The construction industry is known for its poor safety performance when compared with other industries. According to Mohamed (1999), construction accident contribute to many human tragedies, de-motivate workers, disrupt site activities, delay project progress and negatively affect the overall cost, productivity or even the industry’s reputation.
Many researchers made a lot of studies to find ways in having a concrete safety measures to be applied in the construction firm to minimize these related accidents.
Mr. Andreas Adihartanto made a case study on the “Safety Rules and Procedures Development and Implementation” that Thai Construction firms are now applying. The main objective of his study is to investigate effective ways to manage safety rules and procedures when they have to deal with several types of violations. However, to attain the main objective, several sub-objectives were also proposed in his research to (1) investigate the prevalent safety rules and procedures practices in the construction industry in Thailand; (2) explore the relationship between organizational culture attribute and safety rules and procedures development and implementation; (3) examine the relationship between safety rules and procedures development, implementation and type of worker’s violations; (4) explore the relationship between leadership styles and types of safety rules and procedures violations; and (5) As an initial research to investigate the possibility of the “Peltzman Effect” occurrence in construction safety.
Mr. Adihartanto’s conclusions:
SRP’s practices in the construction industry in Thailand
He found out that there were no significant differences between medium-sized and large-sized construction projects in the way they develop and implement SRPs. Most of the SRP’s development variables were scored as high which indicated that contractor companies in Thailand typically take into accounts all of these variables when they develop their SRPs. However, during the implementation, they do not prefer to provide SRPs in form of writing documents (safety cards, manuals, etc.) to all of the workers, including translating written SRPs to the workers’ native language. Further analysis revealed a predisposition that management exploits these variables merely as of value to protect their back from the workers’ excuses. Regarding the translation of written SRPs, most respondents preferred to utilize interpreters to communicate their safety messages into the workgroups in which commonly they are the head of the groups. Therefore, it can be concluded that workers’ type of violations were occurred in similarity, in which they were ranging from erroneous to routine violations.
Organizational culture and SRP’s development and implementation
His analysis result indicated that neither of the clan nor the hierarchical culture attributes is more superior and effective in the development and implementation of SRPs. Each of these attributes has both positives and negatives. It is suggested therefore, that it is much more important for the management to understand the strengths as well as the weaknesses of particular attributes in their relation to the SRP’s development and implementation in order to make necessary adjustment for their organizational effectiveness.
Safety rules and procedures which were known to be complicated or confusing were adjusted, and it is more likely that they willing to put operatives’ suggestions into the rules development. However, in this kind of organizations, drawbacks are resulted from the management deficiencies in supporting their site operation as apparently, the availability of the SRP’s documents to the workforces and maintenance of safety visual signs were insufficient. Therefore, the decisions are skewed more on the management’s side.
SRP’s development and implementation with the type of worker’s violations
The result came with some SRP’s development and implementation variables that could potentially reduce particular type of violations. Therefore, it should be pointed out that mismanaging some of these variables could potentially promote violations. Although the rest of the variables were not found in contributing to the reduction of any type of violations, it is still suggested that management takes these variables into their Hierarchical Attributes Negatives Positives Operation, technical support deficiency Open-systems approach Bureaucratic approachOrdered, well-arranged Procedural rigidity, over reliance Output maximization, torientedClan Attributes Towards FlexiTowards Centra consideration when developing and implementing their SRPs. Table 5.3 and 5.4 below summarizes the analysis result analysis in which they portrayed the potential of each SRP’s development and implementation variable to reduce particular type of violations.
Leadership styles and type of worker’s violations
The result signifies the need for the Safety Officers to carefully understand the impact of their leadership behaviors. It is suggested that emphasize should have been taken to minimize the negative effect of the leadership styles rather than to reduce them. Based from the observations on-site combined with the analyses results, the researcher postulated that the problem largely relies on the workers’ perception. Thus, safety trainings were suggested to address this problem, particularly to take bigger portion in correcting workers’ perception.
5. The Peltzman Effect
In terms of workers’ activeness in safety programs participation, this study did not identify the presence of Peltzman Effect. However, further studies are suggested to investigate this phenomenon from different angle.
His thesis abstract is copied and posted.
ABSTRACT
This study was carried out to identify problems associated with the development and implementation of safety rules and procedures (SRPs) to ensure worker’s compliance and to give an insight of effective solutions to overcome these problems. The discussions were broadened to identify the influence of organizational culture to the SRP’s development and implementation, the potential of leadership styles in handling particular type of violations and the possibility of the Peltzman Effect occurrence in the construction industry.
The result revealed that several SRP’s development and implementation variables have a great potential in reducing particular type of violations. Therefore, management should be aware that mismanaging these variables could potentially promote violations. In general, the finding suggested that SRP’s should be: (i) developed following project risks assessment, (ii) designed so that it will not over restricted individuals working efficiency, and (iii) designed considering operational difficulties. As well, during the implementation, SRP’s should be: (a) available to all of the workforces, (b) implemented alongside with varieties of safety trainings, and (c) enforced by providing wide ranging of PPE or any other resources necessary to do the job safely.
Furthermore, the findings also suggested the need for the management to understand the strengths as well as the weaknesses of the particular organizational culture attributes in their relation to the SRP’s development and implementation in order to make necessary adjustments for their organizational effectiveness. It is also suggested the need for the Safety Officers to carefully understanding the impact of their leadership behaviors. At last, in terms of worker’s activeness in safety programs participation, this study did not identify the presence of the Peltzman Effect.
Wednesday, 5 August 2009
Tuesday, 4 August 2009
Framework Implementation Of Reduce, Reuse, Recycle, And Residual Management For Thai Building Construction Industry
In 1972, the first conference in sustainable development was held at Stockholm, Sweden. Since then, several countries all over the world have put a great emphasis on this issue and have accepted it as the major concern in a mainstream. A number of conferences and summits have been organized in order to ensure that the world has met the requirement of sustainable contents. Many countries have signed an agreement to accept the agenda in processing the implementation of sustainable development concept across all industries, especially in construction industry. Consequently, “sustainable construction” is the term commonly used in representing sustainability in construction industry.
In term of sustainable construction, material waste is one of key issues (DIT, 2000). The waste has a directly crucial impact on environment. The obvious effect of which which can be easily observed is the rapid achievement of landfill site. A number of studies tried to find out the causes of the construction material waste and the approaches to minimize the waste. Since the waste minimization and management are the important issues toward the sustainable construction, Mr. Pakawat Pormmoon made a case study concerning the systematic formulation of framework through 4Rs (reduce, reuse, recycling, and residual management) waste management strategy for managing the construction material waste on sites. This framework is hoped to enable the construction companies to deal with the construction material waste.
Mr. Pormmoon’s research objective is to develop the 4Rs framework implementation for the construction industry. In order to achieve this main objective, the three
key objectives were also set to (1) investigate the existing activities relating to the concept of reduce, reuse, recycle, and residual management in Thai building construction industry; (2) test the validation of collected 4Rs-relevant activities; (3) develop the framework implementation following to 4Rs concept.
The result of his case study based from the interview revealed that ten general issues can be implemented through 4R’s concept. These issues include (1) environmental policy; (2) nearly Just-in-time delivery; (3) waste management plan; (4) use of long-life construction material; (5) standardization of design; (6) design and build scheme; (7) project quality plan; (8) off-site prefabrication; (9) supply chain alliances with suppliers and recycling companies; and (10)“Take-back” scheme.
However, upon detailed implementation of each “R” in 4Rs, many activities have been arisen. These activities were categorized as (a) improvement of material ordering and supplying; (b) changes of material selection; (c) improvement of site material management; (d) increase of work controlling; (e) defining of alternative options for reuse and recycle; (f) provision of sorting methods and container, area, or infrastructure for collection of by-product; and (g) setting of policies according to the relevance law and regulation; Residual Collection and Residual Disposal
Another finding of his study validated that 4Rs have many relevant activities such as:
1) General Issues
a. To set up environmental policy in order to contribute the implementation of 4Rs (reduce, reuse, recycle, and residual management) principle in practices
b. To apply ‘nearly Just-in-time’ delivery principle in order to reduce and alleviate the congestion of material movement on site
c. To encourage the use of Design and Build scheme to deliver project in order to utilize use of value engineering concept
d. To enhance the use of standardization of design in term of modular system to improve buildability and reduce the quantity of off-cuts on site
e. To increase the use of off-site prefabrication to control loss, waste, and damage, thus, the off-cut can be reduced
f. To enhance the use of long-life construction materials such as steel, standard wood, and others to construct building components; therefore those structures can longer be used
g. To develop Project Quality Plan for managing construction materials on site
h. To develop Waste Management Plan for managing waste on site
2) Reduce at management level
a. Improvement of material ordering and supplying
b. Changes of material selection
c. Improvement of site material management
d. Increase of work controlling
3) Reduce at operational level
4) Reuse and recycle at management level
a. Defining of alternative options for reuse and recycle
b. Provision of sorting and collecting methods, container, area, or infrastructure for collection of by-product
5) Reuse and recycle at operational level
6) Residual management at management level - Setting of policies according to the relevance law and regulation
7) Residual management at operational level
His study’s last finding is that application of each 4Rs-relevant on sites and its implementation can be done at both site management and operational level as implemented by Bovis Lend Lease (Thailand) Limited. It yields a better work execution than other companies at site management level.
His thesis abstract is copied and posted.
ABSTRACT
The problems regarding to sustainable construction are that the most of construction materials are considered to be low efficiently used. The less efficient use of construction materials will not be a problem if the natural resources are limitless, but in fact it is not. In addition, the construction firms need to be reminded that waste make financial cost both direct cost and indirect cost are significant. Many researches have tried to apply the 3Rs (Reduce, reuse, and recycle) waste strategy for managing waste on construction sites. Consequently, this study has tried to apply the concept of 4Rs, reduce, reuse, recycle, residual management concept in Thai building construction industry. To apply 4Rs, reduce, reuse, recycle, residual management concept in Thai construction industry is the main purpose of this thesis.
In order to correlate the main and the sub-objectives of this study, research methodology has been split into three main steps. The first step is to investigate existing 4Rs-relevant activities. The result is that the related activities following 4Rs concept. These activities would be utilized in the next step, gathering the significance and applicability of collected 4Rs-relevant activities. The second step, some activities have been removed. There are six experts utilized in the second step. The last step is to measure the application of each 4Rs activity on sites at both management and operational level. The data in last step were
collected from both Bovis Lend Lease (Thailand) Limited and other companies within Thai building construction industry.
The results were found that validated eight general issues can be implemented through the 4R’s concept. Moreover, there are eight groups of work which 4Rs concepts can be implemented through that are improvement of material ordering and supplying, changes of material selection, improvement of site material management, increase of work controlling, defining of alternative options for reuse and recycle, provision of sorting methods and container, area, or infrastructure for collection of by-product, and setting of policies according to the relevance law and regulation.
In term of sustainable construction, material waste is one of key issues (DIT, 2000). The waste has a directly crucial impact on environment. The obvious effect of which which can be easily observed is the rapid achievement of landfill site. A number of studies tried to find out the causes of the construction material waste and the approaches to minimize the waste. Since the waste minimization and management are the important issues toward the sustainable construction, Mr. Pakawat Pormmoon made a case study concerning the systematic formulation of framework through 4Rs (reduce, reuse, recycling, and residual management) waste management strategy for managing the construction material waste on sites. This framework is hoped to enable the construction companies to deal with the construction material waste.
Mr. Pormmoon’s research objective is to develop the 4Rs framework implementation for the construction industry. In order to achieve this main objective, the three
key objectives were also set to (1) investigate the existing activities relating to the concept of reduce, reuse, recycle, and residual management in Thai building construction industry; (2) test the validation of collected 4Rs-relevant activities; (3) develop the framework implementation following to 4Rs concept.
The result of his case study based from the interview revealed that ten general issues can be implemented through 4R’s concept. These issues include (1) environmental policy; (2) nearly Just-in-time delivery; (3) waste management plan; (4) use of long-life construction material; (5) standardization of design; (6) design and build scheme; (7) project quality plan; (8) off-site prefabrication; (9) supply chain alliances with suppliers and recycling companies; and (10)“Take-back” scheme.
However, upon detailed implementation of each “R” in 4Rs, many activities have been arisen. These activities were categorized as (a) improvement of material ordering and supplying; (b) changes of material selection; (c) improvement of site material management; (d) increase of work controlling; (e) defining of alternative options for reuse and recycle; (f) provision of sorting methods and container, area, or infrastructure for collection of by-product; and (g) setting of policies according to the relevance law and regulation; Residual Collection and Residual Disposal
Another finding of his study validated that 4Rs have many relevant activities such as:
1) General Issues
a. To set up environmental policy in order to contribute the implementation of 4Rs (reduce, reuse, recycle, and residual management) principle in practices
b. To apply ‘nearly Just-in-time’ delivery principle in order to reduce and alleviate the congestion of material movement on site
c. To encourage the use of Design and Build scheme to deliver project in order to utilize use of value engineering concept
d. To enhance the use of standardization of design in term of modular system to improve buildability and reduce the quantity of off-cuts on site
e. To increase the use of off-site prefabrication to control loss, waste, and damage, thus, the off-cut can be reduced
f. To enhance the use of long-life construction materials such as steel, standard wood, and others to construct building components; therefore those structures can longer be used
g. To develop Project Quality Plan for managing construction materials on site
h. To develop Waste Management Plan for managing waste on site
2) Reduce at management level
a. Improvement of material ordering and supplying
b. Changes of material selection
c. Improvement of site material management
d. Increase of work controlling
3) Reduce at operational level
4) Reuse and recycle at management level
a. Defining of alternative options for reuse and recycle
b. Provision of sorting and collecting methods, container, area, or infrastructure for collection of by-product
5) Reuse and recycle at operational level
6) Residual management at management level - Setting of policies according to the relevance law and regulation
7) Residual management at operational level
His study’s last finding is that application of each 4Rs-relevant on sites and its implementation can be done at both site management and operational level as implemented by Bovis Lend Lease (Thailand) Limited. It yields a better work execution than other companies at site management level.
His thesis abstract is copied and posted.
ABSTRACT
The problems regarding to sustainable construction are that the most of construction materials are considered to be low efficiently used. The less efficient use of construction materials will not be a problem if the natural resources are limitless, but in fact it is not. In addition, the construction firms need to be reminded that waste make financial cost both direct cost and indirect cost are significant. Many researches have tried to apply the 3Rs (Reduce, reuse, and recycle) waste strategy for managing waste on construction sites. Consequently, this study has tried to apply the concept of 4Rs, reduce, reuse, recycle, residual management concept in Thai building construction industry. To apply 4Rs, reduce, reuse, recycle, residual management concept in Thai construction industry is the main purpose of this thesis.
In order to correlate the main and the sub-objectives of this study, research methodology has been split into three main steps. The first step is to investigate existing 4Rs-relevant activities. The result is that the related activities following 4Rs concept. These activities would be utilized in the next step, gathering the significance and applicability of collected 4Rs-relevant activities. The second step, some activities have been removed. There are six experts utilized in the second step. The last step is to measure the application of each 4Rs activity on sites at both management and operational level. The data in last step were
collected from both Bovis Lend Lease (Thailand) Limited and other companies within Thai building construction industry.
The results were found that validated eight general issues can be implemented through the 4R’s concept. Moreover, there are eight groups of work which 4Rs concepts can be implemented through that are improvement of material ordering and supplying, changes of material selection, improvement of site material management, increase of work controlling, defining of alternative options for reuse and recycle, provision of sorting methods and container, area, or infrastructure for collection of by-product, and setting of policies according to the relevance law and regulation.
Monday, 3 August 2009
Total Quality Management In Property Development Projects In Vietnam
Despite of a half-year difficulty, Vietnam real estate market is now considered a long term potential market as foreign investors are keen on developing more projects. From the picture of real estate development in 2008, it showed that all trading in this sector are almost frozen, together with the increasing of interest from the banks and material prices, domestic investors are put in troubles. Meanwhile, foreign capital from the outside investors is continuously put in Vietnam’s real estate market with an impetuous speed.
Many foreign developers are still looking for opportunities to penetrate Vietnam's realty market, and many companies are now interested in HCM City's outskirts such as Thu Thiem and Cu Chi District. Developers are also keen-on complexes of apartments, offices and commercial centers, resorts, industrial parks and residential areas. These segments' supply and demand are not well matched. Consequently, if having visibility strategy such as focusing on target customer, paying attention on marketing and having ability to bring out a high quality product, then chance of success is a seeable thing.
According to Goetsch (2002) “Total Quality Management (TQM) is an approach to doing business that maximizes the competitiveness of an organization through continuous improvement of its products, services, people processes, and environment”. Kotler, 1999 noted that the foundation of TQM is satisfaction renders by products or services and products (or services) are nothing offered to a market for attention, acquisition, use or consumption that satisfy a want or need.
TQM is not a new concept in the manufacturing sector. However, it does not mean that management system which have worked well in the manufacturing sector can be directly well-applied to construction. This is due to the nature differences between the two sectors. Construction industry has its own unique feature while manufacturing calls for repeat processes with products primarily put out in large batches. On the other hand, construction work is undertaken in the main single batch or projects. Although many of the basic processes are repeated from job to job (e.g. concreting and plastering), the specifics of application are always changing (Low & Peh, 1996).
In construction industry, where customers’ requirements are increasingly complex and expectations are uncertain, the application of such tools becomes difficult. Vietnam’s Property market is now considered a complex and “hot” environment for investors. Hence, application of TQM will be a competitive advantage (Low & Peh, 1996). If TQM can be implemented into property development field in a right way, it can help to improve the quality as well as the productivity of the project. It is a need to identify suitable TQM factors that are applicable to these projects in order to take the best efficiency of implementation.
Ms. Nguyen Viet Nhan made a case study that focused on the property developing projects in Ho Chi Minh City to (1) find out TQM factors that are applicable to property developing projects; (2) find out the perception and practices of TQM in Vietnam property development; and (3) develop TQM framework that is applicable in Vietnam property development.
The results of her study clearly indicated that Leadership and commitment by top management is the most critical factor for the successful implementation of TQM in Vietnam property development organizations. Once it is known exactly where the organization is, the manager can take steps to improve the overall effectiveness of quality management system. This study also found out that the first five critical problems of TQM implementation are (1) Customer focus; (2) Relationship with supplier, contractor and subcontractor; (3) Leadership and commitment of top management; (4) Employee involvement and commitment; and (5) Education and training. These five priority factors should be given more attention in order to achieve a satisfactory level.
Her thesis abstract is copied and posted.
ABSTRACT
This study investigates the factors affecting successful implementation of TQM in property developments projects. The primary objectives of this study illustrate the development of TQM, introduce the common TQM model and evaluate the items in property development management's TQM model that are believed to be most successfully and most unsuccessfully implemented. In the later part of the study proposes a new TQM model that is applicable in Vietnam market. The result finding is expected to be powerful information for future research directions especially as an indicator for the development of a suitable TQM framework for the property development projects in Vietnam.
The survey was carried in Ho Chi Minh City and the suburban provinces of Ho Chi Minh City. 145 samples from medium-large scale projects were selected for the analysis. All respondent‟s results were analyzed using SPSS version 15.0. Theory using in this survey is grounded from literature review and expert‟s experience. There are twelve factors which affect successful TQM implementation were identified from the survey. The findings indicated that the most important element in TQM framework is Commitment and Leadership by Top Management. The others critical dimensions of TQM are Employee Involvement and Commitment, Education & Training, Communication to improve quality, Policy, System & Process, Customer focus, Relationship with supplier, contractor and subcontractor, Quality Audit & Evaluation, Improve jobsite quality, Work environment & Culture, Team working for, Continuous improvement, and Resource management. The findings also indicated that there was a difference on TQM perception between project manager and site engineer in some dimension of TQM. These are Customer focus, Quality Audit and evaluation, and Relationship with supplier, contractor and subcontractor. A gap the analysis was carried to examine the importance and actual status of these TQM factors. The results indicated that there are a big gap between actual practice and perception. The top five factors that have largest gaps were Customer focus, Relationship with supplier, contractor and subcontractor, Leadership and commitment of top management, Employee involvement and commitment, Education and training. Improving the satisfactory levels of these factors may lead to a successful TQM implementation. Finally, a framework for implementing TQM is recommended.
Many foreign developers are still looking for opportunities to penetrate Vietnam's realty market, and many companies are now interested in HCM City's outskirts such as Thu Thiem and Cu Chi District. Developers are also keen-on complexes of apartments, offices and commercial centers, resorts, industrial parks and residential areas. These segments' supply and demand are not well matched. Consequently, if having visibility strategy such as focusing on target customer, paying attention on marketing and having ability to bring out a high quality product, then chance of success is a seeable thing.
According to Goetsch (2002) “Total Quality Management (TQM) is an approach to doing business that maximizes the competitiveness of an organization through continuous improvement of its products, services, people processes, and environment”. Kotler, 1999 noted that the foundation of TQM is satisfaction renders by products or services and products (or services) are nothing offered to a market for attention, acquisition, use or consumption that satisfy a want or need.
TQM is not a new concept in the manufacturing sector. However, it does not mean that management system which have worked well in the manufacturing sector can be directly well-applied to construction. This is due to the nature differences between the two sectors. Construction industry has its own unique feature while manufacturing calls for repeat processes with products primarily put out in large batches. On the other hand, construction work is undertaken in the main single batch or projects. Although many of the basic processes are repeated from job to job (e.g. concreting and plastering), the specifics of application are always changing (Low & Peh, 1996).
In construction industry, where customers’ requirements are increasingly complex and expectations are uncertain, the application of such tools becomes difficult. Vietnam’s Property market is now considered a complex and “hot” environment for investors. Hence, application of TQM will be a competitive advantage (Low & Peh, 1996). If TQM can be implemented into property development field in a right way, it can help to improve the quality as well as the productivity of the project. It is a need to identify suitable TQM factors that are applicable to these projects in order to take the best efficiency of implementation.
Ms. Nguyen Viet Nhan made a case study that focused on the property developing projects in Ho Chi Minh City to (1) find out TQM factors that are applicable to property developing projects; (2) find out the perception and practices of TQM in Vietnam property development; and (3) develop TQM framework that is applicable in Vietnam property development.
The results of her study clearly indicated that Leadership and commitment by top management is the most critical factor for the successful implementation of TQM in Vietnam property development organizations. Once it is known exactly where the organization is, the manager can take steps to improve the overall effectiveness of quality management system. This study also found out that the first five critical problems of TQM implementation are (1) Customer focus; (2) Relationship with supplier, contractor and subcontractor; (3) Leadership and commitment of top management; (4) Employee involvement and commitment; and (5) Education and training. These five priority factors should be given more attention in order to achieve a satisfactory level.
Her thesis abstract is copied and posted.
ABSTRACT
This study investigates the factors affecting successful implementation of TQM in property developments projects. The primary objectives of this study illustrate the development of TQM, introduce the common TQM model and evaluate the items in property development management's TQM model that are believed to be most successfully and most unsuccessfully implemented. In the later part of the study proposes a new TQM model that is applicable in Vietnam market. The result finding is expected to be powerful information for future research directions especially as an indicator for the development of a suitable TQM framework for the property development projects in Vietnam.
The survey was carried in Ho Chi Minh City and the suburban provinces of Ho Chi Minh City. 145 samples from medium-large scale projects were selected for the analysis. All respondent‟s results were analyzed using SPSS version 15.0. Theory using in this survey is grounded from literature review and expert‟s experience. There are twelve factors which affect successful TQM implementation were identified from the survey. The findings indicated that the most important element in TQM framework is Commitment and Leadership by Top Management. The others critical dimensions of TQM are Employee Involvement and Commitment, Education & Training, Communication to improve quality, Policy, System & Process, Customer focus, Relationship with supplier, contractor and subcontractor, Quality Audit & Evaluation, Improve jobsite quality, Work environment & Culture, Team working for, Continuous improvement, and Resource management. The findings also indicated that there was a difference on TQM perception between project manager and site engineer in some dimension of TQM. These are Customer focus, Quality Audit and evaluation, and Relationship with supplier, contractor and subcontractor. A gap the analysis was carried to examine the importance and actual status of these TQM factors. The results indicated that there are a big gap between actual practice and perception. The top five factors that have largest gaps were Customer focus, Relationship with supplier, contractor and subcontractor, Leadership and commitment of top management, Employee involvement and commitment, Education and training. Improving the satisfactory levels of these factors may lead to a successful TQM implementation. Finally, a framework for implementing TQM is recommended.
Wednesday, 29 July 2009
Improvement Of The Budgeting System For Transportation Projects By Enhancing Road Transportation Technical Knowledge
Transportation infrastructure is one of the most important categories of infrastructure. It is fundamental in movement of people and goods. According to Andrichak (2005), transportation infrastructure is the durable capital of the city that fixed in the location. It was defined as a long-term asset on investment site. For development side, transportation was defined as the one of the tools which influences two sides of country development. First side, transportation investment effects community development, comprises of social, political and natural, and another side is economic development (Mourmouris, 2005).
In Thailand, ADB (2008) emphasized that the proposed megaprojects program is required to sustain long-term growth of economy. The amount of expenditure in transportation sector is 7.8 billion dollars which is considered to be the third of government allocation in megaproject investment plan. The Bureau of the Budget plays a crucial role in all responsibilities concerned with budgeting such as budget management, budget analysis for budget allocation, monitoring and evaluating the performance of government ministries and agencies. This bureau is also responsible to prepare an annual government statement of expenditure.
For budgeting system, budget is always considered for two main sides which are revenue side and expenditure side. Budgeting is as a document which forecasts and authorizes the annual governmental revenue and expenditure of the state (Storum, 1917). On the expenditure side of the budget, government allocates budgets to project following functional classification of expenditure, such as health care, education and transportation project (World Bank, 2008). The thing is the bigger size of project means bigger amount of budget investing in project. The key important factor is expenditure prioritization. Therefore, principle to considering project is very important for budgeting officers in order to prioritize which project should be allocated budget in.
Ms. Korakade Thamphongsri made a case study to tackle the three main issues such as: (1) inadequate budgeting knowledge using for project prioritization and budget allocation; (2) unclear criteria for project prioritization and selection; and (3) lacking of understanding technical knowledge of transportation project using for project consideration.
The objectives of her study is to (1) investigate current practices and perceptions of governmental budgeting officers from Bureau of the Budget and Ministry of Transportation regarding budgeting system; (2) develop physical model of road transportation components for applying in budget consideration; and (3) propose recommendation for improving budget allocation of road transportation project by applying utilities of developed model.
She concluded that road transportation project is a basic infrastructure which is necessary for the society and needs huge amount of budget for investment. Therefore, bureaucrats who are responsible for budgeting department play crucial role in this task – project consideration and budgeting allocation. Although there is budgeting system used for managing budget, it still has problem in lacking of knowledge of budgeting officers to budget management.
The purpose of studying perception of budgeting officers regarding problem influencing budgeting system is to: 1) investigate current practices and perceptions of governmental budgeting officers from Bureau of the Budget and Ministry of Transportation regarding budgeting system, 2) develop physical model of road transportation components and 3) propose recommendation for improving budget allocation of road transportation project by applying utilities of developed model.
Current Practice of Budgeting System
From investigating current practice of budgeting system, it was found that there are different perceptions between budgeting officers from budgeting level and operational level. Below are crucial points that show different of perceptions to budgeting instrument of budgeting system.
1. Project management: Perception of budgeting officers at budgeting level with problem influencing implementation of budgeting system highly tend to be the problem in part of project management. The reason is problems are mostly related to unreadiness of project operation which mostly comes from planning phase of project. Another problem is related to lacking of important information of project such as project feasibility study which is the main data that budgeting officers use to consider and make decision for budget allocation.
2. Output costing: Perception of operational officers with problem influencing implementation of budgeting system highly tend to be the problem in part of output costing. Almost problems are related with financial recording system from central office which its function is not flexible to be integrated with existing system of operational department. It would make recording cost of activity at operational level difficult which affects to budget record at budgeting level as well. Another problem is activities distribution without considering of central officers before distributing which can lead to unnecessary budget allocation.
3. Output structure: From result, both levels of budgeting officers have good practice in output structure. The thing is that both budgeting officers at budgeting level and operational level familiar in using this budgeting instrument for breaking down output of project from time to time. Therefore, both levels of budgeting officers do not have problem with implementing output structure.
4. Alignment between strategies, objective, strategic plan, and output with the budget: Operational officers mostly have practice problem with this instrument more than budgeting officers. Problem with key performance indicator (KPI) is a main problem for Operational officer. Performance indicator has bigger scale of measurement than actual work. The thing is bigger scale of performance indicators would lead more budgets to project. Therefore, indicator should be indicated with appropriate consideration.
5. Medium Term Expenditure Framework (MTEF): Budgeting officers at budgeting level mostly have practice problem with this instrument more than operational officers. The important practice problem for budgeting officers is a lack of success evaluation of megaproject for MTEF budget ceiling. This problem would affect budgeting allocation. Because megaproject needs large amount of budget, success evaluation of previous megaproject would be useful for considering in order allocating budget to coming megaproject.
6. Performance Assessment Rating Tool (PART): Budgeting officers at budgeting level have practice problem in implementing PART at operational level which operational officers do not emphasize PART evaluation on working performance. A lack of emphasizing PART evaluation would affect to decision making on budget allocating for the next project of department. For operational officers, they have practice problem in inflexible PART system for using operational level because evaluation system is belonging to assessment division in practical.
Problem Ranking
From part of analysis, there are problem ranking of both budgeting officers from Bureau of the Budget and from Ministry of Transportation. For officers at Bureau of the Budget - budgeting level, the first three problems, which are the most importance to influencing budgeting system, are problems in part of project management. These are problems in the first three ranks.
1st rank : Most projects are prioritized by the individual policies of high level management rather than by the readiness of project operation. (Project Management)
2nd rank : There is a lack of important information related to the project, the act of which can hinder effective project prioritization. (Project Management)
2nd rank : A project cannot achieve its target that has been planned because of project delay due to the fact that the project is not ready to be launched and there are on-side obstacles. (Project Management)
For perception of budgeting officers from Ministry of Transportation, first three rank include two problems are in output costing and one problem are in part of big picture of budgeting system.
1st rank : The financial record of the government, GFMIS, used by government divisions at budget management and operational level is not flexible to be integrated in output costing system. (Output Costing)
2nd rank : Officers at the operational level only focus on achieving task-objectives, but lack consideration for the monitoring and evaluation. (Big picture of budgeting system)
3rd rank : Central officers distribute activities and budget to provincial officers even though such activities can be done for the whole country at the central level. (Output Costing)
Model Development
In order to achieve objective two, physical model of road transportation components has been develop. The purposes of model development are:
1. To make budgeting officers more clear perception about physical components of road transportation.
2. Help budgeting officers to be more understanding technical terms of road transportation project and it will be useful for budgeting officers in project consideration process.
3. To make use of relationship between factors for better considering proposed physical output of road transportation project.
4. To be used as an instrument for budgeting officers in order to consider project budget requests from operational officers by using physical output to clarify output costing of project.
5. To improve budget allocation of budgeting officers on road transportation project by reducing unnecessary outputs of road transportation project which causes unnecessary budget.
Recommendation for improving budget allocation of road transportation
There are utilities of physical model on budget allocation. Factors in each group have different utilities issues. This part would propose recommendation for better decision making on budget allocation for budgeting officers. Proposed recommendation mainly focuses on improving budget allocation for road transportation project.
1. Long term planning: Budgeting officers can make use of design factors in order to plan and study road transportation project in long term which would benefit for preparing budget. In addition, project would be ready to be launched with completely information and resources.
2. Emphasis on setting and using performance indicators: Budgeting officers should consider result of measuring performance of project operation by using performance indicators. It would be guideline for considering next project proposal for budget allocation.
3. Eliminating unnecessary budget: Budgeting officers should divide important level of output components of road transportation and consider output that relate with objective of the project. Budgeting officers would eliminate unnecessary output, which can lead more amount of budget, which included in project proposal without relating with targets. Therefore, budgeting officers can eliminate unnecessary budget and budgeting officers also can select the most important project.
4. Understanding technical knowledge of road transportation: Technical terms in physical model of road transportation would make budgeting officers better understanding road transportation project at operational level. It would help budgeting officer consider project easily.
Her thesis abstract is copied and posted
ABSTRACT
Road transportation project is an infrastructure which serves society in movement of people and commodity. Most road transportation projects are megaproject that need huge budget for investment. Therefore, it is a responsibility of Bureau of the Budget in order to consider and allocate budget into project. Budgeting officers use budgeting system to be as an instrument for considering project and allocation budget. From problem statement, for budgeting officers, there are unclear criteria for project selection and inadequate knowledge to prioritize project and allocate budget. Therefore, this research is aimed to investigate current practice and perception of budgeting officers, who work at different level which are budgeting level and operational level, regarding budgeting system and develop model to improve budget allocation process.
To achieve objective of study, the first objective is achieved by using questionnaire survey to investigate current practice and perception of budgeting officers between Bureau of the Budget and Ministry of Transportation. Current practice and perception would be investigated about problems regarding budgeting system throughout budgeting components included six budgeting instruments. Descriptive analysis by mean and ranking is used to analyze important level of problem in each instrument. Result is that there are similar and different perception between budgeting officers from budgeting level and operational level.
Results were found that perception of operational officers with problem influencing implementation of budgeting system highly tend to be the problem in part of output costing. The reason is almost problems are related with financial recording which is not flexible for working at operational level, and also activities distribution which is lack of considering of central officers before distributing. It would affect to unnecessary budget allocation. For budgeting officers at budgeting level, their perception with problem highly tend to be problem in project management. The reason is problems are mostly related to unreadiness of project operation and lacking of important information of project such as project feasibility study which is the main data that budgeting officers use to consider and make decision for budget allocation. Therefore, physical model of road transportation components has been developed. The purpose is to be as an instrument for budgeting officers more understanding in technical term, and used to improve budget allocation of road transportation. Finally, recommendation for improving budget allocation has been proposed.
In Thailand, ADB (2008) emphasized that the proposed megaprojects program is required to sustain long-term growth of economy. The amount of expenditure in transportation sector is 7.8 billion dollars which is considered to be the third of government allocation in megaproject investment plan. The Bureau of the Budget plays a crucial role in all responsibilities concerned with budgeting such as budget management, budget analysis for budget allocation, monitoring and evaluating the performance of government ministries and agencies. This bureau is also responsible to prepare an annual government statement of expenditure.
For budgeting system, budget is always considered for two main sides which are revenue side and expenditure side. Budgeting is as a document which forecasts and authorizes the annual governmental revenue and expenditure of the state (Storum, 1917). On the expenditure side of the budget, government allocates budgets to project following functional classification of expenditure, such as health care, education and transportation project (World Bank, 2008). The thing is the bigger size of project means bigger amount of budget investing in project. The key important factor is expenditure prioritization. Therefore, principle to considering project is very important for budgeting officers in order to prioritize which project should be allocated budget in.
Ms. Korakade Thamphongsri made a case study to tackle the three main issues such as: (1) inadequate budgeting knowledge using for project prioritization and budget allocation; (2) unclear criteria for project prioritization and selection; and (3) lacking of understanding technical knowledge of transportation project using for project consideration.
The objectives of her study is to (1) investigate current practices and perceptions of governmental budgeting officers from Bureau of the Budget and Ministry of Transportation regarding budgeting system; (2) develop physical model of road transportation components for applying in budget consideration; and (3) propose recommendation for improving budget allocation of road transportation project by applying utilities of developed model.
She concluded that road transportation project is a basic infrastructure which is necessary for the society and needs huge amount of budget for investment. Therefore, bureaucrats who are responsible for budgeting department play crucial role in this task – project consideration and budgeting allocation. Although there is budgeting system used for managing budget, it still has problem in lacking of knowledge of budgeting officers to budget management.
The purpose of studying perception of budgeting officers regarding problem influencing budgeting system is to: 1) investigate current practices and perceptions of governmental budgeting officers from Bureau of the Budget and Ministry of Transportation regarding budgeting system, 2) develop physical model of road transportation components and 3) propose recommendation for improving budget allocation of road transportation project by applying utilities of developed model.
Current Practice of Budgeting System
From investigating current practice of budgeting system, it was found that there are different perceptions between budgeting officers from budgeting level and operational level. Below are crucial points that show different of perceptions to budgeting instrument of budgeting system.
1. Project management: Perception of budgeting officers at budgeting level with problem influencing implementation of budgeting system highly tend to be the problem in part of project management. The reason is problems are mostly related to unreadiness of project operation which mostly comes from planning phase of project. Another problem is related to lacking of important information of project such as project feasibility study which is the main data that budgeting officers use to consider and make decision for budget allocation.
2. Output costing: Perception of operational officers with problem influencing implementation of budgeting system highly tend to be the problem in part of output costing. Almost problems are related with financial recording system from central office which its function is not flexible to be integrated with existing system of operational department. It would make recording cost of activity at operational level difficult which affects to budget record at budgeting level as well. Another problem is activities distribution without considering of central officers before distributing which can lead to unnecessary budget allocation.
3. Output structure: From result, both levels of budgeting officers have good practice in output structure. The thing is that both budgeting officers at budgeting level and operational level familiar in using this budgeting instrument for breaking down output of project from time to time. Therefore, both levels of budgeting officers do not have problem with implementing output structure.
4. Alignment between strategies, objective, strategic plan, and output with the budget: Operational officers mostly have practice problem with this instrument more than budgeting officers. Problem with key performance indicator (KPI) is a main problem for Operational officer. Performance indicator has bigger scale of measurement than actual work. The thing is bigger scale of performance indicators would lead more budgets to project. Therefore, indicator should be indicated with appropriate consideration.
5. Medium Term Expenditure Framework (MTEF): Budgeting officers at budgeting level mostly have practice problem with this instrument more than operational officers. The important practice problem for budgeting officers is a lack of success evaluation of megaproject for MTEF budget ceiling. This problem would affect budgeting allocation. Because megaproject needs large amount of budget, success evaluation of previous megaproject would be useful for considering in order allocating budget to coming megaproject.
6. Performance Assessment Rating Tool (PART): Budgeting officers at budgeting level have practice problem in implementing PART at operational level which operational officers do not emphasize PART evaluation on working performance. A lack of emphasizing PART evaluation would affect to decision making on budget allocating for the next project of department. For operational officers, they have practice problem in inflexible PART system for using operational level because evaluation system is belonging to assessment division in practical.
Problem Ranking
From part of analysis, there are problem ranking of both budgeting officers from Bureau of the Budget and from Ministry of Transportation. For officers at Bureau of the Budget - budgeting level, the first three problems, which are the most importance to influencing budgeting system, are problems in part of project management. These are problems in the first three ranks.
1st rank : Most projects are prioritized by the individual policies of high level management rather than by the readiness of project operation. (Project Management)
2nd rank : There is a lack of important information related to the project, the act of which can hinder effective project prioritization. (Project Management)
2nd rank : A project cannot achieve its target that has been planned because of project delay due to the fact that the project is not ready to be launched and there are on-side obstacles. (Project Management)
For perception of budgeting officers from Ministry of Transportation, first three rank include two problems are in output costing and one problem are in part of big picture of budgeting system.
1st rank : The financial record of the government, GFMIS, used by government divisions at budget management and operational level is not flexible to be integrated in output costing system. (Output Costing)
2nd rank : Officers at the operational level only focus on achieving task-objectives, but lack consideration for the monitoring and evaluation. (Big picture of budgeting system)
3rd rank : Central officers distribute activities and budget to provincial officers even though such activities can be done for the whole country at the central level. (Output Costing)
Model Development
In order to achieve objective two, physical model of road transportation components has been develop. The purposes of model development are:
1. To make budgeting officers more clear perception about physical components of road transportation.
2. Help budgeting officers to be more understanding technical terms of road transportation project and it will be useful for budgeting officers in project consideration process.
3. To make use of relationship between factors for better considering proposed physical output of road transportation project.
4. To be used as an instrument for budgeting officers in order to consider project budget requests from operational officers by using physical output to clarify output costing of project.
5. To improve budget allocation of budgeting officers on road transportation project by reducing unnecessary outputs of road transportation project which causes unnecessary budget.
Recommendation for improving budget allocation of road transportation
There are utilities of physical model on budget allocation. Factors in each group have different utilities issues. This part would propose recommendation for better decision making on budget allocation for budgeting officers. Proposed recommendation mainly focuses on improving budget allocation for road transportation project.
1. Long term planning: Budgeting officers can make use of design factors in order to plan and study road transportation project in long term which would benefit for preparing budget. In addition, project would be ready to be launched with completely information and resources.
2. Emphasis on setting and using performance indicators: Budgeting officers should consider result of measuring performance of project operation by using performance indicators. It would be guideline for considering next project proposal for budget allocation.
3. Eliminating unnecessary budget: Budgeting officers should divide important level of output components of road transportation and consider output that relate with objective of the project. Budgeting officers would eliminate unnecessary output, which can lead more amount of budget, which included in project proposal without relating with targets. Therefore, budgeting officers can eliminate unnecessary budget and budgeting officers also can select the most important project.
4. Understanding technical knowledge of road transportation: Technical terms in physical model of road transportation would make budgeting officers better understanding road transportation project at operational level. It would help budgeting officer consider project easily.
Her thesis abstract is copied and posted
ABSTRACT
Road transportation project is an infrastructure which serves society in movement of people and commodity. Most road transportation projects are megaproject that need huge budget for investment. Therefore, it is a responsibility of Bureau of the Budget in order to consider and allocate budget into project. Budgeting officers use budgeting system to be as an instrument for considering project and allocation budget. From problem statement, for budgeting officers, there are unclear criteria for project selection and inadequate knowledge to prioritize project and allocate budget. Therefore, this research is aimed to investigate current practice and perception of budgeting officers, who work at different level which are budgeting level and operational level, regarding budgeting system and develop model to improve budget allocation process.
To achieve objective of study, the first objective is achieved by using questionnaire survey to investigate current practice and perception of budgeting officers between Bureau of the Budget and Ministry of Transportation. Current practice and perception would be investigated about problems regarding budgeting system throughout budgeting components included six budgeting instruments. Descriptive analysis by mean and ranking is used to analyze important level of problem in each instrument. Result is that there are similar and different perception between budgeting officers from budgeting level and operational level.
Results were found that perception of operational officers with problem influencing implementation of budgeting system highly tend to be the problem in part of output costing. The reason is almost problems are related with financial recording which is not flexible for working at operational level, and also activities distribution which is lack of considering of central officers before distributing. It would affect to unnecessary budget allocation. For budgeting officers at budgeting level, their perception with problem highly tend to be problem in project management. The reason is problems are mostly related to unreadiness of project operation and lacking of important information of project such as project feasibility study which is the main data that budgeting officers use to consider and make decision for budget allocation. Therefore, physical model of road transportation components has been developed. The purpose is to be as an instrument for budgeting officers more understanding in technical term, and used to improve budget allocation of road transportation. Finally, recommendation for improving budget allocation has been proposed.
Tuesday, 28 July 2009
Quality Management System For Consultant Supervision For Managing Performance Of Building Contractors In Vietnam
The purpose of the quality control system is to make high quality products and focus on customers’ satisfaction. Business competition in today’s markets has increased that tend the customers to being quality oriented. Many companies try to find the way to satisfy customers’ needs in order to survive. For this reason, quality management accreditations such as ISO 9000, total quality management (TQM), and the likes can be frequently heard and more widely discussed.
Worldwide, ISO 9000 and TQM are considered as the most effective ways of quality managing. ISO 9000 has guidelines and requirements for documenting a quality system. TQM is far wider in application than ISO 9000.
TQM is organization’s set of management practices equipped to guarantee the organization consistently meets or exceeds customer requirements. TQM focused on process measurement and controls as means of continuous improvement. It has four key elements (1) customer’s expectations and definition of quality; (2) Focusing on the improvement process and not the end result; (3) The participation of all employees and their empowerment to make decisions affecting quality; and (4) Continuous, ongoing improvement.
On 8 June 2004, the Vietnamese government issued decree No 209/2004/ on quality management in building projects. This decree requires all construction organizations to follow to avoid related accidents that happened in three construction projects in 2007 until middle 2008. After investigating those problems, construction committee concluded that the owners were lacked of construction quality control. Besides, the consultant also did not have a quality control system to keep track of the contractor’s work.
Therefore, quality control system of the consultant is strongly necessary for both owner and contractor to assure quality and prevent any unexpected hazards.
Mr. Bui Van Bao made a case study on “Quality Management System for Consultant Supervision for Managing Performance of Building Contractors in Vietnam”. The objective of his study is to develop quality management system for consultant supervision in managing the performance of building contractors in Vietnam. His study also aimed to investigate the construction methods which are related with quality control based on the Vietnam standard and regulation, and analyzed the communication process of managing quality and exchanging information between the owner, supervising consultant, designing consultant and contractor to solve many problems at the site.
Worldwide, ISO 9000 and TQM are considered as the most effective ways of quality managing. ISO 9000 has guidelines and requirements for documenting a quality system. TQM is far wider in application than ISO 9000.
TQM is organization’s set of management practices equipped to guarantee the organization consistently meets or exceeds customer requirements. TQM focused on process measurement and controls as means of continuous improvement. It has four key elements (1) customer’s expectations and definition of quality; (2) Focusing on the improvement process and not the end result; (3) The participation of all employees and their empowerment to make decisions affecting quality; and (4) Continuous, ongoing improvement.
On 8 June 2004, the Vietnamese government issued decree No 209/2004/ on quality management in building projects. This decree requires all construction organizations to follow to avoid related accidents that happened in three construction projects in 2007 until middle 2008. After investigating those problems, construction committee concluded that the owners were lacked of construction quality control. Besides, the consultant also did not have a quality control system to keep track of the contractor’s work.
Therefore, quality control system of the consultant is strongly necessary for both owner and contractor to assure quality and prevent any unexpected hazards.
Mr. Bui Van Bao made a case study on “Quality Management System for Consultant Supervision for Managing Performance of Building Contractors in Vietnam”. The objective of his study is to develop quality management system for consultant supervision in managing the performance of building contractors in Vietnam. His study also aimed to investigate the construction methods which are related with quality control based on the Vietnam standard and regulation, and analyzed the communication process of managing quality and exchanging information between the owner, supervising consultant, designing consultant and contractor to solve many problems at the site.
He concluded that to ensure the quality of construction works, the consultant and contractor are responsible to determine the quality of construction project. All management procedures must also be followed on a suggested three stage basis: input à processà output. Of these three, the most important stage is “process”.
The quality management system functions as practiced in building construction. A model for managing quality has been defined and shown to apply to any construction domain and organizational structure for developing and administering a quality assurance program. The model involves multi level quality management participation, encompassing contractors, engineers, and managers. It describes the quality management tasks and the roles assumed in a scheme relating construction quality control, quality assurance, and the interface between them. This study advances the understanding of how quality management is performed and engages participants at several management levels.
His recommendations for management improvement are:
1. The Supervising Consultant should supply the contractor with their quality management system before construction commencement so that the contractor knows and understands QMS for better coordination.
2. Top manager of Supervising Consultant should update new standards in quality management system in order to improve its management system and preventing quality risk in building the project. The Consulting Engineer must have a quality policy that applies the quality standards and approval requirements all in accordance with the law of construction.
3. Top management of the contractor should take a lead role in commitment towards quality. They must understand the quality policy and follow it as a work quality standard.
4. The owner should have a good financial condition to enable the contractor to complete the project in accordance with the contract schedule.
His recommendation for further study is to find out the influence of Owner, Consultant and Contractor in the project quality itself for consultant management improvement.
His thesis abstract is copied and posted.
Abstract
The study gives a thorough description of the quality management system as practised by the supervising consultant in the construction industry. This function is shown as an interconnected system that recognizes the main quality system management activities. The documents and records used in these activities are also reviewed. A model for high level quality system management is defined, including supervising consultants and contractors.
The model depicts the quality management system responsibilities and the roles in a scheme relating to construction quality control, quality assurance, and the interface between them. The scheme can be applied to any construction domain and quality management structure of organization. The study advances the understanding of how quality management is performed and engages participants at several management levels.
The use of quality management system in the construction industry has greatly increased in recent years. Because the purpose of QMS development is to manage the performance of building contractors in Vietnam, it is very important to assure quality in building projects and satisfy the client as much as possible in the construction industry. The objective of the quality management system is to improve the quality of construction projects and to enhance the effect and productivity during the building project in order to achieve client satisfaction.
The research methodology is highlighted as the main philosophy. Besides, different sources of data will be gathered in this research, including project documents, reports from local government and project agencies, newspapers, construction law and standards in Viet Nam etc. an exploratory approach will be adopted by reviewing the available literature to develop a quality management system framework for consultant supervision building projects in Vietnam.
Report the findings of a research study, which was undertaken to examine the underlying factors affecting the quality of a building project. It also aims to identify factors that show a strong correlation to good quality performance. The ultimate goal is to provide clients, project managers, supervising consultants and contractors with information that can help them become more efficient with their limited resources and, as a result, achieve better quality outcomes.
The quality management system functions as practiced in building construction. A model for managing quality has been defined and shown to apply to any construction domain and organizational structure for developing and administering a quality assurance program. The model involves multi level quality management participation, encompassing contractors, engineers, and managers. It describes the quality management tasks and the roles assumed in a scheme relating construction quality control, quality assurance, and the interface between them. This study advances the understanding of how quality management is performed and engages participants at several management levels.
His recommendations for management improvement are:
1. The Supervising Consultant should supply the contractor with their quality management system before construction commencement so that the contractor knows and understands QMS for better coordination.
2. Top manager of Supervising Consultant should update new standards in quality management system in order to improve its management system and preventing quality risk in building the project. The Consulting Engineer must have a quality policy that applies the quality standards and approval requirements all in accordance with the law of construction.
3. Top management of the contractor should take a lead role in commitment towards quality. They must understand the quality policy and follow it as a work quality standard.
4. The owner should have a good financial condition to enable the contractor to complete the project in accordance with the contract schedule.
His recommendation for further study is to find out the influence of Owner, Consultant and Contractor in the project quality itself for consultant management improvement.
His thesis abstract is copied and posted.
Abstract
The study gives a thorough description of the quality management system as practised by the supervising consultant in the construction industry. This function is shown as an interconnected system that recognizes the main quality system management activities. The documents and records used in these activities are also reviewed. A model for high level quality system management is defined, including supervising consultants and contractors.
The model depicts the quality management system responsibilities and the roles in a scheme relating to construction quality control, quality assurance, and the interface between them. The scheme can be applied to any construction domain and quality management structure of organization. The study advances the understanding of how quality management is performed and engages participants at several management levels.
The use of quality management system in the construction industry has greatly increased in recent years. Because the purpose of QMS development is to manage the performance of building contractors in Vietnam, it is very important to assure quality in building projects and satisfy the client as much as possible in the construction industry. The objective of the quality management system is to improve the quality of construction projects and to enhance the effect and productivity during the building project in order to achieve client satisfaction.
The research methodology is highlighted as the main philosophy. Besides, different sources of data will be gathered in this research, including project documents, reports from local government and project agencies, newspapers, construction law and standards in Viet Nam etc. an exploratory approach will be adopted by reviewing the available literature to develop a quality management system framework for consultant supervision building projects in Vietnam.
Report the findings of a research study, which was undertaken to examine the underlying factors affecting the quality of a building project. It also aims to identify factors that show a strong correlation to good quality performance. The ultimate goal is to provide clients, project managers, supervising consultants and contractors with information that can help them become more efficient with their limited resources and, as a result, achieve better quality outcomes.
Monday, 27 July 2009
Managing Subcontractor Schedule Performance In An EPC Contract
The construction industry has been used as a gauge of economic health because of its strong linkage to cyclical fluctuation in the economy. The construction services sector is thus a relatively large employer. It draws on a large part of fixed capital formation in an economy, and it provides the essential support for economic development.
Over the last two decades, up to 70% of construction business opportunities in international markets as measured by the size of contracts were found in developing countries primarily in infrastructure projects. Some developing countries have been exporting construction services successfully and have attained a certain competitive advantage, although they have had extremely limited success in penetrating the markets of development countries.
With economic development, contracts in the construction industry have greatly increased in recent years. The experience of large companies has shown that technology co-operation agreements with developed country partners have helped to reduce organizational and transaction costs, facilitated international sourcing of technology and improved marketing and managerial practices. As a result, main contractor prefer to subcontract the services. Subcontracting has proved to be an entry point to the international market for small and medium-sized construction companies from developing countries and also transition economies. This appears to be because developing country companies seem to have inadequate capacities for executing overall management of large construction projects and are usually subcontracted for other specialized services. In most construction projects, especially building projects, it is common for 80 to 90% of the work to be performed by subcontractors (Hinze and Tracey, 1994).
The contractors that are selected to enter into general EPC contracts must fully satisfy the conditions on experience and capability. In the process of preparing, entering into and performing the contracts, the contractors are encouraged to put forward initiatives, measures or apply their experiences in order to fulfill the contractual jobs, meet the objectives and requirements of the projects or bidding packages and raise their efficiency (Circular 08/2003/QD-BXD - Ministry of Construction of Vietnam).
Most of the work should be done by subcontractors as the main contractors rely on a large number of subcontractors. As much as 90% of the construction work id carried out by the variety of subcontractors while the main contractors tend focus on the management and coordination. Therefore, main contractor need to develop subcontract management strategy that leading to control subcontractors’ performance effectively and efficiently.
Managing subcontractors does not simply involve asking them to allocate resources into the jobsite whenever an activity is scheduled and then push them to speed up the work without the consciousness of schedule and cost risks. A good general contractor or project manager must award to which subcontractors should be paid more attention than others in preventing delay when considering the problems on duration and additional costs.
Mr. Nguyen Tan Hoang made a study to (1) identify problems related with subcontractors’ performance in terms of project schedule and delivery; and (2) study the monitoring the performance of subcontractors in terms of project schedule and delivery.
He found out that relating to the concept of concurrent delay is one of the most troubled and complicated area. It is strongly contested topic in the building and construction industry. Both parties in the construction contract regularly use concurrent delay as an excuse to avoid responsibility for extension of time claims and the assessment of liquidated damages. It was also found out in this study that even contractor hired a third party for selecting subcontractors. The contractor also implemented the bidding that follows basic principles including consideration of the interaction of different factors such as:
Contractual provisions.
Legal principles.
Technical assessment of the construction program.
Definition of criticality.
Floating ownership and methods for proof of delay claims.
The delays absolutely happened 100% in public main subcontractors and only a small % delay of private subcontractors because of unforeseen conditions as very bad weather. Despite of these, contractor almost solved the subcontractors’ delays by using the contractual provisions of back-charge to hire another subcontractor to do the impacted areas. The overall time to be recovered and is similar to required schedule of project.
Conclusions for Subcontractor Control Strategy
It can be concluded based on this study that subcontractor control strategy has been well aligned and well organized in all aspects to international contractor. However, there are some major points that need to be improved in order to strengthen the management efficiency and it effectiveness. These are the following:
1. Consider to the size of scope of work for each package.
2. Consider to the public and private subcontractors in the subcontractor master list and the overall subcontract plan, also their current works at the same time of awarded project as well. They are the main causes of overloading.
3. Study site conditions more carefully in order to consider the proper price of each package that could be awarded to subcontractor.
4. Sharing with subcontractors in risks that could be happened by unforeseen conditions not only generally covered in contractual provisions.
5. Obligate subcontractors must use legal tools for tracking schedule and define delays.
Conclusion for subcontractor Performance Management
It can also be concluded that main contractor maintained a very systematically concise subcontract performance management. However, there are some major points that need to be improved in order to strengthen continually the performance efficiency and it effectiveness. These are the following:
1. Contractor must consider to the prepared schedule may include milestone and interim completion dates that satisfy contractor needs and they should be required in subcontract provisions clearly.
2. Contractor must consider to unforeseen conditions clearly as the bad weather and undiscovered soil conditions.
3. Contractor must consider the progress payments that to be used 100% by subcontractors for project.
4. Contractor must consider the facilities conditions for subcontractors in subcontract before implementing the work at site.
5. Contractor must consider incentive in line of subcontractors’ performances.
Mr. Nguyen Tan Hoang learned from this case study regarding on how the main contractor managed their subcontractors in line of subcontractor control strategy and how they managed the performance in terms of schedule delays together with its strength and weaknesses. In order to improve this, he made some recommendations as follows:
1) Whether the scheduling obligation is to be imposed on a subcontractor, main contractor, the scheduling specification should be as carefully considered and written as any other technical specification.
2) Setting up the rewards for subcontractor performance when achieving each milestone as required in the subcontract in order to increasing the productivity and endeavors from subcontractors.
3) Construct an unforeseen conditions control procedure for applying at site when the parties faced, especially for bad weather and soil conditions not only locked by subcontract provisions.
4) Parties must get resources evaluation for project before implementing the work in the cases of far site location with economic - social centers. They must be considered in the contract negotiation meetings.
5) Maintain the other standby strong subcontractors/ suppliers for cases of back-charge decisions happened. These standby subcontractors could be some ones that are doing other packages of project in order to reuse available resources and facilities.
6) Maintain at least a lawyer for cases of contractual conflictions in a large project in order to solve local rules and regulations, especially when removing any subcontractor out of battery limits.
His thesis abstract is copied and posted.
ABSTRACT
The construction industry has greatly developed and increased in recent years. In most EPC projects, it is common for over 80% of the work to be performed by subcontractors. This has resulted in main contractors concentrating their efforts on managing subcontractor performance rather than employing direct labor to undertake construction work. Therefore, main contractor need to develop a strategy that allow him to control subcontractor effectively and efficiently in terms of schedule delay. In order to understand how the current strategies are being operated together with the strengths and the weaknesses of the strategy, an EPC international contractor who is doing a very large project in Vietnam was investigated through documentation, archival, and interview. Major improvements are needed for the subcontractor control strategy for local subcontractors in order to improve the subcontractor management performance. In contrast, subcontractor control strategy and relationship management from international contractor had been aligned and organized. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance.
Over the last two decades, up to 70% of construction business opportunities in international markets as measured by the size of contracts were found in developing countries primarily in infrastructure projects. Some developing countries have been exporting construction services successfully and have attained a certain competitive advantage, although they have had extremely limited success in penetrating the markets of development countries.
With economic development, contracts in the construction industry have greatly increased in recent years. The experience of large companies has shown that technology co-operation agreements with developed country partners have helped to reduce organizational and transaction costs, facilitated international sourcing of technology and improved marketing and managerial practices. As a result, main contractor prefer to subcontract the services. Subcontracting has proved to be an entry point to the international market for small and medium-sized construction companies from developing countries and also transition economies. This appears to be because developing country companies seem to have inadequate capacities for executing overall management of large construction projects and are usually subcontracted for other specialized services. In most construction projects, especially building projects, it is common for 80 to 90% of the work to be performed by subcontractors (Hinze and Tracey, 1994).
The contractors that are selected to enter into general EPC contracts must fully satisfy the conditions on experience and capability. In the process of preparing, entering into and performing the contracts, the contractors are encouraged to put forward initiatives, measures or apply their experiences in order to fulfill the contractual jobs, meet the objectives and requirements of the projects or bidding packages and raise their efficiency (Circular 08/2003/QD-BXD - Ministry of Construction of Vietnam).
Most of the work should be done by subcontractors as the main contractors rely on a large number of subcontractors. As much as 90% of the construction work id carried out by the variety of subcontractors while the main contractors tend focus on the management and coordination. Therefore, main contractor need to develop subcontract management strategy that leading to control subcontractors’ performance effectively and efficiently.
Managing subcontractors does not simply involve asking them to allocate resources into the jobsite whenever an activity is scheduled and then push them to speed up the work without the consciousness of schedule and cost risks. A good general contractor or project manager must award to which subcontractors should be paid more attention than others in preventing delay when considering the problems on duration and additional costs.
Mr. Nguyen Tan Hoang made a study to (1) identify problems related with subcontractors’ performance in terms of project schedule and delivery; and (2) study the monitoring the performance of subcontractors in terms of project schedule and delivery.
He found out that relating to the concept of concurrent delay is one of the most troubled and complicated area. It is strongly contested topic in the building and construction industry. Both parties in the construction contract regularly use concurrent delay as an excuse to avoid responsibility for extension of time claims and the assessment of liquidated damages. It was also found out in this study that even contractor hired a third party for selecting subcontractors. The contractor also implemented the bidding that follows basic principles including consideration of the interaction of different factors such as:
Contractual provisions.
Legal principles.
Technical assessment of the construction program.
Definition of criticality.
Floating ownership and methods for proof of delay claims.
The delays absolutely happened 100% in public main subcontractors and only a small % delay of private subcontractors because of unforeseen conditions as very bad weather. Despite of these, contractor almost solved the subcontractors’ delays by using the contractual provisions of back-charge to hire another subcontractor to do the impacted areas. The overall time to be recovered and is similar to required schedule of project.
Conclusions for Subcontractor Control Strategy
It can be concluded based on this study that subcontractor control strategy has been well aligned and well organized in all aspects to international contractor. However, there are some major points that need to be improved in order to strengthen the management efficiency and it effectiveness. These are the following:
1. Consider to the size of scope of work for each package.
2. Consider to the public and private subcontractors in the subcontractor master list and the overall subcontract plan, also their current works at the same time of awarded project as well. They are the main causes of overloading.
3. Study site conditions more carefully in order to consider the proper price of each package that could be awarded to subcontractor.
4. Sharing with subcontractors in risks that could be happened by unforeseen conditions not only generally covered in contractual provisions.
5. Obligate subcontractors must use legal tools for tracking schedule and define delays.
Conclusion for subcontractor Performance Management
It can also be concluded that main contractor maintained a very systematically concise subcontract performance management. However, there are some major points that need to be improved in order to strengthen continually the performance efficiency and it effectiveness. These are the following:
1. Contractor must consider to the prepared schedule may include milestone and interim completion dates that satisfy contractor needs and they should be required in subcontract provisions clearly.
2. Contractor must consider to unforeseen conditions clearly as the bad weather and undiscovered soil conditions.
3. Contractor must consider the progress payments that to be used 100% by subcontractors for project.
4. Contractor must consider the facilities conditions for subcontractors in subcontract before implementing the work at site.
5. Contractor must consider incentive in line of subcontractors’ performances.
Mr. Nguyen Tan Hoang learned from this case study regarding on how the main contractor managed their subcontractors in line of subcontractor control strategy and how they managed the performance in terms of schedule delays together with its strength and weaknesses. In order to improve this, he made some recommendations as follows:
1) Whether the scheduling obligation is to be imposed on a subcontractor, main contractor, the scheduling specification should be as carefully considered and written as any other technical specification.
2) Setting up the rewards for subcontractor performance when achieving each milestone as required in the subcontract in order to increasing the productivity and endeavors from subcontractors.
3) Construct an unforeseen conditions control procedure for applying at site when the parties faced, especially for bad weather and soil conditions not only locked by subcontract provisions.
4) Parties must get resources evaluation for project before implementing the work in the cases of far site location with economic - social centers. They must be considered in the contract negotiation meetings.
5) Maintain the other standby strong subcontractors/ suppliers for cases of back-charge decisions happened. These standby subcontractors could be some ones that are doing other packages of project in order to reuse available resources and facilities.
6) Maintain at least a lawyer for cases of contractual conflictions in a large project in order to solve local rules and regulations, especially when removing any subcontractor out of battery limits.
His thesis abstract is copied and posted.
ABSTRACT
The construction industry has greatly developed and increased in recent years. In most EPC projects, it is common for over 80% of the work to be performed by subcontractors. This has resulted in main contractors concentrating their efforts on managing subcontractor performance rather than employing direct labor to undertake construction work. Therefore, main contractor need to develop a strategy that allow him to control subcontractor effectively and efficiently in terms of schedule delay. In order to understand how the current strategies are being operated together with the strengths and the weaknesses of the strategy, an EPC international contractor who is doing a very large project in Vietnam was investigated through documentation, archival, and interview. Major improvements are needed for the subcontractor control strategy for local subcontractors in order to improve the subcontractor management performance. In contrast, subcontractor control strategy and relationship management from international contractor had been aligned and organized. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance.
Wednesday, 22 July 2009
AN OWNER’S PROJECT COST CONTROL STRATEGY FOR BUILDING PROJECTS
The construction industry plays a vital role in any country’s economic growth, both developed and developing ones. Construction cost control did not consider being a major concern as developers rushed to capitalize on the booming market, as what was happened in Vietnam in the years 2006, 2007 and the beginning of 2008.
However, in the late 2008, the world economy as well as in the Southeast Asia sank into recession. Thus, project cost control became a critical issue for the developers as well as the construction companies in managing construction projects. A significant number of projects in the world had suffered cost overruns as the prices of materials are spiraling with no signs of abating in the near future.
Cost control is the activity which compares cost performance against the cost plan, adjusting one or the other dynamically by reference to the changing circumstances in the project's financial environment. It is a process that should be continued throughout the construction period to ensure that the cost of the building is kept within the agreed cost limits. The cost control can be divided into three major areas: the control of cost during the design stages, the control of cost during the tendering stages and the control of cost by the client once the construction of project has started.
In many large projects, professional construction consultants or senior quantity surveyors play a critical role in estimating construction costs, scheduling construction activities and implementing various techniques to complete the projects. During the current economic recession, the cost of construction tends to exceed the budget. This is one of the major problems that need to be addressed by clients, construction management consultants and contractors. To minimize cost overruns, client, project management and contractors need to improve their skills and abilities in dealing with project cost control. Recessions and poor economic times have put pressure on the average company for better cost control.
Mr. Nguyen Dang Thong Nhat made a case study on “An Owner’s Project Cost Control Strategy for Building Projects” to identify the key components of cost control. How the owner in construction industry can become more efficient and respond better to the current economic recession with non-stop prices increase of material and labor cost.
His other objectives are to (1) identify the problems in cost control in an observed case study in Vietnam’s building project and (2) develop a framework for owner’s project cost control strategy that covers the entire project life span, from the conceptual stage to the construction stage.
Based on his study, there are three components that caused project costs overruns. These were (a) incomplete specifications and drawings; (b) requirements of the owner and; (c) changes from contractors. Although the project management team tried to coordinate all requirements and solve the above problems, there were several factors that made overruns inevitable and certain factors were beyond their ability and responsibility.
According to his research, no matter how good the cost and control system is, problems might occur. Below are common causes of cost problems:
• Poor estimating techniques and/or standards, resulting in unrealistic budgets
• Out-of-sequence starting and completion of activities and events
• Inadequate work breakdown structure
• No management policy on reporting and control practices
• Poor work definition at the lower levels of the organization
• Management reducing budgets or bids to be competitive
• Inadequate formal planning that results in unnoticed, or often uncontrolled, increases in scope of effort
• Poor comparison of actual and planned costs
• Comparison of actual and planned costs at the wrong level of management
• Unforeseen technical problems
• Schedule delays that require overtime or idle time costing
• Material escalation factors that is unrealistic
His conclusions for Owner’ Project Cost Control
Design Stage - the project owner did not define the (a) project scope which is a crucial first step towards making the project a success; and (b) failed to set realistic expectation at the design stage.
He did not know how to manage expectations before going to the designer, consultant and contractors. And it became a struggle when he needed to meet changes along the way. Since he wanted to reduce the fees for architects and engineers, their input became limited and insufficient specifications subsequently caused many problems during construction. Also, he did not give the project management team, designer and consultants the authority. When the contractors suggested changing the amount of materials to be purchased and to import some materials that are out of stock, it resulted to project cost control problem and delayed schedule.
Tendering Stage - the project owner did not conduct face-to-face interviews with the bidders. As a result, the project bidders did not discuss directly with the project owner the changes that were made. A lack of understanding on the owner’s expectations also hindered the process. He did not have any chance to negotiate price and costs with contractors as well.
Construction Stage – the project owner did not give some authority and responsibility to the project management team, designer and consultants. Therefore, they needed to get his approval before sending and approving any change orders.
The project owner did not establish project objectives and project expectations clearly and carefully from the beginning of project. He wanted to reduce the fees for architects, designers and engineer resulting to limited input, insufficient specification, and incomplete detailed drawings and project specifications. In addition, he did not understand clearly the benefits of investment license and he did not hire a third party to evaluate the design drawing to check the quality of site works as required by Vietnamese construction law.
Mr. Nguyen Dang Thong Nhat’s recommendations for owner’s cost control management improvement are:
Project Management - The project owner must work with the project management team to detail five major project issues with a comprehensive list in the project definition phase such as: (1) programming/functional needs of a facility; (2) site questions and concerns; (3) building systems requirements; (4) construction schedule; and (5) project budget.
The owner and the project management team have to make sure that each issue needs to be reconciled with the others and updated frequently. If any issue is ill-defined, there is a chance that the project will go out of control.
Project Change Control - When changes must be made that will change the plan, the project manager must control and track them. The guidelines for controlling changes are as follows:
1. Changes can be requested by anyone associated with the project, but submitting the Project Change Request Form to the project manager and the project change committee will start the change process.
2. Project change requests must be evaluated to determine the effect of a request.
3. The project manager and the team must estimate the effort, dependencies, and resources required to institute the project change.
4. The project manager must communicate the impact of proposed changes in terms of cost, scheduling, and performance to the customer.
5. If a change is approved, the signatures of the client and the project manager authorize the project team to make the requested change.
6. The project plan must be revised after the change has been approved for implementation.
7. The project manager must inform the project team of all approved, unapproved, and deferred changes.
8. The Project Change Request Form must be logged, regardless of its approval or denial.
Cost Control
1. Cost control should be approached as an application of Pareto's Law, which essentially states that 80 percent of the outcome of a project is determined by only 20 percent of the included elements. Thus in establishing a cost control system, the idea is to isolate and control in detail those elements with the greatest potential impact on final cost, with only summary level control on the remaining elements. The greatest variable in the final cost of a construction project is usually the labor cost. Most of the other cost elements in the project are materials, labor, equipment, and overhead.
2. Cost control is a process that should be carried out for all types of construction stages and activities. Comparison with a cost standard method is complicated and expensive but it is more accurate than other methods. Subdivision by detail is a method that is not expensive but risky operation, involves little or no control of cost. The integration with other functions method has to take into account other functions and not as a separate entity and control is kept on the functions combined.
3. Cost Control problems come about for many reasons including incorrect estimating techniques, predetermined or fixed budgets with no flexibility, schedule overruns, inadequate WBS development, and so on. Good project management planning techniques during the planning processes may prevent cost problems later in the project. At a minimum, proper planning will reduce the impact of these problems if they do occur.
4. Cost Control, like many of the other Controlling processes, is concerned with monitoring project performance for variances. As the project owner, we try to keep a close eye on the factors that cause variance to keep their impacts to a minimum. An important thing to remember is that Cost Control makes certain all appropriate parties agree to any changes to the cost baseline. This process is ongoing and continues to manage cost changes throughout the project.
5. It is important to have formally cost control system for contractors. It helps project owner to understand and control project costs easier and faster.
6. Using Computers: It’s hard to imagine a project, especially larger projects, moving forward without the use of computers. Project managers can rely on project management software and spreadsheet programs to assist them in calculating actual costs, earned value, and planned value.
Which Cost-Control Strategies Work Best?
The choice of project delivery method depends on variables like funding, time constraints, and project objectives. This view from the experts substantiates that, regardless of delivery method, effective cost controls depend on a commitment to thorough planning, good communication, and rigorous monitoring of a project from start to finish. Building professionals and owners should find it easy to borrow and incorporate many of these cost-control strategies into their practice (Written by Mary Maher, University of Wisconsin – Madison Department of Engineering Professional Development).
His thesis abstract is copied and posted.
ABSTRACT
Nowadays, the construction industry plays a vital role in the healthy growth of the economy of many countries, both the developed and developing ones. Construction cost control did not use to be a major concern as developers rushed to capitalize on the booming market, as was what happened in Vietnam in Year 2006, 2007 and the beginning of 2008. However, in late 2008, the economy of the world and Southeast Asia sank into recession. Project cost control became a critical issue for the developers as well as the construction companies in managing construction projects. A significant number of projects in the world had significant cost overruns as the price of material was spiraling with no signs of abating in the near future.
Cost overruns had been a problem during this period and the use of good project cost control procedures has become a concern of project investors and construction companies in the current world since the recession of the late 2008. Project managers and developers are now aware that the failure of a cost control system or use of a poor system can lead to project failure. Project cost control methods need to be improved to ensure that owners and contractors manage construction costs and meet project goals on time and within budget.
Effective management of construction projects has been a major research subject due to the importance of the construction industry and the amount of investment it attracts. A significant issue facing construction managers is that of inefficient cost control procedures, particularly in developing regions of the world, such as Vietnam. The cost control system is the most important function that facilitates construction organizations in accomplishing profit maximization.
In this study, project cost controls will be examined. These procedures will be researched and it will be illustrated how the project cost control procedures can be applied to the construction industry in Vietnam to increase the awareness of contractors, consultants and client of the functions of cost control in the execution of construction projects.
However, in the late 2008, the world economy as well as in the Southeast Asia sank into recession. Thus, project cost control became a critical issue for the developers as well as the construction companies in managing construction projects. A significant number of projects in the world had suffered cost overruns as the prices of materials are spiraling with no signs of abating in the near future.
Cost control is the activity which compares cost performance against the cost plan, adjusting one or the other dynamically by reference to the changing circumstances in the project's financial environment. It is a process that should be continued throughout the construction period to ensure that the cost of the building is kept within the agreed cost limits. The cost control can be divided into three major areas: the control of cost during the design stages, the control of cost during the tendering stages and the control of cost by the client once the construction of project has started.
In many large projects, professional construction consultants or senior quantity surveyors play a critical role in estimating construction costs, scheduling construction activities and implementing various techniques to complete the projects. During the current economic recession, the cost of construction tends to exceed the budget. This is one of the major problems that need to be addressed by clients, construction management consultants and contractors. To minimize cost overruns, client, project management and contractors need to improve their skills and abilities in dealing with project cost control. Recessions and poor economic times have put pressure on the average company for better cost control.
Mr. Nguyen Dang Thong Nhat made a case study on “An Owner’s Project Cost Control Strategy for Building Projects” to identify the key components of cost control. How the owner in construction industry can become more efficient and respond better to the current economic recession with non-stop prices increase of material and labor cost.
His other objectives are to (1) identify the problems in cost control in an observed case study in Vietnam’s building project and (2) develop a framework for owner’s project cost control strategy that covers the entire project life span, from the conceptual stage to the construction stage.
Based on his study, there are three components that caused project costs overruns. These were (a) incomplete specifications and drawings; (b) requirements of the owner and; (c) changes from contractors. Although the project management team tried to coordinate all requirements and solve the above problems, there were several factors that made overruns inevitable and certain factors were beyond their ability and responsibility.
According to his research, no matter how good the cost and control system is, problems might occur. Below are common causes of cost problems:
• Poor estimating techniques and/or standards, resulting in unrealistic budgets
• Out-of-sequence starting and completion of activities and events
• Inadequate work breakdown structure
• No management policy on reporting and control practices
• Poor work definition at the lower levels of the organization
• Management reducing budgets or bids to be competitive
• Inadequate formal planning that results in unnoticed, or often uncontrolled, increases in scope of effort
• Poor comparison of actual and planned costs
• Comparison of actual and planned costs at the wrong level of management
• Unforeseen technical problems
• Schedule delays that require overtime or idle time costing
• Material escalation factors that is unrealistic
His conclusions for Owner’ Project Cost Control
Design Stage - the project owner did not define the (a) project scope which is a crucial first step towards making the project a success; and (b) failed to set realistic expectation at the design stage.
He did not know how to manage expectations before going to the designer, consultant and contractors. And it became a struggle when he needed to meet changes along the way. Since he wanted to reduce the fees for architects and engineers, their input became limited and insufficient specifications subsequently caused many problems during construction. Also, he did not give the project management team, designer and consultants the authority. When the contractors suggested changing the amount of materials to be purchased and to import some materials that are out of stock, it resulted to project cost control problem and delayed schedule.
Tendering Stage - the project owner did not conduct face-to-face interviews with the bidders. As a result, the project bidders did not discuss directly with the project owner the changes that were made. A lack of understanding on the owner’s expectations also hindered the process. He did not have any chance to negotiate price and costs with contractors as well.
Construction Stage – the project owner did not give some authority and responsibility to the project management team, designer and consultants. Therefore, they needed to get his approval before sending and approving any change orders.
The project owner did not establish project objectives and project expectations clearly and carefully from the beginning of project. He wanted to reduce the fees for architects, designers and engineer resulting to limited input, insufficient specification, and incomplete detailed drawings and project specifications. In addition, he did not understand clearly the benefits of investment license and he did not hire a third party to evaluate the design drawing to check the quality of site works as required by Vietnamese construction law.
Mr. Nguyen Dang Thong Nhat’s recommendations for owner’s cost control management improvement are:
Project Management - The project owner must work with the project management team to detail five major project issues with a comprehensive list in the project definition phase such as: (1) programming/functional needs of a facility; (2) site questions and concerns; (3) building systems requirements; (4) construction schedule; and (5) project budget.
The owner and the project management team have to make sure that each issue needs to be reconciled with the others and updated frequently. If any issue is ill-defined, there is a chance that the project will go out of control.
Project Change Control - When changes must be made that will change the plan, the project manager must control and track them. The guidelines for controlling changes are as follows:
1. Changes can be requested by anyone associated with the project, but submitting the Project Change Request Form to the project manager and the project change committee will start the change process.
2. Project change requests must be evaluated to determine the effect of a request.
3. The project manager and the team must estimate the effort, dependencies, and resources required to institute the project change.
4. The project manager must communicate the impact of proposed changes in terms of cost, scheduling, and performance to the customer.
5. If a change is approved, the signatures of the client and the project manager authorize the project team to make the requested change.
6. The project plan must be revised after the change has been approved for implementation.
7. The project manager must inform the project team of all approved, unapproved, and deferred changes.
8. The Project Change Request Form must be logged, regardless of its approval or denial.
Cost Control
1. Cost control should be approached as an application of Pareto's Law, which essentially states that 80 percent of the outcome of a project is determined by only 20 percent of the included elements. Thus in establishing a cost control system, the idea is to isolate and control in detail those elements with the greatest potential impact on final cost, with only summary level control on the remaining elements. The greatest variable in the final cost of a construction project is usually the labor cost. Most of the other cost elements in the project are materials, labor, equipment, and overhead.
2. Cost control is a process that should be carried out for all types of construction stages and activities. Comparison with a cost standard method is complicated and expensive but it is more accurate than other methods. Subdivision by detail is a method that is not expensive but risky operation, involves little or no control of cost. The integration with other functions method has to take into account other functions and not as a separate entity and control is kept on the functions combined.
3. Cost Control problems come about for many reasons including incorrect estimating techniques, predetermined or fixed budgets with no flexibility, schedule overruns, inadequate WBS development, and so on. Good project management planning techniques during the planning processes may prevent cost problems later in the project. At a minimum, proper planning will reduce the impact of these problems if they do occur.
4. Cost Control, like many of the other Controlling processes, is concerned with monitoring project performance for variances. As the project owner, we try to keep a close eye on the factors that cause variance to keep their impacts to a minimum. An important thing to remember is that Cost Control makes certain all appropriate parties agree to any changes to the cost baseline. This process is ongoing and continues to manage cost changes throughout the project.
5. It is important to have formally cost control system for contractors. It helps project owner to understand and control project costs easier and faster.
6. Using Computers: It’s hard to imagine a project, especially larger projects, moving forward without the use of computers. Project managers can rely on project management software and spreadsheet programs to assist them in calculating actual costs, earned value, and planned value.
Which Cost-Control Strategies Work Best?
The choice of project delivery method depends on variables like funding, time constraints, and project objectives. This view from the experts substantiates that, regardless of delivery method, effective cost controls depend on a commitment to thorough planning, good communication, and rigorous monitoring of a project from start to finish. Building professionals and owners should find it easy to borrow and incorporate many of these cost-control strategies into their practice (Written by Mary Maher, University of Wisconsin – Madison Department of Engineering Professional Development).
His thesis abstract is copied and posted.
ABSTRACT
Nowadays, the construction industry plays a vital role in the healthy growth of the economy of many countries, both the developed and developing ones. Construction cost control did not use to be a major concern as developers rushed to capitalize on the booming market, as was what happened in Vietnam in Year 2006, 2007 and the beginning of 2008. However, in late 2008, the economy of the world and Southeast Asia sank into recession. Project cost control became a critical issue for the developers as well as the construction companies in managing construction projects. A significant number of projects in the world had significant cost overruns as the price of material was spiraling with no signs of abating in the near future.
Cost overruns had been a problem during this period and the use of good project cost control procedures has become a concern of project investors and construction companies in the current world since the recession of the late 2008. Project managers and developers are now aware that the failure of a cost control system or use of a poor system can lead to project failure. Project cost control methods need to be improved to ensure that owners and contractors manage construction costs and meet project goals on time and within budget.
Effective management of construction projects has been a major research subject due to the importance of the construction industry and the amount of investment it attracts. A significant issue facing construction managers is that of inefficient cost control procedures, particularly in developing regions of the world, such as Vietnam. The cost control system is the most important function that facilitates construction organizations in accomplishing profit maximization.
In this study, project cost controls will be examined. These procedures will be researched and it will be illustrated how the project cost control procedures can be applied to the construction industry in Vietnam to increase the awareness of contractors, consultants and client of the functions of cost control in the execution of construction projects.
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