DELAYS AND CLAIMS IN HYDROPOWER PLANT PROJECT

A CASE STUDY OF DONG NAI 4 HYDROPOWER PLANT PROJECT

IN VIETNAM

By

Tran Cao Hy

Abstract

             

Executing a scope of project works within the right time is clearly one of the key components of project success but it is not easy to achieve in construction industry. Indeed, many construction projects have to face with delay problems in which the causes come from many different sources. More importantly, delays are almost always accompanied with cost and time overruns. Construction project delays often results in adverse relationships between construction stakeholders (client, contractor, consultant etc.), distrust, litigation, arbitration, cash-flow problems, and a general feeling of apprehension towards each other.

Due to inherent risk and complexity of modern construction project, delays and delay claims have become common facts in construction industry. While delays are life of construction projects, delay claims tend to be some of the least understood and frequently confusing claims in the construction field. Therefore, a clear understanding of the basic elements necessary to prove delay claims is invaluable in the processing of complex construction claims.

The main purpose of this report is to identify the major causes of delays and types of claims in construction projects. The qualitative method of risk management theory is used to analyze and rank delay factors and their impact in construction progress. Besides, claims analysis framework and construction claims resolution process is also developed for claims management.

Executive summary

Rationale of research

This research has been conducted to identify the delay cause, effects and claim procedure in hydropower plant projects.

Objectives of study

Study major delays, its causations and investigate, evaluate impact level of delay problems affecting on construction projects by using risk management theory.

Study types of claim and claims settlement procedures in construction field, to propose recommendations for reducing impact of project delay on project delivery.

Methodology  

The exploratory method is used to review the literature of some previous studies on delay problems to summary major delays, its causation and claims in construction industry. And a case study on hydropower plant project.

Risk management model is also applied to analyze and evaluate impact degree of delay factor to construction project. For construction claims, common claim types and effective claims preparation is studied based on literature.

Findings and conclusion

Delays and delay claims in construction projects often result in adverse relationships between construction stakeholders (client, contractor, consultant etc.), distrust, litigation, arbitration, cash-flow problems, and a general feeling of apprehension towards each other.

Delay causations in construction project are much diversified and the magnitude of these delays varies considerably from project to project. We can also see that the causations come from not only Contractor but also either Owner, Consultant or external factors. For Dong Nai 4 Hydropower plant project, the following delay causations found are at the top critical factors.

·         Defective design document (errors, omission)

·         Delay in providing owner’s material or components

·         Inadequate contractor’s experience and capacity

·         Unfavorable weather conditions

·         Delayed payment

·         Acts of government

·         Adjustment of salary and material price

·         Accidents

·         Failure to provide proper equipments

·         Materiel is incomplete and non-synchronous

·         Delay in site clearance

·         Change in design or construction equipments

·         Slow mobilization

·         Delay in change order

The majority of claims found in Dong Nai 4 hydropower plant project only focus on claims for extra work. Claims for extension of time often was negotiated and established a new date for completion in the meeting of monthly work progress review. In such meetings, the compensation issues for claimant to cover his damage caused by delay often are not mentioned. Claims for delayed payment founded in this project only asked about payment for completed works, the claimant’s damage caused by delayed payment has not been stated yet.

Recommendation

•  Hire international sub-consultancy service for reviewing design investigation documents
•  International bidding method
• Contractor’s capacity (staff, equipments, finance and project management) must be clearly identified in contract
• Speed up construction works in comfortable weather seasons to cover the difficulty in adverse weather condition.
• For RCC dam, at least two types of puzzolan need to be researched
• Improve health and safety management
• Award and punishment need to be applied strictly
• Strengthen supervision activities of relevant parties for making decision timely
• Choose supervision consultant with good enough capacity to strengthen assistance to project management board
• take advantage of EVN support in conducting local electric supply company for priority project
• Private investigation should be encouraged to reduce financial burden for EVN
• Revise some necessary procedures in tender evaluation criteria in order to choose better equipment supply contractors (reduce score rate of price in winner collection formula)