Risk-Based Multi-criteria Decision Management for a Railway System in Thailand

Infrastructures Management includes a wide range of activities that are essential to efficient working of country utilities and services. The nature of infrastructure management involved a variety of operations such as planning, design, construction, condition evaluation, maintenance, improvement and so on. Infrastructure Maintenance Management System has gradually become an important field for not only developed countries but also for developing countries particularly Thailand. This is because of nature of the infrastructures deteriorate over time and it is crucial to maintain them in order to preserve their condition or performance to be at the acceptable level which satisfies the user’s needs. If the maintenance is neglected, it can lead to disruptions in services for example, traffic accidents, water leaks, or power cuts.

Among different facilities, railway is one of the important infrastructures. A railway system combines several objectives, such as provision of an adequate level of service or safety, preservation of the facility of a number of physical facilities that include railways, bridges, terminals, and traffic control devices. Once these facilities deteriorate, the suitable maintenance action needs to be taken. Most of maintenance policies have been developed in order to reach the most beneficial plan under the budget initiation. However, in the long-term planning, most projects or programs are subjected to risk and uncertainty. The expected maintenance costs of facilities increase as the measurement of uncertainty increases (Madanat and Ben-Akiva, 1994).

Maintenance practice and strategies have a strong impact on the management cost of a facility. Deferred maintenance results in increased life-cycle costs rather than a cost saving (NCHRP 58, 1979). The total ownership cost of infrastructure system is greatly influenced throughout different its lifecycle from the beginning to disposal includes maintenance costs, which are affected by the types of maintenance selected and implementation schedule for these policies. Maintenance costs are also affected by the risk associated with unplanned or unscheduled repairs arising from contingencies such as accidental damages (Ayyub and Popescu, 2003). The decision makers have to establish an optimum maintenance management strategy for an infrastructure system which can reduce or minimize the aforementioned cost effectively and efficiently, while ensuring that the system goals are conformed. The main objective of a decision-making process is to maximize the benefits to its customers and users, based on well-defined goals and with available resources (NYSDOT, 1998).

The current maintenance practice of State Railway of Thailand (SRT) is based on Cyclic Maintenance. Cyclic maintenance is the maintenance program which indicates the exact time and the duration of maintenance. The decision-making of selection of maintenance alternatives is based on track condition inspection i.e. Track Quality Index (Q.I.) (SRT, 1995). However, the development of maintenance management system for individual objective is not effective because it does not take into account all the needs of the system. Without the effective decision-making process, the agency cannot claim that each maintenance alternative meets the obligation to maintain the railway network effectively. Because of the variety of system objective of railway maintenance management, the decision-making process takes into consideration of a multicriteria decision-making process. In addition, the benefits under different measurement units make the decision-making process more complicated. Therefore, the decision makers have to evaluate properly among competitive maintenance alternatives (Li and Sinha, 2004). In order to mitigate this complication, multiobjective decision-making approaches would be useful. It provides a convenient set of mathematical tools to identify an optimum alternative given a set of competing objectives (Clemens, 1997). In this study, one of multiobjective decision-making technique called Analytic Hierarchy Process (AHP), is employed to identify an important of objectives to use in a multicriteria decision-making process. With AHP, weighting factors of all objectives can be identified so that the decision makers can be easily used in a calculation of decision-making.

Mr. Arthit Krachang’s study proposed to develop risk-based multiobjective functions that influence the railway maintenance management. In addition, weighting factors of individual objective provides a non-dimensional output so that planners or decision makers can use those functions for decision-making about a suitable action in railway maintenance management system.

The main objective of his study is to develop a risk-based multicriteria decision framework for the railway system in Thailand. The basis of the decision-making is to maximize the overall benefits as well as to minimize the maintenance costs and risks regarding to the budget constraint. In order to achieve the main objective, secondary objectives were defined as follows: (1) determine objectives of railway maintenance management system and develop the objective functions regarding to influencing parameters as well as their weighting factors; (2) respond to risk through an effective and efficient decision-making process by using quantitative analysis of the effect of influencing parameters that are subjected to risk; and (3) develop an overall risk-based decision-making process for the railway maintenance management system.

Conclusion

In this study, the risk-based multicriteria decision-making process for the railway maintenance selection is carried out by using risk simulation technique. The weighting factors and objective functions are used to setup an overall objective value optimization framework. The developed cost effectiveness and overall objective value optimization model are used to identify the optimal maintenance plan. Finally, the cost effectiveness method is carried out to present the results comparison. The Northern line and the Eastern line are selected to present a case study.

Questionnaire surveys were carried out among the SRT experts who involved in the railway maintenance. The outcome of the questionnaire surveys present the objectives, influencing factors, and their weighting factors that involved with the railway maintenance selection. The obtained weighting factors are determined and then, validated by consistency ratio in the AHP methodology. According to the SRT expert opinions and the obtained weighting factors, all of objectives are the important objectives for the railway maintenance while some of influencing parameters have less important but not the negligible factors. The most three important objectives are safety, costs, condition.

The deterioration model is developed from the historical railway condition and integrated into cost effectiveness optimization model and overall objective value optimization model for the Track Quality Index (Q.I.) prediction. The developed deterioration model is based on the regression analysis of historical Q.I. value and then, the coefficient R2 is used for the model validation. The processes of deterioration model development are discussed in section 4.4. The predicted track condition is used to calculate the cost effectiveness ratio and the objective value.

Development of objective functions of different railway maintenance objectives is the important part of this study. Interview and discussion with SRT experts were carried out to develop the objective functions and validate the results. The objective function refers to a function that quantifies the quality of a solution in an optimization model. The objective function returns an unknown quantity representing the quality measurement of a decision that needs to be made. In this study, there are two optimization models were created for results comparison that are the deterministic model and the probabilistic model.

The development of the optimization model consists of decision variables, objective function, and constraints. The first step when formulating a model is to identify and assign names to the decision variables. The decision variables are the variables that can be directly controlled by the decision makers and those values determine the solution of the model. In this study, the decision variable is the maintenance type. In the optimization model, the maintenance plan which gives either the maximum or the minimum value of the objective function needs to be determined. The second step is to develop the objective function in terms of the decision variables. The objective function is the formula which specifies the goal that is trying to achieve. The goal can either be to maximize or to minimize the value of the objective function.

However, the deterministic cost effectiveness optimization model is the used traditionally in the policy analysis by treating the input variables as exact value. The probabilistic cost effectiveness optimization model is a modified optimization model which takes risk and uncertainty into account. In the probabilistic model, the variables that are subjected to risk are treated probability density function (PDF). In this study the track initial condition is the parameter which is subjected to risk. The historical data is fitted with the best fitted probability density function (PDF) based on chi-square test. The developed PDF of track condition is used in the simulation process. It was randomized treated in the cost effectiveness function until the cost effectiveness ratio is statistically converged.

The optimization results which obtained from both model show that the most effective maintenance plan is 4-year maintenance cycle and in middle of 4 years are do nothing. There are some difference is that the maintenance type in some first year are different. The optimization results were introduced to the SRT experts to validate in term of acceptance. Both of the obtained optimal maintenance plan yield very close maintenance costs and effectiveness ratio. The maintenance costs for both of the optimal maintenance plan are under the budget limitation which is specified by SRT policy. The predicted conditions of the railway are above the minimum acceptable level.

An effective railway maintenance selection is the multiobjective decision-making process. Since the cost effectiveness optimization is solely based on single objective optimization, this situation leads this study to modify the cost effectiveness optimization by applying the concept of multiobjective optimization. According to the results of the questionnaire survey, there are 6 objectives and 19 influencing parameters in railway maintenance selection. In order to accumulate all of objectives in railway selection process, creation of 19 objective functions must be carried out. Due to the time and historical data limitation, the safety and cost objective are selected the present the case study.

According to SRT expert discussion and the obtained weighting factors, railway safety is the most important objective for the railway maintenance. Therefore, the agency maximizes the railway safety by applying the cyclic maintenance policy. However, the maintenance costs are required to be minimized due to the budget limitation. In this study, safety objective function and costs objective function are developed to present the multiobjective optimization. In addition, each objective has more than one influencing parameter. Under this circumstance, weighting factors of different influencing parameters of an objective are used. A product of objective function and weighting factor of influencing factor represents an objective value of an individual influencing factor. The summation of these values represents a total objective value of an objective. The summation of a product of weight and total objective value of an objective represents the overall objective value of each maintenance plan.

The result of the overall objective value optimization reveals that the most effective maintenance plan is 4-year maintenance cycle. It should be noted that the obtained optimal maintenance plan is similar with the optimal plan which obtained from the cost effectiveness optimization. However, the type of maintenance in first year is different. In addition, for the sections that their rails have reached the service life the heavy or medium maintenance are applied in first years.

The overall risk-based decision-making process is completed by accumulating the weighting factors and objective functions for the railway maintenance. The optimal maintenance plans which are obtained from the cost effectiveness and the overall objective value optimization, and current SRT maintenance policy are simulated to identify the PDF of cost effectiveness ratio. Among three maintenance plan the optimal maintenance plan which obtained from the cost effectiveness optimization yields the highest cost effectiveness ratio, the optimal maintenance plan which obtained from the overall objective optimization is the follower, and the SRT current maintenance policy yields least one. In comparison, the maintenance plans which yield the higher cost effectiveness are subject to higher variation of the cost effectiveness ratio.

The mean of cost effectiveness ratio or the standard deviation can be used for prioritize the prefer maintenance alternative in the decision-making process. In this study, if the decision maker prefers only the maximum benefit of the maintenance plan, the optimal plan which obtained from the cost effectiveness optimization is the final decision. In comparison, if the decision maker prefers the less variation of the benefit, the current SRT maintenance policy or the optimal maintenance plan which the overall objective value optimization are the better decision. The developed risk-based multicriteria decision framework is recommended to apply in the network-level management for planning purposes.

An overall risk-based multiobjective optimization reveals the other view point of railway maintenance selection that should be incorporated into the decision making process. The risk-based simulation does not intend to show that the result yields the better maintenance plan or higher accuracy than the deterministic one or the current SRT maintenance practice, but it demonstrates that the risk-based simulation reveals the possible cost effectiveness ratio that are neglected in the deterministic one. Moreover, the risk-based simulation results encourage decision makers to be concerned not only with the outcome value but also with the amount of risk each decision carries.

His thesis abstract is copied and posted.

ABTRACT
State Railway of Thailand (SRT) is a public agency which has the responsibility for planning, constructing, managing, and maintaining railway network in Thailand. Due to the maintenance budget limitation, SRT has established the Railway Maintenance Management System to manage their railway network. SRT has conducted the cyclic maintenance and collected their railway inventory data and its condition data. However, the determination of railway maintenance management system is solely based on the inspected track condition data.
However, an effective railway maintenance selection is the multiobjective decision-making process which is very complex and it is subjected to risk and uncertainty. This situation leads this study to modify the existing determination by applying the concept of objective function. The overall objective value is the summation of objective values for different objectives, influencing parameters, and their weighting factors which obtained from the Analytical Hierarchy Process (AHP). Moreover, some influencing parameter can be changed over time or beyond the control of agency. Therefore, the decision-making process may still expose to risk by invisible risky information.

To address this problem, a framework which takes risk into account is developed for selecting optimal maintenance alternatives. Incorporation of risk analysis by considering the inputs variables in the form of probability density function (PDF) then simulated by using Monte Carlo simulation technique. The result of a risk-based decision-making process can help SRT determine the optimum maintenance alternatives those are targeted towards maximizing benefits and minimizing cost under risk control. Finally, Northern and Eastern routes are selected to present as a case study of an overall risk-based decision-making process.

An Assessment Of The Performance Of Public Hearings As A Vehicle For Public Participation In Infrastructure Development Projects In Thailand

As the world of globalization evolves, there are inevitable and rapid needs of developments to fulfil global and domestic, social and economic demands. Infrastructures are part of those basic requirements. These include transport, communication, energy, water supply, mining, construction, chemicals and petrochemicals, and other relatively large-scale industries. The planning and implementation of these projects present unanticipated difficulties and risks. As a result, with the necessity of both international financial funds and investments, those development projects require many special considerations, especially Social Impact Assessment (SIA) and Environment Impact Assessment (EIA). Public participation has increasingly become a key element for development projects, creating new ground rules and new expectations for a host of funded actions. These are being addressed in developed countries.

In the past decades, many of the infrastructure development projects in Thailand have been initiated and constructed with total ignorance of the public opinion on the project. Moreover, the resource utilization was not clearly specified by development planners at the national level. They may have identified resources only indirectly in the national plans. These deficiencies caused many projects to be unsuccessful both in terms of national investment and the benefit to the public. It is even worse when the deficiencies in planning for construction projects lead to a high level of undesirable conflicts between the public and the project initiators, causing both reluctance on the part of investors or lenders and undermining the nation’s opportunity for faster development.

The important decisions have, traditionally, been made by the public bureaucrats who possess a high degree of technical expertise but who are not directly accountable to the citizens of the affected localities or states. More recently, there have been groups of people formed to express dissatisfaction with the outcomes of this kind of administrative process and have called for even more appropriate public participation.

In recent years, there have been attempts to resolve the conflicts by introducing a method that allows public participation, Public Hearing. Public hearing is one mechanism of public participation that enhances public involvement in decision-making of development projects. However, the full objectives of Public Hearing attempts are not yet achieved due to a number of difficulties such as the knowledge and familiarity of the people with the process, the understanding of their rights and roles to participate, and the process of the public hearing itself. Academicians have recently joined the process. They have assisted in setting up some kinds of people-centered planning and a reorganization of bureaucracies to effectively initiate and carry out infrastructure development projects.

Problem Statement
It is believed that public hearing could be an effective channel for public participation in obtaining public consent and, hence, reducing undesired conflicts during the execution of infrastructure development projects. Nevertheless, conflicts at public hearings conducted in Thailand have repeatedly been obstacles to expediency in the country’s construction of its infrastructure projects. Although it is perceived that public hearing can be the key activity that brings benefit in collecting useful information from stakeholders for government’s decision-making, the principles and the processes for conducting public hearing are rather complicated (Bureekul, 2000). Therefore, it has been evidently and continuously seen that the public hearings conducted in Thailand have hardly been successful. In most of the cases, it appears that public hearings create conflicts and dissatisfaction.
Lack of information, participation from people, sufficient publicity, and misconduct of public hearing, etc., can be considered as some of the factors responsible for insufficiencies and failure in project planning and execution. These issues make it particularly important to study the public hearings. Questions needing answers include:
· What are the benefits of public hearings?
· How are public hearings conducted?
· What are the purposes of public hearings?
· What are the problems being encountered in public hearings?
· What can go wrong with public hearings?
· How effective are the public hearings?
· How can public hearings be improved?

A study is necessary in order to identify and conceptualize the related factors for effective practice of public hearings. Mr. Ektewan Manowong’s previous special study has brought the fundamental area of knowledge concerning public hearings, including basic answers to the questions mentioned above. However, a more comprehensive study on the matters regarding the theoretical and practical aspects of public hearing is yet to be conducted. The above basic questions were basically answered with the broad understandings and explanations that have yet to be thoroughly examined in order to assemble knowledge concerning public hearings.

Mr. Ektewan Manowong conducted a case study for his dissertation in which the key issues to be addressed were as follows;
· What are public hearings intended to do?
· Do public hearings work properly?
· Why are there problems with public hearings?
· How have public hearings been disrupted?
· Where do the conflicts originate from?
· How to effectively implement public hearings?
· How have public hearings been conducted elsewhere?

Conclusion

Major conclusion from this research is summarized according to the following concerns.

Attitudes towards public hearing
In the five main case studies, the hearing participants had overall positive attitudes towards public hearing as a method of public participation in infrastructure development projects in Thailand. However, there were some concerns on appropriateness of implementing public hearing in the cases studied, as it was considered that many project stakeholders still lack knowledge and understanding on public hearing procedures. As such, there were still different opinions on acceptability of the hearings conducted in these projects. This reflects that the attitudes towards public hearing as participation method usually create expectation of good practices of public hearing. When the hearing fails to meet such expectation, it can be considered unacceptable. Qualitative analysis of additional cases supports this statement: if the hearing is not accepted by prospective participants or project stakeholders, the initiated process is regarded as meaningless/unaccountable, resulting in distrust and more conflicts.

Evaluation and satisfaction with public hearings
Generally, public hearings in the five main cases were found to be good and satisfactory. However, when considering details of each performance aspect, it was found that the “participation” aspect was rather poor and unsatisfactory. The public hearing rated to have good and satisfactory process integrity was the most recent one (Ta Chin). Many unsuccessful public hearings previously conducted in several projects may have led to awareness on implementing effective participation. Lessons learned from previous hearings were recognized and applied. However, many of public hearing performance criteria were still poorly achieved and the participants were dissatisfied with them.
Satisfaction with public hearings’ results and contributions
The participants were satisfied with public hearing output (result: report, conclusion, and decision) and outcomes (contributions) when they thought they achieved what they expected. On the contrary, those who thought their concerns/input not adequately listened to or incorporated into the decision-making process were dissatisfied. In addition, if the hearing participants were satisfied with the hearing result, they would also be satisfied with the hearing’s influence on conflict resolution. Since the interface conflicts among project supporters and opponents were not yet dissipated, the influence of public hearing in conflict resolution was considered to be rather poor.
Effectiveness of public hearings
Public hearing effectiveness was examined by considering the combined result of process evaluation and satisfaction with both the process integrity and output/outcomes. The studied public hearings were found to have rather low to moderately low effectiveness, as they have low to moderate evaluation and satisfaction scores. The effective participation process is better structured, participative, better managed, and more supported by the resource required by the process resulting in better contribution or sharing of benefits of the hearing process and, hence, satisfying the hearing participants/project stakeholders.

Structure of public hearing process
The research found that the current public hearing regulation B.E.2539 was considered to be generally good and acceptable by the survey respondents. The regulation provides rigid guidelines to facilitate the public hearing committee to conduct the hearings. However, it needs some degree of flexibility in order to appropriately implement it in unique situation. As learned from cases studied, the widely and adequately publicized hearing better covered the relevant stakeholders. The adaptable hearing process structure is a key influence that exerts and facilitates proactive participation, convenient access to project information, adequate procedural education, and good arrangements of the hearings.

Participation in public hearing process
Although it is a heart of participatory activities, participation in the hearings was found to be generally poor. Public consultation was not adequately carried out at low degree such that most of the initiatives were planned by the authorities. Good participation in the hearing process would allow project stakeholders, especially the members of the public, to get involved early in the process initiation and preparation such as setting up the committee and public hearing issues. At the hearing, due to ineffective control and cooperation from participating groups, it was found that the principle of participation was hardly met. Two-way communication was hardly achieved and most participants still lack of competence to effectively participate. As such, the studied hearings exhibited evident barriers to participation, resulting in poor ratings and dissatisfactions with the hearing performance.

Management of public hearing process
Management of public hearing process involves consideration of what means is to be used to ensure that the manner in which the work handled in hearing preparation and execution stages creates a sense of trust among groups of project stakeholders/hearing participants about the fairness and neutrality of the process. Public relation was found to be a managerial weakness of the case-studied hearings, as it was carried out mainly to convince the public on benefits of the project without real intention to early and consistently provide adequate education on the project and participation through appropriate media. Although the hearing structure provide instructions, the hearings can be poorly managed. Arrangements of hearings play a major role in facilitating convenient and satisfactory hearings such that participation is more encouraging. Fair control with established communication rules at the hearing are also part of well managed public hearing. Besides, the effective hearing process needs to be managed by experienced and effective independent facilitator, which would be more accountable to the public.

Resources required by public hearing process
Information, education, funding, and time were all regarded as important factors for public hearing process. The agencies responsible to conduct public hearing are required to commit sufficient funds and staff to support the process. In the cases of Thailand, limited budget and inexperienced staff were found to be major obstacles to prepare and conduct the hearings. However, more important resources of effective public hearings are not direct financial prospect. The public demands project information to be timely provided. Educational and technical assistance were also considered to be essential to hearing participants, not only for the affected people but also the other groups who had less capability to comprehend complicated issues and bureaucratic procedures of public hearings. As such, in order to enhance participants’ competence, it is essential to simplify the issues into the language of the people, facilitate fundamental and local participation, and allow longer time to participate in the hearing process. Satisfaction with hearing process and its contributions was considerably driven by the communication in the process. Well-informed and educated public would understand more on the subjects under discussion. Failing this, the hearing participants felt they could not competently and effectively participate.

Significance of the Dissertation
This dissertation addresses the results of research on whether the public hearing in Thailand’s infrastructure development projects can be an effective vehicle for the project’s public participation and conflict resolution on projects. It presents a scientific assessment of public hearing performance, constituting a significant step towards understanding and implementation of public hearings in the Thai context as well as their influence on the efficiency and effectiveness of the project management concerning stakeholder values. The research’s results and findings will benefit the government in helping it to define a public participation policy as well as to establish plan for conducting and evaluating future public hearings in infrastructure development projects. Also, by learning from the case studies presented here, the project owners will be able to better plan public hearing, as a public participation scheme, in their future projects.

It is already proved here that proactive public participation is essential for project decision-making during the phases of initial planning, site selection, design, construction, and operations. It is also learned that, through enhanced public hearings, project planners and managers could improve decision-making by including early public consultation in project planning as well as conducting thorough study on project impacts to assure stakeholders’ acceptance and satisfaction with projects.

His abstract is copied and posted.

Abstract
Many infrastructure development projects in Thailand have recently faced unanticipated difficulties and risks during the planning and implementation stages, mainly due to social and environmental conflicts. Project delays and objections are undesirable because of the large amount of investment and associated costs involved. Public participation has increasingly become a key element to promote socially and environmentally sound development. There are wide arrays of public participation methods but public hearing is the most commonly used in many countries. Despite its popularity, public hearing has been criticized as being ineffective as a method of participation. In Thailand, public hearing was introduced only a decade ago. Project owners, mostly government agencies, employ public hearing mainly to settle disputes in projects. Public hearing in Thailand also faced problems and disruptions resulting in skepticisms on its performance. However, since there is no other official method of public participation available in Thailand, public hearing is always called for when public participation is needed. Although many attempts have been made to initiate and implement public hearing, there has been little research on the evaluation of this method of participation. Since more resources are being committed to public participation in projects, it is necessary to derive a framework for assessing public hearing conducted in Thailand’s infrastructure development projects. The findings can be used to improve the effectiveness of public hearings and the quality of public inputs into project decision-making.

In this study, five cases of public hearing conducted in different infrastructure projects were selected for detailed study. Public hearings in the cases were analyzed quantitatively and qualitatively. Quantitative analysis was carried out mainly by means of questionnaire survey. The questionnaire asks public hearing participants to express their attitudes toward public hearing as a means for public participation, their evaluation of the hearing they participated in, and the level of satisfaction with the hearing process and outputs/outcomes. Participants’ rating on preparation and execution of public hearing performance criteria were analyzed through four aspects of public hearing process: structure of the process, participation in the process, management of the process, and resource required by the process. Apart from the five cases, secondary data on other cases of public hearing were also analyzed qualitatively using the same criteria. In the quantitative analysis of the five cases, the ANOVA test was used to explore attitudinal differences on public hearing method. Next, the Principal Component Factor Analysis was employed to group potential factors that have influence on hearing participants’ evaluation and satisfaction with public hearing. Finally, the Multiple Regression Analysis was performed to investigate the level of influence of the identified underlying factors upon the hearing evaluation and satisfaction.

Findings show that the public has positive attitude towards public hearing, believing that hearings provide opportunity to officially participate in projects. However, major problems are that the process is often poorly prepared and executed, making the hearing process to be of low effectiveness such that the hearing results and contributions are not satisfactory. Stakeholder consultation, information, education, participants’ role and competence, hearing arrangements and facilitation, and finally, publicity and incorporation of hearing results are among the major factors that drive successful public hearing. Since positive attitude towards public hearing opens the gateway for public hearing success, achieving the performance goals and satisfying the participants would make hearings more meaningful and constructive.

Subcontractor Management Strategy: An Approach to Manage Subcontractors in Construction Projects

Subcontracting in the construction industry has greatly increased in recent years. Technology, size, and scale of construction projects are tending to be more specific and complex. As a result, main contractor prefer to subcontract the work because of insufficient resources or expertise in a specific area. Subcontracting is used much more extensively on housing and building construction projects than on engineering and industrial projects (Clough and Sears 1994). Arditi and Chotibhongs (2005) defined a subcontractor is a construction firm that contracts with a general contractor to perform some aspect of the general contractor’s work. Hsieh (1998) found the main missing element in the construction process is the disregard of the crucial role played by subcontractors who are hired to perform specific tasks on a project.

Subcontractors have also caused problems (Kumaraswamy and Matthew, 2000; Humphreys et al, 2000). Many of these subcontractor companies do not have the necessary capability to carry out the work satisfactorily. As a consequence, they are unable to give their clients the required service. Matthew et al (1996) believed that the increase in sophisticated technology-based products has required a high degree of design, manufacture, installation, and commissioning skills that have not been readily available to the industry’s clients, as the skill base has moved away from the main contractor’s organization. This has resulted in main contractors concentrating their efforts on managing site operation rather than employing direct labor to undertake construction work (Kumaraswamy and Matthew, 2000).

Furthermore, there are institutional gaps between the contracting parties (i.e., the general contractor and the subcontractors). These gaps may be inherent or established through time with little heed, but they have the potential to divide the construction team into “islands,” or self-centered decision-making units with conflicting interests (Hsieh, 1998).

Even though a large portion of a construction project is usually performed by subcontractors, the issues concerning subcontracting practice are seldom acknowledged and the ways to improve subcontracting practice are seldom discussed (Arditi and Chotibhongs, 2005).

Mr. Allan Janwar Tannaya conducted a research which objectives were to : (1) explore main contractor’s control strategy to manage subcontractors including procurement, cost, scheduling, quality control, and safety aspects; and (2) investigate main contractor-subcontractor relationship in terms of partnering, leadership style, and communication.

Conclusion

Conclusion for Subcontractor Control Strategy

Based on the result of data analysis, it can be concluded that subcontractor control strategy in terms of procurement and cost from local contractor has been aligned and organized, but, in terms of schedule, quality and safety aspects, it has been yet organized. Major improvements are needed for the subcontractor control strategy in local contractor in order to improve the subcontractor management performance. In contrast, it can be concluded that subcontractor control strategy from international contractor has been aligned and organized in all aspects. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance. Comparative subcontractor control strategy between local and international contractor are shown in table below.



Conclusion for main contractor-subcontractor relationship

It can be concluded that main contractor-subcontractor relationship from local contractor has been yet managed since main contractor does not implement partnering concept in practice. The reason is main contractor and subcontractor have a partnership temporarily only in the project. Moreover, task-oriented leadership style of project manager and site manager may create the distance between main contractor and subcontractor. Considering site manager has a lot of work to be cared, by assigning the site manager more responsible for maintaining the communication with the subcontractor may cause site manager work ineffectively. On the contrary, it can be concluded that main contractor-subcontractor relationship from international contractor has been managed by implementing partnering in practice. The reason is subcontractor has to be trained in order to understand the complicated system of main contractor. It also supported by relationship-oriented leadership style of project manager and site manager. Furthermore, by employing a person to be special coordinator, communication between main contractor and subcontractor can be managed effectively. The summary can be seen in table below.



Recommendation for subcontractor management improvement

After recognizing how main contractors managed their subcontractors together with the strength and weaknesses of each strategy, recommendation for improvement can be reliable proposed as follows:

1) It is important to have formally procurement standard for subcontractors. It helps main contractors to make decision easier and faster whether the subcontractors are qualified with the main contractor’s commitment.

2) Always have two-way lead times built into subcontract agreements. Two-way means that the main contractor and subcontractors agree on an appropriate time for the main contractor to notify the subcontractor when to begin work and an appropriate amount of time for the subcontractors to inform the main contractor of any conflict. Main contractor should monitor subcontractor’s schedule by developing a system or adopting advanced technology software that allows main contractor to track causes of schedule variance.

3) Top management should take a leader role in commitment toward quality. There should be quality policy and activities performed in an effort to implement the quality policy. Subcontractor should understand the quality policy and follow it as a quality standard of the work. The problems related with low quality can be prevented.

4) By establishing a subcontractor database, main contractors are able to know the information about subcontractors. It helps main contractors to have better understanding subcontractors’ performance.

5) Main contractor should develop comprehensive project safety policy and safety programs which make provisions for subcontractor safety. Subcontractor has to obey the main contractor’s safety policy and follow the main contractor’s safety programs by the inclusion of specific language to that effect in their contracts.

6) Main contractor may consider employing subcontract coordinator in order to improve coordination and communication with subcontractors.

His abstract is copied and posted.

ABSTRACT

Subcontracting in the construction industry has greatly increased in recent years. In most construction projects, especially building projects, it is common for 80 to 90% of the work to be performed by subcontractors. This has resulted in main contractors concentrating their efforts on managing site operation rather than employing direct labor to undertake construction work. Therefore, main contractor need to develop a strategy that allow him to control subcontractor effectively and efficiently including procurement, cost, scheduling, quality, and safety and manage the relationship in terms of partnering, leadership style, and communication. In order to understand how the current strategies are being operated together with the strengths and the weaknesses of the strategy, four local contractors and one international contractor were investigated through documentation, archival, and interview. The results shows subcontractor control strategy and relationship management from local contractor has been yet aligned and organized. Major improvements are needed for the subcontractor control strategy in local contractor in order to improve the subcontractor management performance. In contrast, subcontractor control strategy and relationship management from international contractor had been aligned and organized. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance.

Happy Lunar New Year

Dear all

In this new tiger year, i wish you all a happy and prosperous year. I believe this metal tiger year will give you courage and strong spirit for your continuous success.

Regards
Hadikusumo
Professional Master in Project Management Coordinator

Assessment Of Critical Infrastructures: December 2004 Tsunami In The Southern Region Of Thailand

The tsunami that stroke six southern coastal provinces of Thailand on 26 December 2004, has increased concern over an infrastructure system. This event caused extensive damage to human lives and properties which include many infrastructures that have vital services and facilities for citizens as a whole.

This tsunami had possible effect and impact on: (1) physical components of infrastructure systems; (2) potential loss of service; (3) the safety of humans and; (4) the security of sensitive systems in the natural and built environments (Wallace, et al., 2003). Many aspects of tsunami impact were studied by many experts in various fields. Infrastructure is one of important aspect that is needed to study because disruptions of infrastructures have a serious impact to people as a whole in both during an emergency period and a long term development.

Disruption in an infrastructure is said to occur when one or more of the physical components or one or more of the activities needed to operate a physical component cannot function at prescribed levels (Wallace, et al., 2003).

The word “Critical infrastructure” was said a long time before this tsunami event. This word was more concerned in The September 11, 2001, attack on the World Trade Center in New York City. The threat at that time, which was terrorism, was not natural phenomenal disaster like this time. Critical infrastructures identification provides information to prioritize which infrastructure is more crucial to protect from a treat. Criticality assessments were applied for critical infrastructure identification in this research study. Criticality assessments provide information to prioritize assets and determine which potential targets merit further evaluation. Criticality assessments provide a basis for focusing the mitigation strategies and implementation methods on the most important items by identifying which assets and structures are more crucial to protect from a treat (United States Coast Guard, 2002).

Tourist industry of Phuket and Phang–Nga Provinces were serious depressed by tsunami. Especially, Phuket Province is very famous tourist place of Thailand for both domestic tourist and international tourist. Revenue of tourist industry is a major income for these two provinces. Tourism infrastructure is the physical element that is created or made to cater for visitors (Davidson, 1993). The emergency plan and evacuation plan is thus needed to study in order to reduce the potential loss of human lifes. The host community has the onus of preparing for disasters not only for their own protection, but also for the safety of tourists (Drabek, 1994).

There is a relationship between tourism infrastructure and tourist industry because without recovery of tourism infrastructure, recovery of tourist industry cannot be accomplished. Although tsunami is unpredicted event, preparation to minimize losing human life and property is still important. Planning for tsunami helps people do better next time. To accomplish critical infrastructure protection, disaster management is needed to study in order to reduce potential loss of infrastructure services and human lives.

Mr. Bunpot Luttakoon made a study which main objective is to assess critical infrastructures during the December 2004 tsunami in the southern region of Thailand. Three specific objectives of his research study were to : (1) develop a framework to identify critical infrastructures in the event of December 2004 Tsunami in the southern region of Thailand; (2) assess the changes in the hotel management and tourist industry that was related to the emergency plan, evacuation plan, strategy, and policy after the event of December 2004 Tsunami in the southern region of Thailand; and (3) formulate strategy and policy recommendations for critical infrastructure protection to reduce potential loss of human lives and infrastructure services.

Conclusions

The tsunami event on 26 December 2004, was striking in the southern region of Thailand, has been being concerned for infrastructure systems. Tsunami is a widespread natural phenomenon disaster. Disruption of infrastructures was a serious problem for both during an emergency period and a long term development. During the recent tsunami event, many infrastructures were disrupted. It caused a serious impact on the national defense, economic security, public safety and public health. In addition, infrastructure interdependence also increased an impact between them.

The major findings in the first phase of research study are: (1) Phang–Nga Navy Base of Royal Thai Navy Force is the most critical infrastructure based on national defense criterion; (2) Hotels and accommodations are the most critical infrastructure based on economic security criterion; (3) Hospital is the most critical infrastructure based on public health and public safety criterion and; (4) no infrastructure was serious impact based on critical infrastructure interdependence criterion.

It was found that some infrastructure is critical infrastructure in other extreme event but it was not critical infrastructure for tsunami event because their infrastructures do not have a risk that is impacted by tsunami event. It can be concluded that risk is one factor that should be considered to identify critical infrastructure for tsunami event. The researcher suggested that critical infrastructure for specific location and specific event are different because at lease, level of complexity of infrastructure and type of threat in different country are different. Critical infrastructures were identified in the first phase.

In the second phase, hotels and accommodations was selected for further study. All selected hotels, located in the risk area of tsunami, were impacted by the tsunami in both direct and indirect impact.

It was found that all studied hotels and accommodations in the impacted area do not have emergency plan and evacuation plan for tsunami before the tsunami event on December 2004. The hotels have only emergency plan, evacuation plan, and training program for fire emergency that is enforced by government regulation otherwise the hotels cannot continue their hotel license for tourist business. The emergency procedure for fire was trained every year for employees. The report paper of training has to submit to government agency every year for continuing of hotel license.

Emergency plan for tsunami was very much concerned by every hotel in affected area after the tsunami of December 2004. But it seems to be declining by a time it was passed. It was found that major pressure to implement tsunami emergency plan is human life concern and community–based activity while depressed tourism industry situation is the minor pressure to implement this plan.

The royal Thai government was a center of tsunami emergency plan and evacuation plan for a whole community, including every hotels and accommodations. Hotels and accommodation representatives were selected for this training program. After that, the representatives of each hotel and accommodation had to implement emergency plan and evacuation plan for each own hotel. The successful levels of this implementation for each hotel are different. It is up to the capability of each hotel and level of attention.

The emergency plan and evacuation plan were not government regulation but all hotels and accommodations have a good concern by them because this implementation also effected to the trust from both customers and employees. For overall impacted area or community, it has a training program and tsunami warning systems test every month. This training was held very frequent in the first year after the tsunami event especially when tsunami warning system was installed but it seems to be less in the second year as reported by many executives.

Post–tsunami development offers the opportunity to correct the mistakes of the past. Activation of emergency plans is based upon assessment of the potential impacts of disaster. Skill in emergency preparedness and planning is to be distinguished from skill in the emergency management. The core of emergency management has to do with inter–organizational relationships (Drabek, 2002).

Existing policy and strategy were acted by both individual hotel and cooperation of many organizations. It was found that the best policy for recover tourism industry is confidence creation. Many ways of promotions were acted by the government agency and related organization for confidence creation and confirm that all area was recovered back to the normal situation. Tsunami warning system installation was also a purpose for confidence creation. The completion of disaster management, including preparedness, detection, response and recovery, would not have been accomplished without the support by collaboration of Hotels, Tourism Authority of Thailand, Tourism Guide Company, Government Agency, Airlines, the Thai Hotels Association and the Association of Thai Travel Agents.

Researcher suggested that almost critical infrastructure protection previously started was concentrated on human disaster such as terrorism, human error, and dangerous chemical. It is very less that critical infrastructure is concerned on natural phenomenal disaster especially tsunami because preparedness for disaster is up to the frequency or recurrence of disaster event. The main policy of this research study was applied from disaster management. The key of disaster management can be applied for every disaster. These are preparedness, detection, response, and recovery. In addition, three important words should be added. These are resilience, robust and redundant of critical infrastructure.

Critical infrastructure protection requires a consistent, cooperative partnership between the owners and operators of critical infrastructure and government agencies. Owners and operators of critical infrastructure would provide adequate security of their assets by actively implementing their emergency plans, evacuation plan, and exercises. The government should enforce emergency plan and evacuation plan for tsunami as legislation for hotels and accommodations for tourist industry security. This legislation should cover minimum standards for infrastructure design. Even the best security management plans and legislation which compel to their enforcement are worthless without proper implementation. Experience proves that independent Commission security inspections of their implementation are the only efficient instrument to guarantee the correct implementation of security requirements.

Communication breakdowns often hamper the effective coordination of a disaster response. Tsunami in the south of Thailand 2004 creates the need for cooperation within and among responding organizations. Many government agencies involved with Tsunami response operations. However, if all organizations hope to achieve full cooperation during a response, many inconsistencies in the management of information within and between organizations will have to be eliminated. The functional responsibilities of every relief organizations are different, and understanding how to translate differing capabilities and concerns into a unified inter–organizational interaction is a major priority.

The response during the relief period after the tsunami event has to include the following issues. These are human life rescue, food, water, sanitation facilities, temporary shelter, and clothing. The recovery period includes many development programs, reconstruction of facilities, education recovery, economic recovery, and etc.

In order to achieve a sustainable development, basic infrastructure should be provided and recovered after the tsunami event. The provision of food is a crucial for survival needs of affected families and to help sustain recovering communities. Government has to provide shelter options for tsunami affected communities, including safe and appropriate public buildings. Schools or education facilities should be reconstructed for students and teachers. The government should focus on increasing appropriate health care services in tsunami–affected communities. Ambulances, hospital beds, major medical equipment, and pharmaceuticals should be provided for victims. Victim could access to clean water, toilet and laundry facilities, pavements, wells, water towers, drainage systems, rainwater harvesters, public bathrooms, boreholes, and etc.

His thesis abstract is copied and posted.

ABSTRACT

During December 2004 Tsunami in the Southern Region of Thailand, many infrastructures were disrupted by seismic sea waves. This research study developed a framework to assess critical infrastructures during the December 2004 Tsunami in the southern region of Thailand. Specific locations of this study were Phuket and Phang–Nga Provinces. Four criteria were developed to identify critical infrastructures that were disrupted in the study areas. These criteria were national defense, economic security, public health and public safety, and infrastructure interdependence. The questionnaire and interview were conducted among experts who were responsible for these infrastructures during the emergency and recovery period. It was found that: (1) Phang–Nga Navy Base of Royal Thai Navy Force is the most critical infrastructure based on national defense criterion; (2) Hotels and accommodations are the most critical infrastructure based on economic security criterion; (3) Hospital is the most critical infrastructure based on public health and public safety criterion and; (4) no infrastructure was serious impact based on critical infrastructure interdependence criterion.

Hotels and accommodations were selected for a further study. This study aimed to assess the changes in the hotel management and tourist industry that was related to the emergency plan, evacuation plan, policy, and strategy after the event of December 2004 Tsunami in the southern region of Thailand. The questionnaire was developed for a telephone interview of fifteen hotels in Phuket Province and five hotels in Phang–Nga Province. It was found that the government agencies were a center of tsunami emergency plan, evacuation plan and training exercises for a whole community, including the hotels and accommodations. These hotels and accommodations have been implementing tsunami emergency plan and evacuation plan after the Tsunami event. The stimulated factors to implement these plans were human life concern, community–based activity and depression of tourism situation.

Finally, strategy and policy recommendations were formulated in order to reduce potential loss of human life and infrastructure services. These policy and strategy were applied by the key of disaster management. These are preparedness, detection, response, and recovery. In addition, resilience, robust, and redundant of infrastructure were included for critical infrastructure protection.

IT Application For Construction Safety Management: Planning, Monitoring And Trending

Construction industry is considered as one of the most complicated industries because of its uniqueness, rapid growth, and dynamic nature. All the three main resources of this industry, i.e. labor, material and equipment have their own complexity and moreover their complexity vary with environment or workplace. Complexity and dynamic nature of construction industry makes it very difficult for the department of management of the company to take care of the occupational health and safety of their employee in construction site.

Every day construction site deals with lots of activities which surround with different hazards. Most of the company has many manuals, rules, regulations, and checklists. So it is very difficult for a safety officer to remember all the things to do. So it becomes essential for a development of a tool which can remind safety officer that the activities that should be done daily, weekly and monthly. This also helps new safety officer as his tool of assistance which can remind him important jobs to be done priority wise.

According to Cheung et al. (2003) safety and health issues are of very dynamic nature in construction industry. Anytime and anywhere new hazard can be identified and accident may occur. For that purpose sometimes safety officers require expert advice and instruction. It will be advantageous for a safety officer if a tool is designed to enable online expert advice and instruction.

More over Cheung et al. (2003) emphasized on the requirement of a detector of potential risks and hazards which can able to highlight with a warning sign to the activities that required immediate corrective action.

Kartam (1997) has identified three main elements who are obligated to provide safe work environment. They are owner, contractors and regulatory agencies. All this three elements has different needs towards safety. Owner needs a tool to monitor and control safety during construction and to assess safety plans as criteria for selecting a contractor. According to Kartam (1997) contractors need a tool by which to actively integrate safety and health measures into project planning.

Mr. Bhaskar Jyoti Das conducted a study which main objective was to develop an information technology application, which can facilitate construction safety officials to manage health and safety. In order to obtain the main objective, the following sub-objectives must be fulfilled: (1) to identify and understand the safety practices; (2) determination of the system requirement; (3) design and development of the databases system to store safety information; and (4) to design and development of Information Technology (IT) application.

Conclusions

Identification of Safety Practices
After reviewing the literature in construction safety and by interviewing different safety officers, the various safety practices in construction industries are identified. Those are listed below.

- Management roles & responsibilities
- Work method statements
- Safety Planning
- Orientation
- Training
- Safety Meeting
- Toolbox Talk
- Audit of Safety Performance
- Records and Reporting
- Accident Investigation
- Health and Safety Promotion
- Development of Emergency Response Plan
- Risk identification, assessment & control
- Global minimum requirements
- Software use

These practices are used in determining the requirement of the IT application.

Determination of System Requirements
To solve all the problems mentioned above, the construction industry demands a computer application which can be used for planning, monitoring and trending.

· Linking of safety information with project scheduling software like Primavera Project Planner and Microsoft Project.
· Planning of occupational health and safety issues accordance with the project schedule.
· Activity wise citation of occupational health and safety issues for the purpose of review and discussion in safety meetings.
· Addition or modification of safety library anytime
· Safety assessments which address the specific hazards of the site
· To monitor the performance using the data gathered from safety audit.
· Using historical data, to find out the trend of safety performance.
· Remind the user for required safety practices need to perform
· User friendly and compatible with Windows operating system

Considering the above mentioned requirements as baseline, the computer application ACSM-PMT is designed and developed.

Development of the Database System
For planning, monitoring and trending, the system needs to store all the information in a safe and secure location for easy access. A database would be ideal to store all the information. Four different databases have been developed:

Project Schedule: To store the project schedule imported from Primavera Project Planner or Microsoft Project.

Safety Library: To store Hazards and their related information

Safety Records: To store the data from safety audit and accident investigation report

Utility: To store user information, administrator information, and project information.

Development of IT Application
The IT application ACSM-PMT is basically a database management application. This IT application retrieves relevant information from the Database System to present them in a familiar format based on user specifications. The application can use for planning occupational health and safety aspect accordance with the project schedule. Along with the planning, ACSM-PMT can generate work method statement for the activities. The safety audit checklist specifically directing the onsite hazards and accident investigation reports can also be generated. It gathers data from the safety audit and recalculates it in order to be displayed in safety meter graphs. Based on the data accumulated from the safety audit, the user can additionally use the application to compare the performance between various projects. In addition the system can also use for risk analysis based on the collected data from the safety audit and accident investigation report. A reminder function is developed to remind the safety officer about the onsite hazards which are also linked with the corresponding general guidelines files of the hazards for their reference.

The IT Application has been developed using Visual Basic (VB). VB 6.0 was used since it is easy to deploy the project in Microsoft Windows. VB additionally provides a very user-friendly environment. For displaying the results Microsoft Excel and Microsoft Word has been used.

Evaluation
The evaluation was done in two stages i.e. system verification and system validation. For system verification, initially a case study was developed to test the system. Implementing the case study, all the functions were tested and the system was running as per expectations. All the functions gave error free results both in terms of required information and visualization. Connections and query between the databases were found to be established successfully.
Validation was carried out to determine its utility in he construction field by demonstrating the application ACSM-PMT in front of experts in the field of construction. The experts rated the applicability of the system as useful for the construction industry. On the average the system is also rated as easy to use.

His thesis abstract is copied and posted.

Abstract

Saving lives and reducing injuries is crucial for every construction business. Construction companies can save money and improve productivity by using an effective health and safety program. This thesis aims to develop IT software capable of managing health and safety issues by Planning, Monitoring and Trending/Analyzing. It is planned to be used as a supporting tool for the safety officers.

The system requirements are gathered from literature review and interviewing safety officers. Based on the requirements, the databases and the IT application are designed and developed.

This software imports project schedules from Primavera Project Planner and Microsoft Project, and links with the safety library. The user can view information regarding the risk level of on-going activities, their work method statement, and other information. The safety audit checklist and accident investigation reports can also be generated. The system additionally supports safety meter graph, and can be used to compare the safety performance of different projects.

As a final step of this work, the software has been tested for its accuracy and reliability by taking some case studies under consideration. On the brighter side, the outputs obtained for the case studies have been quite satisfactory. This implementation of the software on case studies and the outputs thus obtained have been demonstrated in front of experts in the field of construction for their much sought after comments and suggestions. Based on feedback from the experts, it can be concluded that the system can be successfully used in real-time for planning, monitoring and trending/analyzing safety performance in construction industry.

Special Purpose Vehicle (SPV) For Infrastructure Projects Financing Through Public Private Partnerships (PPPs)

In managing and controlling the construction projects, there are two basic features which go hand in hand ‘project management’ and ‘project finance’. In general, most of the people especially engineers are aware of the project management aspects while they do not pay much attention to the project financing. As a result, most of the project failures and project delays arise due to the lack of the reliable financing which is the main blood stream in developing the infrastructure projects.

Project financing in the form of Public Private Partnership (PPP), Asset Backed Securitisation (ABS) are now becoming popular and in some cases a mandatory investment technique. Projects have traditionally relied upon project finance techniques with debt being made available by commercial banks often from financial institutions and/or multilateral financing agencies. But to accumulate loans, long term debt, subordinated or senior debt, equity, quasi-equity against the project is not an easy task. Alternatively, securitisation offers an attractive potential alternative for generating capital to finance the projects. More and more major infrastructure financing are now using securitisation in conjunction with more traditional project finance techniques. Such in the popularity of securitisation, the experts are estimating that it will only take 10 to 15 years for it to replace traditional bank-lending (Project Finance International). Therefore, in light of such estimates, it is imperative to have basic knowledge of public private partnership, securitisation role in the projects by parties involved especially engineers on it.

Typically, creating an SPV allows privately managed infrastructure projects, either at the stage of construction and/or operation, to enjoy most degree of isolation. In most cases the use of an SPV is a requirement imposed on the private agent by the public sector, the financiers, the guarantors or the contractors of the project. The special purpose vehicle (SPV) conceptually can be divided into two as in legal and financial view point. This research is limited to the legal and financial framework analysis of SPV in PPP projects. So, it can be described as special legal purpose vehicle and special financial purpose vehicle.

SPV varies depending on the legal and financial agreements with stakeholders in a project. Moreover, different infrastructure projects have different structure of SPV. For example, Power Purchase Agreement (PPA), telecommunication, gas and oil, mining or even water treatment projects the structure of SPV is quite different and unique. Therefore, no single SPV structure is suitable for all PPP projects.

In project financing, the special purpose vehicle, the consortium or project company what would be it named is the hub and the desired financing depends on its functionality, its linkage to varies participants involved in the project. Mr. Abu Naser Chowdhury conducted a research which objectives is to find the following:

- Comparison of various SPV models used in many worldwide projects to search for essential attributes which strengthen the development of the model
- Investigate the forces in SPV development process and potential solutions on legal and financial framework
- Propose a prototype SPV that can be adaptive for infrastructure projects – a guideline

Conclusions

Project finance transactions in public-private partnership projects are complex contractual arrangements among a number of different parties with different objectives. Such transactions can work only if the needs of the private and public sector can be met in an appropriate manner. Financing is the essential part for all these activities; a special purpose vehicle is formed for this issue. It is true that the financing of infrastructure project depends on the anticipated financial performance of the SPV. A proper financial structure needs to set by the special purpose vehicle not only for tapping funds from lending institutions but also for operation and service for the project itself.

The purpose of studying special purpose vehicle for infrastructure projects financing through public private partnerships is to (1) identify the financial components for the development of SPV (2) the legal framework requirements, and (3) finally, propose a guideline as a decision support tool for special purpose vehicle in infrastructure projects financing. The research is carried out by examining 12 worldwide public-private partnerships projects. The focus is to identify and evaluate various components of special purpose vehicle used in those projects. After that, four IPP and two desalination projects in Asia and Mediterranean Middle East are screened out for in-depth analysis on (1) financial sources and strategies (2) market conditions (3) securities and agreements (4) legal framework and support and (5) credit enhancement. The analysis is taken into the financial and legal issues related to project vehicle. A qualitative research is prepared where the data collection techniques are case studies.

From the analysis, the attributes of project vehicle for infrastructure project financing can be divided into five categories; (1) finance-ability (2) sources of funds (3) securities and agreements (4) sovereign support and (5) credit enhancement. All these five attributes are essentially important for financial and legal risk consideration too.

Finance-ability: It is vital to structure the financial attributes of special purpose vehicle. In this respect the foremost duty is to set and check the finance-ability attributes of the project. The structure is the ‘sell idea’ to attract funds from lending and financial institutions. The analysis reveals that Dabhol project had high financial and legal risks involved in it. In finance-ability category, the rigid ‘hell-or-high water’ agreement, foreign supply contract with absence of performance guarantee, high tariff rate and above all direct negotiation to achieve contract had made the project vehicle risky in all aspects. Paiton 1 project in Indonesia is also suffered in financial ground due to high tariff rate. This happened as the supply contract was costly, no performance guarantee provided by the supplier, had little experience in this business and not at all creditworthy. The Indonesian government did not provide counter guarantee for off-take thought it provided ‘comfort letter’ a sort of payment security.

Sources of funds: In question of sources of fund (if domestic capital market contribution is not significant) the sponsors must consider World Bank as the first and foremost option. The host government can take the world bank’s help for subordinated debt financing mechanism and ensuring partial credit guarantee and/or partial risk guarantee to attract other lending institutions in debt financing for the project. Export credit agencies, bilateral banks are in a better position to compel the government to meets its obligations to the project investors and lenders. The support of ECA is sometimes crucial in the project finance market. These agencies need to be selected carefully according to the risks and mitigation strategy set by the project vehicle because most of the ECAs engage in buying-off the host government which in terns charges high premium from the project.

Securities and Agreements: Securities and agreements need to be transparent, concrete and creditworthy. For developing countries particularly in Asia, the contract awarding process must be ‘competitive’, no matter what the situation exists. It has been found that two projects used direct negotiation as awarding contract were Dabhol and Paiton 1. The direct negotiation of achieving the contract had huge impact of mistrust to the project. Skikda desalination project in Algeria initiated in 2004 where the supplier contract, performance guarantee has not set yet. It is found that the project attracted foreign investors, EPC contractors from Spain, achieved MIGA guarantee but payment security like escrow account and host government payment guarantee has not finalized.

Sovereign Support: Government should step in and provide guarantees to the investors in terms of payment guarantee, comfort letter etc. The performance guarantee and counter guarantee to the central bank for foreign exchange availability and transfer. It is found that in HUBCO project, Pakistan government had extended its sovereign support for successful financial structure of SPV regarding to fund accumulation, guarantees to payment and performance even foreign exchange by the central bank of Pakistan.

Credit Enhancement: Sponsors’ contingency equity support played a big role in credit enhancement in Paiton 1 project, Indonesia. This not only attracted financing by private offshore and export credit agencies but also this helped at the time of restructuring debt mechanism. The subordinated debt mechanism was also acted as credit enhancement in HUBCO and Ashkelon project which was set by these two projects on different mechanism.

Finally, it is found that improper setup of SPV in Dabhol project made Indian Government to renege the project, Paiton 1 in Indonesia to restructure the debt financing repayment after a difficult settlement among the stakeholders. At the end, a prototype SPV is proposed as a decision support tool to the experts, government entities, sponsors and lending institutions which helps as guideline.

Recommendations for the Prototype SPV

The prototype special purpose vehicle has been structured on considering financial and legal attributes. Based on findings from the information of diverse situations, the SPV is been structured on finance-ability, sources of fund, securities and agreements, sovereign support and credit enhancement areas. The applicability of the SPV structure will depend on selecting the attributes suitable on that particular condition of the situation exists. The proposed guideline will help the policy maker of the government sector, project sponsors to foresee the essential attributes governing the financial and legal aspects at the time of structuring the SPV framework.

His thesis abstract is copied and posted.

ABSTRACT

The development of special purpose vehicle (SPV) is essential for successful financial closeout of public-private partnership (PPP) projects. The financing of infrastructure projects depends on the anticipated financial performance of the SPV. Ambitious and improper setup of SPV causes suffering to project, forces restructuring debt mechanism and even bankruptcy to giant companies. Concerted efforts from the government and private sectors, as well as political, legal and financial issues need to deal with for smooth mechanism of SPV. These issues have been identified and evaluated from twelve worldwide infrastructure projects. It is found that different projects used different SPV structure. An Attempted has taken to identify the attributes governing the setup of SPV in those cases. Furthermore, six cases out of twelve in Asia and Mediterranean Middle East are screened out for in-depth analysis on financial strategies, legal framework, contract, securities for the SPV framework. The findings are based on a variety of diverse situations.
Finally, a SPV structure for infrastructure projects in general has been developed, addressing key issues in five areas: (1) finance-ability; (2) sources of funds; (3) securities and agreements; (4) sovereign support; and (5) credit enhancement. The research findings should enable public as well as private sector clients to establish more efficient SPV with respect to financial framework for infrastructure projects.