New Urban Zone Infrastructure Development Project Risks

Risk and uncertainties comes from various sources. In new residential zone project, risk impact schedule of project implement, project quality, project finance and time of customers and government hand-over.

In recent years, many real estate companies have been establishing and many New Residential Zone Projects were established. Along Nguyen Van Linh highway and in HCMC many of new residential zone Infrastructure development projects have been being delayed and project cost over run due to many reason such as land compensation issues, lack of social agreement, insufficient of capital for buying the land, late in permitted from authority especially in master plan and architectural city design, poor in design and construction, water treat and environment issue and so on. In those projects managers could not deal with the risks and uncertainties which they met in project implementation process.

Project risk is an uncertain event or condition that, if it occurs, has a positive or a negative effect on at least one project objective, such as time, cost, scope, or quality (PMI, 2004). Additionally, Ahuja and Nandakumar (1985) demonstrated that a delay in project completion can cause a cost escalation at least equal to the sum of inflation, overhead cost, and addition interest cost for the period.

Furthermore, there is another actuality to be noted that even successful project have not been able to transfer their best performance and knowledge in the effectively and efficiently way to other projects. Consequently, realizing the list of factors contributing to reducing project time and cost is lacking.

Mr. Hoang Ngoc Anh made a study to find out the risks or uncertainties in new urban infrastructure development project in general and in particular An Phu Tay residential zone project of SADECO and to conduct a risk management to response to them. The objectives of his study were: (1) identifying the risk factors in the infrastructure development in new residential area project; and (2) propose strategies to effectively avoid or mitigate the negative impacts of major risks.

Conclusions

Risks and uncertainties come from various sources. Risk can not be eliminated, but can be minimized, transferred or retained. There are some ways of risk dealing such as transfers the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

The process of taking a construction project in general as well as Development infrastructure for new residential project in particular from initial to completion and transfer is complex. Moreover, there are many organizations and partners who involved a construction project, especial in New urban zone Infrastructure Development project. These organizations involve land owners, client, designers, contractors and subcontractors, consultants, material suppliers, power and water suppliers, customers, public facility agencies, authorities and so on.

In new urban zone development project, risk impact schedule of project implement, project quality, project finance and time of customers and government hand-over. In order to deal with risks, it is essential to establish a strategy that can effectively and efficiently response. Thus, this project study tried to identify major risks and conducted a risk management study for New urban zone Infrastructure Development project. Besides it, the author proposed appropriate strategies to mitigate these major risks.

Identify major risks

Characters of New Urban Development Project as follow:

1. Land area of the project has to big enough over 20ha following Decree 02/ND-CP issued by VN Government. Thus, there are a lot of land owners at area that will be construction site.

2. There are various specialized design consultant organizations on engineering infrastructure joining in design.

3. There are many contractors different from specialized technology, constructing in the same site on surface and underground at the same time.

4. Running time for the project implementation is often long.

5. After engineering infrastructure construction completed, developers have to transfer them to Public Facility Agencies and Government for management.

These above characters related with risks and uncertainties occurring in the project. It is essential to understand project’s characters so that we can deal with risks occurring in the project.

According to data from An Phu Tay residential zone project, statistics of new urban zone development projects and the similar projects in HCMC and throughout VN recent, many major risks were identified and found out that the top three risks occurring in this project as follow:

1. Late in design approval by the authorities,
2. Late in site clearance in construction process, and
3. Construction cost increase because of delay and inflation.

Recommendations

The findings of this study are expected to contribute to identify major risks and more effective risk management process in project. This study proposes some recommendation:

1. When planning the Feasibility Study, it is necessary to study carefully on financial capacity of developers, size and implement time of the project, as well as inflation predictions.

2. Specialists of project planning have to master on engineering, get much working experience. They are to estimate scope of works in order to take project running time reasonably.

3. Feasibility Study Evaluation Authority needs to consider the reality to access project’s feasibility; especially, site clearance issue.

4. It is necessary to define clearly capital flow, option for partitioning investment and business in Feasibility Study. Besides, it is suggested to submit ideas to the Government on construction investment, engineering infrastructure constructions lying outside of fences of the project, connection point and so on.

5. To site clearance, developers need to have planning and schedule suitable to construction procedure of the project.

6. Clients must make timely and quickly decisions in negotiating costs with land owners and need to have good relationship with local authorities to get supports in compensation on site clearance. Beside, it is necessary to make arrangements for resettlement area or temporary residence zone for households living at construction region, so that can hand over site area sufficiently to contractor.

7. Choose experienced design companies; project leader of design team has experienced in design the same construction items.

8. Design contract has to be stipulated conditions on reward and punishment; especially, responsibilities on submission and approval at Public Facility Agencies.

9. Designers and consultants have to always update regulations and standards of Government and Public Facility Agency, and responsible for their acceptance and accept of contract based on their ability only.

10. Design costs are low following Vietnam Government’s regulation; therefore, developers should not recommend designers down expenses.

11. EPC contract should be applied on construction items transferred to Public Facility Agencies. EPC contracts will be signed with high-capable companies dealing with transferring products to Public Facility Agencies.

12. As planning construction schedule, it is necessary to study carefully overlapped building items; from then, take measures fitted with surface and underground engineering items building in the same lay-out.

13. Clients should know that high commitment of all people involved in all processes of project is very important to solve complex conflicts and problems occurring in project. In addition, developers have to set up a Project Management Unit (PMU) that owns a team of experienced and capable experts in order to manage and run the project. The PMU must have authority to make decisions quickly under delegation of developers.

14. Clients should make favorable conditions for staffs improving their knowledge, skills and to update new knowledge. On the other hand, to attract capable and experienced experts and engineers, developers should pay high salaries for them.

15. Building construction progress and program must be planned strictly. It should be taken care of items be able to overlapped. For example, as road contractors finish road foundation, contractors on water, electricity are to install uptime underground systems; avoiding that contractors on underground works excavate the roads accomplished to install underground systems; then, reconstruct them as happened to some projects in Vietnam. Besides, it is avoided damages for road contractors as stopping construction to wait for operation of contractors on underground systems.

His thesis abstract is copied and posted.

Abstract

Risks and uncertainties come from various sources. In New Urban Zone Infrastructure Development Project, risks related participants involving the project, impacted schedule of project implement, project quality, project finance and time of customers and government hand-over.

Risk management is an important part of the decision-making process of all construction companies. Risk and uncertainty can potentially have damaging consequences for some construction projects. Risk can be affect productivity, performance, quality, and the budget of the project. Risk can not be eliminated, but can be minimised, transferred or retained

Risk management is a systematic approach to managing unexpected related to a threat, through a sequence of human activities including: Risk identification, Risk classification, Risk analysis, Risk response, Risk evaluation.

In the organization, there are some ways of risk dealing such as transfers the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.