Critical Success Factors of Owner’s Contract Management for Building Projects in Vietnam

The construction industry is one of the largest industries in Vietnam. In recent years, the construction business has expanded rapidly. Most construction projects are large and more complex than they were in the past. Inevitably consequences are complicated and difficult problems existed in every steps of construction process. The owners required the all parties involved to complete the project on time, within the budget and with high quality and the Construction Management Team has taken an important role to integrate and to manage all these. Every party involved (e.g. the owner, the contractor, the designer, and the Construction Management (CM)) must take their own roles according to the pre-agreed responsibility written in the contract which will make project works efficiently because the construction contracts are covered by laws.

The construction contract is the most important key for project accomplishment. Each party concerned should be satisfied and accept to follow it. The contract will recognize and also influence organizational setting, and process of payment. Whenever one violates the contract, the dispute conflicts and delays are usually occurred.

Hence, weakness of capacity from owner side in contract management lead to the cost of project overrun compared with estimated cost. It can rise from the shortcoming of preparing of project inception such as:

•        - Poor scope of project, definition and control.

•       -  Clients’ design changes.

•       -   Inadequate preparing for bill of quantity (BOQ).

•       -  Various types of construction contract.

•       -  Change orders in construction phase

Besides, there are a number of contractual risks which owner can face as the following:

•         - Unclear contract clauses.

•         - Misunderstanding.

•        -  Different scope of contract.

•         - Insufficient tendering.

•        - Different working conditions of contract.

•         - Delay in signing contracts.

•       -   Inadequate in types of contract.

Ms. Le Hong Ha made a research aimed to:

1. identify the critical success factors of owner’s contract management for building projects in Vietnam

2. study effective owner’s contract management that affect project performance.

Conclusion

1. The critical factors of owner’s contract management for building projects in Vietnam

At first, the ranking by three main parties of project (owners, contractors, and consultants) was conducted to discover the critical success factors of owner’s contract management based on the view of five groups.

Based on the result, the top ten critical success factors of owner’s contract management for building projects in Vietnam are: (1) Employers/ Engineers clearly prepare tender documents (such as: letter of invitation to tender, instructions to renderers, conditions of contract, etc…), (2) Proper technical review of requirement before assignment to contract specialists, (3) Fair progress assessment, (4) Employers/ Engineers complete contract requirement package, (5) Employers/ Engineers obtain performance security from contractor, (6) Customers understanding their role in the contracting process, (7) Good communication with customers/contractors, (8) Employers/ Engineer prepare contract documents signing of contract, (9) Timely receipt of quality contract requirements packages, (10) Clear line of authority in making decision and problem solution.

2. The effects of owner’s contract management in building project performance in Vietnam

Almost groups of owner’s contract management have correlation with three effects of project performance, including time performance (schedule), cost performance (budget) and customer satisfaction.

(i) Time performance

Time performance has correlation with almost groups of owner’s contract management, which created by the special character of project. The consequence described that all success factors of owner’s contract management can impact to time performance. However, there are some relative factors with the character of project such as time line of contract is too short/ not appropriate, legal and disputes, penalties of are not enough power to make certain the implement of process, type of construction contract (DBB, DB…), etc...

(ii) Cost performance

Normally, cost performance will be lead by time performance. Therefore, the correlations between these success factors and cost performance are the same with time performance. This study identifies that almost groups of owner’s contract management impact to cost performance.

(iii) Customer satisfaction

Customer satisfaction is measured through dispute, claims; express the satisfaction about the progress. In fact, contract requirement and condition-related, workforce-related, process-related, relationship-related and leadership-related factors are the major success, which affect the owner’s contract management during construction phrase. Furthermore, the contract content is an important thing to the owners. The contractual clauses are provided well and clear they will become the source of lots successes in the next stage.

Her thesis abstract is copied below.

Abstract

For construction project, contract is the most important key for project accomplishment. Every party concerned should be satisfied and accept to follow it. The contract will identify and also influence organization setting, payment process. Whenever one violates the contract, the dispute conflicts and delays are usually occurred. Besides, contract is the most important to every project’s participation such as owner, contractor, consultant, vendor, supplier, etc…In decade of construction industry, the traditional delivery known as Design-Bid-Build and Design-Build delivery is widely using in building projects. Critical success factors have a direct impact on organization’s project management and contract management process as well as resulting outcomes.  Thus, the purpose of this study is to identify and rank the success factors in owner’s contract management as well as to determine the factors that effectively help the owners to manage contract .The study is based on quantitative research, using questionnaire for data collection and utilizing SPSS software to analyze the data.

The survey of this study was implemented in two big places in Vietnam – Ho Chi Minh City, Binh Duong province. The outcome of data analysis is the ranking of factors in contract management that will help increase the attention of the Vietnamese owners to the critical ones which might threaten their project success.

Key words: Construction Contract Management, Contract Management, Design-Bib-Build, Design-Build, Construction Phrase, Project Delivery, Project Management, Project Owner, Success Factor.