPATNAM 535 766 938 1,107 1046 1,107
AGARTALA 4,737 5,979 6,755 7,105 6889 7,105
BHUBANESWAR 1,258 1,287 1,998 2,667 2286 2,667
UDAIPUR - - - 0 0 -
BAGDOGRA 568 636 869 1,114 1672 1,114
PORTBLAIR 1,962 2,139 2,290 2,299 2386 2,299
MADURAI 655 572 574 580 842 580
BHOPAL 744 1,028 924 1,175 890 1,175
RAJKOT 812 666 635 933 738 933
AURANGABAD 1,058 963 1,247 1,841 1227 1,841
RAIPUR 1,600 1,444 1,593 2,356 2870 2,356
IMPHAL 568 636 4,719 6,002 4984 6,002
CHANDIGARH 395 413 219 1,013 3042 549
LEH 902 842 1,368 1,426 1336 1,426
JUHU 334 412 383 311
JODHPUR 101 90 n.a 27 41 n.a.
RANCHI 336 449 677 1,306 1650 1,306
SILCHAR 338 319 342 480 497 480
TIRUPATI - 27 23 12 26 13
DIBRUGARH - 299 331 322 343 322
Other Airports - - 1,057 1,279 1491 995
Total 80,980 81,130 1,09,386 1,41,615 1,37,117 1,43,290
Grand Total 4,82,457 5,32,191 5,60,645 5,43,791 6,90,954 8,54,336
Source: Airport Authority of India
149 | Study on Project Schedule and Cost Overruns
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Airports 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Metro Airports
MUMBAI 7.35 7.98 8.12 8.23 9.08 9.70
DELHI 6.65 7.34 7.77 8.31 9.28 10.75
CHENNAI 2.90 3.41 3.66 3.86 4.25 4.31
BANGALORE 1.26 1.54 1.64 1.94 2.22 2.35
KOLKATA 0.81 1.00 1.00 1.19 1.43 1.57
HYDERABAD 1.21 1.44 1.57 1.72 1.89 1.93
Total 20.17 22.73 23.76 25.25 28.14 30.61
Non - metro Airports
AHMEDABAD 0.40 0.70 0.68 0.85 0.83 0.74
GOA 0.40 0.43 0.39 0.43 0.58 0.58
TRIVANDRUM 1.19 1.40 1.47 1.70 1.84 1.84
CALICUT 0.90 1.08 1.52 1.66 1.83 1.98
GUWAHATI - - 0.01 0.01 0.01 0.03
AMRITSAR 0.49 0.20 0.44 0.50 0.47 0.40
SRINAGAR 0.02 0.02 0.02 0.02 - -
JAIPUR 0.19 0.08 0.22 0.26 0.25 0.23
NAGPUR 0.08 0.55 0.09 0.05 0.04 0.04
COCHIN (CIAL) 1.43 1.77 2.01 2.23 2.36 2.59
PORT BLAIR 0.00 -
PORT BLAIR - - - - 0.00 0.00
PUNE 0.05 0.03 0.03 0.04 0.06 0.06
COIMBATORE 0.01 0.05 0.09 0.09 0.10 0.10
LUCKNOW 0.13 0.17 0.17 0.28 0.34 0.36
MANGALORE 0.03 0.16 0.21 0.28 0.25 0.26
VARANASI 0.03 0.05 0.05 0.05 0.06 0.06
BAGDOGRA - - - 0.02 0.02 0.02
TRICHURAPALLI 0.16 0.30 0.38 0.59 0.67 0.79
GAYA 0.05 0.05 0.05 0.06 0.05 0.08
PATNA - - - - - -
Total 5.56 7.07 7.81 9.10 9.75 10.17
Other Airports 0.02 0.02
Grand Total 25.73 29.79 31.57 34.36 37.91 40.80
Source: Airport Authority of India
Study on Project Schedule and Cost Overruns | 150
International freight for the last six years (in tonnes)
Airports 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Metro Airports
MUMBAI 3,27,507 3,73,770 3,78,610 4,08,452 4,70,402 4,67,182
DELHI 2,74,801 3,01,959 2,97,931 3,33,473 3,90,932 3,67,830
CHENNAI 1,95,197 2,27,958 2,19,562 2,49,522 2,95,497 2,72,461
BANGALORE 97,847 1,07,701 99,690 1,02,751 1,35,263 1,41,693
KOLKATA 36,379 41,004 40,743 40,088 45,098 43,890
HYDERABAD 21,715 24,059 29,665 36,295 42,170 43,627
Total 9,53,446 10,76,451 10,66,201 11,70,581 13,79,362 13,36,683
Non - metro Airports
AHMEDABAD 4,126 6,708 10,294 11,657 12,980 11,793
GOA 964 775 688 917 2,535 2,154
TRIVANDRUM 30,465 30,673 30,169 31,708 37,795 46,753
CALICUT 10,691 8,747 12,556 17,132 21,964 25,400
GUWAHATI 51 6 2 - - -
AMRITSAR 1,744 1,252 1,798 2,784 5,834 6,998
SRINAGAR - - - - - -
JAIPUR 728 395 340 446 398 235
NAGPUR 1 4 217 279 346 388
COCHIN 17,009 18,987 25,219 32,779 32,198 34,173
PUNE 7 1 - - - -
COIMBATORE 1,615 1,300 917 702 390 467
LUCKNOW 158 134 49 378 586 839
MANGALORE - - - - - -
VARANASI - 13 3 - - 1
PATNA - - - - - -
TRICHURAPALLI 868 1,153 904 1,349 1,775 2,012
GAYA - - - - - -
Total 68,427 70,148 83,156 1,00,131 1,16,801 1,31,213
Other Airports 76 -
Grand Total 10,21,873 11,46,599 11,49,357 12,70,712 14,96,239 14,67,896
Source: Airport Authority of India
151 | Study on Project Schedule and Cost Overruns
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Airports 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Metro Airports
MUMBAI 14.90 17.88 15.32 17.37 20.00 21.04
DELHI 13.79 16.63 15.07 17.81 20.67 25.13
CHENNAI 6.08 7.21 6.18 6.67 7.80 8.62
BANGALORE 6.86 8.58 7.12 8.00 9.37 10.34
KOLKATA 5.19 6.46 5.99 6.86 8.20 8.74
HYDERABAD 4.54 5.54 4.65 4.80 5.71 6.52
Total 51.36 62.30 54.33 61.51 71.75 80.39
Non - metro Airports
AHMEDABAD 2.09 2.46 2.14 2.68 3.22 3.95
GOA 1.81 2.14 1.83 2.20 2.50 2.94
TRIVANDRUM 0.60 0.70 0.48 0.64 0.68 0.98
CALICUT 0.23 0.23 0.16 0.21 0.23 0.23
GUWAHATI 1.07 1.34 1.37 1.58 1.92 2.22
AMRITSAR 0.11 1.14 0.13 0.20 0.30 0.49
SRINAGAR 0.68 0.76 0.72 0.91 1.04 1.63
JAIPUR 0.60 0.77 0.98 1.27 1.41 1.60
NAGPUR 0.58 0.13 0.71 0.76 1.20 1.38
COCHIN 1.13 1.57 1.35 1.65 1.98 2.13
PORTBLAIR 0.50 0.33 0.48 0.52 0.58 0.61
PUNE 1.53 1.64 1.74 2.21 2.75 3.23
COIMBATORE 0.85 1.01 0.92 1.01 1.14 1.24
LUCKNOW 0.48 0.54 0.65 0.91 1.24 1.66
MANGALORE 0.45 0.55 0.49 0.56 0.59 0.63
VARANASI 0.32 0.40 0.36 0.43 0.50 0.68
PATNA 0.31 0.39 0.34 0.55 0.84 1.02
TIRUCHCHIRAPPALLI 0.05 0.09 0.09 0.10 0.09 0.12
GAYA 0.00 0.00 0.00 0.00 0.00 0.02
VADODARA 0.40 0.50 0.44 0.50 0.60 0.67
JAMMU 0.47 0.55 0.40 0.52 0.69 0.89
INDORE 0.36 0.50 0.60 0.70 0.88 1.11
VISAKHAPATNAM 0.33 0.55 0.60 0.63 0.71 0.96
AGARATALA 0.32 0.41 0.37 0.50 0.75 0.84
BHUBANESWAR 0.35 0.41 0.67 0.83 1.04 1.25
UDAIPUR 0.24 0.29 0.26 0.36 0.37 0.37
BAGDOGRA 0.26 0.37 0.44 0.53 0.65 0.71
MADURAI 0.26 0.41 0.35 0.37 0.39 0.51
BHOPAL 0.17 0.29 0.23 0.26 0.32 0.42
RAJKOT 0.16 0.15 0.13 0.19 0.23 0.26
AURANGABAD 0.17 0.20 0.19 0.22 0.27 0.40
RAIPUR 0.25 0.41 0.40 0.44 0.53 0.80
IMPHAL 0.21 0.32 0.32 0.41 0.56 0.73
CHANDIGARH 0.15 0.23 0.36 0.47 0.65 0.80
LEH 0.14 0.17 0.20 0.23 0.26 0.37
DIBRUGARH 0.23 0.23
TIRUPATI 0.17 0.24
JUHU 0.14 0.14 0.15 0.15 0.00 0.00
JODHPUR 0.11 0.14 0.08 n.m 0.18 0.21
RANCHI 0.15 0.11 0.25 0.27 0.36 0.49
SILCHAR 0.12 0.15 0.14 0.15 0.16 0.21
Total 18.16 22.52 21.54 26.12 32.22 39.24
Other Airports 1.41 1.55 1.87
Grand Total 69.52 84.81 75.87 89.04 105.52 121.51
Source: Airport Authority of India | n.m: Not Meaningful
Study on Project Schedule and Cost Overruns | 152
153 | Study on Project Schedule and Cost Overruns
About KPMG in India
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Study on Project Schedule and Cost Overruns | 154
About PMI
1.*�JT�POF�PG�UIF�XPSMEijT�MBSHFTU�OPU�GPS�QSPěU�NFNCFSTIJQ�BTTPDJBUJPOT�for the project management profession. Our professional resources and
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