Risk and Project Contract Management for Preventing and Solving Disputes in FIDIC Contract

Any project has to deal with problems/issues that can affect its objectives. These issues are sometimes predictable, but in some cases it is impossible to predict. Once it is predicted, the project team shall have proactive counter-measures, and thus limit the possible impact of risks. Risk management is the process of pre-defining risks that may occur in the project, analyzing, and finding appropriate measures for the purpose of increasing the opportunity of success and minimizing damage to the project. Regardless of the size and nature of the project, risk management should be implemented in accordance with the ordering process with the appropriate tools and effective solution.

It is essential to reinforce the capability of identifying risks and contract management in construction projects closely. The control and adjustment of risks are to carry out risk dealing with plans in reality in order to reduce and minimize risks of the project. Moreover, strict management of contract is the only way to prevent disputes and litigations of the project. It is wise that the parties should seek negotiation, discussion or conciliation once disputes occur. Using an amicable settlement approach is simple, effective and inexpensive while adopting claim and arbitration approach is more complicated, costly and time consuming.

Mr. Dang Thai Son made a case study on can tho bridge construction project to: (1) study issues on project risk management: implicit risks, the tenor and process of project risk management; (2) study issues on project contract management: signing and implementing the project contract, amending, canceling or terminating the contract; and (3) find approaches to mitigate risks as well as to prevent and resolve disputes, litigations in project contract.

Conclusion

Risks are unavoidable in construction projects, yet it is still possible to prevent them before and during a project. With such a length (15.85 km), Cantho Bridge was a typical example for risk management. The project has received full financial support from the Japanese government which is Twenty Four Billion Eight Hundred Forty Seven Million Japanese Yen (¥24,847,000,000). However, there was still delay in land requisition. Although only two local households did not agree on their compensation, they affected the progress of the project. In addition, shipping equipment and complex custom procedures also hindered the progress.

On the good side, the Contractor has implemented good management for best results. To start with, the Contractor designed a hierarchy of management with well-targeted goals as well as backup plans. This helped the project progress even in case of force majeure. Second, good management on quality and quantity also contributed to the success of this work. Various aspects of working requirements such as materials, equipment, construction methods and skilled labors were focused and well-prepared. Thirdly, the Contractor showed that environment was taken with extreme care so that almost no effects on the local landscape and ecosystem were done by pollution from the construction. This was done thanks to a third-party specializing in the field of environmental protection. Finally, the Contractor always followed the most important motto: "Safety first." The disastrous accident in foundation settlement showed the nature of risk on the one hand; but on the other hand, it showed that the Contractor prepared and implemented practical and helpful steps in preventing diseases and treating injuries to workmen. As a result, construction workers felt better and secure to continue their work and the project could be completed in due time.

After Cantho Bridge was completed, it has provided the researcher with practical experience in terms of capital, specific infrastructure conditions, hi-tech quality of the contractor and compensation negotiation. This study showed us that reality is always unexpected but with well-planned risk management, we can still handle and heal the uninvited damage to project effectively and in time so as to fulfill the project as pre-planned.

In conclusion, throughout the analysis, we see that Can Tho Bridge Construction Project achieved more successful factors than its constrained ones. This project obtained good delivery system from setting to closing out phase thanks to have good environments such as stable society economy and politics, favorably legal environment especially the great support from the project stakeholders: Financier (JIBIC), Owner, Consultant, Contractors, Suppliers and others (Local Authorities and so on).

Among the three Contract Packages, Package -1 and Package-2 achieved good target. Especially Package-2 completed all the works of the project on schedule without complaints even exceeding the progress compared to that set by the Ministry of Transport. Although Package-2 was a major item of the bridge and very complicated for construction, with all endeavors and efforts of the whole expatriates, engineers, staff and workers of the Main Contractor: Taisei-Kajima-Nippon Steel Joint Operation and his sub-contractors, finally they made good delivery system for the project.

However, the project suffered big delay from Package-3, the Contractor of this Package received many complaints from the Owner because he could not manage his work schedule, while the works of the other two Packages were successfully completed.

Once again, apart from the strengths achieved as analyzed in Chapter 3, there are many weaknesses that the project stakeholders should pay much attention to and should take them as valuable recommendations for future projects:

- Before carrying out the construction of any project, the Project Owner together with Local Authorities shall ensure land requisition to be well-executed and give right of access and site possession to the Contractor at appropriate time without any delay and obstruction from local residents.

- When making the estimation for a project, besides calculating an official capital source for the main items of the project, the project planner should carefully calculate an extra money fund for nearby existing land compensation including the crops. Therefore, the Project Owner will be able to get sufficient land area and provide further access to the Contractor for construction. Because the construction activities of the Contractor definitely affect to the neighboring structures of the inhabitants.

- The Project Owner should thoroughly consider selecting competent, qualified contractors who are healthy in finance and capable of high technology. Not to give the award to the bidder of the lowest price, and poor equipment and poor technology transfer.

It was time for Vietnamese Government and its subordinating Ministries consider carefully when deciding to select the bidder especially for foreign ones. Before inviting them for bidding, a well pre-qualified selection of experienced, prestigious and competent bidder list should be made and elimination of unqualified bidders from the list should be done. If doing so, the Government saves a lot of time and money for unreasonable loss and damage from rectification of defects and re-works.

His thesis abstract is copied and pasted.

Abstract

Risk management is an indispensable job because it will help the project reduce and minimize the extraordinary impacts occur which affect to the general objective of the project.

In this study, we should learn about the concept of risk with its two specific characteristics: probability of occurrence and degree of impact. In addition, the classification of risk is also a meaningful deed; each kind of risk is different, therefore, risk management issue is also totally different. To manage risk, a process of six steps can be applied. First, making risk management plan for general orientation of work and scope of performance to manage the risks. Then, carrying out risk determination, it means to list out the risks might occur in the project. Since then analyzing probability of occurrence and the degree of impact of the risks, Control and adjustment of risks are to implement the plan for dealing with actual risks.

Contract management is extremely important in the project management. Referring to the contract, the project manager will treat and adjust the relationship as well as contradiction between interests and liability of the parties concerned in the project. Therefore, being a project manager, he or she needs to master the sequence of steps of signing and implementing the project contract, the arising issues and conditions of alteration, omission or termination of project contract as well as the approaches to resolve and settle disputes in the contract. Once dispute arises, it is wise that the parties should seek for negotiation, discussion or conciliation. This approach is simple, effective and little cost while claim and arbitration approach is more complicated, costly and waste of time.

“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fee, expenses and waste of time.”

Abraham Lincoln