The transportation of gas from fields (offshore) to the shore is normally by using the sub-sea pipeline. The constructions of Offshore Gas Pipelines are quite complex, in which pre-commissioning activities contains high risk that cause schedule and cost impact. In some case, the risk occurrence leads to the delay of the whole project complex and have negative impacts to Client and Contractors. And sometimes even serious disputes between the involved parties if no precautions are undertaken.
To run the project at highest efficiency, Contractor must look the whole picture of construction phase including pre-commissioning phase.
Due to special conditions of Construction of Offshore Gas Pipelines such as ocean conditions, weather, marine activities and seabed conditions, the pipeline installation is normally contained high risks. The risk management works are normally carried out at starting of design. However, the risk management for pre-commissioning phase is not taken care sufficiently.
Mr. Khuong Minh Dat made a case study on “Risk Management in the Pre-Commissioning Phase of an oil and gas pipeline project” to offer a risk management methodology, especially for pre-commissioning phase of Offshore Oil and Gas Pipeline Project.
His conclusions are:
1) Pre-Commissioning Process of Oil and Gas:
The pre-commissioning process is normally performed by Construction Contractor to ensure that the pipeline construction is completed successfully before handover to start-up activities and put project into operation. It determines how well the construction phase is done; how the project quality is met; stipulates the minimum requirements for the flooding, cleaning, gauging, hydrostatic testing, dewatering, drying and commissioning of the offshore Oil/Gas pipeline; and is the last and important process of offshore pipeline construction.
2) Risk identification for Pre-Commissioning Process
There are many risks can occur from some sources. However, one of the major problems is the risk related with Piping Internal Gauging (PIG) operation that may get stuck inside a pipeline section due to many reasons. The contractors need to develop a strategy that allows him to manage their process effectively and efficiently. The risk identification has crucial role throughout Pipeline Risk Management. The six typical hazards identified in this study are (1) Accident; (2) Gas Explosion; (3) Pig is stuck; (4) Bad gauging performance; (5) Bad cleaning/testing/drying performance; and (6) Schedule delay.
3) Propose Risk Management for Pre-Commissioning Process
There are three frame works recommended for risk management such as:
Ø The systematic approach to risk management for construction” by Anthony Mills (2005)
Ø Risk management Approach in “Managing Risk in Large Projects and Complex Procurements” by Dale F. Cooper et al (2004)
Ø Practical Risk Management in Construction Industry” framework by Leslie Edwards (1995)
Based on the above three typical frameworks which are advisable for Pre-Commissioning Pipeline Risk Management at their practical recommendations, the author offers the PPRM frame work.
His recommendation are as follows:
o It is important to have a good plan is not only for pre-commissioning work but also for the whole construction phase, in which the bad weather window of the sea must avoid. The necessary equipment for work must be arranged probably. Review the quality document and certificates completed with conformance inspect of materials and equipments are also conducted probably.
o The design of pipeline is important requirement. The designer has to foresee construction requirements and all project constrains have to be incorporated in his design. Any insufficient design can cause of problems for construction and pre-commissioning phase.
o The manufactures of line pipes and equipment preparation are taken a very important part of the PPRM. The most finding is the awareness of the preparation work’s impact on PPRM performance.
o PPRM not eliminate almost risks but the risks are minimized and concentrated to acceptable level. Hence, PPRM can save the cost of risk transfer.
o PPRM is recommended applying for the Oil/ Gas pipeline projects not only in Viet Nam but also on the worldwide.
His thesis abstract is copied and posted.
ABSTRACT
Many pipeline projects have been continuously building to get the gas and oil from sea to the shore. The transportation of gas from fields (offshore) to the shore is normally by using the sub-sea pipeline. The constructions of Offshore Gas Pipelines are quite complex, in which pre-commissioning activities contains high risk that cause of schedule and cost impact. In some case, the risk occurrence leads to delay the whole project complex. The negative impacts to project (cost and schedule) at Client and Contractors, or even serious disputes between the involved parties could be raised if no precautions are undertaken.
Risk management is an important part of the decision-making process of all construction companies. Risk and uncertainty can potentially have damaging consequences for some construction projects. Risk can affect productivity, performance, quality, and the budget of a project. Risk cannot be eliminated, but it can be minimized, transferred or retained (Burchett, 1999).
In this report, a risk management for pre-commissioning phase of oil and gas project is presenting. Six important risks
Tuesday, 7 July 2009
Monday, 6 July 2009
KEY INTERACTIVE ACTIVITIES AND RISKS OF PPP INFRASTRUCTURE DEVELOPMENT PROJECTS: THE MASS RAPID TRANSIT IN THAILAND
Construction industry has played the vital role in world’s and country’s economic growth. Large construction project such as infrastructure needs to be proposed to cover the national strategic investment and national demand including community needs resulting to the increase in national growth rate. Therefore, infrastructure development and growth rate become linked.
In Thailand, government initiates to invest the physical and social infrastructures in 2008 such as mass transit rail (ADB, 2007). But due to political instability, the construction industry growth is declining. In order to develop successful infrastructure, the attractive alternative for government is to use the privatization approach called called “Public Private Partnerships” (PPP). In this approach, the government will allow the private sector to finance, design, construct and operate depending on the contract or procurement option. The private sectors use their technical and financial expertise to put a viable infrastructure project.
Since Thailand is one of the developing countries that have many infrastructure development projects, the Royal Thai Government (RTG) also has difficulty to propose infrastructure project because the infrastructure development project has high capital investment cost. The public private partnerships are used by RTG or state-own enterprises as the tool to provide the infrastructure service for community. The RTG increased the participation of private sector in infrastructure development.
Therefore, it is important to have a study public private partnerships in order to understand the interactive relationship and risks along development process between public and private sector. By understanding this interaction and risks between public and private sector, the PPP infrastructure projects will be completed with effective and efficient management.
Mr. Thotsaphol Rattananapalai made a study that aimed to investigate the interactive activities, relationships and risks between public and private sector in PPP infrastructure projects.
His results from the data analyses were found that the case study met twenty-six risks along the project development. It has nine, two, one, four, five and five risks in conceptual, tendering, financing, design and planning, construction and operation and maintenance phase, respectively. However, the concession agreement between public and private sector had covered only nine risks without any clause in first four phases. The key activities in PPP project development were found out: demand-supply assessment, signing concession agreement, developing financing plan, procuring outline and definitive design, revenue service commencement and operating and maintaining facilities. Then the key risks were found out: uncertainty of government policy, poor public decision making process, delay in financial closure, unavailability of fund, service commencement delay and revenue shortfall. Finally, the interactive model between public and private sector and risks relationship model were illustrated in this research.
His thesis abstract is copied and posted.
ABSTRACT
Due to increasing of the infrastructure projects, the public private partnership approach is getting more using. However, the public private partnership project development is complicated with the interrelation between public and private sector. For that reason, both public and private sector are getting into many problems along project life cycle. Therefore, it is necessary to have a study concerned with the development of public private partnership project along project life cycle. This research aims to investigate the interaction between public and private sector in project life cycle of PPP project. It also identifies the key risks and key activities along the project development.
In order to achieve the objective of research, the research uses case study approach as a research design. The process begins with framework identification that comprises of activity identification, framework development and framework verification. The selected PPP case study is the first underground mass rapid transit in Thailand. It continues with the data collection that uses the documentation, archival record and interview. The data analysis is conducted towards the case study evidences using explain and describe method to reveal and explain the important evidences.
Results from the analysis were found that the case study met twenty-six risks along the project development. It has nine, two, one, four, five and five risks in conceptual, tendering, financing, design and planning, construction and operation and maintenance phase, respectively. However, the concession agreement between public and private sector had covered only nine risks without any clause in first four phases. The key activities in PPP project development were found out: demand-supply assessment, signing concession agreement, developing financing plan, procuring outline and definitive design, revenue service commencement and operating and maintaining facilities. Then the key risks were found out: uncertainty of government policy, poor public decision making process, delay in financial closure, unavailability of fund, service commencement delay and revenue shortfall. Finally, the interactive model between public and private sector and risks relationship model were illustrated in this research.
In Thailand, government initiates to invest the physical and social infrastructures in 2008 such as mass transit rail (ADB, 2007). But due to political instability, the construction industry growth is declining. In order to develop successful infrastructure, the attractive alternative for government is to use the privatization approach called called “Public Private Partnerships” (PPP). In this approach, the government will allow the private sector to finance, design, construct and operate depending on the contract or procurement option. The private sectors use their technical and financial expertise to put a viable infrastructure project.
Since Thailand is one of the developing countries that have many infrastructure development projects, the Royal Thai Government (RTG) also has difficulty to propose infrastructure project because the infrastructure development project has high capital investment cost. The public private partnerships are used by RTG or state-own enterprises as the tool to provide the infrastructure service for community. The RTG increased the participation of private sector in infrastructure development.
Therefore, it is important to have a study public private partnerships in order to understand the interactive relationship and risks along development process between public and private sector. By understanding this interaction and risks between public and private sector, the PPP infrastructure projects will be completed with effective and efficient management.
Mr. Thotsaphol Rattananapalai made a study that aimed to investigate the interactive activities, relationships and risks between public and private sector in PPP infrastructure projects.
His results from the data analyses were found that the case study met twenty-six risks along the project development. It has nine, two, one, four, five and five risks in conceptual, tendering, financing, design and planning, construction and operation and maintenance phase, respectively. However, the concession agreement between public and private sector had covered only nine risks without any clause in first four phases. The key activities in PPP project development were found out: demand-supply assessment, signing concession agreement, developing financing plan, procuring outline and definitive design, revenue service commencement and operating and maintaining facilities. Then the key risks were found out: uncertainty of government policy, poor public decision making process, delay in financial closure, unavailability of fund, service commencement delay and revenue shortfall. Finally, the interactive model between public and private sector and risks relationship model were illustrated in this research.
His thesis abstract is copied and posted.
ABSTRACT
Due to increasing of the infrastructure projects, the public private partnership approach is getting more using. However, the public private partnership project development is complicated with the interrelation between public and private sector. For that reason, both public and private sector are getting into many problems along project life cycle. Therefore, it is necessary to have a study concerned with the development of public private partnership project along project life cycle. This research aims to investigate the interaction between public and private sector in project life cycle of PPP project. It also identifies the key risks and key activities along the project development.
In order to achieve the objective of research, the research uses case study approach as a research design. The process begins with framework identification that comprises of activity identification, framework development and framework verification. The selected PPP case study is the first underground mass rapid transit in Thailand. It continues with the data collection that uses the documentation, archival record and interview. The data analysis is conducted towards the case study evidences using explain and describe method to reveal and explain the important evidences.
Results from the analysis were found that the case study met twenty-six risks along the project development. It has nine, two, one, four, five and five risks in conceptual, tendering, financing, design and planning, construction and operation and maintenance phase, respectively. However, the concession agreement between public and private sector had covered only nine risks without any clause in first four phases. The key activities in PPP project development were found out: demand-supply assessment, signing concession agreement, developing financing plan, procuring outline and definitive design, revenue service commencement and operating and maintaining facilities. Then the key risks were found out: uncertainty of government policy, poor public decision making process, delay in financial closure, unavailability of fund, service commencement delay and revenue shortfall. Finally, the interactive model between public and private sector and risks relationship model were illustrated in this research.
Saturday, 4 July 2009
Professor Christian Brockmann delivered Applied Project Management in Highway Project Lecture on 26-28 June 2009 in Vietnam
Prof Christian Brockmann has delivered his lecture on applied Project Management in Highway Construction. He discussed effective project management approach and technology for highway construction. He presented some highway projects that he managed in the past, including Expressway BangNa Trad in Bangkok Thailand.
Students were very pleased to learn his practical knowledge in highway project management.
We will invite him again next semester! and he has agreed to come to Thailand and Vietnam to teach in our CEIM and MPM program.
Posted by
Hadikusumo
Wednesday, 1 July 2009
PROJECT MANAGEMENT COMPETENCY DEVELOPMENT: A CASE STUDY OF VIETNAMESE SMALL AND MEDIUM-SIZED CONSTRUCTION FIRMS
As one of the most dynamic cities in Viet Nam, Ho Chi Minh City has numinous changes in both its image and infrastructure. In the year of 1998, there were few buildings, most of which were located in the downtown area. However, for the last decade, many large scale projects have been built.
Following Vietnam’s economic growth, the demand for high-rise buildings increases and the need for efficient construction are therefore evident. However, like other developing countries, Vietnam is also facing many weaknesses in project management that weakened domestic competitiveness.
Improper project management competency is present both in the public sector and private sector and in small and large scale projects. Seminars and workshops have been held to discuss and explore the effectiveness of this issue in term of project cost, time and quality, as well as to seek for an enhancement of project management competency.
Mr. Chu Bien Cuong made a case study to (1) identify the project management competency of an SME construction company in Vietnam; and (2) identify on how to enhance project management knowledge and skills for human resources.
Mr. Cuong analyzed the weakness and identified the root causes attributable to project management competence. And based on which, he gave recommendations to solve the problems peculiar to a real-world project, while highlighting the expected enhancements of a real contractor. After all, a project management competence framework was developed for projects under the administration of a small or medium-sized construction firm.
Through this case study, Mr. Cuong found out that among small and medium sized construction firms, the competency of SMEs still does not meet the project management in terms of effectiveness and efficiency. Most SMEs are restricted in applying the management system. Besides, the management knowledge is the most important thing that SMEs have to improve in order to obtain the potential competition with other rivals.
Through various assessments and analyses, his study successfully explored insights in project management competency. The findings are found to be practical for small and medium-sized construction firms. His recommendations are the following:
1. Individual competency. The use of suitable leadership style is of prime importance in the firms. In addition, the individuals should be aware of the necessity to acquire knowledge as well as fundamental project management skills. Lessons from project failures can be a source of experience to learn. Beside, the project management should have full support of his top management and colleagues to carry out project tasks successfully.
2. Team competency. Group leadership and cooperation is crucial for the survival and development of any organization. A good system should therefore be established to address at least the following issues:
(i) line of communication;
(ii) vague and ambiguous defined responsibilities;
(iii) individual relationships;
(iv) decision-making processes;
(v) high cooperation.
3. The organization institutionalization is very important for its own development and as a good working environment for its staff. The organization should be structured in such a way that divisions, departments or strategic development, etc. can meet the project-focused objectives. In addition, the employees also contribute greatly to the development of the organization itself. It is strongly recommended that in setting rules and policies, the top management should, among other things, focus on enhancing individual and team competency through special-purpose capacity-building programs designed for its responsible staff.
His thesis abstract is copied and posted.
ABSTRACT
For the last decade, most projects in Vietnam were in small and medium scales. So with crowded labor sources at that time, contractors satisfied the basic project requirements with inefficient outputs and outcomes. However, construction projects have nowadays been developing in scale as well as in quantity. As a result, the requirements on improvements in competition in terms of quantity, cost, and technology are increasing.
The role of contractors in construction projects is very important since their performance brings successful or failure to these projects. In Vietnam, project management competence of local contractors has recently not satisfied market demand and project requirements. Such low project management competence has resulted in poor performance and side effects. These not only have a direct impact on the stakeholders but also on the project objectives and social interests. To enhance project management competence is therefore required by and from individuals and organizations.
Project owners have been seeking for efficient and effective contractors who can deliver a promised project. As stated, contracts are often awarded to foreign contractors who have experience and capacity to meet their client’s expectations. Meanwhile, the chance to lose contracts in high demand markets is obvious for local contractors due to limited abilities.
The need of approaching and improving project management competence is critical. This study will therefore address the project management competence by investigating a project by a construction firm, and then recommending solutions to improve project management competence in small and medium-sized construction firms in Vietnam.
His research framework is illustrated below.
Following Vietnam’s economic growth, the demand for high-rise buildings increases and the need for efficient construction are therefore evident. However, like other developing countries, Vietnam is also facing many weaknesses in project management that weakened domestic competitiveness.
Improper project management competency is present both in the public sector and private sector and in small and large scale projects. Seminars and workshops have been held to discuss and explore the effectiveness of this issue in term of project cost, time and quality, as well as to seek for an enhancement of project management competency.
Mr. Chu Bien Cuong made a case study to (1) identify the project management competency of an SME construction company in Vietnam; and (2) identify on how to enhance project management knowledge and skills for human resources.
Mr. Cuong analyzed the weakness and identified the root causes attributable to project management competence. And based on which, he gave recommendations to solve the problems peculiar to a real-world project, while highlighting the expected enhancements of a real contractor. After all, a project management competence framework was developed for projects under the administration of a small or medium-sized construction firm.
Through this case study, Mr. Cuong found out that among small and medium sized construction firms, the competency of SMEs still does not meet the project management in terms of effectiveness and efficiency. Most SMEs are restricted in applying the management system. Besides, the management knowledge is the most important thing that SMEs have to improve in order to obtain the potential competition with other rivals.
Through various assessments and analyses, his study successfully explored insights in project management competency. The findings are found to be practical for small and medium-sized construction firms. His recommendations are the following:
1. Individual competency. The use of suitable leadership style is of prime importance in the firms. In addition, the individuals should be aware of the necessity to acquire knowledge as well as fundamental project management skills. Lessons from project failures can be a source of experience to learn. Beside, the project management should have full support of his top management and colleagues to carry out project tasks successfully.
2. Team competency. Group leadership and cooperation is crucial for the survival and development of any organization. A good system should therefore be established to address at least the following issues:
(i) line of communication;
(ii) vague and ambiguous defined responsibilities;
(iii) individual relationships;
(iv) decision-making processes;
(v) high cooperation.
3. The organization institutionalization is very important for its own development and as a good working environment for its staff. The organization should be structured in such a way that divisions, departments or strategic development, etc. can meet the project-focused objectives. In addition, the employees also contribute greatly to the development of the organization itself. It is strongly recommended that in setting rules and policies, the top management should, among other things, focus on enhancing individual and team competency through special-purpose capacity-building programs designed for its responsible staff.
His thesis abstract is copied and posted.
ABSTRACT
For the last decade, most projects in Vietnam were in small and medium scales. So with crowded labor sources at that time, contractors satisfied the basic project requirements with inefficient outputs and outcomes. However, construction projects have nowadays been developing in scale as well as in quantity. As a result, the requirements on improvements in competition in terms of quantity, cost, and technology are increasing.
The role of contractors in construction projects is very important since their performance brings successful or failure to these projects. In Vietnam, project management competence of local contractors has recently not satisfied market demand and project requirements. Such low project management competence has resulted in poor performance and side effects. These not only have a direct impact on the stakeholders but also on the project objectives and social interests. To enhance project management competence is therefore required by and from individuals and organizations.
Project owners have been seeking for efficient and effective contractors who can deliver a promised project. As stated, contracts are often awarded to foreign contractors who have experience and capacity to meet their client’s expectations. Meanwhile, the chance to lose contracts in high demand markets is obvious for local contractors due to limited abilities.
The need of approaching and improving project management competence is critical. This study will therefore address the project management competence by investigating a project by a construction firm, and then recommending solutions to improve project management competence in small and medium-sized construction firms in Vietnam.
His research framework is illustrated below.
Tuesday, 30 June 2009
Riza Yosia will join University of New South Wales (UNWS) Australia
Riza Yosia receives a PhD scholarship from UNSW. He will join on 19 July 2009.
Congratulations! and Good luck with your PhD study.
Posted by
Hadikusumo
Congratulations! and Good luck with your PhD study.
Posted by
Hadikusumo
EPC PROJECTS MANAGEMENT AND PROBLEMS: CASE STUDY OF INTERNATIONAL AND LOCAL EPC CONTRACTORS OF OIL/GAS AND PETROCHEMICAL PROJECTS IN VIETNAM
Now with a stable political and social economic status, Vietnam becomes a destination of the foreign investors from developed countries. The foreign investors always perceived to be beneficial to the host countries. In the side of host counties, foreign investment business structures are predicted to bring back the foreign capital, advanced technologies, management know-how and better quality products for re-export or for domestic market distribution. The quest for technology is more essential for the host countries when the requirement of foreign investors’ capital is obvious and great.
Since the start of the opening market economy, hundred investors have transferred their money to Vietnam and found out the business, almost strong and famous chaebol or enterprises invested to Vietnam have concentrated in investment to Oil and Gas industry. With the Joint Venture Agreements selection, they became shareholders with Vietnamese State Owned Companies and have been starting their businesses successfully.
In recent years, Vietnam Oil and Gas Group (PVN) have been carrying out a lot of mega projects. Some have been done and others are progressing like Vietnam-Soviet Union JV (VSP) oil exploration and developing projects.
In order to ensure that most projects will be executed with the aiming cost, quality and time targets, Vietnamese Government and PVN particularly have to invite engineering and technical resources from developing or developed countries by bidding for the International EPC Contractors, International PMC, Certificate Agents, Insurance companies etc
With the Joint Venture Agreements selection, these companies became shareholders with Vietnamese State Owned Companies and have been starting their businesses successfully.
Even though most of EPC Contractors who were selected for PVN’s projects are well experienced and well-known in their particular categories, it does not mean that all the EPC Contractors were successful in reaching clients’ satisfactions. The common problems during the implementation the projects were schedule delay, contingencies, variation orders and unqualified accomplishment
Mr. Nguyen Khoa conducted a case study on “EPC Projects Management and Problems: Case Study of International and Local EPC Contractors of Oil/Gas and Petrochemical Projects in Vietnam” to (1) explore some reasons why some EPC contractors getting troubles in carrying out the project, also their problems in EPC Project Management; and (2) explore the better practices in EPC project management.
His research study focused on how the EPC contractors control and manage the EPC projects in Vietnam including procurement, cost, scheduling management. Three Petrochemical construction projects were selected base on specific criteria such as:
· Medium to large projects
· Executed by International EPC contractors and Local EPC Contractor this have dealing experiences in Vietnamese construction market.
· Mentioned projects were accomplished and now under operation.
The case study projects are Phumy Fertilizer Project, Phumy PVC Project and Thivai Terminal and LPG Pipeline Project since these three have similar things in common:
Belonging to PetroVietnam.
Projects were built in Southern of Vietnam, in 02 adjacent Industrial Zones.
The Execution time of these 03 projects was happened in 1997 to 2005.
The Type of contract is EPC Contract; 02 EPC Contractors were assigned and the other one was selected by bidding.
The 02 Projects were carried out by International EPC Contractors were successful in project execution. The other one was executed by the Local EPC Contractor was the failure one (in time, cost and quality management.)
Based on the result of the study, among hundred projects belonged to PetroVietnam, the Phumy Fertilizer Project was the first and only project that was accomplished on time and under the estimated budget. The reasons for this project’s success were due to the competence of the Consortium, support and direction from the Nation Leaders, and scare of fertilizer in current situation. But, in the point of view of a member who joined this project, the hard working spirit of the Project Management Board in both sides (Client and Consortium) is the only primary reason.
Phumy Plastic Plant was also one of the accomplished projects of PetroVietnam within Joint Venture field. The project itself was started, executed and finished on time and within the approved budget. Most of the site activities were the equipment erection and installation works; the civil and construction works occupied a small part of whole project without any special solution need to be applied. The procurement activities were done by the EPC Contractor with the fixed configuration from the Licensor and PETRONAS (shareholders), so it was not sophisticatedly ordered and contracted to the International Vendors.
Thivai LPG Terminal and Pipeline Project was a small project without any high techniques or sophisticated configuration. It is about 12 ha in total and 20 ha for extension consideration in the future following the International Codes and Standards in engineering design and project management. It was still considered a failure due to the incompetencies of the EPC Contractor. Without historical experiences in role as the EPC Contractor, PVECC did not know how to solve and manage the project.
Mr. Khoa concluded that the main cause in the projects’s failure was depending on the competency of the EPC Contractor. Lack of experiences in the similar works, bad in planning and scheduling, bad financing plan, fragile in contracts negotiation, low reputation, lack of world wide relationships, unskillful in project management, shortcoming of human resources etc. are the constraints that the Local EPC Contractors have to overcome to improve and affirm themselves for getting the reputation from the clients in current competition market.
His thesis abstract is copied and posted.
ABSTRACT
Vietnam social-economic is booming in recent years, with attracting investment policies, the Vietnamese Government have been successful in luring many foreign investors starting their businesses in Vietnam, especially in Oil and Gas Industry.
Known as a country has rich natural fossil resources, Vietnam has large capacity of crude oil and natural gas in his off-shore East Sea areas. But with the restriction of engineering and updated technologies, the Vietnamese Government / PetroVietnam have been exerted themselves to attract as more bilateral relationships from developed countries (US, Russian, England, France, Norway, Japan...) as possible to expand their advantages in exploration and own their fossil energy resources.
Most of the projects that related to Oil and Gas Industry which have been carried out in Vietnam following the EPC type of contract. In the point of view of PetroVietnam, Oil and Gas projects should be implemented effectively, and that is the reason why the international EPC Contractors are the most feasible selection, cause of the lack of experiences in mega projects executing of Local EPC Contractors.
In order to manage and control the project to reach the demands from the Client / Owners, normally are cost, time and quality, the International EPC Contractors should have very efficiency project management methods which could help the International EPC Contractors in order to avoid any problems and adverse factors related to cost overrun, delay and inadequate productivities.
In the contain of this thesis, the author would like to focus on the research of International EPC Contractors Project Management, in Oil and Gas Industry Projects. The three selected case study projects are the Phumy Fertilizer Project, the Phumy PVC Project and the last one is the Thivai LPG Pipeline and Terminal Project. Those mentioned projects will be draft informed as below:
1. Phumy Fertilizer Project:
Petrochemical Industry, that included the Urea (Fertilizer) production, is one of foundation industries, it’s really important for the national economic developing. The shape and growing of this industry will become a force to develop the agriculture and other related industries.
In economic developing strategies of the Government, execution the Fertilizer or Urea Plant, not only to ensure the stability and initiative in supplying the fertilizer with reputedly as the strategic production for national developing, but also to bring back the other effective outcomes aspects such as economic, social, political and also distribute to impulse the industrialize and modernize processing that taken initiative by Vietnamese Communist Party.
In years ago, Vietnamese Government did have the mission the develop the fertilizer industry, but it was impossible due to some objective existences. There have been only some small size plants of Urea and Phosphates were operating in Vietnam in current time, with the supplying capacity approximately only 7% of the national demand, and the remain requires should depend on the importing resources and be paid with valuable foreign currencies.
On the April of 2000, the Prime Minister delegated to PetroVietnam (PVN) incorporated with Vietnam General Chemical Companies (VinaChem) and Vietnam Agriculture Company (Vigecam) to establish the Feasibility Study Report (FS) of Fertilizer Plant with the feedstock from associated (nature) gas resources.
Followed the order of the Prime Minister (correspondence No. 58/TB-VPCP dated 30th April, 2000 referred to Developing the Gas – Power – Fertilizer Program), PVN urgently drafted and submitted to the Government for approval the Feasibility Study Report of Fertilizer Project. This project was invested by Vietnamese Government / PVN, and the selected location of the project is in Phumy 1 Industrial Zone in Baria – Vungtau Province.
This is the first Fertilizer Plant in Vietnam could use the feedstock from the associated nature gas, this Plant supplies the production to the domestic market, concentration to the Mekong Delta provinces and the other areas in the South of Vietnam. Until now, most of Urea used in Vietnam must be imported from regional countries. As forecasting, the 2000 – 2005 Urea demand increased around 4,8%. The predict urea demand in 2000 was 1,975 millions tons, it was 2,07 millions ton on 2001, 2,169 millions ton in 2002, 2,224 millions ton in 2003, 2,29 millions ton on 2004 and 2,37 millions ton in 2005. The demand speed of grow in 2005 – 2010 period is 4,1% and total urea demand in 2010 will be 2,9 millions ton. In case the Plant will operate full design capacity (740.000 ton – 800.000 ton /year) in the initiate stage, it only satisfies 35% of domestic demand (Phumy Fertilizer Project – The Feasibility Study Report). Consequently, the project will have advantages in competition compare to the other imported resources.
The Fertilizer Plant uses the feedstock from the associated gas resources from CuuLong and Nam ConSon gas basins, and the predict output capacity around 740.000 ton / year of urea (2.200 tons of urea / day and 1.350 tons of ammonia / day). The flexible in using the feedstock (gas) will warranty the high efficiency of economic and necessary security for the Plant in case of the fluctuation of cost and supplying resources in the market.
2. The Phumy PVC Plant:
This project was a Joint Venture project between 04 shareholders: PetroVietnam, Petronas - Malaysia, Marubeni - Japan and TMS - Thailand. This project located nearby the Thivai LPG Pipeline and Terminal, in the Caimep Industrial Zone, Baria – Vungtau Province, with total square around 07 ha.
The outputs of this plant is Polyvinyl Chloride with capacity is 100,000 MTPA. Total investment of this project is USD70 millions and via the License of European Chloride, UK. The project has Amended Joint Venture Contract signed on 12th April 2000. Amended Investment License 1305/GPDC3 issued on 6th May 2000. EPCC (Engineering – Procurement – Construction – Commissioning) Contract awarded to Samsung Engineering and site handover on 15th May 2000. Site preparation and soil improvement works essentially completed and Piling scheduled to start end June 2001. The plant on stream by October 2002.
The PVC plant uses the LPG and Natural gas as the feedstock to their inputs. In the project management perspective, this project could be a success. But in operation phase, due to Joint Venture Terms and References, this plant has to face with a lot of difficulties in production and selling their products. But it is a difference aspect of The Phumy PVC Plant. In this scope of research, the author only focus on the EPCC Contractor Project Management side and will present the detail in the Chapter 4.
3. The Thivai LPG Terminal and Pipeline Project:
This project is a complex of the 03 x 06 inches pipelines system connecting the DinhCo Gas Distribution Plant to the Thi Vai LPG Terminal with the distance of on-shore underground pipeline around 48 km. The production was transported via the pipelines system and separated into three kinds of products such as Condensate, Butane-Propane gas and LPG. Products were terminated in separate storages and exported to the customers via barges or lorries.
The processing system of this project is including: 01 Pig Launcher Skid, 01 Pig Receiver Skid, 03 Line Block Valve Skids, 33 x 463m3 horizontal pressure vessels (bullets) for LPG, 02 x 6500m3 floating roof tanks for Condensate. 02 Loading Arm systems for product export, 02 LPG Compressors, Online Bu-Pro Mixing system, the Flare with burning capacity in 7503/h and the Close Drain System, Nitrogen Compressor, Diesel Generators, Fire Fighting System. 02 Product export Berths and function Buildings .etc. This project had the total budget cost was around USD 58 million and scheduled to construct in 02 years, from 1997 to 1999. But actually, this project had delay 02 years more and had a lot of contingencies that raised the budget into USD 71 millions. Finally the project had have finished and handed over to the End-User, the company named PetroVietnam Gas Co. (PV Gas.) on the end of 2001 with 02 years delay.
The EPC Contractor of this project was one of PetroVietnam Subsidiaries – PetroVietnam Engineering and Construction Company (PVECC). It was the biggest construction company of PVN and had construction experiences in most of mega projects which had been invested by PVN in Vietnam. This Company had about 20 Construction Enterprises underneath and they were the subcontractors for PVECC to carry out this project at that time.
This project received a lot of supports from the PetroVietnam, but could not be a success project in cost, time, and quality management aspects. In this case study, the author would like to present some of main reasons that led this project still will be a nightmare of everyone who used to be involved in, and the information of this project will be detail in the Chapter 4.
Since the start of the opening market economy, hundred investors have transferred their money to Vietnam and found out the business, almost strong and famous chaebol or enterprises invested to Vietnam have concentrated in investment to Oil and Gas industry. With the Joint Venture Agreements selection, they became shareholders with Vietnamese State Owned Companies and have been starting their businesses successfully.
In recent years, Vietnam Oil and Gas Group (PVN) have been carrying out a lot of mega projects. Some have been done and others are progressing like Vietnam-Soviet Union JV (VSP) oil exploration and developing projects.
In order to ensure that most projects will be executed with the aiming cost, quality and time targets, Vietnamese Government and PVN particularly have to invite engineering and technical resources from developing or developed countries by bidding for the International EPC Contractors, International PMC, Certificate Agents, Insurance companies etc
With the Joint Venture Agreements selection, these companies became shareholders with Vietnamese State Owned Companies and have been starting their businesses successfully.
Even though most of EPC Contractors who were selected for PVN’s projects are well experienced and well-known in their particular categories, it does not mean that all the EPC Contractors were successful in reaching clients’ satisfactions. The common problems during the implementation the projects were schedule delay, contingencies, variation orders and unqualified accomplishment
Mr. Nguyen Khoa conducted a case study on “EPC Projects Management and Problems: Case Study of International and Local EPC Contractors of Oil/Gas and Petrochemical Projects in Vietnam” to (1) explore some reasons why some EPC contractors getting troubles in carrying out the project, also their problems in EPC Project Management; and (2) explore the better practices in EPC project management.
His research study focused on how the EPC contractors control and manage the EPC projects in Vietnam including procurement, cost, scheduling management. Three Petrochemical construction projects were selected base on specific criteria such as:
· Medium to large projects
· Executed by International EPC contractors and Local EPC Contractor this have dealing experiences in Vietnamese construction market.
· Mentioned projects were accomplished and now under operation.
The case study projects are Phumy Fertilizer Project, Phumy PVC Project and Thivai Terminal and LPG Pipeline Project since these three have similar things in common:
Belonging to PetroVietnam.
Projects were built in Southern of Vietnam, in 02 adjacent Industrial Zones.
The Execution time of these 03 projects was happened in 1997 to 2005.
The Type of contract is EPC Contract; 02 EPC Contractors were assigned and the other one was selected by bidding.
The 02 Projects were carried out by International EPC Contractors were successful in project execution. The other one was executed by the Local EPC Contractor was the failure one (in time, cost and quality management.)
Based on the result of the study, among hundred projects belonged to PetroVietnam, the Phumy Fertilizer Project was the first and only project that was accomplished on time and under the estimated budget. The reasons for this project’s success were due to the competence of the Consortium, support and direction from the Nation Leaders, and scare of fertilizer in current situation. But, in the point of view of a member who joined this project, the hard working spirit of the Project Management Board in both sides (Client and Consortium) is the only primary reason.
Phumy Plastic Plant was also one of the accomplished projects of PetroVietnam within Joint Venture field. The project itself was started, executed and finished on time and within the approved budget. Most of the site activities were the equipment erection and installation works; the civil and construction works occupied a small part of whole project without any special solution need to be applied. The procurement activities were done by the EPC Contractor with the fixed configuration from the Licensor and PETRONAS (shareholders), so it was not sophisticatedly ordered and contracted to the International Vendors.
Thivai LPG Terminal and Pipeline Project was a small project without any high techniques or sophisticated configuration. It is about 12 ha in total and 20 ha for extension consideration in the future following the International Codes and Standards in engineering design and project management. It was still considered a failure due to the incompetencies of the EPC Contractor. Without historical experiences in role as the EPC Contractor, PVECC did not know how to solve and manage the project.
Mr. Khoa concluded that the main cause in the projects’s failure was depending on the competency of the EPC Contractor. Lack of experiences in the similar works, bad in planning and scheduling, bad financing plan, fragile in contracts negotiation, low reputation, lack of world wide relationships, unskillful in project management, shortcoming of human resources etc. are the constraints that the Local EPC Contractors have to overcome to improve and affirm themselves for getting the reputation from the clients in current competition market.
His thesis abstract is copied and posted.
ABSTRACT
Vietnam social-economic is booming in recent years, with attracting investment policies, the Vietnamese Government have been successful in luring many foreign investors starting their businesses in Vietnam, especially in Oil and Gas Industry.
Known as a country has rich natural fossil resources, Vietnam has large capacity of crude oil and natural gas in his off-shore East Sea areas. But with the restriction of engineering and updated technologies, the Vietnamese Government / PetroVietnam have been exerted themselves to attract as more bilateral relationships from developed countries (US, Russian, England, France, Norway, Japan...) as possible to expand their advantages in exploration and own their fossil energy resources.
Most of the projects that related to Oil and Gas Industry which have been carried out in Vietnam following the EPC type of contract. In the point of view of PetroVietnam, Oil and Gas projects should be implemented effectively, and that is the reason why the international EPC Contractors are the most feasible selection, cause of the lack of experiences in mega projects executing of Local EPC Contractors.
In order to manage and control the project to reach the demands from the Client / Owners, normally are cost, time and quality, the International EPC Contractors should have very efficiency project management methods which could help the International EPC Contractors in order to avoid any problems and adverse factors related to cost overrun, delay and inadequate productivities.
In the contain of this thesis, the author would like to focus on the research of International EPC Contractors Project Management, in Oil and Gas Industry Projects. The three selected case study projects are the Phumy Fertilizer Project, the Phumy PVC Project and the last one is the Thivai LPG Pipeline and Terminal Project. Those mentioned projects will be draft informed as below:
1. Phumy Fertilizer Project:
Petrochemical Industry, that included the Urea (Fertilizer) production, is one of foundation industries, it’s really important for the national economic developing. The shape and growing of this industry will become a force to develop the agriculture and other related industries.
In economic developing strategies of the Government, execution the Fertilizer or Urea Plant, not only to ensure the stability and initiative in supplying the fertilizer with reputedly as the strategic production for national developing, but also to bring back the other effective outcomes aspects such as economic, social, political and also distribute to impulse the industrialize and modernize processing that taken initiative by Vietnamese Communist Party.
In years ago, Vietnamese Government did have the mission the develop the fertilizer industry, but it was impossible due to some objective existences. There have been only some small size plants of Urea and Phosphates were operating in Vietnam in current time, with the supplying capacity approximately only 7% of the national demand, and the remain requires should depend on the importing resources and be paid with valuable foreign currencies.
On the April of 2000, the Prime Minister delegated to PetroVietnam (PVN) incorporated with Vietnam General Chemical Companies (VinaChem) and Vietnam Agriculture Company (Vigecam) to establish the Feasibility Study Report (FS) of Fertilizer Plant with the feedstock from associated (nature) gas resources.
Followed the order of the Prime Minister (correspondence No. 58/TB-VPCP dated 30th April, 2000 referred to Developing the Gas – Power – Fertilizer Program), PVN urgently drafted and submitted to the Government for approval the Feasibility Study Report of Fertilizer Project. This project was invested by Vietnamese Government / PVN, and the selected location of the project is in Phumy 1 Industrial Zone in Baria – Vungtau Province.
This is the first Fertilizer Plant in Vietnam could use the feedstock from the associated nature gas, this Plant supplies the production to the domestic market, concentration to the Mekong Delta provinces and the other areas in the South of Vietnam. Until now, most of Urea used in Vietnam must be imported from regional countries. As forecasting, the 2000 – 2005 Urea demand increased around 4,8%. The predict urea demand in 2000 was 1,975 millions tons, it was 2,07 millions ton on 2001, 2,169 millions ton in 2002, 2,224 millions ton in 2003, 2,29 millions ton on 2004 and 2,37 millions ton in 2005. The demand speed of grow in 2005 – 2010 period is 4,1% and total urea demand in 2010 will be 2,9 millions ton. In case the Plant will operate full design capacity (740.000 ton – 800.000 ton /year) in the initiate stage, it only satisfies 35% of domestic demand (Phumy Fertilizer Project – The Feasibility Study Report). Consequently, the project will have advantages in competition compare to the other imported resources.
The Fertilizer Plant uses the feedstock from the associated gas resources from CuuLong and Nam ConSon gas basins, and the predict output capacity around 740.000 ton / year of urea (2.200 tons of urea / day and 1.350 tons of ammonia / day). The flexible in using the feedstock (gas) will warranty the high efficiency of economic and necessary security for the Plant in case of the fluctuation of cost and supplying resources in the market.
2. The Phumy PVC Plant:
This project was a Joint Venture project between 04 shareholders: PetroVietnam, Petronas - Malaysia, Marubeni - Japan and TMS - Thailand. This project located nearby the Thivai LPG Pipeline and Terminal, in the Caimep Industrial Zone, Baria – Vungtau Province, with total square around 07 ha.
The outputs of this plant is Polyvinyl Chloride with capacity is 100,000 MTPA. Total investment of this project is USD70 millions and via the License of European Chloride, UK. The project has Amended Joint Venture Contract signed on 12th April 2000. Amended Investment License 1305/GPDC3 issued on 6th May 2000. EPCC (Engineering – Procurement – Construction – Commissioning) Contract awarded to Samsung Engineering and site handover on 15th May 2000. Site preparation and soil improvement works essentially completed and Piling scheduled to start end June 2001. The plant on stream by October 2002.
The PVC plant uses the LPG and Natural gas as the feedstock to their inputs. In the project management perspective, this project could be a success. But in operation phase, due to Joint Venture Terms and References, this plant has to face with a lot of difficulties in production and selling their products. But it is a difference aspect of The Phumy PVC Plant. In this scope of research, the author only focus on the EPCC Contractor Project Management side and will present the detail in the Chapter 4.
3. The Thivai LPG Terminal and Pipeline Project:
This project is a complex of the 03 x 06 inches pipelines system connecting the DinhCo Gas Distribution Plant to the Thi Vai LPG Terminal with the distance of on-shore underground pipeline around 48 km. The production was transported via the pipelines system and separated into three kinds of products such as Condensate, Butane-Propane gas and LPG. Products were terminated in separate storages and exported to the customers via barges or lorries.
The processing system of this project is including: 01 Pig Launcher Skid, 01 Pig Receiver Skid, 03 Line Block Valve Skids, 33 x 463m3 horizontal pressure vessels (bullets) for LPG, 02 x 6500m3 floating roof tanks for Condensate. 02 Loading Arm systems for product export, 02 LPG Compressors, Online Bu-Pro Mixing system, the Flare with burning capacity in 7503/h and the Close Drain System, Nitrogen Compressor, Diesel Generators, Fire Fighting System. 02 Product export Berths and function Buildings .etc. This project had the total budget cost was around USD 58 million and scheduled to construct in 02 years, from 1997 to 1999. But actually, this project had delay 02 years more and had a lot of contingencies that raised the budget into USD 71 millions. Finally the project had have finished and handed over to the End-User, the company named PetroVietnam Gas Co. (PV Gas.) on the end of 2001 with 02 years delay.
The EPC Contractor of this project was one of PetroVietnam Subsidiaries – PetroVietnam Engineering and Construction Company (PVECC). It was the biggest construction company of PVN and had construction experiences in most of mega projects which had been invested by PVN in Vietnam. This Company had about 20 Construction Enterprises underneath and they were the subcontractors for PVECC to carry out this project at that time.
This project received a lot of supports from the PetroVietnam, but could not be a success project in cost, time, and quality management aspects. In this case study, the author would like to present some of main reasons that led this project still will be a nightmare of everyone who used to be involved in, and the information of this project will be detail in the Chapter 4.
Monday, 29 June 2009
CONSTRUCTION MANAGEMENT PRACTICES UNDER CONSTRUCTION MATERIAL PRICE FLUCTUATION
Project cost management is defined as one of the nine knowledge areas which are applicable knowledge and practices to most projects. Construction materials generally consume about 40 percent to 60 percent of total budget of the project.
In 2002, the result of break-up construction costs by Construction Industry Development Council Survey in India explained that construction material roughly consume at range from 41 percent to 60 percent of total construction costs. Hence, it is very important to closely pay attention on the material cost then build a good material cost management.
In cost management, one of the favorite indicators is the cost index. It is the ratio of cost or price for a given commodity or service or set of commodities or services at a given time and place compared to the cost or price at a base or standard time and place (Humphreys, 2005). Likewise, it is necessary to learn the cost index because one of many factors influencing construction costs is time due to changes in demand, economic conditions, and prices. Cost indexes convert costs which was applicable at a past date to equivalent costs now or in the future (William, 1994).
However, the use of cost indexes has several limitations. For example, cost indexes are based on average values so in specific cases, the actual value may be different from the average. Humphreys (2005) mentioned that at this time, the technology is changed so the method by which any given index is complied may periodically be changed by the complier. In such cases, the index values at different times should not be compared directly. Figure 1.1 is an example of construction material price indexes by Ministry of Commerce Thailand that based year to compare for these indexes is year 2000.
Figure 1.2 revealed that the construction price indexes in Thailand are very uncertain from year 2000 to 2008. A trend of uncertainty at recent years is increasing. To apply escalation in construction project, it should be considered in two levels which are historic and future (Squire, 2008). From historic escalation are such bid results, price indexes, price comparisons and cost record. For future escalation data, it can be found from assessed forecast which attempts to anticipate cost. Hence, it is important to find the way to handle with uncertain material prices in construction.
Squire (2008) stated that in construction, the price fluctuation comprises material, labor, equipment, overhead costs and fees. Cost management on projects becomes a particular challenge in a location where the economic climate is uncertain. In this circumstance, one of the significant consequences is uncertain construction price which can lead to many problems. Gallagher and Riggs (2006) stated that ripple effect of this price escalation has included numerous other impacts. For example, the first impact is putting project on hold while supplemental funding is sought. Second, the alternative of canceling the project if additional money is not available is chosen. Third, scale-down the project scope is attempting to be proceeded. Therefore, the price fluctuation can create enormous difficulty in the construction industry.
Ms. Piyachat Thaveelert made a survey on Construction Management Practices under Material Price Fluctuation to (1) investigate the situation of material price fluctuation and its effects on the practice of construction contractors during each stage namely estimating, bidding and construction stage; (2) identify the existing practices of how contractor strategically do to the situation and indicate interrelationships among practices; and (3) propose recommendation on how to handle the situation of construction price fluctuation.
Ms. Thaveelert found out that construction industry in Thailand usually confronts with the situation of material price fluctuation. Since the materials normally cost at the highest proportion of total cost, the situation of material price fluctuation becomes severe for construction industry. At this point, the appropriate management under material price fluctuation should be found out and investigated in order to be able to handle with the situation.
Her thesis abstract is copied and posted.
ABSTRACT
A construction management is very important for a construction project. To be a successful project, it requires an appropriate management from contractors to cope with especially the situation in construction industry that is unaccustomed. According to the recent record, it has been found that construction industry faced with the situation of material price fluctuation. Due to the material cost usually consumes the highest proportion in the construction cost, it is very significant for contractors to know how to handle with the situation. This research aims to investigate the existing of construction management practices under the construction material price fluctuation and propose the recommendation to respond to the situation.
The study uses a questionnaire as a research instrument to explore the existing practices of contractors. Two statistic methods were mainly used to analyze data from questionnaire surveys. The first analysis was descriptive analysis which used means and rankings to analyze. Second, the hypothesis testing was used to compare practices of the Bill of Quantity making and, procurement and employment among three groups of respondents. Those respondents are contractors focusing on private owners, public owners and both owners. In addition, another hypothesis testing was to compare practices relating to contract conditions between private owners and public owners through contractors’ perceptions. At his point, the correlation between groups of contractors was also tested through the hypothesis testing of correlation. Finally, the factor analysis was carried out to find out the interrelationship among practices by grouping the variables.
Result were found that for the Bill of Quantity making process, contractors prefer to find out the price trend by discussing the price trend with their suppliers with the highest mean. For the procurement and employment of contractors, contractors need to pay more attention on supplier selection process with the highest mean. For practices on contract conditions, it showed that the practice of the Specifying contract condition relating to furnishing materials clearly has the highest level of practice in private owners. In public owners, the Reasonable advance payment has the highest level of practice. The correlation between these two groups is also high positive correlation for practices on contract conditions. Last, the result of factor analysis showed that interrelationships of practices and it could be categorized into eight groups: Negotiating with Owners, Subcontractor Pricing Agreement, Government Pricing Index, Material Price Risk, Proactive Cost Control, Contractors’ Historical Data, Contractor Procurement Strategy and Estimate Pricing.
In 2002, the result of break-up construction costs by Construction Industry Development Council Survey in India explained that construction material roughly consume at range from 41 percent to 60 percent of total construction costs. Hence, it is very important to closely pay attention on the material cost then build a good material cost management.
In cost management, one of the favorite indicators is the cost index. It is the ratio of cost or price for a given commodity or service or set of commodities or services at a given time and place compared to the cost or price at a base or standard time and place (Humphreys, 2005). Likewise, it is necessary to learn the cost index because one of many factors influencing construction costs is time due to changes in demand, economic conditions, and prices. Cost indexes convert costs which was applicable at a past date to equivalent costs now or in the future (William, 1994).
However, the use of cost indexes has several limitations. For example, cost indexes are based on average values so in specific cases, the actual value may be different from the average. Humphreys (2005) mentioned that at this time, the technology is changed so the method by which any given index is complied may periodically be changed by the complier. In such cases, the index values at different times should not be compared directly. Figure 1.1 is an example of construction material price indexes by Ministry of Commerce Thailand that based year to compare for these indexes is year 2000.
Figure 1.2 revealed that the construction price indexes in Thailand are very uncertain from year 2000 to 2008. A trend of uncertainty at recent years is increasing. To apply escalation in construction project, it should be considered in two levels which are historic and future (Squire, 2008). From historic escalation are such bid results, price indexes, price comparisons and cost record. For future escalation data, it can be found from assessed forecast which attempts to anticipate cost. Hence, it is important to find the way to handle with uncertain material prices in construction.
Squire (2008) stated that in construction, the price fluctuation comprises material, labor, equipment, overhead costs and fees. Cost management on projects becomes a particular challenge in a location where the economic climate is uncertain. In this circumstance, one of the significant consequences is uncertain construction price which can lead to many problems. Gallagher and Riggs (2006) stated that ripple effect of this price escalation has included numerous other impacts. For example, the first impact is putting project on hold while supplemental funding is sought. Second, the alternative of canceling the project if additional money is not available is chosen. Third, scale-down the project scope is attempting to be proceeded. Therefore, the price fluctuation can create enormous difficulty in the construction industry.
Ms. Piyachat Thaveelert made a survey on Construction Management Practices under Material Price Fluctuation to (1) investigate the situation of material price fluctuation and its effects on the practice of construction contractors during each stage namely estimating, bidding and construction stage; (2) identify the existing practices of how contractor strategically do to the situation and indicate interrelationships among practices; and (3) propose recommendation on how to handle the situation of construction price fluctuation.
Ms. Thaveelert found out that construction industry in Thailand usually confronts with the situation of material price fluctuation. Since the materials normally cost at the highest proportion of total cost, the situation of material price fluctuation becomes severe for construction industry. At this point, the appropriate management under material price fluctuation should be found out and investigated in order to be able to handle with the situation.
Her thesis abstract is copied and posted.
ABSTRACT
A construction management is very important for a construction project. To be a successful project, it requires an appropriate management from contractors to cope with especially the situation in construction industry that is unaccustomed. According to the recent record, it has been found that construction industry faced with the situation of material price fluctuation. Due to the material cost usually consumes the highest proportion in the construction cost, it is very significant for contractors to know how to handle with the situation. This research aims to investigate the existing of construction management practices under the construction material price fluctuation and propose the recommendation to respond to the situation.
The study uses a questionnaire as a research instrument to explore the existing practices of contractors. Two statistic methods were mainly used to analyze data from questionnaire surveys. The first analysis was descriptive analysis which used means and rankings to analyze. Second, the hypothesis testing was used to compare practices of the Bill of Quantity making and, procurement and employment among three groups of respondents. Those respondents are contractors focusing on private owners, public owners and both owners. In addition, another hypothesis testing was to compare practices relating to contract conditions between private owners and public owners through contractors’ perceptions. At his point, the correlation between groups of contractors was also tested through the hypothesis testing of correlation. Finally, the factor analysis was carried out to find out the interrelationship among practices by grouping the variables.
Result were found that for the Bill of Quantity making process, contractors prefer to find out the price trend by discussing the price trend with their suppliers with the highest mean. For the procurement and employment of contractors, contractors need to pay more attention on supplier selection process with the highest mean. For practices on contract conditions, it showed that the practice of the Specifying contract condition relating to furnishing materials clearly has the highest level of practice in private owners. In public owners, the Reasonable advance payment has the highest level of practice. The correlation between these two groups is also high positive correlation for practices on contract conditions. Last, the result of factor analysis showed that interrelationships of practices and it could be categorized into eight groups: Negotiating with Owners, Subcontractor Pricing Agreement, Government Pricing Index, Material Price Risk, Proactive Cost Control, Contractors’ Historical Data, Contractor Procurement Strategy and Estimate Pricing.
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