Developing oil refining and petrochemical industry is an index for success of each country’s industrialization because it is a spearhead industry with an essential role that widely influences many aspects of the national economy. Vietnam is one of the leading countries in Southeast Asia, after China, Indonesia and Malaysia, having large crude oil reserves.
The project to build Dung Quat Oil Refinery is a national key project in oil and gas field that is of great significance for social and economic development in Vietnam’s Central region in general, and Quang Ngai Province in particular. Investment in the construction of Dung Quat Oil Refinery will help facilitate domestic crude oil processing, step by step to ensure energy security and reduce reliance on petroleum imports, and contribute to boosting national industrialization and modernization.
Dung Quat Oil Refinery was built in Binh Tri and Binh Thuan Communes, Binh Son District of Quang Ngai Province, under the planning of the Dung Quat Economic Zone. Together with a deep-sea port system and the bay out of wind, it creates a strategic position in the Central key economic area. When invested for development, this area will have a very important role in security and national defence, as well as economic interaction and integration.
In order to minimize the interfaces and reduce any conflicts between the separated Contractors and the Owner during executing a grass root refinery project, Owners normally prefer to award and sign an EPC contract with an EPC contractor. Mr. Dinh Van Ngu made a study during the precommissioning and commissioning phase for the EPC contract of DungQuat refinery project due to limited time. The problems of his study were to; (1) define and describe the precommissioning and commissioning organisation, roles and responsibilities; (2) provide information as to how precommissioning and commissioning is to be executed and controlled; and (3) the sequence in which process and utility Units shall be commissioned.
An EPC contract is generally applied for developing a Refinery project, in case of problems or disputes happen during the project execution, then these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract. Therefore the objective of his report was focused on the following issues related to EPC contract:
i. To study organisation, roles and responsibilities of EPC contractors;
ii. To study executed and controlled the precommissioning and commissioning phase in accordance with the signed Contract;
Conclusion
To ensure a successful implementation of this phase of the Project, Owner must have full support from its Stakeholder and the Government. The Owner must have a strong leadership and commitment from senior management throughout the execution of the Project. The availability and competency of the Project Management core team also contribute an important factor during the initial/ preparation phase when the rest of the team will be mobilized. As many cost-schedule trade-off areas may be required, Owner must prepare a strong financial status and willing to accept or compromise some commercial terms.
The results from this study have identified that the Managing of Precommissioning and Commissioning phase play important roles on Project. In this report, Mr. Dinh’s identified the most important key success in managing EPC pre-commissioning and commissioning phase of the project based on his real experience. These are the following:
1. Safety system and site safety team: it is essential for the success of commissioning phase that the Safety system must be in place. During the commissioning phase, there are still many activities that belong to the construction phase. Therefore the site safety inspection team is vital for keeping safe situation at site.
2. Organizational structure that fits to the Commissioning phase: To have a suitable organization with full authority at site and proper coordination procedures is a key for success of commissioning stage. It should be noted that both EPC and Owner must nominate the Commissioning Manager position who will take sole responsibility and single contact point for any decision making related to the commissioning.
3. Qualified and experience commissioning staff in all disciplines: having experienced staff who has several commissioning assignments will be the key for success. He/she will lead the team to conduct the required activities because they know exactly what to do and how to do it following the general commissioning procedures and guidelines. Therefore having experienced staff in the team will help to reduce risk of schedule slippage, avoid common problems and failures and help the team do it right first time.
4. Approval authority for site team for any additional work: During the commissioning of the plant with such complex like Dung Quat refinery, there are many new issues that may raise. For that reason Commissioning manager and its team must be authorized to take the decision, cross the table without any delay.
5. Availability of Utilities: service water, electricity, instrument air, plant air, nitrogen, steam and some chemical for chemical cleaning, passivation of piping must be available at anytime in sufficient quantity to meet the commissioning requirement. It was experienced that during the commissioning phase of Dung Quat refinery project, there were several electrical cut-off from the EVN net work that make the commissioning activity interrupted and delayed the overall schedule.
6. Work Permit System: Having proper Work Permit System in place will ensure that work activities are in good order and sequence.
7. Coordination between EPC team and OWNER's team: Owner team will normally support EPC team for any commissioning activities. Any misunderstanding between the two parties may have impact to the schedule, that’s why a clear coordination procedure must be agreed and implemented.
8. Roles of daily coordination meetings: there are many activities happen daily and new activities raise that require discussion and agreement before conducting the work.
9. Equipment availability: commissioning equipment like crane, vaccum trucks, portable pumps, instrument portable devices, tools, analyzers, etc. must be available at any time for commissioning needs.
10. Maintenance workshop& its equipment readiness: this will ensure that many broken part of the equipment, material, etc. can be repaired at the site workshop to save time of commissioning.
11. Commissioning Spare parts; Tools & Materials availability: any spare part missing like flanges, gaskets, bolt and nuts, mechanical seal, thermo couples, etc. that may takes months to get it delivered at site therefore commissioning spares must be kept in sufficient quantity at site.
12. Ready stage from Construction phase- Mechanical Completion: for any section of Plant or unit, it must be mechanically complete before any commissioning activities but note that between section, there may be some overlapped activities of construction and commissioning can do in parallel.
13. Detailed level III, IV schedule for each Section and each discipline: this will help the team know exactly what to do next for each area, each disciplines and can plan ahead and prepare for incoming activities.
14. Vendor technical representatives availability: there are many major equipment that EPC staff does not have a specialized knowledge to commission the equipment first time that’s why it is mandatory to have vendor representative at site to support and advice on commissioning and start-up of such equipment like compressors, turbines, fired heaters, boilers, major motors, major pumps, etc.
15. Quick resolution of Punchlist and outstanding technical issues: from a public source of data, it is known that there are over 100.000 punchlist items found by EPC and Owner team during the plant check and inspection against specifications and requirements. It requires lots of time, effort, manpower and cost for fixing, correcting, replacing, etc. such items. This is considered as most time impact for the plant completion.
16. Availability of Commissioning procedures: without procedures, commissioning work may be delayed, prohibited and more chance for mistake.
17. Access of Project database and Vendor document: these document must be available for reference, guidelines and also used for making procedures.
18. Roles of good document control.
19. Rotation of shift work round- the- clock concept: Commissioning work is very time consuming and happen in continues manner so the activities must be taken 24 hour a day and shift work is required.
20. Availability of sub-contractors: they will provide manpower, tool, and equipment for commissioning therefore it is important to mobilize subcontractors to work at site.
21. Impact of weather conditions: any rain, thunder storm, flood of water at site will impact to the schedule. The commissioning if cannot avoid from raining/ bad weather season, EPC and Owner must be aware and prepare for that to minimize damages due to flooding or storm. As well as ensuring suitable condition and schedule to work during the bad weather season.
The initial assessment will consider items such as those above to ensure timely correction of operational and maintenance issues that affect the ongoing refinery operation.
Finally, with the limit time, the author was not discussed all the problems in Precommissioning and Commissioning phase in the thesis. Author wants all readers and colleagues have practical suggestions and comments for the thesis are more effective.
His thesis abstract is copied and posted.
Abstract
In the process of industrialization and modernization in Vietnam, the construction of Dung Quat Oil Refinery is considered an extremely important step to lay a foundation for the spearhead industry of the country. Capitalized at over 2.5 billion USD, the Dung Quat Oil Refinery Project will effectively meet the demands on jobs, shifting the economic structure, increasing the State budget and developing other services of the locality during the construction and operation periods. The construction of Dung Quat Oil Refinery also encourages domestic and foreign investors to invest in Dung Quat Economic Zone in the fields of chemical industry, engineering, manufacturing and installation industry, ship building and repairing, steel refining and laminating, transport, electronics, processing and other industries. With its scale and significance Dung Quat Oil Refinery is considered the heart of Dung Quat Economic Zone.
The formation and implementation of the project on Dung Quat Oil Refinery, the first of this kind in Vietnam, have lasted many years and experienced through different periods and with various forms of investment. The decision to build Dung Quat Oil Refinery with Vietnam’s own investment in 2003 showed the great determination of the Vietnamese Party and State in the strategy to ensure national energy security and promote national industrialization and modernization. Deeply aware of the project’s significance and with responsibility of an investor, Vietnam National Oil and Gas Group has been concentrating all sources on the management and supervision of the project to ensure construction of the refinery to be completed on schedule, safely and with high quality.
This study will also discuss on point of view and how to managing the precommissioning and commissioning phase for the EPC contract of DungQuat refinery project that can be happened during the project execution phase.
Monday, 19 July 2010
Thursday, 15 July 2010
Contract Management How Owners Can Be Responsible For Changing Orders In Oil And Gas Project Management
Many oil and gas projects endure cost overrun or delay due to change order. Contractors send many change order requests to owner but many owners do not respond on time, leading to project delay. Contractors have to spend extra time waiting for owner’s approval, and claim extra payment for the project extension. So how could Owner manage change order request on time, to reduce minimum extra money and project could finish on time?
Mr. Do Van Hanh made a study which main objectives were as follows:
- How owner could minimize change order in pre-contract phase.
- How owner could respond to manage change order during construction phase
- Analyze the practice of change order through a case study of offshore oil and gas construction project.
Conclusion
All construction projects, even the best planned projects have experienced change, cost overrun, impacts, and disruptions associated with implementing the change. The Author realized some keys to managing the change which are: 1) to be knowledgeable about pricing change orders, and understand the potential for changes, to have additional impacts beyond the direct cost of the change; 2) Owner should prepare a contract form with adequate clear clauses, term etc, that prescribe contractor to have response to engineering, procurement, construction and installation, and each parties have to respond with time limit when a change order happens; 3) owner and contractor should set up a good communication; 4) Both owner and contractor should assign contract management and administration to an experienced person; 5) Owner should hire a well-experienced and professional consultant company to manage the project.
1)By understanding and including these costs in early change order pricing, both the owner and contractor can have impacts associated with changes, and can limit conflict and claims later in the project. Furthermore, by understanding and implementing these change management steps, the changes of the parties resolving the outstanding change orders more effectively and efficiently during the construction process greatly increase.
2) If Owner prepares a good contract with adequate clear clauses, term, standard, norm and criterion… that prescribe clear responsibility, authority of each party, it will be easier to have agreements during negotiation.
3) Communication is very important to solve early problems; it helps the owner and contractor to understand each other. If Owner and contractor should set up a good communication mode, both parties will have a trouble-free agreement.
4) If the owner assigns contract management and administration to an experienced person, he or she is knowledgeable about terms, clauses, and how to solve each kind of situation.
5) A consultant will help the owner to gather and can give best advice in solving problems.
His thesis abstract is copied and posted.
Abstracts
Viet Nam is a developing country needs to develop projects to build infrastructure, investment production base is a huge. However, the new approach and experience should not have management contracts particularly weak resolving issues, related to treatment change order. Many owners do not have the experience or the responsible handling of problems arising inappropriately caused the projects’ capital increase, and project delay.
In this report, the author wants to highlight the theoretical overview to investors arising manage and resolve them effectively. Also make some recommendations to reduce the risks of change order due to the project caused.
Furthermore, the authors also offer a case study and analysis baked each issue during project implementation, thereby giving recommendations as well as the lessons and conclusions for management change orders of investors.
Mr. Do Van Hanh made a study which main objectives were as follows:
- How owner could minimize change order in pre-contract phase.
- How owner could respond to manage change order during construction phase
- Analyze the practice of change order through a case study of offshore oil and gas construction project.
Conclusion
All construction projects, even the best planned projects have experienced change, cost overrun, impacts, and disruptions associated with implementing the change. The Author realized some keys to managing the change which are: 1) to be knowledgeable about pricing change orders, and understand the potential for changes, to have additional impacts beyond the direct cost of the change; 2) Owner should prepare a contract form with adequate clear clauses, term etc, that prescribe contractor to have response to engineering, procurement, construction and installation, and each parties have to respond with time limit when a change order happens; 3) owner and contractor should set up a good communication; 4) Both owner and contractor should assign contract management and administration to an experienced person; 5) Owner should hire a well-experienced and professional consultant company to manage the project.
1)By understanding and including these costs in early change order pricing, both the owner and contractor can have impacts associated with changes, and can limit conflict and claims later in the project. Furthermore, by understanding and implementing these change management steps, the changes of the parties resolving the outstanding change orders more effectively and efficiently during the construction process greatly increase.
2) If Owner prepares a good contract with adequate clear clauses, term, standard, norm and criterion… that prescribe clear responsibility, authority of each party, it will be easier to have agreements during negotiation.
3) Communication is very important to solve early problems; it helps the owner and contractor to understand each other. If Owner and contractor should set up a good communication mode, both parties will have a trouble-free agreement.
4) If the owner assigns contract management and administration to an experienced person, he or she is knowledgeable about terms, clauses, and how to solve each kind of situation.
5) A consultant will help the owner to gather and can give best advice in solving problems.
His thesis abstract is copied and posted.
Abstracts
Viet Nam is a developing country needs to develop projects to build infrastructure, investment production base is a huge. However, the new approach and experience should not have management contracts particularly weak resolving issues, related to treatment change order. Many owners do not have the experience or the responsible handling of problems arising inappropriately caused the projects’ capital increase, and project delay.
In this report, the author wants to highlight the theoretical overview to investors arising manage and resolve them effectively. Also make some recommendations to reduce the risks of change order due to the project caused.
Furthermore, the authors also offer a case study and analysis baked each issue during project implementation, thereby giving recommendations as well as the lessons and conclusions for management change orders of investors.
Tuesday, 13 July 2010
Contract Clauses In EPC Thermal Power Projects: A Case Study Of Hai Phong Thermal Power Project
Demand of electrical energy in the world is increasing very fast with the development of economic and population growth in the global. In Vietnam, there are 27 Thermal power plants (TPP). The overall project duration for developing a thermal power factory is normally take 2 to 3 years depending on the size of facilities to be built.
Developing the facilities for a thermal power field such as platform, Thermal power 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 not so many 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 stipulated too generally with unclearly understanding and interpreting when having disputes between the contractor and the project company. Therefore, studying the method to develop the effective clauses in the EPC contract is necessary to simplify and make involved parties to understand and interpret clearly during 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 thermal project, the thermal power 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:
i. Take time to make the clarification and finalization before contract signing;
ii. Wrong understanding and interpreting of stipulated clauses in the contract;
iii. Conflict between contractor and the project company during project execution.
An EPC contract is generally applied for developing the thermal power project, in case of problems or disputes happen during the project execution, then these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract. Mr. Bui Tien Dung made a study which focused on the following issues related to EPC contract:
i. To study EPC contract process and management from literature review;
ii. To study the contract clauses in EPC thermal power project;
iii. To study the implementations of the contract clauses and their performance with reference to project advantages and problems.
Conclusions
Results from this report discussed and focused on some clauses applied for an EPC contract for developing a thermal power project as well as other EPC contracts in the construction industry. 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 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.
Conclusion for important clauses in the contract that clearly identify risk, roles and responsibilities of each party
As discussed above, the EPC contract is quite complicated in term 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 performance.
The Owner wish to transfer all of the construction risks to the contractor and be certain of his commitment. Usually, the responsibility for the package is vested in a single contractor, and bid evaluation is straightforward. The contractor agrees to carry out the work for the amount of money stated in the contract regardless of its actual cost as long as there is no change or breach of the contract from the owner. This is quite common for schools, warehouses and similar works where the scope is relatively well defined and the work is straightforward.
In this project, a fixed price lump sum turnkey contract is identified as the most suitable contract strategy provided the project could be completed within the owner’s budget. The owner can utilise model forms for the contract based on other projects procured in this manner.
Conclusion for the EPC project performance and how the contract contribute to the performance
The contract clauses are the most important tool to manage the EPC project. Therefore, the involved parties (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 to the performence.
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.
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, etc.
His thesis abstract is copied and posted.
Abstract
Nowadays, the EPC contract is very wide applied in energy industry (specially in thermal projects) in this Region for developing an energy 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 a thermal power field such as platform, Thermal power 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 not so many 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 stipulated too generally with unclearly understanding and interpreting when having disputes between the contractor and the project company. Therefore, studying the method to develop the effective clauses in the EPC contract is necessary to simplify and make involved parties to understand and interpret clearly during 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 thermal project, the thermal power 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:
i. Take time to make the clarification and finalization before contract signing;
ii. Wrong understanding and interpreting of stipulated clauses in the contract;
iii. Conflict between contractor and the project company during project execution.
An EPC contract is generally applied for developing the thermal power project, in case of problems or disputes happen during the project execution, then these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract. Mr. Bui Tien Dung made a study which focused on the following issues related to EPC contract:
i. To study EPC contract process and management from literature review;
ii. To study the contract clauses in EPC thermal power project;
iii. To study the implementations of the contract clauses and their performance with reference to project advantages and problems.
Conclusions
Results from this report discussed and focused on some clauses applied for an EPC contract for developing a thermal power project as well as other EPC contracts in the construction industry. 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 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.
Conclusion for important clauses in the contract that clearly identify risk, roles and responsibilities of each party
As discussed above, the EPC contract is quite complicated in term 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 performance.
The Owner wish to transfer all of the construction risks to the contractor and be certain of his commitment. Usually, the responsibility for the package is vested in a single contractor, and bid evaluation is straightforward. The contractor agrees to carry out the work for the amount of money stated in the contract regardless of its actual cost as long as there is no change or breach of the contract from the owner. This is quite common for schools, warehouses and similar works where the scope is relatively well defined and the work is straightforward.
In this project, a fixed price lump sum turnkey contract is identified as the most suitable contract strategy provided the project could be completed within the owner’s budget. The owner can utilise model forms for the contract based on other projects procured in this manner.
Conclusion for the EPC project performance and how the contract contribute to the performance
The contract clauses are the most important tool to manage the EPC project. Therefore, the involved parties (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 to the performence.
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.
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, etc.
His thesis abstract is copied and posted.
Abstract
Nowadays, the EPC contract is very wide applied in energy industry (specially in thermal projects) in this Region for developing an energy 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 July 2010
Cash Flow Projection Management For Small – Medium Sized Vietnamese Contractors
Construction is a complicated business that faces ever-changing conditions. Those who are not prepared or capable of meeting these demands may ultimately fail. Cash is the most important of the construction company resources, because of failure of cash management more than inadequate management of other resources (Singh and Lakanathan, 1992; Navon, 1994b). That inadequate cash resources are a cause of failure would rarely be disputed. However, the conclusion that temporary shortages of working capital may lead to failure might be challenged. The shortage of working capital may be real, and the shortage temporary, but the shortage is predictable and normal.
Mrs. Pham Thi Ngoc Hien conducted a case study which primary objectives were to: (1) study the theory of project cash flow management in construction; (2) synthesize the project management issues related to cash flow projection; and (3) apply project cash flow management into a case.
Conclusions
Theory of cash flow
- This study is useful and limited to small and medium- sized projects. In large project the number of variables should be large and complex and takes long-time duration, it needs the deeper research with the help of software computer and take into account of the time value of money analysis and inflation affects. However, in the large project that consists of many smaller subprojects, these financing solutions may help bring the requirements and paybacks which are used as information or inputs to large projects.
- Adequate cash flow management benefits not only in cost control and assists profit acquisition for contractors but also contribute to other management skills. Individual project net cash flows contribute to and from the organizational cash flow which directly relates to the financial health of the organization. The key aspect to cash flow is to understand the way project cash flows layer over each other to generate organizational cash flow. A secondary aspect is to understand that organizational cash flow is dependent on the individual project profiles. Manipulation of these layered profiles has the capacity to change the organizational. In turn it is the overall management of a portfolio of net cash flow which determines the success of the whole organization. The aim of cash flow projection is to maintain the positive or at least manageable cash flow. In cash flow projection, the management of the timing of payments most important to the effective management.
- Cash flow management helps the contractor in inspecting project financing issues , resource usage and can be a useful tool to prove with banks.
- Combining the cash flow management and earned value technique, a project can be, a project can track the real status of progress, detect any early cost deviation, suggest payment strategy and be a factor that affects the scheduling for the coming projects.
Project management issues related to cash flow management
- Cash flow forecast should be made at all phases of the construction process. Cash flow can be contributed to tendering stage to decide the agreement of the contract payment terms and schedule, decide whether accept or reject the bid; to construction stage to determine capital have to be available at a time, track the real status of the project ,set out a financial plan to recover costs; and retainage management.
- In project scheduling problems resources-constrained issue is generally considered essential for contractors as a means; furthermore there is an involving of cash flow in project scheduling. Contractor thus can evaluate appropriate project schedules under associated constraints, and arrange activities and resources.
- A company level cash flow model must be based on cash flows of all the company’s individual projects. The use of cash flow management at company level or project level helps the company to be in active position in any financial related decisions.
Applying project cash flow management theory into a case study
- In portfolio project cash flow contractor should avoid accept the schedule and payment that caused the cash outflow and inflow of projects at the same time. Although following an abundant cash inflow. This cause a load at a time and an abundant at other.
- Small to medium Vietnamese should consider cash management as rational and idiographic evaluation in integration with empirical evaluation rather than only empirical process which focused solely on the project margin.
- The contractor doesn’t need to have a large working capital to run the operation of projects, just managing well the cash flow.
Her thesis abstract is copied and posted.
Abstract
Cash is the most important of all business’s resources. Many construction companies fail not because of technique or skills but the insufficient cash flow management (Singh and Lakanathan, 1992; Navon, 1994b). In progress-payment contracts, the contractor is paid for the work performed based on progress reports made at specified intervals. The owner holds back a percentage of the payments until the project are completed. The insufficient of time and amount of money contractor receives from client and pay to their supports causes the financial problems. This study provides concepts and tools that can be applicable during the construction phase based on the planned earned value and the actual incurred cost on a project from a general contractor’s viewpoint as the cash flow projection’s role integration to project management. Combining the cash flow and earned value technique, a project can track the real status of progress, detect any early cost deviation, suggest payment strategy, adjusting the planned schedule and be a factor that affects the scheduling for the coming projects.
Keywords: Percentage, Payments, Project, Insufficient, Construction, Lakanathan, Schedule, Technique
Mrs. Pham Thi Ngoc Hien conducted a case study which primary objectives were to: (1) study the theory of project cash flow management in construction; (2) synthesize the project management issues related to cash flow projection; and (3) apply project cash flow management into a case.
Conclusions
Theory of cash flow
- This study is useful and limited to small and medium- sized projects. In large project the number of variables should be large and complex and takes long-time duration, it needs the deeper research with the help of software computer and take into account of the time value of money analysis and inflation affects. However, in the large project that consists of many smaller subprojects, these financing solutions may help bring the requirements and paybacks which are used as information or inputs to large projects.
- Adequate cash flow management benefits not only in cost control and assists profit acquisition for contractors but also contribute to other management skills. Individual project net cash flows contribute to and from the organizational cash flow which directly relates to the financial health of the organization. The key aspect to cash flow is to understand the way project cash flows layer over each other to generate organizational cash flow. A secondary aspect is to understand that organizational cash flow is dependent on the individual project profiles. Manipulation of these layered profiles has the capacity to change the organizational. In turn it is the overall management of a portfolio of net cash flow which determines the success of the whole organization. The aim of cash flow projection is to maintain the positive or at least manageable cash flow. In cash flow projection, the management of the timing of payments most important to the effective management.
- Cash flow management helps the contractor in inspecting project financing issues , resource usage and can be a useful tool to prove with banks.
- Combining the cash flow management and earned value technique, a project can be, a project can track the real status of progress, detect any early cost deviation, suggest payment strategy and be a factor that affects the scheduling for the coming projects.
Project management issues related to cash flow management
- Cash flow forecast should be made at all phases of the construction process. Cash flow can be contributed to tendering stage to decide the agreement of the contract payment terms and schedule, decide whether accept or reject the bid; to construction stage to determine capital have to be available at a time, track the real status of the project ,set out a financial plan to recover costs; and retainage management.
- In project scheduling problems resources-constrained issue is generally considered essential for contractors as a means; furthermore there is an involving of cash flow in project scheduling. Contractor thus can evaluate appropriate project schedules under associated constraints, and arrange activities and resources.
- A company level cash flow model must be based on cash flows of all the company’s individual projects. The use of cash flow management at company level or project level helps the company to be in active position in any financial related decisions.
Applying project cash flow management theory into a case study
- In portfolio project cash flow contractor should avoid accept the schedule and payment that caused the cash outflow and inflow of projects at the same time. Although following an abundant cash inflow. This cause a load at a time and an abundant at other.
- Small to medium Vietnamese should consider cash management as rational and idiographic evaluation in integration with empirical evaluation rather than only empirical process which focused solely on the project margin.
- The contractor doesn’t need to have a large working capital to run the operation of projects, just managing well the cash flow.
Her thesis abstract is copied and posted.
Abstract
Cash is the most important of all business’s resources. Many construction companies fail not because of technique or skills but the insufficient cash flow management (Singh and Lakanathan, 1992; Navon, 1994b). In progress-payment contracts, the contractor is paid for the work performed based on progress reports made at specified intervals. The owner holds back a percentage of the payments until the project are completed. The insufficient of time and amount of money contractor receives from client and pay to their supports causes the financial problems. This study provides concepts and tools that can be applicable during the construction phase based on the planned earned value and the actual incurred cost on a project from a general contractor’s viewpoint as the cash flow projection’s role integration to project management. Combining the cash flow and earned value technique, a project can track the real status of progress, detect any early cost deviation, suggest payment strategy, adjusting the planned schedule and be a factor that affects the scheduling for the coming projects.
Keywords: Percentage, Payments, Project, Insufficient, Construction, Lakanathan, Schedule, Technique
Thursday, 8 July 2010
Implementation Problems Causing Cost Overrun Of World Bank-Supported Construction Projects: A Case Study In Afghanistan
The World Bank's projects have very important role in achieving strategic goals of the Afghanistan National Development Strategy (ANDS) that is a five year development plan to carry out the country's development cycle further than the post-conflict situation. The present environment of the country that is the implementation domain of all development projects, is currently effected by number of difficulties such as lack of security, lack of complete governance, corruption, lack of adequate infrastructure, and poverty. Since, the solution process of these challenges may take longer time as it is indicated in the ANDS in URL1 (http://www.ands.gov.af), planning, and implementing development projects in such environment may be more difficult than implementing them in a stable field. The uncertainty of problems against successful implementation of projects makes the risk management processes more complicated; therefore, most of preventing assumptions become not applicable, or projects even face new and unpredicted circumstances. Dealing with these un-forecasted barriers, in order to run and to complete the projects, not only requires extra managerial challenges, but it often causes project delay, and further expenditures than the estimated budgets.
In brief, the on-time completing the World Bank-supported projects in Afghanistan within the approved budgets is difficult because of an uncertain environment and many aspects of problems. Most likely, every unexpected constraint, and implementation risks have to be compensated by accepting some additional expenditures, the amounts of which are often too large and significant. On the other hand, executive procedure of providing these additional funds may not be an easy process because of the Bank's policies, Government regulations, and deal of other concerning entities within the country. So, keeping the World Bank-supported projects in Afghanistan within their budgets or at least reducing their extra costs as much as possible, are considered a very important issue for PIUs and the government. In order to take effective decisions in this concern, first of all necessary to be identified particular problems in the area that directly or indirectly cause the projects' cost overrun; second need to be studied the nature of their causations, and finally have to be found out, and applied most suitable methods of controlling these problems.
Mr. Mohammad Sharif made a case study which primary objectives were: (1) identifying what are the significant problems that often cause the World Bank- supported projects‘ cost overrun in Afghanistan; (2) studying the reasons why these problems cause cost overrun; and (3) analyzing how to mitigate the cost overrun risks
Conclusions
1. Although within the uncertain post-conflict environment of the country, in which the construction projects are subject to be implemented different political, legal, organizational, and cultural challenges are likely to affect the sound implementation of the projects finally ending to their cost overruns, most of the identified problems either have been looking like managerial or financial types of problems, or at least arising from these two areas. It means that the project management teams have to study these issues in advance and have to set effective practical plans and strategies to deal with them. A summary of the related areas of the identified problems are given in the table below.
2. Analysis show that the main involving stakeholders of these projects along the implementation phases of the projects' life cycles were the general contractors, the related government departments, and the project implementation units as it was assumed in the conceptual framework below. The most of identified items through the objective one were related to these organizations. The consulting agencies that usually have important role in this interval can be considered either as a part of PIUs or as the general contracting units based on the related points of view. In this research those are reflected on as general contractors.
Accounting Model
(Source: http://systemizesoftware.com/databuilder.aspx)
Since the identified problems are strongly interrelated they can be linked to each other based on a hierarchy of causes and effects according to the logical framework approach of problem solving. After analyzing the case reports, and the related literatures there were found the most likely reasons for the sixteen identified problems as below:
1. The problem of lacking capable construction companies in area is due to:
- Poor technical and managerial skills of site managers and engineers; also, lack of sufficient plants, due to their poor financial capacities.
- Inadequate investigations of capacity issues in establishing a new construction company, and
- Lack of security that impacts the willingness of foreign companies to work in Afghanistan.
2. The main reasons of poor human resource capacities of Afghan construction companies are:
- Ineffective site monitoring by owner organizations
- Non realistic organizational structures of contracting companies
- Poor condition of infrastructure
- Unsafe environment of the country
- Instability of labor market
- Dependence of labor supply to particular agencies, and
- Unsafe working conditions and other de motivation factors
3. Poor financial management of contracting companies are due to:
- Missing preparation of financial plans
- Unavailability of Bank credits
- Unavailability of financial data, and
- Inadequate administration of contracts
4. Delay by contracting companies are cause because of:
- Late start, slow mobilization, late materials and components delivery
- Wrong arrangements with the related government agencies
- Job site accidents
- Missing financial commitments by the partners
- Cash flow limitations, and
- Default
5. Poor involvement of top management in site works is happened because of undertaking several projects by the contractors, or their own businesses
6. Poor contribution of government agencies in fulfilling their committed responsibilities is because of:
- Human resource issues
- Corruption
- Limited annual budgets. and
- Lack of common, and clear goals, strategies, or lack of strong commitments to it
- Bureaucratic administrative systems
7. Dual chains of command comes from:
- Inadequate leadership and ineffective approach of motivation
- Difference between the dynamic requirements of the projects, and the government, and
- Relevance of project to other sources
8. There are no adequate codes for engineering designs due to:
- Lack of a national standard or clear regulation requiring a specific system or code for engineering issues
- Less enforcement of the quality and standardization of construction, and
- Different systems of academic institutions outputs
9. Project risks are not assessed and managed, since there are:
- An extra uncertain environment, and an ongoing military and security challenges in the country
- Lack of detailed and clear risk assessment functions within the PIUs, and
- Partly involvements of project managers with the whole life cycle challenges of the projects due to their late assignments
10. Missing the hierarchy of project planning is the result of:
- Lacking realistic strategic plans in the benefiting organizations that reflect all required projects with its hierarchies and priorities
- Missing the existing strategic plans, and
- Supporting some particular and a specific intervals of the overall plans by some special random investments
11. Incompleteness of design documents are because of:
- Poor contribution of the projects' partners
- Fixed and limited budgets, and
- An ineffective coordination by the project management units
12. Inadequateness of bidding process are caused by:
- Lack of security, authority of warlords
- Corruption, and
- Lack of qualified contractors
13. Variations during the implementation phases are generated due to:
- Constructive changes
- Inadequate design
- Poor coordination arrangements by responsible groups, and
- Lack of security, or authority of warlords
14. Delay in fulfilling financial commitments is occurred because of:
- Incomplete documentation
- Inefficiency of some line departments, and
- Poor financial capacity and management of the committing parties
15. Authority of warlords in the site is due to:
- Lack of security and complete state governance, and
- Ineffective planning, and risk management
16. Inadequate weather can cause difficulties if there is either:
- Some unprecedented critical climate change, or
- The plans and schedules are not effective, and efficient.
3. Since most of the analyzed problems are interrelated through the cause and effect chains, the developed objectives also tend to be common in many cases. Consequently the proposed activities for achieving each objective even in cases of common objectives may be differed because of the natures of the original problems. It means that the various dimensions of the objectives will be supported by variety of activities subject to be performed by several agencies. The summary of the finally developed objectives that are listed in a hierarchical manner in terms of the commonness of the issue are as below:
1. Bringing the security to the country
2. Enforcement the law and regulations in entire aspects of project performance
3. Eliminating corruption from the public sector
4. Improving infrastructure development of the country
5. Full implementation of projects by Government agencies
6. Effective use of the assisted funds
7. Rebuilding the capacity of government agencies
8. Effective coordination with related agencies
9. Improvement of the quality of construction projects
10. Improvement of human resource capacity of Afghan construction companies
11. Improvement of financial viability of construction companies
12. Properly managing the implementation risks
13. Adequate planning & management of project resources
14. Enforcement of safety requirements in construction companies
15. Improving efficiency and effectiveness of monitoring systems
His thesis abstract is copied and posted.
Abstract
The World Bank-supported projects in Afghanistan that significantly contribute implementation of the country's national development strategy are often affected by cost overrun issues caused by a variety of problems in the current post-conflict environment of the state. The implementation phase; in which the several sub-components of the projects are executed in the area under direct responsibility of the government agencies, and technical consultancy of the project implementation units, are considered as a problematic stage of the projects' life cycle. A qualitative research based on case studies was designed to contribute the prevention of cost overrun problems of such projects through identifying the problem items; analyzing the causes; and proposing effective strategies for solving them. The methodology consists of determining research assumptions, data collection criteria, and developing interview forms through a literature review; preparing case reports; analyzing the cause and effect natures of the problems; converting the main causes to the objectives; and finally setting up the effective strategies for achieving them. The collected data encompassed different cost overrun cases of five construction projects in Balkh and Faryab provinces of Afghanistan under the two major "Strengthening the Higher Education" and" the National Solidarity" Programs supported by World Bank. Through the cross-case analyses were identified sixteen items concerned to the main three stakeholders such as the general contractors, the related government agencies, and the project implementation units. By structuring the cause and effect trees, there were listed out most likely causes of each problem, from which were developed the related long and short term strategies after converting them to the objectives. The long term strategies, some of which were already the parts of Afghanistan National Development Strategy were concerned to a numbers of the government agencies. Some non government agencies such as the Afghanistan Reconstruction and Development Services through which procurement of the projects are conducted, the Project Implementation Units, and the General Contracting Companies were assigned to make more detailed operational contributions in ongoing project management processes. The result of the study were a set of the identified problems causing cost overrun of the mentioned projects in Afghanistan, a comprehensive table showing the causes, the objectives and strategies of its solutions, and the contributing departments of each strategy; and separate allocation of issues to the four key stakeholders of the projects.
In brief, the on-time completing the World Bank-supported projects in Afghanistan within the approved budgets is difficult because of an uncertain environment and many aspects of problems. Most likely, every unexpected constraint, and implementation risks have to be compensated by accepting some additional expenditures, the amounts of which are often too large and significant. On the other hand, executive procedure of providing these additional funds may not be an easy process because of the Bank's policies, Government regulations, and deal of other concerning entities within the country. So, keeping the World Bank-supported projects in Afghanistan within their budgets or at least reducing their extra costs as much as possible, are considered a very important issue for PIUs and the government. In order to take effective decisions in this concern, first of all necessary to be identified particular problems in the area that directly or indirectly cause the projects' cost overrun; second need to be studied the nature of their causations, and finally have to be found out, and applied most suitable methods of controlling these problems.
Mr. Mohammad Sharif made a case study which primary objectives were: (1) identifying what are the significant problems that often cause the World Bank- supported projects‘ cost overrun in Afghanistan; (2) studying the reasons why these problems cause cost overrun; and (3) analyzing how to mitigate the cost overrun risks
Conclusions
1. Although within the uncertain post-conflict environment of the country, in which the construction projects are subject to be implemented different political, legal, organizational, and cultural challenges are likely to affect the sound implementation of the projects finally ending to their cost overruns, most of the identified problems either have been looking like managerial or financial types of problems, or at least arising from these two areas. It means that the project management teams have to study these issues in advance and have to set effective practical plans and strategies to deal with them. A summary of the related areas of the identified problems are given in the table below.
2. Analysis show that the main involving stakeholders of these projects along the implementation phases of the projects' life cycles were the general contractors, the related government departments, and the project implementation units as it was assumed in the conceptual framework below. The most of identified items through the objective one were related to these organizations. The consulting agencies that usually have important role in this interval can be considered either as a part of PIUs or as the general contracting units based on the related points of view. In this research those are reflected on as general contractors.
Accounting Model
(Source: http://systemizesoftware.com/databuilder.aspx)
Since the identified problems are strongly interrelated they can be linked to each other based on a hierarchy of causes and effects according to the logical framework approach of problem solving. After analyzing the case reports, and the related literatures there were found the most likely reasons for the sixteen identified problems as below:
1. The problem of lacking capable construction companies in area is due to:
- Poor technical and managerial skills of site managers and engineers; also, lack of sufficient plants, due to their poor financial capacities.
- Inadequate investigations of capacity issues in establishing a new construction company, and
- Lack of security that impacts the willingness of foreign companies to work in Afghanistan.
2. The main reasons of poor human resource capacities of Afghan construction companies are:
- Ineffective site monitoring by owner organizations
- Non realistic organizational structures of contracting companies
- Poor condition of infrastructure
- Unsafe environment of the country
- Instability of labor market
- Dependence of labor supply to particular agencies, and
- Unsafe working conditions and other de motivation factors
3. Poor financial management of contracting companies are due to:
- Missing preparation of financial plans
- Unavailability of Bank credits
- Unavailability of financial data, and
- Inadequate administration of contracts
4. Delay by contracting companies are cause because of:
- Late start, slow mobilization, late materials and components delivery
- Wrong arrangements with the related government agencies
- Job site accidents
- Missing financial commitments by the partners
- Cash flow limitations, and
- Default
5. Poor involvement of top management in site works is happened because of undertaking several projects by the contractors, or their own businesses
6. Poor contribution of government agencies in fulfilling their committed responsibilities is because of:
- Human resource issues
- Corruption
- Limited annual budgets. and
- Lack of common, and clear goals, strategies, or lack of strong commitments to it
- Bureaucratic administrative systems
7. Dual chains of command comes from:
- Inadequate leadership and ineffective approach of motivation
- Difference between the dynamic requirements of the projects, and the government, and
- Relevance of project to other sources
8. There are no adequate codes for engineering designs due to:
- Lack of a national standard or clear regulation requiring a specific system or code for engineering issues
- Less enforcement of the quality and standardization of construction, and
- Different systems of academic institutions outputs
9. Project risks are not assessed and managed, since there are:
- An extra uncertain environment, and an ongoing military and security challenges in the country
- Lack of detailed and clear risk assessment functions within the PIUs, and
- Partly involvements of project managers with the whole life cycle challenges of the projects due to their late assignments
10. Missing the hierarchy of project planning is the result of:
- Lacking realistic strategic plans in the benefiting organizations that reflect all required projects with its hierarchies and priorities
- Missing the existing strategic plans, and
- Supporting some particular and a specific intervals of the overall plans by some special random investments
11. Incompleteness of design documents are because of:
- Poor contribution of the projects' partners
- Fixed and limited budgets, and
- An ineffective coordination by the project management units
12. Inadequateness of bidding process are caused by:
- Lack of security, authority of warlords
- Corruption, and
- Lack of qualified contractors
13. Variations during the implementation phases are generated due to:
- Constructive changes
- Inadequate design
- Poor coordination arrangements by responsible groups, and
- Lack of security, or authority of warlords
14. Delay in fulfilling financial commitments is occurred because of:
- Incomplete documentation
- Inefficiency of some line departments, and
- Poor financial capacity and management of the committing parties
15. Authority of warlords in the site is due to:
- Lack of security and complete state governance, and
- Ineffective planning, and risk management
16. Inadequate weather can cause difficulties if there is either:
- Some unprecedented critical climate change, or
- The plans and schedules are not effective, and efficient.
3. Since most of the analyzed problems are interrelated through the cause and effect chains, the developed objectives also tend to be common in many cases. Consequently the proposed activities for achieving each objective even in cases of common objectives may be differed because of the natures of the original problems. It means that the various dimensions of the objectives will be supported by variety of activities subject to be performed by several agencies. The summary of the finally developed objectives that are listed in a hierarchical manner in terms of the commonness of the issue are as below:
1. Bringing the security to the country
2. Enforcement the law and regulations in entire aspects of project performance
3. Eliminating corruption from the public sector
4. Improving infrastructure development of the country
5. Full implementation of projects by Government agencies
6. Effective use of the assisted funds
7. Rebuilding the capacity of government agencies
8. Effective coordination with related agencies
9. Improvement of the quality of construction projects
10. Improvement of human resource capacity of Afghan construction companies
11. Improvement of financial viability of construction companies
12. Properly managing the implementation risks
13. Adequate planning & management of project resources
14. Enforcement of safety requirements in construction companies
15. Improving efficiency and effectiveness of monitoring systems
His thesis abstract is copied and posted.
Abstract
The World Bank-supported projects in Afghanistan that significantly contribute implementation of the country's national development strategy are often affected by cost overrun issues caused by a variety of problems in the current post-conflict environment of the state. The implementation phase; in which the several sub-components of the projects are executed in the area under direct responsibility of the government agencies, and technical consultancy of the project implementation units, are considered as a problematic stage of the projects' life cycle. A qualitative research based on case studies was designed to contribute the prevention of cost overrun problems of such projects through identifying the problem items; analyzing the causes; and proposing effective strategies for solving them. The methodology consists of determining research assumptions, data collection criteria, and developing interview forms through a literature review; preparing case reports; analyzing the cause and effect natures of the problems; converting the main causes to the objectives; and finally setting up the effective strategies for achieving them. The collected data encompassed different cost overrun cases of five construction projects in Balkh and Faryab provinces of Afghanistan under the two major "Strengthening the Higher Education" and" the National Solidarity" Programs supported by World Bank. Through the cross-case analyses were identified sixteen items concerned to the main three stakeholders such as the general contractors, the related government agencies, and the project implementation units. By structuring the cause and effect trees, there were listed out most likely causes of each problem, from which were developed the related long and short term strategies after converting them to the objectives. The long term strategies, some of which were already the parts of Afghanistan National Development Strategy were concerned to a numbers of the government agencies. Some non government agencies such as the Afghanistan Reconstruction and Development Services through which procurement of the projects are conducted, the Project Implementation Units, and the General Contracting Companies were assigned to make more detailed operational contributions in ongoing project management processes. The result of the study were a set of the identified problems causing cost overrun of the mentioned projects in Afghanistan, a comprehensive table showing the causes, the objectives and strategies of its solutions, and the contributing departments of each strategy; and separate allocation of issues to the four key stakeholders of the projects.
Tuesday, 6 July 2010
Assessing Project Management In Myanmar Construction Companies
Many organizations are project-based in their operations and process, therefore they had to plan, manage and complete the project more successfully. Such project-based operations put pressure on project manager to plan, integrate, control schedule and improve overall organizational performance. However many organizations are uncertain, complicated and misdirected about the current applications of project management. Consequently, many companies are having major problems in implementing or improving their project management processes. This is especially important to project managers who have responsibility for implementing project management processes and practices in their organization. To perform the project success, engineering and construction organizations need to have high maturity levels and capabilities in performing in project activities.
Myanmar is a developing country which infrastructure needs to develop from buildings, transportation, telecommunication and etc. Many companies are interested in construction business for sure profit, but most projects are not successful. Therefore, how to enhance the success of the projects has become the important task for Myanmar practitioners and researcher. These delays can be avoided or reduced by identifying the major causes of delay and implementing good project management.
The management of construction projects has faced many difficulties, so project management (PM) should be improved. Ms. Saw Sandar made a case study which main objectives were: (1) to study PM implementation and PM process in Myanmar Construction Company; (2) to investigate organizational maturity and project management maturity; (3) How organizational maturity and project management maturity affect the project performance; and (4) How organizational maturity affect the project management maturity
Results of the Study
The results are based on the SPSS analyses.
1. Project management process in Myanmar construction organizations
Most of the construction companies in Myanmar were small and medium enterprises and they were family types. Authority and power was distributed to the lowest level, so the organization structure was flat and communicate easily. In addition, top manager of Myanmar construction companies were spent enough time in running the projects and the quality control system. As a result the quality of construction project was good and they got acceptable client satisfaction.
For the project management, although Myanmar construction projects were created WBS by subdividing the major project deliverables, project managers were weak in looking for impacts to constraint of time and budget when change order occurred. For the procurement management, most project managers were not assured the timely flow of materials and they cannot minimize the procurement to reduce the purchase costs which were excess uses of resources. As a result, most of the construction projects were cost overrun and cannot deliver on time.
2. The dimension of organizational maturity and project management maturity
In this study, organizational maturity is the combination of project management knowledge, project management attitude and actual project practices. The organization will be mature when the organization has knowledge on input, process and output and an understanding of the whole picture. The maturity level of organization will increase if the organization has attitude of low uncertainty avoidance, low power distance, femininity and collectivism which is strongly cohesive force between the groups. In addition, the organizational maturity level will be increased when the actions at top management level, tactical level, admin level and operative level are well applied during the project operation.
Project management maturity is based on nine knowledge area that means project management maturity is the degree of project management best practices which are developed by implementing project integration management, project scope management, project time management, project cost management, project quality management, project human resource management, project communication management, project risk management and project procurement management.
3. Organizational Maturity, Project Management Maturity and Project Performance
The result of analysis showed that the organizational maturity and project management maturity is significantly positively correlated to project performance. Organizational maturity is the combination of project management knowledge, project management attitude and actual project practices. The results indicate that these factors are significantly positively correlated with project performance. That means that the mature the organization, the better the project performance.
The results showed the time criteria for project performance are not correlated with the dimension of organizational maturity of project management knowledge about input, process and output. However the mean score of project management knowledge about input, process and output are not too low, over 3.5 (acceptable). It can be concluded that most of the Myanmar construction companies have acceptable knowledge on how to acquire qualified construction materials and human resources requirements and good understanding in the effective way to operate the projects, the projects were still cost overrun and delay. This is due to external factors such as rising in construction costs, lack in updating technical performance, took long time to meet the government regulation and sometimes the projects were have to stop due to heavy rain and flooding. Therefore, in order to successfully operate the construction project, external factors must have to consider.
Project Performance
Based on the result of this study, it can be concluded that in order to finish the project on time, project scope management, project quality management and project procurement management should be given emphasis when running the project. The researcher found out that most of the Myanmar construction projects were weak in this project management and especially in procurement management. Most developer and construction contractors were suffering from lack of finance, since construction materials were imported and the prices varied all the time. Therefore they cannot manage the materials to reach the project sites on time.
4. Organizational maturity and Project management maturity
The result of analysis showed that the organizational maturity is significantly positively correlated with project management maturity. That means the higher the organizational maturity, the better the project management maturity. On the other hands organizational best practices influenced project management best practices and vice versa.
Organizational maturity assessment provides identifying and measuring the participants knowledge about project management, attitude towards project management and actual project practices of an organization. Furthermore, project management maturity assessment also provides measuring project management maturity by analyzing nine project management knowledge areas. This study analyzed the strength and weakness of project management practices of construction companies and it also identified the problems that the project managers face in the project management process. In addition, companies should benchmark their operation by using these assessment questionnaires which are logical references to make process improvement.
Her thesis abstract is copied and posted.
Abstract
The construction industry is vital for the development of any nation, even though construction projects are commonly faced in uncertainty due to low maturity of project management and the nature of the project. Construction industry is performance industry compare to another industry. To perform the project success, engineering and construction organizations need to have high maturity levels and capabilities in performing in project activities. This study was based on quantitative research through questionnaires and conducted to identify the organizational maturity, project management maturity and how it effect on project performance.
This study was conducted in Myanmar construction companies and construction projects to study organizational maturity and project management maturity. The overall organizational maturity means score for Myanmar construction industry is 3.66. The result found that project management knowledge, project management attitude and actual project practices of organization are prerequisite for organizational maturity. The best project management practices based on nine knowledge area and it can improve the project management maturity.
The result showed that the organizational maturity and project management maturity is significantly positively effect on project performance. That means the mature the organization and project management, the better the project performance. In addition the organizational maturity is also positively correlated with project management maturity. On the other hands, organizational best practices influences project management best practices. This study indicates not only correlation of organizational maturity, project management maturity and project performance but also the best practices for organization and project management
Myanmar is a developing country which infrastructure needs to develop from buildings, transportation, telecommunication and etc. Many companies are interested in construction business for sure profit, but most projects are not successful. Therefore, how to enhance the success of the projects has become the important task for Myanmar practitioners and researcher. These delays can be avoided or reduced by identifying the major causes of delay and implementing good project management.
The management of construction projects has faced many difficulties, so project management (PM) should be improved. Ms. Saw Sandar made a case study which main objectives were: (1) to study PM implementation and PM process in Myanmar Construction Company; (2) to investigate organizational maturity and project management maturity; (3) How organizational maturity and project management maturity affect the project performance; and (4) How organizational maturity affect the project management maturity
Results of the Study
The results are based on the SPSS analyses.
1. Project management process in Myanmar construction organizations
Most of the construction companies in Myanmar were small and medium enterprises and they were family types. Authority and power was distributed to the lowest level, so the organization structure was flat and communicate easily. In addition, top manager of Myanmar construction companies were spent enough time in running the projects and the quality control system. As a result the quality of construction project was good and they got acceptable client satisfaction.
For the project management, although Myanmar construction projects were created WBS by subdividing the major project deliverables, project managers were weak in looking for impacts to constraint of time and budget when change order occurred. For the procurement management, most project managers were not assured the timely flow of materials and they cannot minimize the procurement to reduce the purchase costs which were excess uses of resources. As a result, most of the construction projects were cost overrun and cannot deliver on time.
2. The dimension of organizational maturity and project management maturity
In this study, organizational maturity is the combination of project management knowledge, project management attitude and actual project practices. The organization will be mature when the organization has knowledge on input, process and output and an understanding of the whole picture. The maturity level of organization will increase if the organization has attitude of low uncertainty avoidance, low power distance, femininity and collectivism which is strongly cohesive force between the groups. In addition, the organizational maturity level will be increased when the actions at top management level, tactical level, admin level and operative level are well applied during the project operation.
Project management maturity is based on nine knowledge area that means project management maturity is the degree of project management best practices which are developed by implementing project integration management, project scope management, project time management, project cost management, project quality management, project human resource management, project communication management, project risk management and project procurement management.
3. Organizational Maturity, Project Management Maturity and Project Performance
The result of analysis showed that the organizational maturity and project management maturity is significantly positively correlated to project performance. Organizational maturity is the combination of project management knowledge, project management attitude and actual project practices. The results indicate that these factors are significantly positively correlated with project performance. That means that the mature the organization, the better the project performance.
The results showed the time criteria for project performance are not correlated with the dimension of organizational maturity of project management knowledge about input, process and output. However the mean score of project management knowledge about input, process and output are not too low, over 3.5 (acceptable). It can be concluded that most of the Myanmar construction companies have acceptable knowledge on how to acquire qualified construction materials and human resources requirements and good understanding in the effective way to operate the projects, the projects were still cost overrun and delay. This is due to external factors such as rising in construction costs, lack in updating technical performance, took long time to meet the government regulation and sometimes the projects were have to stop due to heavy rain and flooding. Therefore, in order to successfully operate the construction project, external factors must have to consider.
Project Performance
Based on the result of this study, it can be concluded that in order to finish the project on time, project scope management, project quality management and project procurement management should be given emphasis when running the project. The researcher found out that most of the Myanmar construction projects were weak in this project management and especially in procurement management. Most developer and construction contractors were suffering from lack of finance, since construction materials were imported and the prices varied all the time. Therefore they cannot manage the materials to reach the project sites on time.
4. Organizational maturity and Project management maturity
The result of analysis showed that the organizational maturity is significantly positively correlated with project management maturity. That means the higher the organizational maturity, the better the project management maturity. On the other hands organizational best practices influenced project management best practices and vice versa.
Organizational maturity assessment provides identifying and measuring the participants knowledge about project management, attitude towards project management and actual project practices of an organization. Furthermore, project management maturity assessment also provides measuring project management maturity by analyzing nine project management knowledge areas. This study analyzed the strength and weakness of project management practices of construction companies and it also identified the problems that the project managers face in the project management process. In addition, companies should benchmark their operation by using these assessment questionnaires which are logical references to make process improvement.
Her thesis abstract is copied and posted.
Abstract
The construction industry is vital for the development of any nation, even though construction projects are commonly faced in uncertainty due to low maturity of project management and the nature of the project. Construction industry is performance industry compare to another industry. To perform the project success, engineering and construction organizations need to have high maturity levels and capabilities in performing in project activities. This study was based on quantitative research through questionnaires and conducted to identify the organizational maturity, project management maturity and how it effect on project performance.
This study was conducted in Myanmar construction companies and construction projects to study organizational maturity and project management maturity. The overall organizational maturity means score for Myanmar construction industry is 3.66. The result found that project management knowledge, project management attitude and actual project practices of organization are prerequisite for organizational maturity. The best project management practices based on nine knowledge area and it can improve the project management maturity.
The result showed that the organizational maturity and project management maturity is significantly positively effect on project performance. That means the mature the organization and project management, the better the project performance. In addition the organizational maturity is also positively correlated with project management maturity. On the other hands, organizational best practices influences project management best practices. This study indicates not only correlation of organizational maturity, project management maturity and project performance but also the best practices for organization and project management
Monday, 5 July 2010
Owner’s Contract Administration For Project Time And Cost Control Strategy In Commercial Building Projects
The construction industry development in Vietnam suddenly improved when it becomes a member of World Trade Organization (WTO). Vietnam impressed foreign investors who come to find the opportunities to invest in construction market. In recent years, a number of the investment in commercial construction building has increasing. Majority of foreign investors invest with projects such as office building, commercial center, apartment and commercial center building, hotel, resort with commercial services etc. These projects have gaining a large amount of GDP bringing benefit for economic growth.
Commercial building projects are especially time sensitive. Due to high construction costs and tight deadlines, they require state-of-the-art analysis and design, innovative thinking, quick turnaround, and quality service. Owners and contractors must have a good contract which can contain activities such as change control and contract maintenance, cost monitoring and charges, payment procedures and ordering, management reporting. The critical of contract administration for the contract’s success, and for the provider and customer relationship, could not be underestimated.
Following Patil, causes of delay in completion of projects include:
• Failure to handover full possession of the site within a reasonable time from the date of commencement.
• Failure to supply full and complete set of working drawings, designs, decisions etc., at the commencement of the work or as and when necessary. In some projects the delay is on account of late approved by the engineer to the Engineer to the working drawings, where the same are required to be prepared by the contractor.
• Failure to supply materials and/or power agreed to be supplied by the employer to the contractors as and when needed or demanded.
• Failure to organize and get done the work to be executed by other agencies so as not to hinder the main contractor’s program.
• Failure to pay at proper time the mobilization advance, the running account bills, cost of extra items and also failure to release requisite exchange, etc.
Therefore, weakness of capacity from owner side in managing construction contract lead to project cost overrun compared with estimated cost. It might rise from the shortcoming of preparing of project inception such as:
• Poor project scope definition and control.
• Design changes from client.
• Inadequate preparing for bill of quantity (BoQ)
• Various construction contract types
• Change orders in construction phase
Mr. Nguyen Xuan Phong wanted to find out usual and specific problems which affect directly to contract management on all phase of the entire of project. He conducted a survey to client contract managers to identify successes and fail factors and how these factors affect to project cost and project cost control, then, giving the comment to help clients control the contract to minimize cost overrun in commercial building project. His study objectives were to: (1) investigate the contract administration which can be used by project client to manage commercial project in Vietnam; (2) investigate the existing practices of project client in Vietnam in managing contract; and (3) propose recommendations and develop a process of contract administration by using multi-case study method.
Conclusions
The results of this study are discussed in three main catalogues.
1. Investigate the Owner’s contract administration
Six projects are determined under the applying of multi-case analysis in qualitative methodology and they are gathered into two cases groups. Once, DB cases group reveals the trend of the investor in commercial building in Vietnam when choosing delivery method is employing fast-tracked method for time saving and sooner operate the constructed building. Once, current practices of DBB cases group emphases the weakness of project time scale. For instance, in the life cycle of tender phase it takes time if there were no bidder selected.
Almost cases reveal a usual attitude of the owner when choosing the out sources of contract administration which prove that the need of a contract administration process is highly emphasis. It is able to apply the process whether the owner have or have no in-house staffs of contract administration
2. Commons and specifics activities in existing practical
The existing practical are investigated in effort of attempting to find the commons activities and specific activities by examining the critical problems occurred during all the phases of project.
3. Process of contract administration
Common activities are collected by the selected answers in the papers of multi-choice questionnaire and including verbal interview. A development of construction process between DB and DBB delivery is summarized which will be the fundamental to develop a contract administration process for these kinds of project delivery. Table below contains the full activities for individual stage of project from concept to close-out. It distributes an improvement to the system control capability, reducing cost overrun and project delay, examining potential cost benefit saving.
Recommendation
In area of construction project, to prevent the project from cost overrun and delay and smoothly implement construction activities regarding continue phases within budget and scheduled time contract management engineer need to be aware of construction phases in detail and having their own requirement. Nevertheless, the phases of construction project should be adopted appropriate with contract administration progress. Thus, author develops a process of construction project, purpose a progress of contract administration for DB and DBB projects comprise with other forms of check-list that mentioned on the chapter 2 and on the discussed cases.
His thesis abstract is copied and posted.
Abstract
For construction project, contract is the most important to every project’s participation such as owner, constructor, vendor, and supplier. Therefore, the appropriate contract administration for contract management is vitally important to determine the practical of any construction project. In decade of construction industry, the traditional delivery known as design-bid-build and design-build delivery is widely using in commercial building projects. According to construction industry development, nature of construction project are increase in size and becoming more complex that led to number of shortcoming in management system. Thus, this study conducts to assist the project owner understanding and implementing contract administration in Vietnam.
The study conducts to analysis cases on implementing the design-bid-build and design-build of commercial building projects which are highly increasing on demand of trading services market, domestic and foreign investments in Vietnam by using multi-cases study methodology. The objectives are emphasized on how the owner’s organization interact with the efforts of contractor, implementation of contract administration process, critical problems and their responds during phases of construction project. Data were collected through personal interview from project manager department and contract management members; it included contract documents, relevant reports of these cases.
The study finding covers the lack of contract administration capability in the owner organization to manage the contract. The commons of existing practical are determined as well as problems occurred on practices with specific activities of contract administration of each case. Assisting the owner to overcome the worsening situation, it is recommended that a detailed process of contract administration should be developed that investigate the contract management of each project.
Key words: Construction Contract Administration, Design-Build, Design-Bid-Build, Construction Phases, Project Delivery, Project Owner.
Commercial building projects are especially time sensitive. Due to high construction costs and tight deadlines, they require state-of-the-art analysis and design, innovative thinking, quick turnaround, and quality service. Owners and contractors must have a good contract which can contain activities such as change control and contract maintenance, cost monitoring and charges, payment procedures and ordering, management reporting. The critical of contract administration for the contract’s success, and for the provider and customer relationship, could not be underestimated.
Following Patil, causes of delay in completion of projects include:
• Failure to handover full possession of the site within a reasonable time from the date of commencement.
• Failure to supply full and complete set of working drawings, designs, decisions etc., at the commencement of the work or as and when necessary. In some projects the delay is on account of late approved by the engineer to the Engineer to the working drawings, where the same are required to be prepared by the contractor.
• Failure to supply materials and/or power agreed to be supplied by the employer to the contractors as and when needed or demanded.
• Failure to organize and get done the work to be executed by other agencies so as not to hinder the main contractor’s program.
• Failure to pay at proper time the mobilization advance, the running account bills, cost of extra items and also failure to release requisite exchange, etc.
Therefore, weakness of capacity from owner side in managing construction contract lead to project cost overrun compared with estimated cost. It might rise from the shortcoming of preparing of project inception such as:
• Poor project scope definition and control.
• Design changes from client.
• Inadequate preparing for bill of quantity (BoQ)
• Various construction contract types
• Change orders in construction phase
Mr. Nguyen Xuan Phong wanted to find out usual and specific problems which affect directly to contract management on all phase of the entire of project. He conducted a survey to client contract managers to identify successes and fail factors and how these factors affect to project cost and project cost control, then, giving the comment to help clients control the contract to minimize cost overrun in commercial building project. His study objectives were to: (1) investigate the contract administration which can be used by project client to manage commercial project in Vietnam; (2) investigate the existing practices of project client in Vietnam in managing contract; and (3) propose recommendations and develop a process of contract administration by using multi-case study method.
Conclusions
The results of this study are discussed in three main catalogues.
1. Investigate the Owner’s contract administration
Six projects are determined under the applying of multi-case analysis in qualitative methodology and they are gathered into two cases groups. Once, DB cases group reveals the trend of the investor in commercial building in Vietnam when choosing delivery method is employing fast-tracked method for time saving and sooner operate the constructed building. Once, current practices of DBB cases group emphases the weakness of project time scale. For instance, in the life cycle of tender phase it takes time if there were no bidder selected.
Almost cases reveal a usual attitude of the owner when choosing the out sources of contract administration which prove that the need of a contract administration process is highly emphasis. It is able to apply the process whether the owner have or have no in-house staffs of contract administration
2. Commons and specifics activities in existing practical
The existing practical are investigated in effort of attempting to find the commons activities and specific activities by examining the critical problems occurred during all the phases of project.
3. Process of contract administration
Common activities are collected by the selected answers in the papers of multi-choice questionnaire and including verbal interview. A development of construction process between DB and DBB delivery is summarized which will be the fundamental to develop a contract administration process for these kinds of project delivery. Table below contains the full activities for individual stage of project from concept to close-out. It distributes an improvement to the system control capability, reducing cost overrun and project delay, examining potential cost benefit saving.
Recommendation
In area of construction project, to prevent the project from cost overrun and delay and smoothly implement construction activities regarding continue phases within budget and scheduled time contract management engineer need to be aware of construction phases in detail and having their own requirement. Nevertheless, the phases of construction project should be adopted appropriate with contract administration progress. Thus, author develops a process of construction project, purpose a progress of contract administration for DB and DBB projects comprise with other forms of check-list that mentioned on the chapter 2 and on the discussed cases.
His thesis abstract is copied and posted.
Abstract
For construction project, contract is the most important to every project’s participation such as owner, constructor, vendor, and supplier. Therefore, the appropriate contract administration for contract management is vitally important to determine the practical of any construction project. In decade of construction industry, the traditional delivery known as design-bid-build and design-build delivery is widely using in commercial building projects. According to construction industry development, nature of construction project are increase in size and becoming more complex that led to number of shortcoming in management system. Thus, this study conducts to assist the project owner understanding and implementing contract administration in Vietnam.
The study conducts to analysis cases on implementing the design-bid-build and design-build of commercial building projects which are highly increasing on demand of trading services market, domestic and foreign investments in Vietnam by using multi-cases study methodology. The objectives are emphasized on how the owner’s organization interact with the efforts of contractor, implementation of contract administration process, critical problems and their responds during phases of construction project. Data were collected through personal interview from project manager department and contract management members; it included contract documents, relevant reports of these cases.
The study finding covers the lack of contract administration capability in the owner organization to manage the contract. The commons of existing practical are determined as well as problems occurred on practices with specific activities of contract administration of each case. Assisting the owner to overcome the worsening situation, it is recommended that a detailed process of contract administration should be developed that investigate the contract management of each project.
Key words: Construction Contract Administration, Design-Build, Design-Bid-Build, Construction Phases, Project Delivery, Project Owner.
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