Developing Project Governance Framework for Industrial Estate Developers

Since 1994, Amata (Vietnam) decided that its main mission is to develop industrial estate going along with living community in Vietnam. In order to gain the mission, many projects have been invested by Amata (Vietnam). Those projects are office building, factory for lease, traffic road, water supply system, drainage system, wastewater treatment system, electricity, telecom system, etc. Based on the record of these developing projects, Amata (Vietnam) has experienced common project failures such as project delay, cost variation, useless and ineffective facilities of project investment, etc. These problems initiate a research study to find out the root causes as well as remedy methods of the project failures.

Mr. Nguyen Van Nhan made a research to learn about the project governance framework which has been applying by Amata (Vietnam) for developing projects in comparison with models of effective project governance developed by Gross Garland, 2009. Learning from the comparison, the research study found root causes of project delay, cost variation and useless and ineffective facilities of project investment. Resulting from the study, an applicable project governance framework is proposed for developing industrial estates.

Conclusions

1. Weaknesses found from the current project governance framework

Applicable project governance framework is required for developing projects successfully. Therefore, the industrial estate developers need to study project governance frameworks which are suitable to their organizations. Analysis of the five case studies found weaknesses of the current project governance framework with regard to the four principles of effective project governance. Besides, the validation interviews also contributed more points on weaknesses of the project governance framework that the researcher did not get from the case study analysis. Those mentioned weaknesses can be summarized as the following:

The project owner - One of the first weaknesses related to the project owner found from the research study is unclear accountability for project’s success. Accountability of the project owner was not clearly defined for the success of project delivery. The project owner should be the single one person who chairs the project board, however, this role was sometimes held by the key stakeholder. Besides, the project owner shared their decision making role to the senior user of the project board, therefore, confusion and ineffectiveness happened during the project decision making process.

Another weakness related to the project owner which the research study found is the project owner could not have adequate arrangement to both chair the project board and hold the president of the organization. Both roles are key important roles with very heavy workloads. Moreover, the project owner was appointed to hold the role of project owner for many projects under parallel executions. The project is unavoidable to be in the situation that slow and ineffective decision making activities of the project owner.

The project director - Similarly to the project owner, the research study also found weakness of the current project governance framework relevant to the project director. The project director joined the project board to keep the role of coordination between the project board and the project manager, however, the project director at the same time held other position of department manager of the organization. Moreover, the project director was assigned to hold the role of project director for many projects under parallel executions. The project is unavoidable to be in the situation of slow and ineffective decision making activities of the project director.

The senior user - The presence of the senior user was not available from the early stage of project execution. Project investment was aimed to deliver services to customers who were not defined since the beginning of the project. Therefore, the project board did not have adequate information of the user’s demand in order to deliver the project appropriately.

The strategic advisor’s group - The strategic advisor’s group is necessary to support the project board in delivering projects of new business investment. Without support of the group, the project board did not make appropriate study on service delivery of project

2. Conclusion on the proposed applicable project governance framework in compliance with the four principles of effective project governance

The research study proposed an applicable project governance framework to the organization. It basically kept structure of the current framework and proposed some additions. The below discussion concludes on the proposed applicable project governance framework in compliance with the four principles of effective project governance framework.

The project owner - The position of project owner is held by the president of the organization. Following the principle 1 of effective project governance, the project owner is accountable for the success of the project delivery. They keep the role of preparation for project plan such as budget, schedule, etc. and appointing other members of the project board including the project director, the senior user and the senior supplier. The project owner prepares for the guidance of project’s target from the early stage of the project. The project owner chairs the project board to find solution of any conflicts within the project board. The project owner reports directly to the investment decision group (the board of directors). In order to fulfill the principle 4 of effective project governance, the project owner empowers the project director to act as the coordinator of daily project activities. This way helps the project owner to avoid heavy workload influenced by both the organizational governance and the project governance.

The senior user - Following requirements of the principle 1, sales, after sales or operation and maintenance divisions may hold the position of the senior user. These divisions make surveys on user’s demand to provide information to the project board and prepare user’s manual of the project. The senior may consult the strategic advisor’s group to update and complete information of user’s demand. The present of the senior user is one of the additions to the current project governance framework of the organization. It is necessarily required for delivering project successfully.

The senior supplier - It is kept the old process of selection for the senior suppliers through bidding or nomination. Project owner or the project board must award qualified senior suppliers professionally in delivering the projects. In some special cases which the project is new business investment of the organization, the project owner needs to consult the strategic advisor’s group in selection the senior supplier.

The project director -The project director is still recommended from manager of the engineering department. It is recommended that the project director should be appointed from internal organization to gain more effective cooperation with other members who were also selected within the organization. The project director should be expertise in construction management to assist the project owner. The project director sits in the project board to report directly to the project owner as well as the coordination between the project board and the project manager. As the project director is empowered by the project owner, the project director checked and approval for project partly execution and completion and report directly to the project owner. The project director and the mentioned project engineers are responsible for daily activities of the project execution. In order to fulfill the principle 4, it is required that the project director must assign suitable project engineers to support him in detailed project activities so that the project director can balance the requirements between the project activities and the organizational activities.

The project board - The project board is structured from the project owner, the project director, the senior user and the senior supplier. In compliance with the principle 1, the project board is chaired by the project owner. Within the project board, the project owner takes priority in decision making. As the project board has periodic meeting for project decision making, size of the project board should not exceed 6 members. It is to comply to requirement of the principle 3. This compliance will avoid the project board to suffer from stakeholder meeting.

The investment decision group - The investment decision group is maintained with its structure of a chairman, a vice chairman and six directors. Main role and responsibility of the investment decision group is to consider and approve for project plan such as budget plan, project delivery plan, etc. as well as changes on the original plan.

The strategic advisor’s group - The establishment of the strategic advisor group is required for cases of new business investment. The group is responsible for consulting on the tendering preparation, technology selection as well as selection of the senior supplier. It also helps the senior user to complete information of user’s demand as required in the principle 2 of effective project governance. The project owner is still recommended to chair the strategic advisor’s group. Other members of the strategic advisor’s group are from the organization and the superior organization and external experts from professional consultant.

The project manager - The project manager is appointed by the senior supplier. This position is changed respectively to the project stages change. The project manager is responsible to deliver project within limitations of time, cost and quality stated in contract signed between the project owner and the senior supplier. The project manager works closely with the project director to make sure that the project delivery meets the project’s owner’s needs. It is important to have qualified project manager for well coordinating and supporting with the project director.

The project team - The project team is normally from the senior supplier’s side. It includes engineers in the fields appropriate to the requirement of the project. The members of the project team work and report directly with the project manager.

3. Conclusion on the validation interview

From the validation of interviews of both internal and external organizations, the research study concludes on important points regarding to the proposed applicable project governance framework. Research study on the five project cases was endorsed and the proposed applicable project governance framework was recommended as a useful framework and supported to apply for the organization in developing project.

- The project owner was suggested to be accountable for the project’s success. However, it is required for the organization to choose the right project owner for driving the project successfully. In order words, the project owner must be capable in coordinating the project board for project decision making process.

- The project director should be appointed by the project owner to the person from internal organization rather than from external organization. The project director is recommended to be the center of the project board. The recommendation replaced the role of the project owner by the project director. Hence, the research study may consider this recommendation as the project owner should provide more empowerment to the project director for detailed project activities. There was one question about number of projects which a project director can handle effectively. The question may initiate more study on the project director.

- The senior user must be correctly appointed from the sales, after sales or operation and maintenance division. Those divisions shall need to make survey on user’s demand.

- The strategic advisor’s group is chaired by the project owner to help the senior user fulfilling information of user’s demand. Other members of the group are from internal experts, experts from superior organization or external experts to contribute better innovative expertise.

- Others: the research study should consider on other causes of project failures. Besides, the four principles are probably not enough for developing project effectively. Option of seven enablers was recommended to apply for the proposed project governance framework. They are gate process, clear deliverable, clear governance, holistic organization, competence team, adequate resource, feedback to the next project. The recommendation raised more study on the effective project governance framework and the four principles.

His thesis abstract is copied below.

Abstract

Infrastructure such as traffic roads, electricity, water, drainage, wastewater treatment plants, office buildings and factories are necessarily required in developing industrial estate. As per the requirement, this research study has developed an applicable project governance framework for industrial estate developers. An industrial estate developer named Amata (Vietnam) Joint Stock Company was selected to study on its developed projects in Amata Industrial Estate and Amata Commercial Complex in Long Binh ward, Bien Hoa city, Dong Nai province, Vietnam. The research study analyzed data of five project case studies taken from record of project executions to find root causes of project failures. Data analysis was based on theory of effective project governance and its four principles. Cross analysis was done for the five case studies to find common causes of project failures. Through the common causes of project failures, the research study proposed an applicable project governance framework in which contributed remedy methods to the current project governance framework of the organization. The proposed applicable project governance framework for industrial estate developers is probably only suitable for Amata (Vietnam) Joint Stock Company. The researcher suggests more case studies from other industrial estate developers to complete the value of the proposed applicable project governance framework for widen use. Moreover, further study is recommended as project failure can be from other causes which were not studied in this research.

Keywords: Project decision making, accountability, service delivery ownership, project ownership, stakeholder management, project governance and organizational governance.