One of the key factors that have significant and positive influence on economic growth, especially in the developing countries, is infrastructure development (ADB, 1996).
However, infrastructure development requires massive capital investments because most infrastructure projects are large in size and have a high level of complexity (Grimsey & Lewis, 2002). Due to the capital-intensive nature of infrastructure projects, most developing countries do not have the required amount of capital to develop the necessary infrastructure on their own.
Without the required capital, these nations would not be able to properly develop their infrastructure sector, and without these developments their economic condition could suffer. Therefore, in order to keep pace with the economic growth and the increasing demand from the ever-growing population, the private sector participation was introduced with the intention to assist the government of these developing countries by providing additional capital investment to finance the infrastructure sector development (Walker & Smith, 1995).
However, the private participation in infrastructure in the East Asia and Pacific region is not regarded as a challenger or rival, instead it is utilized to complement the investment made by government agencies and/or state-owned enterprises. As a result of this approach, private participation is not utilized to increase the efficiency of the existing enterprises but rather to build new assets through Greenfield projects (World Bank, 2002). A Greenfield project is a project where a particular private entity or a public-private joint venture builds and operates a new facility for a period of time, which has been determined previously in the project contract, and the facility itself may be returned to the public sector at the end of the concession period (Beery & Crow, 2003). These projects can be broken down into several sub-classes, such as buildlease-own, build-own-transfer, build-own-operate-transfer, build-own-operate, build-operate-transfer, etc. However, the build-operate-transfer (BOT) approach is widely accepted as the preferred form of infrastructure financing, not only in Asia but also in many countries around the world (Lombardo, 1999).
Private sector participation had actually existed as early as the 17th century (Walker & Smith, 1995); however, there are currently still a lot of projects with private participation that have failed. There are several things that could cause these types of projects to fail and they are mostly due to the following reasons (Kumaraswany & Zhang, 2001):
1. Poor arrangement and coordination between government agencies in packaging the projects.
2. Insufficient legal arrangements.
3. Lack of coordination between private and public sectors.
4. The unwillingness of the host government to provide guarantees against the risks originating from the unstable economical and political environment.
The results of previous studies on risk allocation and project success is still insufficient because they have not been able to assess whether or not the risks have been properly allocated, which party actually has the ability and willingness to accept the consequences of these risks and what needs to be done to achieve proper risk allocation. Therefore, there is a need to develop a guideline that can help assess the ability and willingness of the parties that are involved in these kinds of projects to help achieve proper risk allocation and ultimately project success.
Mr. Martinus P. Abednego made a case study on PPP as his dissertation thesis for his Ph. D. degree. The main objective of his research is to assess the relationships between risk allocation and project success by developing a common ground concept of proper risk allocation and utilize its result as the foundation to produce a guideline that can help determine proper risk allocation arrangement at the project initiation stage as well as perform as a control system for the project and its participants along the concession period of a tollway project developed under PPP procurement system. From his main objective, several sub-objectives were further elaborated as follows:
1. To identify the project risks in each stage of project development based on the perceptions of the public sector (government agencies) and private sectors (concessionaire and contractors).
2. To identify the critical success factors that are significant for project success based on the goals and objectives of the public and private sectors.
3. To investigate the risk allocation arrangements used by the public and private sectors.
4. To investigate the influence of risk allocation arrangements on project success.
Moreover, the expected outcomes from his research are:
An improved theory of relationship between risk allocation and project success, especially in tollway projects that are developed under PPP procurement system.
A conceptual framework of good project governance (GPG) for assessing proper risk allocation so that it may enhance the project performance thus achieving an overall project success.
In his overall conclusions, he cited that Public-Private Partnership can be defined in many ways depending on which perspective one chooses. Regardless of differences in perspective, all possess similar characteristics (Peters, 1998). These characteristics can be summarized into a general perception of PPP as a form of partnership of at least one public and one private entity in which each entity contributes its key resource(s) with a willingness to accept the consequences that are associated with the responsibilities. Accordingly, a lot of advantages can be obtained from its implementation, especially in the development of public infrastructure. One of the main advantages is in terms of project financing. Unfortunately what generally happens is the exact opposite, especially when it is put into practice in countries such as Indonesia, Thailand and Vietnam that has less or no experience regarding the approach. The common misconception of the PPP procurement system is that the government as the owner of the project has more authority in the partnership, thus considered as a justification for being superior towards the other stakeholders.
Additionally, the general approach in dealing with the consequences of the risks that occur in projects developed under this system is through problem solving rather than prevention. As a result, the private sector has no choice but to accept these consequences for most of the times even though it does not have the required resources and experience to manage the unanticipated losses. When such situation continues, the possibility of projects experiencing further problems in the future will be greater - making it even more difficult to achieve success, both in the short-term and the long-term. Unfortunately, the majority of stakeholders do not realize that projects developed under this system would have to deal with short-term issues as well as long-term issues.
Mr. Abednego’s research provides an alternative point of view in observing PPP projects by pointing out that these projects are not only confronted with project management problems but also they have project governance concerns. Good Project Governance concept was developed in an effort to ensure the achievement of long-term project success. It has the characteristics of: 1) Making the right decision at the right time; 2) Ensuring contract fairness; 3) Information transparency; 4) Responsiveness; 5) Continuous project control and monitoring; 6) Equality; 7) Effectiveness and efficiency and 8) Accountability (Abednego & Ogunlana, 2006). Four core principles of GPG were established from this to help assess the relationship between risk allocation and project success in each of the case studies. These core principles are fairness, transparency, accountability and sustainability. Each of these principles was further devolved into subcomponents and each subcomponent into key analytical issues, which are then used to assess whether or not risks have been properly allocated and to judge how it affects project success.
Mr. Abednego has several significant conclusions made from his research and each of them is briefly described in the following sections.
1. Perceptions on risk and its allocation - The result of the analysis shows that the government has a clearly different perception compared to the private sector with regards to what is considered as potential risk. In all of the case studies, the governments tend to be more concerned about the problems that may occur during the construction stage of the project. On the other hand, the private sectors are more concerned about the lack of commitment and support from the government that shows in the existing regulations, laws and policies that tend to be discriminatory and insufficient in providing the necessary protection for private investments. This shows that the private sector is more concerned about the source of the problem rather than the actual problem itself because of the belief that problems can be prevented if necessary improvements are made towards the source. Although the private sector is more than willing to be responsible for the consequences of decisions and actions, however, they also expect the government to accept its own share of responsibilities, starting by honoring agreements and providing the necessary guarantees for the private sector, this condition most of the time if they want to be involved in such projects. This puts them in an inferior position relative to the government and eventually prevents project risks from being allocated properly.
2. Perceptions on project success - the following are the significant success factors that were identified from the case studies:
Ability to carry out negotiations
Accurate estimation (traffic demand & construction cost)
Advance risk management system
Availability of the required resources
Communication method
Compliance on agreement/contract
Continuous project monitoring and control
Attractive investment environment/condition
Non-discriminative and non-ambiguous agreement/contract
Effective project management
Equality of rights and responsibilities among stakeholders
Experience
Fair compensation policy
Fair tendering process
Financial achievement
Functionality
Good contractor/concessionaire selection system
Good coordination
Good managerial capabilities
Government guarantee
Government support
Improved laws/regulations related to PPP procurement system
Information dissemination
Market/demand oriented
Minimize government interference
Minimize land acquisition problem
Less political pressure
On-time project completion
Professionalism
Project quality achievement
Proper infrastructure development planning
Proper project financing strategy
Public participation
Reasonable payback structure
Sufficient time to complete project engineering design
Trust
There is a lack of knowledge with respect to the unique characteristics of projects that are developed under the PPP scheme. Most stakeholders do not realize that this kind of projects have governance concerns in addition to management concerns. Consequently, PPP projects are still managed like regular construction projects that are considered to be successful as long as they manage to deal with the short-term issues. Unfortunately, without acknowledging and understanding the importance of addressing the long-term issues, the overall success of PPP projects will be affected.
3. Assessment based on the fairness principle - The main issue discovered from the case studies that prevent the risks to be allocated properly and creating unfair conditions is government’s unwillingness to provide the necessary support and guarantees that would protect private sector investments. This condition is worsened by the ambiguity in the agreements between the government and private sector, and also by the constant interference by the government during the whole course of the project. As a result, the private sector was not able to properly identify the project risks, causing them to involuntarily assume the consequences that were not actually theirs. This would negatively affect the private sector’s revenue in the long run and eventually jeopardize the overall success of projects.
4. Assessment based on the transparency principle - Information dissemination is often a problem in PPP projects. Instead of being shared, it is often obscured; resulting in misperception and misinformation in the project. Unfortunately, this condition is often exploited by the government for fear that the information may be used by the private sector to make claims. Adding to the fact that the existing information management system is insufficient and still requires further improvements, these circumstances prevented the private sector from developing accurate plans and make better preparations. In addition, the government had not also been able or willing to make reasonable adjustments on the project’s financing strategy as previously agreed. Due to this lack of information and financial transparency, conflicts and disputes are inevitable, causing additional problems.
5. Assessment based on the accountability principle
The government and the private sector often overlooked the end-users of the infrastructure as well as its surrounding communities in the process of developing projects. Aside from the Don Muang Tollway project, the projects in Indonesia and Vietnam did not involve any public hearings. As such, the people were given no chance to raise their concerns or even offer suggestions for the project, which prevented them from participating and contributing directly to the project. Regarding the quality issue, most stakeholders refer to it in terms of the physical condition of the infrastructure whereas it should also include the management value and this, unfortunately, is the real situation. Unless the public is given more opportunity to be involved in the development process of projects and quality, both physical and managerial, is improved, the government is (here considered to be) accountable for the negative consequences that it may cause.
6. Assessment based on the sustainability principle
Lack of coordination between government agencies and also between the government and the private sector has prevented the stakeholders of PPP projects from sustaining their partnership in the long run. Consequently, this would affect project performance. For example, lack of coordination would result in inappropriate information dissemination creating difficulties to produce accurate estimation in terms of project cost. The latter situation would then further affect the development of a suitable project financing strategy and payback structure. Ultimately, disputes are inevitable and the sustainability of the project is vulnerable.
7. Overall achievement in terms of Good Project Governance
Based on the assessments that have been made using the four core principles of GPG, the risks in the three case studies were still allocated improperly. This condition influenced the performance of the projects, not only during the initiation and construction stages but also for throughout whole concession period. Consequently, it prevented the projects from achieving overall success. Therefore, these projects cannot be considered to have good project governance because they failed to deal with most of the issues that have long-term implications on the projects, which are mainly caused by improper risk allocation.
His thesis abstract is copied and posted.
Abstract
Studies have shown that there are increasing trends of using Public-Private Partnership (PPP) procurement system in developing countries, including the Southeast Asia countries. In addition to this, the concept of good governance is also becoming a more perceived issue, especially in state-owned enterprises. With such development in the construction industry, it is important to understand what would be the best approach to govern (manage) a construction project, especially public infrastructure projects under PPP procurement system such as tollway projects, so that it may increase the project’s level of success.
Proper risk allocation is considered as one of the critical success factors to enhance the performance of PPP projects. However, parties that are involved in a PPP project typically have different perception of risks, risk allocation strategy as well as project success. Moreover, PPP projects are generally challenged with both project management problems, which require day-to-day supervision (short-term) as well as partnership problems that require more of a strategic approach (long-term). Due to this unique condition, PPP projects can be considered to have governance concerns in addition to management concerns because it deals with monitoring and overseeing strategic direction as well as strategic decision-making (Mueller, 1981).
This research is conducted to examine the influence of risk allocation towards project success. Since proper risk allocation is considered to be an essential part for attaining good project governance, therefore, it is assumed that the performance level of a project would increase due to the proper allocation thus generating a successful project. A good project governance concept was developed as a result of this research. Its four core principles, fairness, transparency, accountability and sustainability is used to assess the influence of the risk allocation arrangements that were applied towards the project success, especially in the long-term. Three tollway projects from Indonesia, Thailand and Vietnam were selected as case studies for this research. The research discovered that the government clearly has a different perception of risk and proper risk allocation compared to the private sector. However, these two stakeholders still lack the knowledge to the unique characteristics of PPP projects and fail to recognize the fact that this kind of projects has governance concerns in addition to management concerns. As a result of their short-term oriented point of view, the project’s long-term issues were often overlooked, affecting its overall success.
Tuesday, 20 October 2009
Thursday, 15 October 2009
Contract Clauses In EPC Oil And Gas Projects: A Case Study Of The Pearl Development Project
Recently, the oil and gas prices increase day by day which makes difficulties for developing countries like China, India and Vietnam to have a stable economic condition. The demand of oil and gas consumption all over the world is increasing, therefore the services required in developing new offshore facilities for oil and gas exploration also increases.
Developing the facilities for an offshore oil and gas field such as platform, Oil and Gas Companies (hereinafter referred as the Project Company) normally sign an EPC (Engineering, Procurement and Construction) contract with the EPC contractor. For this field of industry, there are only few numbers of EPC Contractors in the Asian South East countries who can execute a full EPC project, therefore the EPC contractor is normally selected and awarded thru the international bidding tender. The major factors for executing an EPC project are the contract clauses which are normally generally stipulated, with unclear understanding and interpretation when having disputes between the contractor and the project company. Therefore, studying the method in developing the effective, simplified and understandable clauses in the EPC contract is necessary. In this context, involved parties will understand and interpret clearly the contract negotiation prior to the EPC contract signing and commencement. The understandable and applicable contract clauses properly will help an EPC project to be executed smoothly and effectively.
In order to minimize the interfaces and risks between the separated contractor and the project company during executing an oil and gas project, the oil and gas companies normally prefer to award and sign an EPC contract with the EPC contractor, however this project delivery method will take a lot of time to make clarification, explanation and get the mutually agreement on the contract clauses between the contractor and the project company. The following problems are normally involved with the EPC contract clauses:
1. Take time to make the clarification and finalization before contract signing;
2. Wrong understanding and interpreting of stipulated clauses in the contract;
3. Conflict between contractor and the project company during project execution.
Mr. Nguyen Van Diep made a case study that focused on the issues related to EPC contract. His study objectives are to (1) study the advantages and disadvantages of EPC contract; (2) study the contract clauses to manage EPC oil and gas project; and (3) state the problems in the contract and propose the effective solutions to resolve the problems.
Mr. Diep outlined below the summary of effective clauses in oil and gas EPC project and lessons learned in the EPC contract and conclusion. He also gave some suggestions in applying the effective clauses that can be carried out to expand the understanding regarding the contracting arrangement that are used in EPC project in the Vietnam Oil and Gas industry.
1. Summary of contract clauses
These clauses are normally defined and given by the Project Company in order to protect the project objectives and the Project Company from any kind of risks that may happen. However from contractor’s point of view, it will be very risky if the Contractor complies with all these clauses without any exception or amendment. Therefore, providing the effective clauses based on the project documents and the Project Company’s interest shall be addressed during the bidding preparation and negotiation.
In summary, the effective clauses are the terms and conditions stipulated in the contract which shall be defined based on the interest and “win-win solution” basis for both the Project Company and the EPC Contractor.
2. Lessons learned in the EPC contract
EPC contract is quite complicated in terms of legal issue, therefore the Project Company and the EPC Contractor shall have enough experiences and knowledge about the nature of project facilities in order to avoid their faults and minimize the risks during contract execution. There are some key elements that the Contractor shall be needed to focus on the following issues below to implement in an EPC contract:
- Incorporate a more thorough requirement of using an earned value system with an objective measurement method. Try to use the Contractor’s standard system to its full extent and make sure it is an objective, not a subjective, measurement.
- Specify the types, formats, and frequency of reports in the contract to set the expectations and to avoid disturbing contractor’s standard practices
- Agree on the monthly percent completion of EPC early and compare them with other past EPC project experiences
- Continue the use of “monthly milestone events” evaluation and payment structure.
- Distinguish documents subject to the project company’s approval turnaround and documents subject to the project company’s review
- Assign the Project Company’s specific equipment and drawing numbers early
- Ask each discipline engineer to write and communicate the hottest items/concerns in their areas of responsibilities in the early stage of the Project
- Promote a proactive planning effort throughout the organization
- Devise a method to facilitate the early detection of potential cost and schedule deviation to minimize surprises
- Use variance analysis to concentrate the management efforts
- Ensure that milestone events and progress curves support and consistency each other
- Clarify the project company’s responsibilities and roles in construction, commissioning and hand-over.
- Identify commissioning system/events early.
For the project company to manage EPC lump sum contract, they also need to understand lump sum contract characteristics from the perspectives of both the contractor and the Project Company. EPC projects offer a mutually beneficial and exciting form of project delivery for both the project company and the contractor. However the EPC contract come many new risks that are often severe, due to the complex nature and high cost frequently associated with this type of project. Understanding the risks and some of the other unique characteristics of EPC contracting is critical to a successful project where both the project company and the contractor obtain the high rewards for the risk.
3. Conclusion for the advantages and disadvantages of EPC Contract
The advantage from the Project Company’s point of view of an EPC contract is that the contractor takes full responsibility in respect of the following:
- Cost of completion if it is a lump sum contract (subject to limited adjustments);
- The time for completion (subject to extensions of time);
- The quality of the design and work and achievement of performance guarantees (subject to any exclusion).
This means that the potential factors for multiple disputes is also avoided. However, the major disadvantage for the Project Company of the EPC contract is that the detailed design is the contractor's prerogative. Accordingly, in an EPC contract, great care needs to be taken that the Project Company specifies and defines the design parameters and deliverables (including consumption of utilities and emissions) so that the Project obtains a project of the required standard. This is usually required more than simply stipulating performance criteria in relation to the output of the project, and will include design-life and maintenance issues.
The results from his study have identified that the advantages and disadvantages of EPC contract as well as description of the application for some major clauses and finding the way how to minimize the risks for the Project by providing the effective amendment in consideration of the EPC Contractor’s point of view and the project objectives expected by the Project Company.
4. Conclusion for the contract clauses to manage EPC oil & gas project
The contract clauses are the most important tool to manage the EPC project. Therefore, the involved parties (i.e. Project Company, EPC Contractor) shall understand and know how to apply this tool effectively to manage the project in term of costly, timely and quality.
The contract clauses will be only effective when these are defined and stipulated in accordance with the project specification, documents and nature of work to be performed. Finally, these clauses also are established and finalized according to the mutually agreement between the Project Company and EPC Contractor.
5. Conclusion for resolving the problems in an EPC contract
The problems always happen in the construction project and it will be very difficult to avoid problems happening to the project; however the problems can be ignored or minimized by understanding clearly about the scope of application for each contract clause in term of legal aspects and project requirement. In addition, these problems can be foreseen and negotiable during the bidding phase prior to finalization of contract documents and these shall be controlled and monitored during all phases of project.
In conclusion, besides the other relationships between Project Company and EPC Contractor, the fair and effective contract clauses stipulated in the contract document are tool to resolve all problems in an EPC contract in term of contractual relationships between Project Company and EPC Contractor.
General Conclusion
In conclusion, the major clauses in the EPC contracts are not the same for all project, these also depend on each project scope of work, complexity, specification and documents, the project company’s requirement and expectation and mostly on the outcome of contract negotiation between the Project Company and the EPC Contractor. Therefore, the meaning and application of major clauses in the EPC contracts shall be different in term of the standard form contract i.e. FIDIC or other organizations as well as in each kind of industry i.e. construction, oil and gas, etc.
His thesis abstract is copied and posted.
ABSTRACT
Nowadays, the EPC contract is very wide applied in oil and gas industry in this Region for developing an oil & gas field project, this EPC contract is as a “fast track” tool to reduce the project duration. In order to execute this kind of contract successfully in term of the benefit for all involved parties, it is necessary to focus on some key factors that shall be affected on the project during execution phase i.e. contract terms and conditions clauses. Therefore, understanding and interpreting the application of term and condition clauses clearly in EPC contract will help the project to be executed and monitored by using the proper manning level in accordance with project specification and the project will be achieved its goals without the minimized disputations and conflicts happening.
This study will also discuss on the advantages and disadvantages of EPC contract from both Contractor and Project Company’s point of view and how to manage the EPC contract in accordance with term and condition clauses stipulated in the signed contract documents; how to resolve problems by understanding the contract clauses. However, the improvement of some major clauses are still needed in order to specify and define clearly the duties and responsibilities as well as obligations of involved parties to minimize the conflicts, interfaces, risks and disputes that can be happened during the project execution phase.
Developing the facilities for an offshore oil and gas field such as platform, Oil and Gas Companies (hereinafter referred as the Project Company) normally sign an EPC (Engineering, Procurement and Construction) contract with the EPC contractor. For this field of industry, there are only few numbers of EPC Contractors in the Asian South East countries who can execute a full EPC project, therefore the EPC contractor is normally selected and awarded thru the international bidding tender. The major factors for executing an EPC project are the contract clauses which are normally generally stipulated, with unclear understanding and interpretation when having disputes between the contractor and the project company. Therefore, studying the method in developing the effective, simplified and understandable clauses in the EPC contract is necessary. In this context, involved parties will understand and interpret clearly the contract negotiation prior to the EPC contract signing and commencement. The understandable and applicable contract clauses properly will help an EPC project to be executed smoothly and effectively.
In order to minimize the interfaces and risks between the separated contractor and the project company during executing an oil and gas project, the oil and gas companies normally prefer to award and sign an EPC contract with the EPC contractor, however this project delivery method will take a lot of time to make clarification, explanation and get the mutually agreement on the contract clauses between the contractor and the project company. The following problems are normally involved with the EPC contract clauses:
1. Take time to make the clarification and finalization before contract signing;
2. Wrong understanding and interpreting of stipulated clauses in the contract;
3. Conflict between contractor and the project company during project execution.
Mr. Nguyen Van Diep made a case study that focused on the issues related to EPC contract. His study objectives are to (1) study the advantages and disadvantages of EPC contract; (2) study the contract clauses to manage EPC oil and gas project; and (3) state the problems in the contract and propose the effective solutions to resolve the problems.
Mr. Diep outlined below the summary of effective clauses in oil and gas EPC project and lessons learned in the EPC contract and conclusion. He also gave some suggestions in applying the effective clauses that can be carried out to expand the understanding regarding the contracting arrangement that are used in EPC project in the Vietnam Oil and Gas industry.
1. Summary of contract clauses
These clauses are normally defined and given by the Project Company in order to protect the project objectives and the Project Company from any kind of risks that may happen. However from contractor’s point of view, it will be very risky if the Contractor complies with all these clauses without any exception or amendment. Therefore, providing the effective clauses based on the project documents and the Project Company’s interest shall be addressed during the bidding preparation and negotiation.
In summary, the effective clauses are the terms and conditions stipulated in the contract which shall be defined based on the interest and “win-win solution” basis for both the Project Company and the EPC Contractor.
2. Lessons learned in the EPC contract
EPC contract is quite complicated in terms of legal issue, therefore the Project Company and the EPC Contractor shall have enough experiences and knowledge about the nature of project facilities in order to avoid their faults and minimize the risks during contract execution. There are some key elements that the Contractor shall be needed to focus on the following issues below to implement in an EPC contract:
- Incorporate a more thorough requirement of using an earned value system with an objective measurement method. Try to use the Contractor’s standard system to its full extent and make sure it is an objective, not a subjective, measurement.
- Specify the types, formats, and frequency of reports in the contract to set the expectations and to avoid disturbing contractor’s standard practices
- Agree on the monthly percent completion of EPC early and compare them with other past EPC project experiences
- Continue the use of “monthly milestone events” evaluation and payment structure.
- Distinguish documents subject to the project company’s approval turnaround and documents subject to the project company’s review
- Assign the Project Company’s specific equipment and drawing numbers early
- Ask each discipline engineer to write and communicate the hottest items/concerns in their areas of responsibilities in the early stage of the Project
- Promote a proactive planning effort throughout the organization
- Devise a method to facilitate the early detection of potential cost and schedule deviation to minimize surprises
- Use variance analysis to concentrate the management efforts
- Ensure that milestone events and progress curves support and consistency each other
- Clarify the project company’s responsibilities and roles in construction, commissioning and hand-over.
- Identify commissioning system/events early.
For the project company to manage EPC lump sum contract, they also need to understand lump sum contract characteristics from the perspectives of both the contractor and the Project Company. EPC projects offer a mutually beneficial and exciting form of project delivery for both the project company and the contractor. However the EPC contract come many new risks that are often severe, due to the complex nature and high cost frequently associated with this type of project. Understanding the risks and some of the other unique characteristics of EPC contracting is critical to a successful project where both the project company and the contractor obtain the high rewards for the risk.
3. Conclusion for the advantages and disadvantages of EPC Contract
The advantage from the Project Company’s point of view of an EPC contract is that the contractor takes full responsibility in respect of the following:
- Cost of completion if it is a lump sum contract (subject to limited adjustments);
- The time for completion (subject to extensions of time);
- The quality of the design and work and achievement of performance guarantees (subject to any exclusion).
This means that the potential factors for multiple disputes is also avoided. However, the major disadvantage for the Project Company of the EPC contract is that the detailed design is the contractor's prerogative. Accordingly, in an EPC contract, great care needs to be taken that the Project Company specifies and defines the design parameters and deliverables (including consumption of utilities and emissions) so that the Project obtains a project of the required standard. This is usually required more than simply stipulating performance criteria in relation to the output of the project, and will include design-life and maintenance issues.
The results from his study have identified that the advantages and disadvantages of EPC contract as well as description of the application for some major clauses and finding the way how to minimize the risks for the Project by providing the effective amendment in consideration of the EPC Contractor’s point of view and the project objectives expected by the Project Company.
4. Conclusion for the contract clauses to manage EPC oil & gas project
The contract clauses are the most important tool to manage the EPC project. Therefore, the involved parties (i.e. Project Company, EPC Contractor) shall understand and know how to apply this tool effectively to manage the project in term of costly, timely and quality.
The contract clauses will be only effective when these are defined and stipulated in accordance with the project specification, documents and nature of work to be performed. Finally, these clauses also are established and finalized according to the mutually agreement between the Project Company and EPC Contractor.
5. Conclusion for resolving the problems in an EPC contract
The problems always happen in the construction project and it will be very difficult to avoid problems happening to the project; however the problems can be ignored or minimized by understanding clearly about the scope of application for each contract clause in term of legal aspects and project requirement. In addition, these problems can be foreseen and negotiable during the bidding phase prior to finalization of contract documents and these shall be controlled and monitored during all phases of project.
In conclusion, besides the other relationships between Project Company and EPC Contractor, the fair and effective contract clauses stipulated in the contract document are tool to resolve all problems in an EPC contract in term of contractual relationships between Project Company and EPC Contractor.
General Conclusion
In conclusion, the major clauses in the EPC contracts are not the same for all project, these also depend on each project scope of work, complexity, specification and documents, the project company’s requirement and expectation and mostly on the outcome of contract negotiation between the Project Company and the EPC Contractor. Therefore, the meaning and application of major clauses in the EPC contracts shall be different in term of the standard form contract i.e. FIDIC or other organizations as well as in each kind of industry i.e. construction, oil and gas, etc.
His thesis abstract is copied and posted.
ABSTRACT
Nowadays, the EPC contract is very wide applied in oil and gas industry in this Region for developing an oil & gas field project, this EPC contract is as a “fast track” tool to reduce the project duration. In order to execute this kind of contract successfully in term of the benefit for all involved parties, it is necessary to focus on some key factors that shall be affected on the project during execution phase i.e. contract terms and conditions clauses. Therefore, understanding and interpreting the application of term and condition clauses clearly in EPC contract will help the project to be executed and monitored by using the proper manning level in accordance with project specification and the project will be achieved its goals without the minimized disputations and conflicts happening.
This study will also discuss on the advantages and disadvantages of EPC contract from both Contractor and Project Company’s point of view and how to manage the EPC contract in accordance with term and condition clauses stipulated in the signed contract documents; how to resolve problems by understanding the contract clauses. However, the improvement of some major clauses are still needed in order to specify and define clearly the duties and responsibilities as well as obligations of involved parties to minimize the conflicts, interfaces, risks and disputes that can be happened during the project execution phase.
Monday, 12 October 2009
AIT-CV (Hanoi and Ho Chi Minh) August 2009 Intake for CEIM and MPM Field of Studies
The AIT-CV Hanoi branch accepted 13 students for August 2009 semester. Twelve (12) students are now enrolled in Professional Master in Project Management and one (1) MS student for Construction, Engineering and Infrastructure Management.
In AIT-CV Ho Chi Minh City Branch, twenty four (24) students are currently registered; four (4) MS students and one (1) Ph. D. for Construction, Engineering and Infrastructure Management, while nineteen (19) students for Professional Master in Project Management field of study.
Below is the complete list of AIT-CV students.
Hanoi Branch
No. Name Field
1. Mr. Tran Van Trung - MPM
2. Mr. Pham Nhu Dung - MPM
3. Ms. Le Ngoc Diep - MPM
4. Mr. Doan Thai Duong - MPM
5. Mr. Le Nam Binh - MPM
6. Mr. Pham Van Thanh - MPM
7. Mr. Le Van Thu - MPM
8. Mr. Nguyen Trung Kien - MPM
9. Mr. Nguyen Duy Duc Thu - MPM
10. Mr. Dinh Quang Hiep - MPM
11. Mr. Bui Duc Luong - MPM
12. Mr. Vu Van Cao - MPM
13. Ms. Nguyen Phung Hai - CEIM
Ho Chi Minh City Branch
No. Name Field
1. Mr. Nguyen Tuan Tu - CEIM
2. Mr. Bui Duy Khanh - CEIM
3. Mr. Nguyen Quoc Trung - CEIM
4. Mr. Duong Quang Minh - CEIM
5. Mr. Ha Cong Huy - Ph.D – CEIM
6. Mr. Bui Kim Binh - MPM
7. Mr. Nguyen Phan Hoa Binh - MPM
8. Mr. Truong Thai Binh - MPM
9. Mr. Le Minh Đang - MPM
10. Mr. Truong Ngoc Dung - MPM
11. Mr. Nguyen Duy Thien Giang - MPM
12. Ms. Trinh Thi Thu Ha - MPM
13. Mr. Bien Nam Hai - MPM
14. Mr. Vo Si Hoai - MPM
15. Mr. Bui Hai Nam - MPM
16. Mr. Ha Chi Nghia - MPM
17. Mr. Nguyen Van Nhan - MPM
18. Mr. Nguyen Chanh Phuong - MPM
19. Mr. Nguyen Le Thuan - MPM
20. Mr. Le Mien Thuy - MPM
21. Ms. Nguyen Thu Trang - MPM
22. Mr. Nguyen Duc Trong - MPM
23. Mr. Nguyen Quoc Viet - MPM
24. Ms. Nguyen Thi Vui - MPM
In AIT-CV Ho Chi Minh City Branch, twenty four (24) students are currently registered; four (4) MS students and one (1) Ph. D. for Construction, Engineering and Infrastructure Management, while nineteen (19) students for Professional Master in Project Management field of study.
Below is the complete list of AIT-CV students.
Hanoi Branch
No. Name Field
1. Mr. Tran Van Trung - MPM
2. Mr. Pham Nhu Dung - MPM
3. Ms. Le Ngoc Diep - MPM
4. Mr. Doan Thai Duong - MPM
5. Mr. Le Nam Binh - MPM
6. Mr. Pham Van Thanh - MPM
7. Mr. Le Van Thu - MPM
8. Mr. Nguyen Trung Kien - MPM
9. Mr. Nguyen Duy Duc Thu - MPM
10. Mr. Dinh Quang Hiep - MPM
11. Mr. Bui Duc Luong - MPM
12. Mr. Vu Van Cao - MPM
13. Ms. Nguyen Phung Hai - CEIM
Ho Chi Minh City Branch
No. Name Field
1. Mr. Nguyen Tuan Tu - CEIM
2. Mr. Bui Duy Khanh - CEIM
3. Mr. Nguyen Quoc Trung - CEIM
4. Mr. Duong Quang Minh - CEIM
5. Mr. Ha Cong Huy - Ph.D – CEIM
6. Mr. Bui Kim Binh - MPM
7. Mr. Nguyen Phan Hoa Binh - MPM
8. Mr. Truong Thai Binh - MPM
9. Mr. Le Minh Đang - MPM
10. Mr. Truong Ngoc Dung - MPM
11. Mr. Nguyen Duy Thien Giang - MPM
12. Ms. Trinh Thi Thu Ha - MPM
13. Mr. Bien Nam Hai - MPM
14. Mr. Vo Si Hoai - MPM
15. Mr. Bui Hai Nam - MPM
16. Mr. Ha Chi Nghia - MPM
17. Mr. Nguyen Van Nhan - MPM
18. Mr. Nguyen Chanh Phuong - MPM
19. Mr. Nguyen Le Thuan - MPM
20. Mr. Le Mien Thuy - MPM
21. Ms. Nguyen Thu Trang - MPM
22. Mr. Nguyen Duc Trong - MPM
23. Mr. Nguyen Quoc Viet - MPM
24. Ms. Nguyen Thi Vui - MPM
Wednesday, 7 October 2009
Public Private Partnerships for Low Income Housing Development in Cantho City, Vietnam
According to assessment of World Bank (2006), Vietnam has made remarkable progress in GDP and poverty reduction over the past decade. A critical factor in this success is significant government emphasis on investment, particularly in infrastructure. Since 1997, infrastructure investment has highly occupied GDP growth, boosting the economy’s productivity. Vietnam, together with Thailand and China, has been the leading countries in terms of infrastructure investment in East Asian region (ADB et al., 2006a).
As for the future investment, some sector plans and forecasts (transport sector, electricity sector, telecommunications sector, and water and sanitation sector) future annual infrastructure investment assuming to 11.4% of GDP (World Bank, 2006). At provincial level, public private financing schemes have been found to assist in urban development carried out by local government (Kyvelou & Karaiskou, 2006). Provincial governments have more jurisdictions in choosing their own projects within a given budget envelop (ADB et al., 2006b). Some local governments have created specialist government investment funds with significant roles in infrastructure financing.
Private investment in infrastructure at provincial level has been noticeable growth as the result of decentralization policy of central government in recent years. There are a number of projects funded successfully by local governments as Hanoi, Binhduong, Dongnai, and Hochiminh including two main areas privatization of existing assets and green-field investment in new assets.
In Cantho city, there are no actual model BOT, BTO, BT implemented under city’s government up till now. Cantho City has to face with pressing needs in developing infrastructure in general while state budget is limited. Government of Cantho City is seeking for the possible models with participation of private sector to reduce the burden of state budget and offer the housing for employees with affordable price. Therefore, Mr. Tran Quang Ninh made a case study and considered the following problems:
1) Limit of using public private partnership approach at local government level may cause difficulties for infrastructure development;
2) Lack of reference to public private partnerships models applied in other countries to create the efficient delivery infrastructure system;
3) Lack of public private partnerships model is to support as the referential procurement in development low income housing in Cantho city, Vietnam.
Mr. Nihn made a case study which main objectives are to: (1) develop public private partnerships models for low income housing development in Cantho city, Vietnam; (2) evaluate the applicability of developed models, and 3) propose the applicable public private partnerships model and its implementation guidelines for low income housing development in Cantho city, Vietnam.
His study revealed that in the context, the price of land is extremely expensive compared with average income of the majority of the people, which makes housing always bother them and also, a big concern for Vietnamese government now. Three local governments were appointed to implement the pilot projects and only Binhduong province’s project proposal was approved by the Prime Minister.
Public private partnerships approach has been applied for developing infrastructure in Vietnam in recent years. There are many projects implemented successfully under PPP, especially power sector and transport sector. According to experts (ADB, 2005), public private partnership approach has much potential to be applied widely through many fields in Vietnam.
Mr. Nihn proposed 3 PPP Models, its strength and weakness for low income housing in Cantho city. See table below:
And finally, the PPPs structure of applicable model he proposed can seen below: 
His thesis abstract is copied and posted.
ABSTRACT
Public private partnerships approach is considered efficient tool for infrastructure development in Vietnam recently. There are many implemented successfully under this approach, especially power sector and transport sector. The objective of this study is to apply the public private partnerships approach into low income housing development in Cantho city, Vietnam. The Vietnam legal framework, existing Public private partnerships models in various countries, and case study in Binhduong are investigated to develop the possible Public private partnerships models. And then, interviews stakeholders are conducted to evaluate applicability of developed models. The study proposes the applicable model to develop low income housing in Cantho city under public private partnerships concept. The proposed model is adequate to the real context of Cantho city. And this model possesses some improvements in comparison with the case study’s model, especially in financial aspect, it reduces around 24% state budget under the same assumptions of case study’s project. The proposed model either satisfies the low income people due to adequate price of service or reduces spending state budget and also uses more efficient subsidies through private participations and an adequate subsidy mechanism. The prominent performances of proposed model are specifically showed in two aspects sources of funds and government. That leads the applicability of proposed model.
As for the future investment, some sector plans and forecasts (transport sector, electricity sector, telecommunications sector, and water and sanitation sector) future annual infrastructure investment assuming to 11.4% of GDP (World Bank, 2006). At provincial level, public private financing schemes have been found to assist in urban development carried out by local government (Kyvelou & Karaiskou, 2006). Provincial governments have more jurisdictions in choosing their own projects within a given budget envelop (ADB et al., 2006b). Some local governments have created specialist government investment funds with significant roles in infrastructure financing.
Private investment in infrastructure at provincial level has been noticeable growth as the result of decentralization policy of central government in recent years. There are a number of projects funded successfully by local governments as Hanoi, Binhduong, Dongnai, and Hochiminh including two main areas privatization of existing assets and green-field investment in new assets.
In Cantho city, there are no actual model BOT, BTO, BT implemented under city’s government up till now. Cantho City has to face with pressing needs in developing infrastructure in general while state budget is limited. Government of Cantho City is seeking for the possible models with participation of private sector to reduce the burden of state budget and offer the housing for employees with affordable price. Therefore, Mr. Tran Quang Ninh made a case study and considered the following problems:
1) Limit of using public private partnership approach at local government level may cause difficulties for infrastructure development;
2) Lack of reference to public private partnerships models applied in other countries to create the efficient delivery infrastructure system;
3) Lack of public private partnerships model is to support as the referential procurement in development low income housing in Cantho city, Vietnam.
Mr. Nihn made a case study which main objectives are to: (1) develop public private partnerships models for low income housing development in Cantho city, Vietnam; (2) evaluate the applicability of developed models, and 3) propose the applicable public private partnerships model and its implementation guidelines for low income housing development in Cantho city, Vietnam.
His study revealed that in the context, the price of land is extremely expensive compared with average income of the majority of the people, which makes housing always bother them and also, a big concern for Vietnamese government now. Three local governments were appointed to implement the pilot projects and only Binhduong province’s project proposal was approved by the Prime Minister.
Public private partnerships approach has been applied for developing infrastructure in Vietnam in recent years. There are many projects implemented successfully under PPP, especially power sector and transport sector. According to experts (ADB, 2005), public private partnership approach has much potential to be applied widely through many fields in Vietnam.
Mr. Nihn proposed 3 PPP Models, its strength and weakness for low income housing in Cantho city. See table below:
And finally, the PPPs structure of applicable model he proposed can seen below:
His thesis abstract is copied and posted.
ABSTRACT
Public private partnerships approach is considered efficient tool for infrastructure development in Vietnam recently. There are many implemented successfully under this approach, especially power sector and transport sector. The objective of this study is to apply the public private partnerships approach into low income housing development in Cantho city, Vietnam. The Vietnam legal framework, existing Public private partnerships models in various countries, and case study in Binhduong are investigated to develop the possible Public private partnerships models. And then, interviews stakeholders are conducted to evaluate applicability of developed models. The study proposes the applicable model to develop low income housing in Cantho city under public private partnerships concept. The proposed model is adequate to the real context of Cantho city. And this model possesses some improvements in comparison with the case study’s model, especially in financial aspect, it reduces around 24% state budget under the same assumptions of case study’s project. The proposed model either satisfies the low income people due to adequate price of service or reduces spending state budget and also uses more efficient subsidies through private participations and an adequate subsidy mechanism. The prominent performances of proposed model are specifically showed in two aspects sources of funds and government. That leads the applicability of proposed model.
Tuesday, 6 October 2009
Developer’s Investment Decision Making on Real Estate Development:
In Thailand, most of real estate investors depends their decision on the overall economic situation resulting to property development industry downsizing since 2005. This phenomenon directly affects the consumer’s confidence, and has direct coloration with economic situation. While housing demand was reducing gradually, housing supply was increasing at the same time. And some investors therefore could not gain revenues base on their expectation.
For real estate project, it is impossible to make investment decision which aim is to achieve the business goal without understanding the whole process of investment and the factors which influence every state of decision making process.
Ms. Rahongsree Prayongrut made a case study to investigate the investment decision making process of real estate project and to identify the key factors which influence every stage. In order to accomplish these primary objectives, she outlined three sub-objectives which are to (1) develop model of investment decision making process of real estate project and identifying factors which influence investment decision in each stage; (2) investigate the practice of developer’s investment decision making base upon developed model, through finding out significant factors affecting decision making process, and their behaviors in facing fluctuation and alter of factors in investment decision making process for real estate project; and (3) propose recommendations to developers in order to improve practical management decisions by using the model and significant factors.
Her study revealed that the residential property project investment decision is divided into two directions; a) investment decision driven by supply, and b) investment decision driven by demand. Each direction has four main decisions such as location, target group, design and finance. In the investment decision driven by supply, it started with land acquisition while investment decision driven by demand is started with identify target group. Some processes and key influence decision are different between two directions.
Her study also revealed that there are many internal and external factors which induce developer to follow each direction. These are:
1. The reasons for choosing any of investment direction
Generally investment decision making process driven by supply is long process of development and more in land bank strategy. On the other hand, investment decision making process driven by demand is raced against time and several competitors because of attractive existing demand. The developer can choose any investment direction, and the decision will depend on internal factors (investment strategy and financial health) and external factors (land price, economic situation, and property market trend). Land price and property market trend is one of the most important considerations of decision making process.
2. Residential investment decision driven by supply: land acquisition and target group selection.
For the acquisition of land through legal process, the developers should consider several factors such as land price, right of land, accessibility, transportation, the distant form CBD, amenity, facility, infrastructure, government development plan obligation, expropriate, physical feature of land, elevation, physical constrain, and previous building.
For identifying the target group, there are several factors which developers should consider such as housing demand, customer’ confidence, housing stock, demographic, housing supply, housing loan, housing affordability, average income, and government financial and housing policy, competitor’s price, quality and brand royalty for target group consideration.
3. Residential investment decision driven by demand: target group selection, land acquisition, and financial decision. To identify and analyze the target group, the developers are advised to do the following steps:
a) Evaluate the real estate market trend, housing demand and supply to find the existing demand in terms of number, income, characteristic, and affordability
b) Analyze whether the government policy in terms of housing development and finance is supportive or not.
c) Analyze the competitors in terms of their target group and location. The market segmentation is evaluated.
For site selection, the developers must identify where the existing demand and project’s competitors are. They need to evaluate the site in terms of transportation, accessibility, facility and amenity, physical feature and land price, and for the legal requirements, analysis of right of land and other legal title of land.
4. Design: The similar of two investment directions, the investment decision driven by supply and demand. Below are some points for developers to follow:
a) Start with developing detail financial plan and feasibility analysis in terms of cash flow statement, budget, unit price, discount rate, mark-up, break event point, D/E, and capital arrangement. Sensitivity analysis is achieved afterward.
b) Set up the construction cost following financial plan from financial activities,
c) Analyze customer in terms of customers’ needs, lift style and family size and then they identify selling point.
d) Point out the legal and environmental requirement and constrain if any, then carried out the project design and product design subsequently, and
e) Finally, conduct master plan, payment condition, and contract condition with other stakeholders and negotiation.
5. The difference between financial methods. Generally, investment decision making process driven by supply uses long term loan or developer’s equity for land acquisition, contrary to the process driven by demand which uses short term finance for projects.
Her thesis abstract is copied and posted.
ABSTRACT
Currently, economic and financial are varying over the time among increase in business competitors. Therefore, it encourages the higher investment risks especially in real estate industry because of its nature. The study focused on residential investment which is the major part of real estate industry. The study aims to investigate investment decision making process of real estate project and identifying factors which influence investment decision and recommend the effective operational method for making residential investment decisions.
The study uses case study as a research design. The processes begin with factor identification which consists of preliminary factor and verification of the factors. It is the continued with the data collection using the abovementioned factors to design the case study question. Data analysis is conducted toward the evidences using explanation building method in which all the important evidences are revealed and explained.
The result from project case studies indicated, that residential property project investment decision is divided into two directions. There are investment decisions driven by supply and demand. Any of investment direction, there are four main decisions which are location, target group, design and finance. The framework shows the how to choose the investment direction and how each investment direction are performed.
For real estate project, it is impossible to make investment decision which aim is to achieve the business goal without understanding the whole process of investment and the factors which influence every state of decision making process.
Ms. Rahongsree Prayongrut made a case study to investigate the investment decision making process of real estate project and to identify the key factors which influence every stage. In order to accomplish these primary objectives, she outlined three sub-objectives which are to (1) develop model of investment decision making process of real estate project and identifying factors which influence investment decision in each stage; (2) investigate the practice of developer’s investment decision making base upon developed model, through finding out significant factors affecting decision making process, and their behaviors in facing fluctuation and alter of factors in investment decision making process for real estate project; and (3) propose recommendations to developers in order to improve practical management decisions by using the model and significant factors.
Her study revealed that the residential property project investment decision is divided into two directions; a) investment decision driven by supply, and b) investment decision driven by demand. Each direction has four main decisions such as location, target group, design and finance. In the investment decision driven by supply, it started with land acquisition while investment decision driven by demand is started with identify target group. Some processes and key influence decision are different between two directions.
Her study also revealed that there are many internal and external factors which induce developer to follow each direction. These are:
1. The reasons for choosing any of investment direction
Generally investment decision making process driven by supply is long process of development and more in land bank strategy. On the other hand, investment decision making process driven by demand is raced against time and several competitors because of attractive existing demand. The developer can choose any investment direction, and the decision will depend on internal factors (investment strategy and financial health) and external factors (land price, economic situation, and property market trend). Land price and property market trend is one of the most important considerations of decision making process.
2. Residential investment decision driven by supply: land acquisition and target group selection.
For the acquisition of land through legal process, the developers should consider several factors such as land price, right of land, accessibility, transportation, the distant form CBD, amenity, facility, infrastructure, government development plan obligation, expropriate, physical feature of land, elevation, physical constrain, and previous building.
For identifying the target group, there are several factors which developers should consider such as housing demand, customer’ confidence, housing stock, demographic, housing supply, housing loan, housing affordability, average income, and government financial and housing policy, competitor’s price, quality and brand royalty for target group consideration.
3. Residential investment decision driven by demand: target group selection, land acquisition, and financial decision. To identify and analyze the target group, the developers are advised to do the following steps:
a) Evaluate the real estate market trend, housing demand and supply to find the existing demand in terms of number, income, characteristic, and affordability
b) Analyze whether the government policy in terms of housing development and finance is supportive or not.
c) Analyze the competitors in terms of their target group and location. The market segmentation is evaluated.
For site selection, the developers must identify where the existing demand and project’s competitors are. They need to evaluate the site in terms of transportation, accessibility, facility and amenity, physical feature and land price, and for the legal requirements, analysis of right of land and other legal title of land.
4. Design: The similar of two investment directions, the investment decision driven by supply and demand. Below are some points for developers to follow:
a) Start with developing detail financial plan and feasibility analysis in terms of cash flow statement, budget, unit price, discount rate, mark-up, break event point, D/E, and capital arrangement. Sensitivity analysis is achieved afterward.
b) Set up the construction cost following financial plan from financial activities,
c) Analyze customer in terms of customers’ needs, lift style and family size and then they identify selling point.
d) Point out the legal and environmental requirement and constrain if any, then carried out the project design and product design subsequently, and
e) Finally, conduct master plan, payment condition, and contract condition with other stakeholders and negotiation.
5. The difference between financial methods. Generally, investment decision making process driven by supply uses long term loan or developer’s equity for land acquisition, contrary to the process driven by demand which uses short term finance for projects.
Her thesis abstract is copied and posted.
ABSTRACT
Currently, economic and financial are varying over the time among increase in business competitors. Therefore, it encourages the higher investment risks especially in real estate industry because of its nature. The study focused on residential investment which is the major part of real estate industry. The study aims to investigate investment decision making process of real estate project and identifying factors which influence investment decision and recommend the effective operational method for making residential investment decisions.
The study uses case study as a research design. The processes begin with factor identification which consists of preliminary factor and verification of the factors. It is the continued with the data collection using the abovementioned factors to design the case study question. Data analysis is conducted toward the evidences using explanation building method in which all the important evidences are revealed and explained.
The result from project case studies indicated, that residential property project investment decision is divided into two directions. There are investment decisions driven by supply and demand. Any of investment direction, there are four main decisions which are location, target group, design and finance. The framework shows the how to choose the investment direction and how each investment direction are performed.
Monday, 5 October 2009
Safety Improvement Programs In An Oil And Gas Construction Company: A Study Of Petrovietnam Technical Services Company (Ptsc Production)
Safety is of prime importance in oil and gas industry, and one of the most important factors that contribute to Petrovietnam success in the past years. The effective application of the Health, Safety and Environment Management System (HSEMS) in all Divisions has been applied in almost oil and gas construction companies operating in Viet Nam. This is a modern approach in domestic oil and gas industry where safety requirements are very strictly controlled with tight supervision mechanism.
However, there are some occupational accidents, which happen, kill and injure many people every year. Therefore, preventing accidents and providing safe working environment to protect employees are very important issues in oil and gas operations in Petrovietnam’s subsidiaries and a safety improvement program can be compulsorily necessary to prevent people from any harm, minimize any damage to property and to the environment during production and business processes.
The purposes of the safety improvement programs are to identify strong and weak issues of the safety management system, and then to give the best solutions for control of all risks to achieve goals “All activities are completed with zero injuries to people and zero damage to equipment, property and environment”.
Although the oil and gas construction companies in Vietnam have already established the health, safety and environment management systems to provide the flexible and integrated approach to manage HSE, risks, and develop HSE programs to meet the requirements of Vietnamese and international standards and laws, but there have been some problems about the safety such as:
a) High rate of accidents occurs at the offshore platforms.
b) Problems with workers participation when working on offshore platform
Mr. Pham Van Tuan made a case study to (1) identify safety improvement programs used in the oil and gas construction company; and (2) discuss and review the effectiveness of the safety improvement programs.
He found out that many oil and gas companies in Vietnam have been applied the successful safety improvement programs for several years now. They considered these useful tools to avoid and mitigate accidents and to improve safety performances that resulting in achieving effective cost control and quality control. They recognize the importance of the safety improvement programs and have responsibilities to identify, assess, prevent and manage all risks and injury to people, damage to property and working environment.
These safety improvement programs establish actions for achieving the objectives and targets, in line with the policy commitment of continuous improvement. When establishing targets, take into considerations of the following:
a) Current legal (comply with the national and international regulations and standards related to health, safety and environment) and regulation requirements.
b) The HSE performances (includes: Site and office).
Mr. Tuan also found out that after implementations the safety improvement programs, there are some achieved results about the safety management such as:
1) All accidents have been reduced.
2) The HSE management system objective is to conduct every trade and service activity with all risks identified and well controlled to achieve its goals.
3) The HSE and risk management roles and responsibilities are allocated, and that accountability for the maintenance and continuous improvement of HSE performance is established in all operations.
4) Eliminating injuries by providing rigorous risk mitigation process including safe systems of work, rectifying, and reporting all actions and conditions, which could lead to an incident.
5) Responsibilities for HSE performance will be visible throughout the organization, with clarity on line management accountability.
6) The HSE management system have provided its units and offices with HSE framework that can be used to manage risk that may arise from the existing projects and future projects.
His thesis abstract is copied and posted.
ABSTRACT
Occupational health and safety is related to a good working environment, which covers terms of employment. The main purposes of the safety performance are to foster and develop safety management programs and promote the working abilities of the employees to prevent any risks, accidents and hazards.
Most companies can give many good reasons why they want to improve their management safety system. A well-designed safety management system can help to reduce injuries and illnesses and prevent risks and hazards. In addition, a good management system can increase efficiency, improve productivity and quality of services.
The occupational health and safety improvement programs are very crucial for any oil and gas construction companies in Vietnam. The programs provide the basis for managing and controlling the occupational health and safety performance and identify the safety problems and methods to improve the occupational health and safety performance in the future.
However, there are some occupational accidents, which happen, kill and injure many people every year. Therefore, preventing accidents and providing safe working environment to protect employees are very important issues in oil and gas operations in Petrovietnam’s subsidiaries and a safety improvement program can be compulsorily necessary to prevent people from any harm, minimize any damage to property and to the environment during production and business processes.
The purposes of the safety improvement programs are to identify strong and weak issues of the safety management system, and then to give the best solutions for control of all risks to achieve goals “All activities are completed with zero injuries to people and zero damage to equipment, property and environment”.
Although the oil and gas construction companies in Vietnam have already established the health, safety and environment management systems to provide the flexible and integrated approach to manage HSE, risks, and develop HSE programs to meet the requirements of Vietnamese and international standards and laws, but there have been some problems about the safety such as:
a) High rate of accidents occurs at the offshore platforms.
b) Problems with workers participation when working on offshore platform
Mr. Pham Van Tuan made a case study to (1) identify safety improvement programs used in the oil and gas construction company; and (2) discuss and review the effectiveness of the safety improvement programs.
He found out that many oil and gas companies in Vietnam have been applied the successful safety improvement programs for several years now. They considered these useful tools to avoid and mitigate accidents and to improve safety performances that resulting in achieving effective cost control and quality control. They recognize the importance of the safety improvement programs and have responsibilities to identify, assess, prevent and manage all risks and injury to people, damage to property and working environment.
These safety improvement programs establish actions for achieving the objectives and targets, in line with the policy commitment of continuous improvement. When establishing targets, take into considerations of the following:
a) Current legal (comply with the national and international regulations and standards related to health, safety and environment) and regulation requirements.
b) The HSE performances (includes: Site and office).
Mr. Tuan also found out that after implementations the safety improvement programs, there are some achieved results about the safety management such as:
1) All accidents have been reduced.
2) The HSE management system objective is to conduct every trade and service activity with all risks identified and well controlled to achieve its goals.
3) The HSE and risk management roles and responsibilities are allocated, and that accountability for the maintenance and continuous improvement of HSE performance is established in all operations.
4) Eliminating injuries by providing rigorous risk mitigation process including safe systems of work, rectifying, and reporting all actions and conditions, which could lead to an incident.
5) Responsibilities for HSE performance will be visible throughout the organization, with clarity on line management accountability.
6) The HSE management system have provided its units and offices with HSE framework that can be used to manage risk that may arise from the existing projects and future projects.
His thesis abstract is copied and posted.
ABSTRACT
Occupational health and safety is related to a good working environment, which covers terms of employment. The main purposes of the safety performance are to foster and develop safety management programs and promote the working abilities of the employees to prevent any risks, accidents and hazards.
Most companies can give many good reasons why they want to improve their management safety system. A well-designed safety management system can help to reduce injuries and illnesses and prevent risks and hazards. In addition, a good management system can increase efficiency, improve productivity and quality of services.
The occupational health and safety improvement programs are very crucial for any oil and gas construction companies in Vietnam. The programs provide the basis for managing and controlling the occupational health and safety performance and identify the safety problems and methods to improve the occupational health and safety performance in the future.
Wednesday, 30 September 2009
Project Time and Cost Management in Water Supply Pipeline Construction in Dong Nai Province, Vietnam: A System Dynamics Approach
The primary objectives of any construction projects are to complete the project within the limited period of time, to meet the determined quality based on the standard and specifications, and to keep the project cost under the estimated budget. The concept and practice of project time and cost management in construction industry have been used in recent years in Viet Nam, since at that time, the country had the open-door policy to lure the investment from FDI projects.
It has been proven that, in construction industry especially in water supply pipeline construction, time and cost management played an important role among several construction project management activities. The efficiency of time and cost management can result in the success or failure of construction projects. Hence, it is considered that there is the necessity to develop the model for effective project time and costs management in water supply pipeline construction in Dong Nai province.
Mr. Tran Minh Tung made a case study which objectives are to (1) find out critical factors affecting the project time and cost in water supply pipeline construction project and analyzing the relationship of these factors and thereby enhance understanding of construction delays and cost overruns; (2) develop a generic model based on the factors identified using system dynamic approach; and (3) formulate implementable policies that may aims to reducing project time and costs in water supply pipeline construction project in Dongnai Province, Viet Nam.
He found out that the problem of time delays and cost overrun in the construction industry is a global phenomenon. Project delay and cost overrun have frequently happened in most of construction project and water supply pipeline construction project is not exception. Below are his conclusions and discussions:
1. The critical factors and their interrelationship
By using exploratory research, he found out that there are several critical factors affecting the project cost and time in implementing a water supply pipeline construction project. Project cost and project time completion are significantly influenced by factors in six aspects such as:
a. Labor - by hiring the seasonal laborers, the labor cost can be reduced but the quality and labor productivity will also be affected. However, ‘training’ can enhance the workforce’s productivity; reduce rework and supervisor on site. Besides, ‘Financial difficulties of contractor’ along with ‘late monthly payment’ can negatively influence the ratio of labor turnover which causes laborers shortage.
b. Quality – from this point of view, project cost and time completion rate have related with rework that causing by ‘errors in construction pipeline’. The higher schedule pressure increases, the more ‘errors in construction’ happen. Conversely, the increase of ‘tighter in control and monitoring’ results in ‘error in construction pipeline’ reduction and therefore ‘fault in testing pipeline’ will be increased.
c. Schedule pressure - project cost and time can be influenced by the variance of ‘schedule pressure’, ‘speed up work’ and ‘work remaining’. The increase of ‘speed up’ helps reducing ‘work remaining’ which decreases the project time completion. Also, ‘coordination closely among other Department’ in Dongnai province also helps decreasing ‘the necessary time to consult among these departments’, which can reduce project delay and cost overrun.
d & e. Material and equipment - ‘accuracy material planning design’ helps delivering material on time, saving material and increasing ‘purchasing coordination’ which reduces ‘late delivery of material’. The effectiveness in ‘accuracy material planning’ has positively affected to project time completion. However, ‘late delivery of material’ can happen by the consequence of ‘late payment to suppliers’, ‘financial difficulties of contractors’. In another aspect, the result from simulator shows that ‘qualified subcontractor’ can increase quality of equipment, which reduces rework, leading to accelerate project time completion rate.
f. Safety - project cost and time have the relation with ‘labor productivity’, ‘the rate of labor turnover’, and ‘unsafe act and condition on site’. The higher schedule pressure increases, the more ‘unsafe act and condition’ happen. Conversely ‘safely construction method’ and ‘supervisory effort and monitoring’ help reducing ‘unsafe act and condition’ on site.
2. The system dynamics modeling
It is not difficult for the practitioners to capture the behavior of construction project. The dynamics model will facilitate practitioners to identify the problems related to performance gap by adjusting inputs of exogenous variables with their real scenario. It also makes possible for practitioners to find out the reasonable strategy to implement project in an effective way. Beside, in order to reach the usefulness of system dynamics model, the managers should develop the ability to understand construction project as a whole rather than simply concentrating on the detail of specific issues.
With the aim of setting up the model, the critical factors that have a potential to affect project cost and time in water supply pipeline construction project were identified and analyzed in term of their probable impact on construction process. Then, adopting by system dynamics approach, the generic system dynamics model has been formulated in this study by integrating a number of endogenous and exogenous factors to make dynamic interactions visible.
The generic performance model, when calibrated and tested with data from Nhon Trach water supply project in Dongnai Province, Vietnam, the simulated behavior (base run) of the adopted model has been replicated with the historic behavior (reference mode). This implied that the generic model dynamics performance model can be able to simulate the dynamic of project cost and time during implementing project.
3. Policies for improving
In order to considerably improve project time and cost performance in water supply pipeline construction project, five policies having the most potential were evaluated. The result showed that delay and cost overrun can be reduced by carrying out several important policies during the construction phase, including accuracy design, quality improvement; qualify subcontractors, multi-skilled training and material management.
His thesis abstract is copied and posted.
ABSTRACT
Normally, achieving the project within predetermined time, budget, and quality is the basic purpose of construction project control. Unfortunately, most water supply projects can not be completed within specified time and budget. Most projects showed massive cost and time overruns.
In general, the problem involved with project delays and cost overruns are avoidable. In an attempt to solve these problems, there are various strategies have been applied. Among them, many factors were found as the main source lead to manage time and cost in project efficiently.
This thesis analyzes factors affecting project time and costs in water supply pipeline construction in Dongnai Province, Viet Nam. The qualitative research is conducted to fulfill the objective of the research. Data collection is based on case study in water supply pipeline construction in Dongnai Province. It will be found out from this study that there are a lot of factors affecting project time and costs in water supply pipeline construction. Research objectives is the development of the model involved with the factors affecting project time and costs in water supply pipeline construction project.
In analysis, the model including the factors for reducing project time and cost in water supply pipeline construction projects will be built by using system dynamics modeling. Finally, some strategies deal with project delays and cost overruns are proposed.
It has been proven that, in construction industry especially in water supply pipeline construction, time and cost management played an important role among several construction project management activities. The efficiency of time and cost management can result in the success or failure of construction projects. Hence, it is considered that there is the necessity to develop the model for effective project time and costs management in water supply pipeline construction in Dong Nai province.
Mr. Tran Minh Tung made a case study which objectives are to (1) find out critical factors affecting the project time and cost in water supply pipeline construction project and analyzing the relationship of these factors and thereby enhance understanding of construction delays and cost overruns; (2) develop a generic model based on the factors identified using system dynamic approach; and (3) formulate implementable policies that may aims to reducing project time and costs in water supply pipeline construction project in Dongnai Province, Viet Nam.
He found out that the problem of time delays and cost overrun in the construction industry is a global phenomenon. Project delay and cost overrun have frequently happened in most of construction project and water supply pipeline construction project is not exception. Below are his conclusions and discussions:
1. The critical factors and their interrelationship
By using exploratory research, he found out that there are several critical factors affecting the project cost and time in implementing a water supply pipeline construction project. Project cost and project time completion are significantly influenced by factors in six aspects such as:
a. Labor - by hiring the seasonal laborers, the labor cost can be reduced but the quality and labor productivity will also be affected. However, ‘training’ can enhance the workforce’s productivity; reduce rework and supervisor on site. Besides, ‘Financial difficulties of contractor’ along with ‘late monthly payment’ can negatively influence the ratio of labor turnover which causes laborers shortage.
b. Quality – from this point of view, project cost and time completion rate have related with rework that causing by ‘errors in construction pipeline’. The higher schedule pressure increases, the more ‘errors in construction’ happen. Conversely, the increase of ‘tighter in control and monitoring’ results in ‘error in construction pipeline’ reduction and therefore ‘fault in testing pipeline’ will be increased.
c. Schedule pressure - project cost and time can be influenced by the variance of ‘schedule pressure’, ‘speed up work’ and ‘work remaining’. The increase of ‘speed up’ helps reducing ‘work remaining’ which decreases the project time completion. Also, ‘coordination closely among other Department’ in Dongnai province also helps decreasing ‘the necessary time to consult among these departments’, which can reduce project delay and cost overrun.
d & e. Material and equipment - ‘accuracy material planning design’ helps delivering material on time, saving material and increasing ‘purchasing coordination’ which reduces ‘late delivery of material’. The effectiveness in ‘accuracy material planning’ has positively affected to project time completion. However, ‘late delivery of material’ can happen by the consequence of ‘late payment to suppliers’, ‘financial difficulties of contractors’. In another aspect, the result from simulator shows that ‘qualified subcontractor’ can increase quality of equipment, which reduces rework, leading to accelerate project time completion rate.
f. Safety - project cost and time have the relation with ‘labor productivity’, ‘the rate of labor turnover’, and ‘unsafe act and condition on site’. The higher schedule pressure increases, the more ‘unsafe act and condition’ happen. Conversely ‘safely construction method’ and ‘supervisory effort and monitoring’ help reducing ‘unsafe act and condition’ on site.
2. The system dynamics modeling
It is not difficult for the practitioners to capture the behavior of construction project. The dynamics model will facilitate practitioners to identify the problems related to performance gap by adjusting inputs of exogenous variables with their real scenario. It also makes possible for practitioners to find out the reasonable strategy to implement project in an effective way. Beside, in order to reach the usefulness of system dynamics model, the managers should develop the ability to understand construction project as a whole rather than simply concentrating on the detail of specific issues.
With the aim of setting up the model, the critical factors that have a potential to affect project cost and time in water supply pipeline construction project were identified and analyzed in term of their probable impact on construction process. Then, adopting by system dynamics approach, the generic system dynamics model has been formulated in this study by integrating a number of endogenous and exogenous factors to make dynamic interactions visible.
The generic performance model, when calibrated and tested with data from Nhon Trach water supply project in Dongnai Province, Vietnam, the simulated behavior (base run) of the adopted model has been replicated with the historic behavior (reference mode). This implied that the generic model dynamics performance model can be able to simulate the dynamic of project cost and time during implementing project.
3. Policies for improving
In order to considerably improve project time and cost performance in water supply pipeline construction project, five policies having the most potential were evaluated. The result showed that delay and cost overrun can be reduced by carrying out several important policies during the construction phase, including accuracy design, quality improvement; qualify subcontractors, multi-skilled training and material management.
His thesis abstract is copied and posted.
ABSTRACT
Normally, achieving the project within predetermined time, budget, and quality is the basic purpose of construction project control. Unfortunately, most water supply projects can not be completed within specified time and budget. Most projects showed massive cost and time overruns.
In general, the problem involved with project delays and cost overruns are avoidable. In an attempt to solve these problems, there are various strategies have been applied. Among them, many factors were found as the main source lead to manage time and cost in project efficiently.
This thesis analyzes factors affecting project time and costs in water supply pipeline construction in Dongnai Province, Viet Nam. The qualitative research is conducted to fulfill the objective of the research. Data collection is based on case study in water supply pipeline construction in Dongnai Province. It will be found out from this study that there are a lot of factors affecting project time and costs in water supply pipeline construction. Research objectives is the development of the model involved with the factors affecting project time and costs in water supply pipeline construction project.
In analysis, the model including the factors for reducing project time and cost in water supply pipeline construction projects will be built by using system dynamics modeling. Finally, some strategies deal with project delays and cost overruns are proposed.
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