BUSINESS PROCESS MANAGEMENT AND KEY PERFORMANCE INDICATORS IN REAL ESTATE CONSTRUCTION

By

Le Anh Thai

Abstract

             

The controlling of construction processes is important to achieve project’s goals. Many companies now start look for solutions to optimize their own business process. In order to develop in business area, every organization has to continually finding solution for business to act in term of effectiveness and efficiency. The question to save cost and business improvement is the effort so that organizations must consider if they want to maintain sustainable development. How to ensure that the organization is operated effectively and whether the organization is taking competitive advantage? These problems only answer if the organization know their own business processes and have clearly measure, monitor and analyzes its performance.

This report is going to make effort to understand the applied of Business Process Management (BPM) and Key Performance Indicators (KPIs) which should be implement in construction stage to measure the effectiveness and efficiency of the construction process.

  

Executive summary

Rationale of research

This research has been conducted to identify key performance indicators to improve construction process in real estate project.

Objectives of study

To study business process management (BPM) in real estate construction projects, to identify the indicators for improving construction process.

Methodology  

The exploratory research method is used to review theory of business process management and performance management of construction processes.

Findings and conclusion

In applying BPM in the construction stage, the most important is to identify main phase, sub-process to be delivered. The main process need to focus control the output, and also control issues in sub-processes. After the main or critical processes were identified, it is necessary to assess the process performance. The key performance indicators is defined to evaluate whether the process performance comply with organization’s goals and objectives.

For effective implement BPM in construction stage, we should understand all the process of construction stage. And identify critical process to focus controlling. No need to control all the process in order to reduce expense for measurement activity, but the result still acceptable. There is very little guideline in selecting which indicators is appropriate lead to achieve project objective and organization‘s goal. The measurement process should regularly audit to guarantee the transparency. The follow indicators is the most applied in measuring the construction process.

Performance measurement allows an organization to determine what is working and what is not. In order to make effective performance measurement and to improve construction process, one must identify appropriate Key Performance indicator to focus on. In construction process generally, and real estate construction process, it is difficult to develop an agreed set of KPIs, because of the nature of construction industry.  

Recommendations

• Cost performance: It shows how the process consume budget. This performance indicator also tells about how effective the budget control.
• Time performance: this KPI tell whether the process has completed on planned schedule.
• Quality performance: this measurement shows the degree of satisfaction of the process to the requirement. 

RISK MANAGEMENT OF DIAPHRAGM WALL CONSTRUCTION

AFFECTING ADJACENT BUILDINGS

A CASE STUDY OF CONSTRUCTION PROJECT

IN HO CHI MINH CITY, VIETNAM

By

Huynh Thanh Quang

Abstract

In Vietnam was, is and will construct several buildings with basements. The construction of the basement in the soft ground in urban areas is more difficult and risky. There have been many successes but also happened to shame. There are many causes affecting the displacement of the structure and the land around the pit with and without adjacent works. Due to the urgent problem is mentioned so many studies summarizing the experience in the design and construction of over. This project report studied about risk management of basement construction affecting adjacent buildings.

We can only avoid the risks have clearly defined the cause risks to be proactive prevention measures in quality control work is to manage every stage of investment preparation, performance investment and exploitation. To limit risks in this problem, we must to risk identification and solving methods of risk in preparing and constructing stage of diaphragm wall and basements. Although many projects have quality management system, but risk still occurs, and even causing very severe damages for surrounding building.

Therefore, risk identification is the problem very important in quality management system of the project.

Executive summary

Rationale of research

This research has been conducted to identify risk in construction of Diaphragm wall.

Objectives of study

To identify the risk factors involving construction of Diaphragm wall and its effects on surrounding buildings and to propose recommendations to  reduce its effect on surrounding buildings.

Methodology  

The exploratory research method is used to study Diaphragm wall construction process by analyzing case of a building construction project Ho Chi Min City Vietnam.

Findings and conclusion

We can only avoid risks when we identified the cause of risk clearly and made a proactive and preventive measure in project quality management. So, the cause analysis of incident, technical error should be considered large study range in the development strategy of science and technology. Practice shows that many building was caused incidents in execution process of basement, it create severe impact such as structure damages, non-uniform settlement, collapse, casualties etc, some of the problems happened at site are as flows.

·         Damages to the adjacent buildings due to movement of machines and vibration caused by execution of diaphragm wall and bored piles, it will bad impact on the adjacent buildings.

·         Increasingly local deformation of the diaphragm walls made surrounding soil deformed.

·         Defect on the diaphragm wall have occurred pierced holes at basement.

We can see the above reasons are due to less experience of managers. Besides, the investor and relevant parties does not expected budget for risks. If the funding to solving of risks have not or not enough, plans for risk management will be limited and not efficient.

Recommendations

Limit and control of incident are a very complicated task; it requires high level experienced experts and responsibility before the work. Before design and building construction, the consultant must be to investigate the surrounding building thorough, to clarify the position, the status of the building, underground structure, roads, underground pipes, etc, currently in incidence, and estimated affect about adjacent building due to pumping lower ground water level and basement excavation. The contractor must be proposed method to prevent, control, observation and deal with urgent incidents when they happen.

The risks might cause severe incidents (Defect on diaphragm wall (pierced holes), deformation of shoring and king-post system, settlement of adjacent building, displacement of diaphragm wall, etc), there solving problem when it happened is quick enough and thoroughly. They must have plans to deal with urgent incidents and to focus on manpower, equipment and finance to solving risks. Besides, when incident happen they must to displacement and settlement observation for the building and adjacent building. Moreover, they should be study geologic conditions inside and outside the building, this problem is also very important in during process of observing and solving incidents, even solution to move people exit dangerous area when incidents happen.

TMAXIMIZE PROFIT OF CONSTRUCTION CONTRACTOR

CASE STUDY FOR NAM THINH M&E CONTRACTOR

By

Ha Chi Nghia

Abstract

             

Business results of all the companies represent by profit that the company has achieved in business, the ultimate and first goals all of the company and type of business is profit. Profit is also a vital issue of whether large or small company, so companies are always looking for ways to achieve the highest possible profit. Profits are affected by many different factors that can directly or indirectly, may affect more or less.

The subject of this thesis will focus on the analysis of factors affecting the profitability of building contractors and thereby discuss effective strategies to achieve maximum profit for construction contractors.

My case study will focus on:

• Analysis of revenue, cost and profit of Nam Thinh M & E contractor all projects from 2005 – 2011.
• Manage financial of each project during construction for Nam Thinh M&E Contractor.
• Cash flow forecasting for Nam Thinh M&E Contractor.
• Key Performance Indicator for Nam Thinh M& E Contractor.
• Management system of Nam Thinh M & E Contractor in head office and Site.

Executive summary

Rationale of research

This research has been conducted to identify factors impacting profitability of project.

Objectives of study

To identify the factors involving increases in project cost and investigate the behavior of project making high profit by analyzing revenue cost and profit of project.

Develop management plan and strategy to control the factors affecting profitability of construction projects.

Methodology  

The exploratory research method is used to study revenue, cost and profit of Nam Thinh projects to identify high and less profitable projects.

Findings and conclusion

Cash flow and profits is critical for any organization. But in every business has unique properties and its own complexity, for the construction industry, the cash flow can be identified as the most important factor for all bidders. The profit that profit can be considered the first major puzzle in evaluating the success and viability of the contractor, the contractor's operation was successful or not taken on these factors, cash flow is that the profits of the enterprise.

Cash flow, profitability of the bidder is the best which allows evaluating capacity of the contractor's. Some of the unique aspects of cash flow for contractors include retention, lump sum contracts and multiple layers of contractors and suppliers. In addition, accounts receivable for contractors usually consists of a low volume of accounts with a relatively high amount.

So that, to maximize profit for the contractor's project, the most important thing is the contractors must organize and manage project cash flow for the most appropriate projects. To the best project cash flows of the bidder must provide the project planning, purchasing about equipment, labor and other expenses relative to the other details of the project period. So we have cash flow estimates for each task of the project, then consolidated cash flow for the project and finally summed up for all the company's projects are implemented.

In the cash flow projection for the activities of the project, the contractor must provide an alternative option to the best forecast performance, but the contractor should consider several different options for forecasting cash flow and make appropriate plans for settlement if that happens. Most importantly, the contractor needs to consider the worst case of cash flow, from planning to prepare and implement solutions to the company's ongoing.

To optimize the profit of the contractor, in addition to cash flow management and cash flow projection, the elements of the project is to evaluate management's effectiveness in project implementation phase of construction is also very important and we call it the KPIs (Key Performance Indicator).

Latter problem was studied in this topic "Maximize profit for the contractor's project" is the project management, with the subject of research will not be deep, but also offers the overall project management to maximize profits for contractor.

Recommendations

Some factors to consider contractors effectively manage cash flow and profitability of the project, including the following:

·         Implement an accounting system that provides timely information to be used in forecasting. Interface all areas of the company in the process to help ensure thorough and accurate data.

·         Negotiate to reduce contract retainage terms, particularly in situations in which the contractor has a successful prior relationship with the owner.

·         Use reasonable “front-end loading” techniques in preparing the schedule of values to provide better cash flow on the project in early phases. This will help ensure adequate cash to perform the work if, for example, unforeseen site conditions are encountered with front-end excavation.

·         Set the tone for open communication regarding cash flow among all relevant parties to the project. Openly discussing cash flow during pre-construction can better establish expectations, timing and procedures that will help start the job off on the right track. Ensure that any ambiguous terms or billing requirements are discussed and resolved to avoid payment delays as the job progresses.

MPM 5th Year Anniversary in Ho Chi Minh City, Vietnam

On February 18, 2012, MPM celebrated its 5th year anniversary in HCMC with participation of almost 150 guests including MPM alumni and current students, faculties, President of AITAA Mother Chapter in Thailand, representative of AITAA Vietnam chapter in HCMC, representatives from authorities and corporations in Ho Chi Minh city and southern provinces and AIT, AITVN staffs. Present at the ceremony were also sponsors from popular domestic and foreign construction companies including Gold sponsors from Promana, BTA Investment, MPM JSC., and Classic sponsors from Saigon Construction Quality Control JSC. (SCQC),Vinson, Nam Thinh M&E, Wiik-Hoeglund (Thailand), and more.


Participants in MPM 5th Year Anniversary - Majestic hotel, Ho Chi Minh city


Present from Mr. Nguyen Sinh Khang (alumni from MPM2-Vung Tau), Vice President of PetroVietnam.


Speech from Mr. Chawalit – President of AITAA Mother Chapter


One of MPM 5th year anniversary in HCMC’s activities was a tennis tournament for MPM faculties, alumni and current students with main sponsor came from Mr. Tran Duc Quang, MPM3B-HCMC. The double-man tennis matches were conducted in the morning 18 February 2012 at First Hotel Tennis court with participation of 24 players.

The tennis tournament price have awarded at the ceremony of MPM 5th year anniversary in the same evening. The champion has also received incentive price from Ms. Mai Do Thuy Dung, MPM1-HCMC with 1 free night at Hyaat Regency resort, Da Nang city.

1. Champion: Mr. Vo Dinh Nguyen - MPM3B-HCMC
Mr. Le Van Thong – MPM1-Vung Tau
2. 2nd Runner-up: Mr. Hoang Manh Chi – MPM4B-HCMC
Mr. Pham Hai Chien – MPM5A-HCMC
3. 3rd Runner-up: Mr. Tran Duc Quang – MPM3B-HCMC
Mr. Ho Khue – MPM5B-HCMC
Mr. Nguyen Hoang Anh Chuong – MPM2-HCMC
Mr. Nguyen Ngoc Thi – MPM4A-HCMC


Participants in tennis tournament



MPM Tennis tournament – Champion award

PROJECT MANAGEMENT IN HIGH RISK BASEMENT CONSTRUCTION

A CASE STUDY OF CONSTRUCTION PROJECT

IN HA NOI CITY, VIETNAM

By

Tran Xuan Canh

Abstract

In civil and industrial construction, the deep basement construction now contains so many risks and difficult and complicated works.

To minimize the risks can be happened during deep basement construction; we should fully and clearly research the hidden risks for this work as well as give out the suitable solutions and how to apply those solutions during construction and to reduce the disadvantages of those risks to the minimum.

A full and exact research on risks and the method to manage the risks and also the project management during the deep basement construction is very necessary and urgent.

This project report studied about project management in high risk basement construction.

Executive summary

Rationale of research

This research has been conducted to identify risk in basement construction of high rise building.

Objectives of study

To study project planning and control to understand risk in Royal city Project, Hanoi by studying strengths & weaknesses in planning & control practices.

Propose framework for planning & Control in basement construction for high rise.

Methodology                                            

The exploratory research method is used to study risk management in basement construction and the current Vietnam regulations for quality management in construction projects.

Findings and conclusion

To obtain the best efficiency for the project and to minimize the possible damages for the project and the neighboring buildings, we should have a suitable risk management system (RMS) to implement in the project to ensure that the project is operated in the best and safest way to gain full targets of the project: Safety – Quality – Process - Efficiency.

The deep Basement construction needs to be done by the Professional Contractor with a full knowledge about the possible risks and there is a methodical and full control system about this issue.

The implementation of the risk management system (RMS) also requires Client and Contractors to accept the necessary costs to maintain and to operate this system. However, these costs are necessary and proper to ensure the safety for the project.

Recommendations

To achieve the best effect of the risk management in the project, we should take some steps:

For Client

·         Establishing risk management system (RMS) for projects and ensure the system is properly implemented.

·         For collecting data of the contractor, requesting Contractors to submit the risk management system/policy comply with the requirements, conditions of Client for the project in the file bid. Client should collect the contractor that has enough ability to implement the project.

·         While checking RMS of client & contractor there is need of third party throughout implementation to check both.

·         Need to have the insurance contracts for the project and related parties with Insurance Company.

For Contractor

·         Establishing the RMS with the most suitable policies, strategies for the project and to well comply with the requirements of Client and the legal regulations and the policy of the company.

·         There is a serious combination with Client and related parties throughout the project implementation to ensure the best maintenance of the risk management for the project.

·         Establishing and using the suitable tools to manage the risk for the project in order to analyze the reason of the incidents on site and to get the solution to avoid, minimize the damages the most effectively.

·         Using Risk strategies effectively share the risk with third parties as the insurance company or to require Client to be responsible for some risk of the project.

·         Giving out the detail classification for the risks may be occurred for the project, defining the reason to give out the most suitable solution to avoid or minimize the influences of the risks.

·         Establishing the most suitable and effective Risk Organization Chart for each project and establishing the most effective plan.

·         Establish reward and penalty system to reduce the risk in project.

·         Having the most suitable Method Statement for the project to minimize the risks

·         Developing the human control with the suitable management measures to ensure that the staffs are collected and used for the most effectively for the project,

·         Have to have the insurance contracts for workers, equipments of Contractor and third party on site with Insurance Company.

THE DELAY FACTORS DURING CONSTRUCTION PHASE OF

A RESIDENTIAL PROJECT IN BINH DUONG, VIET NAM

CASE STUDY OF AN DIEN URBANIZED RESIDENTIAL COMMERCIAL ZONE

By

Bui Viet Thi

Abstract

             

A project is considered to be perfectly performed when it obtains three basic criteria such as completing on time within the planned budget, ensures the required quality such as winning the customer’s demands and meets labor safety requirements successfully in the performance stage. However, all the residential zones built in Viet Nam have had problems of project management leading to construction delays. Giving solutions for these problems has become project manager’s integral requirements.

  Delays in construction projects are able to be solved. In striving to give solutions for these problems, the significant factors influencing badly construction duration should soon be found out. Therefore, it is very critical to form a systematical approach that should be applied as a device for the investigation.

This report will evaluate and analyze twenty factors which caused delay matters at Residential Zones and were fulfilled at Ben Cat District Binh Duong Province. The qualitative methods will be used, basically based on the principal of evaluating the risk level of factors having a negative influence on the construction schedule of the Residential Zone. It is conducted to realize the objective of the study.

Finally, some solutions to deal with delay problems in the construction duration of projects are given in the text.

Executive summary

Rationale of research

This research has been conducted to identify factors causing delay in construction projects during construction phase.

Objectives of study

To study and analyze delay happening in residential area An Dien Commune, Ben Cat District, Binh Duong province. Recommend strategies for improving project delivery.

Methodology  

Case study approach is considered a major philosophy. In addition, many sources of data will be collected in this study and project reports, documents from local authorities and related agencies, construction standards, and exploratory approach by reviewing available literature to deploy the research of construction delays at Binh Duong and Viet Nam.

Findings and conclusion

By analyzing factors to affect delay in the project, this research showed the problems causing delays in construction stages. This research has identified that delays of the projects were originated from survey stage till construction one. From these result, most delays have generated   from the project owner who is responsible for inexcusable and excusable delays with some compensability and non-compensability.

 In this project, the owner committed some mistakes in blown-off leveling process due to improper planning and slowness decisions given. Then, the owner lacks of qualification and experiences to nominate main contractor, suppliers and Tender Prequalification consultants, to draft Specification resulting in disagreements amongst sub-contractors and fraudulent tender occurring. Also, to deal with uprising problems related to surrounded inhabitants and environmental protection, the owner was not activated and flexible in those eventualities, failed to avoid disputes happening.

In case of the study, the project has 20 factors causing delays in the construction process of An Dien Residential Zone. Delay related to accident of labor safety is so serious, delay related to material delivery is mean effect, and delay related to break-down of machineries and equipments had smallest impacts to the project.

 Suggest for future research

The research has analyzed the factor of delays, reason / severity rate and solution for each cause of delay problem in this construction project. Hence, the similar study can be realized in different type of project such as: Apartment- zone, Resettlement project, etc… in Viet Nam.

                     

Management of Road System Construction under the General Construction Planning by the year 2020 of Cau Giay District, Hanoi City

By

Le Van Thu

Abstract

The district of Cau Giay is one of Hanoi’s districts achieving high-speed urbanization level. Along the district’s urbanization process, many new traffic systems have been constructed and developed, contributing to renovating and modernizing the general urban picture of Hanoi in general and of the district in particular. However, beside the achievements, there remained a lot of weaknesses in the district’s construction and management of urban traffic systems, especially in that of road systems. This study points out the significant problems existing in Cau Giay’s construction and management of road systems. Among those is the development of road systems in the districts are not catching up with Hanoi’s current urbanization process.

In fact, the construction and management of urban landscape along the district’s streets is not efficient. The local technical infrastructures in some areas of the district are not modern and synchronous enough. There remain a lot of problems in the activities of technical infrastructure construction management in accordance with the district’s general construction plan. Based on the facts and figures, the study refers to the theories to describe the roles of road systems in the city’s urbanization process as well as the role of planning road networks in the city’s general urban plan. It also mentions the requirements and legal basis of road system management under the general construction plan.

In the following part, the study use Cau Giay as a case study for this topic, in which solutions to all the existing problems in the district’s road systems management are analyzed so that the road system development is in accordance with the district’s general construction plan by 2020.

To the study’s conclusion, it is essential to build traffic systems synchronized with the district’s other technical infrastructure systems. At the same time, there need to pay more attention in improvement of the local residents’ compliance with the regulations on construction. In addition, the study also emphasizes that importance of building short-term investment plan within the long-term plan for road system construction and attract the other investment sources beside the state budget by encouraging the various investment firms such as BT (Build- Transfer), BOT (Build – Operate – Transfer) and BTO (Build – Transfer – Operate).

  

Executive summary

Rationale of research

This research has been conducted to identify problems in road system of Cau Giay District, Hanoi City.

Objectives of study

To study, analyze and assess road system construction under the general construction planning of Cau Giay District, Hanoi City. propose solution to improve efficiency the general construction planning of Cau Giay District, Hanoi City.

Methodology  

The exploratory research method is used to study road management Cau Giay District, Hanoi City and the current Vietnam regulations for road management.

Findings and conclusion

Management of the road system under the construction planning is a complicated work and relates to a lot of sectors. The road system construction planning management may be assessed comprehensively as follows:

         Attained results: Some new roads have been planned and developed in accordance with the approved planning, forming beautiful, modern and sychronous streets for technical infrastructure and landscape, settling difficulties occured from the urbanization process. Management of construction planning has been regulated and improved suitable to the practice for the first step.

          Shortcomings: Beside the attained results in the road system managementconstruction planning, there are still shortcomings to be settled: construction of many roads is in confusion, not in accordance with the planning; the spontaneous building of works along streets still exists and is not timely prevented. The reality requires strenthening management of construction planning of the road system re-organization of construction administration agency, improvement of inspection and supervision of construction in conformity to the planning, supplementation and completion of regulations on disciplines for violations in road construction.

            Therefore, we have to correctly assess the real situation of the construction and development of the road system subject to the construction planning to give solutions for effective management and construction, contributing to and accelarating the developement of Cau Giay District in coming time.

To conclude, it is very neccessary to manage the construction of road system in Cau Giay District under the general construction planning in order to improve the living standards, conforts and create favorable environment for urban inhabitants.

Therefore, the topic “Management of road system under the general construction planning by 2020 in Cau Giay district, Hanoi city” aiming at proposing measures on management in order to increase the efficiency of road system construction in accordance with the general planning of Cau Giay district. This topic is practical and high feasible in order to speed up the urbanization of Cau Giay district; at the same time, solving inadequate situation caused by the urbanization. In addition, the topic has specialized and completed measures on management of road system construction and local reform, serving practically the economic, cultural and social development of Cau Giay district in accordance with Hanoi Capital planning by 2020.

Recommendations

• In the investment and construction of road system, besides the construction of new urban areas, it must be focused on the investment of infrastructure reform with existing construction area.
•     Routes must be defined the heart and boundary line that have been approved and closely managed, avoiding re-occupying and violating boundary line.
• Positively taking part in the completion of legal document system on management of urban construction planning as well as management of urban roads; proposing difficulties during the execution; simultaneously, increasing the work of construction management as planned.
•   Increasing capacity of management, adding power and responsibilities of ward-level authority in the work of management of road system construction and management of road boundary line.

cost estimation problem in FS and FEED phase of thermal power PROJECTS

A CASE STUDY OF

thai binh 2 thermal power PROJECT

By

Tran Viet Sinh

Abstract

The accurate determination of investment capital and project costs in all projects as well as its stages has strong affect to the project success and efficiency. The required levels of accuracy of project cost estimates vary at different stages of project development, ranging from ball park figures in the early stage to fairly reliable figures for budget control prior to construction. Since design decisions made at the beginning stage of a project life cycle are more tentative than those made at a later stage, the cost estimates made at the earlier stage are expected to be less accurate. Generally, the accuracy of a cost estimate will reflect the information available at the time of estimation.

The project cost estimates may be viewed from different perspectives because of different institutional requirements. In spite of the many types of cost estimates used at different stages of a project, cost estimates can best be classified into three major categories according to their functions. A project cost estimate serves one of the three basic functions: design, bid and control. For establishing the financing of a project, either a design estimate or a bid estimate is used.

1.Design Estimates

For the owner or its designated design professionals, the types of cost estimates encountered run parallel with the planning and design as follows:

-           Screening estimates (or order of magnitude estimates)
-           Preliminary estimates (or conceptual estimates)
 -          Detailed estimates (or definitive estimates)
 -          Engineer’s estimates based on plans and specifications
for each of these different estimates, the amount of design information available typically increases.
2. Bid Estimates

For the contractor, a bid estimate submitted to the owner either for competitive bidding or negotiation consists of direct construction cost including field supervision, plus a markup to cover general overhead and profits. The direct cost of construction for bid estimates is usually derived from a combination of the following approaches.

-           Subcontractor quotations
-           Quantity takeoffs
-           Construction procedures.

3. Control Estimates
For monitoring the project during construction, a control estimate is derived from available information to establish:
-           Budget estimate for financing
-           Budgeted cost after contracting but prior to construction
-           Estimated cost to completion during the progress of construction.

In this study, the author shall focus on the cost estimation methods in the view of the Owner (Design estimate), with reality project case study of Thai Binh 2 Thermal Power Plant Project.

Executive summary

Rationale of research

This research has been conducted to identify problems in cost estimating for EPC contract

Objectives of study

To study different estimating methods from FS to FEED phase, Government regulation which affects estimation.

Discuss strengths and weakness, to propose frame work for accurate estimation for power plant projects.

Methodology                                            

The exploratory research method is used to study problems in cost estimation of thermal power projects in Vietnam and using case to study about frame work for estimating in thermal power plant projects.

Findings and conclusion

As the power plant projects in Vietnam are invested by Government, so total cost from FS to FEED should comply government rules and regulations. The application of the Vietnam government regulation in determining the total investment and total project cost of the thermal power project, also raises some of problem

·         Equipment Cost is usually estimated too low (compared to similar international projects)

·         Policies and cost rates of layout clearance, compensation and resettlement is not close to reality price which leads to almost of the thermal power projects have encountered obstacles to hand over plan and causing project delays.

·         Cost consultants and project managers is low due to excluding the cost of foreign consultants

·         Contingency cost is determined too low.

The method of estimating the total investment and total project cost of thermal power project is combined methods, including some of the following main steps.

·         Breakdown total cost to subdivision of cost areas.

·         Quantity takeoff is determined basing on the basic design for FS phase and the FEED design for FEED Phase. If design drawings are not available, the quantities are calculated with references to similar projects already executed.

·         Detail cost determination.

·         Applying the government rules and regulations into the project to identify sub-divide the areas cost of project.

·         Summarize total project cost estimation.

Recommendations

·         In the thermal power project, the imported equipment and materials cost is a large proportion of the total cost of the project, so the currency in calculation and approval of total project cost is recommended to use two type of money in the spreadsheet which is VND and USD. Amount in USD which is used for the purchase of overseas equipment/material. This reduces the risk causing by variation of exchange rate (always increasing) between VND and USD for investors.

·         Management and consulting Cost of projects need to be supplemented the unit price for the foreign consultant

·         Policies and unit prices application for compensation must be consistent with the actual market price; residential land can be compensated under once with the real market prices. With agricultural land compensation policy of the State should pay for farmer in yearly based on the profits of farm products on the land.

·         Contingency cost applied in FS stage is minimum rate of 20%; For the FEED is 10%, as same with international project cost estimate.

·         Electricity distribution prices to consumers in Vietnam are now too low. PPA (Power Purchase Agreement) between investor (PVN) with EVN should be low. Therefore, the investor has pressure to reduce of total investment and total project cost estimates to meet the economic criteria of the project (IRR, NPV).

·         In the technical engineering design (FEED) and bidding documents, OWNER should define the origin of Equipment. Estimator can determine the equipment cost in a more accurately.