The Vietnamese Textile and Garment (T&G) industry consists of around 2.000 enterprises (25 State owned enterprises, 1.500 private enterprises and 450 reign direct investment enterprises) with over 2 million employees involved. Vietnam is ranking the 10th largest textile and apparel export countries in the world. Currently in Vietnam there are only two foreign companies producing PES fiber and filament yarn ‚ namely Formosa and Hualon company. Vietnam Textile industry has to import most PES fiber and filament yarn from abroad.
In order to minimize the interfaces and risks between the separated contractors and the Owner during executing a polyester project, Owners normally prefer to award and sign an EPC contract with an EPC contractor. However, this project delivery method will take a lot of time to make bidding, clarification, explanation and get the mutually agreement on the contract clauses between the contractor and the Owner. The following problems are normally involved with the EPC contract clauses:
1. Take time to make the bidding, clarification and finalization before contract signing;
2. Wrong understanding and interpreting of stipulated clauses in the contract;
3. Conflict between contractor and the Owner during project execution.
An EPC contract is generally applied for developing a polyester project, in case of problems or disputes during the project execution, these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract. Mr. Vu Dinh Duy made a research which focused on the following issues related to EPC contract:
1. to study EPC contract process and management from literature review;
2. to study the contract clauses in EPC polyester project;
3. to study the implementations of the contract clauses and their performance with reference to project advantages and problems.
Conclusion
EPC Contract, (known as the “Lump-sum Turnkey Contract”, “package deal”, or Engineering, Procurement, Construction and Commissioning Contract) places the duty to design, procure, construct and commissioning solely on the Contractor. The term “Lump-sum Turnkey” tends to mean the most extreme form of placing design, procurement, construction and commission responsibility on the contractor, such that after completion the Owner need only turn the key to commence operation of the Plant or Constructed facilities.
The use of EPC Contract results in a considerable reduction of intervention by the Owner in design, procurement, construction and commissioning process throughout the Project. The role of the Owner will consist primarily of contract administration, such as supervision, review and/or approval of critical works of detailed designs, procurement of long-lead items etc.
Lump-sum pricing method is often used for EPC Contract and enables the use of fixed payment by stages of completion. Lump-sum pricing and fixed installment payments provide the Owner with greater certainty in overall cost as well as in the timing of payment.
Advantages and Disadvantages of EPC Contract:
Advantages:
The EPC Contract makes contractor entirely responsible for the whole project regarding detailed design, procurement, construction and commissioning. The Owner receives a completed project in accordance with his performance specification.
The Owner does not need to worry about co-coordinating contractors effectively and avoids claims resulting from lack of interface definition.
In addition, single-point responsibility can also reduce the opportunity for claims by the contract. The Contractor must deliver the works that are fully operational to the specifications of the Owner; any defect or default is necessarily his responsibility except where the contract provides otherwise. Everything relating to the works can, thus, be concentrated in a single point of responsibility – the contractor.
With lump-sum pricing method, this system reduces front-loading by the contractor and encourages rapid completion. Also, it facilitates financing, as lender will have greater certainty of financial exposure and the timing of draw-downs.
The control given to the contractor should facilitate implementation of new and better approaches to design, developed through his experience and expertise. The contractor will have an intensive to implement such time saving changes under the turnkey structure.
Since the designer, purchaser, constructor work as a team, they are more likely to identify critical flaws in the design at an earlier stage, ensuring avoidance or mitigation of the flaw when such action is more effective. This team approach will help avoid many design, procurement, construction, commissioning risks which a separate designer, purchaser, constructor would not be able to identify, The joining of the design, procurement, construction and commissioning task under on contractor may also reduce the number of disputes which arise between the contractor and Owner.
Disadvantages:
Loss of control. The overall supervision role of the Owner is absent from the EPC Contract. The EPC model generally contemplates less day-to-day intervention. Under the EPC contract, it may be more difficult for the Owner to exercise his variation power properly. He may be distanced from the design, procurement, construction activities, reducing his understanding of the process used and his ability to verify for a variation and whether a variation proposed will affect the performance of the finished works.
The contractor will want to execute the works within the parameters of the Owner’s requirements for the least cost possible. The contractor in a EPC contract may be tempted to under-design the project in order to cut his costs and save on time.
Cost of risks. Under the EPC contract the Owner benefits from an increased amount of the risk of the project being placed on the contractor. However, depending upon market forces, a contractor will attempt to increase the contract price in accordance with the increase in risk. Where there is little competition, the Owner may have to assume the cost of the increased risk placed on the contractor. Thus the Owner may end up paying a higher overall price for the project due to the degree of risk that is placed on the contractor and the need for the contractor to price such risk.
So that, EPC contracts nowadays become popular in construction projects, especially in oil and gas sector. However, together with the advantages, EPC contract also exposes its disadvantages and is quite complicated in terms of legal issues, therefore the Owner and the EPC Contractor shall have enough experiences and knowledge to understand lump sum contract characteristics from the perspectives of both the contractor and the Owner in order to avoid their faults and mitigate the risks during contract execution.
The EPC contract also come many new risks that are often severe, due to the complex nature and high cost frequently associated with this type of project. Understanding the risks and some of the other unique characteristics of EPC contracting is critical to a successful project where both the owner and the contractor obtain the high rewards for the risk.
His thesis abstract is copied and posted.
Absract
The Vietnamese Textile and Garment (T&G) industry consists of around 2.000 enterprises (25 State owned enterprises, 1.500 private enterprises and 450 reign direct investment enterprises) with over 2 million employees involved. Vietnam is ranking the 10th largest textile and apparel export countries in the world. The industry generates an economy contribution of 8% to country’s GDP. The T&G industry is employing 12% of national industrial workforce, holding the second position in export turnover and making the contribution of 14% to country‘s export turnover. Average growth rate from 2002 - 2007 is about 18% per year.
Therefore, valuable arguments for the implementation of a Polyester fiber project:
Saving of foreign currency due to substitution of imported Polyester staple fiber and filament;
Creation of new employment for qualified labor;
Further strengthening of the textile industry in Vietnam as a second largest export earner after crude oil;
Establishment of the whole polyester esterification, polycondensation, spinning and fiber drawing process through introduction and transfer of state-of-the-art technology;
First step in the Vietnamese synthetic fiber industry to extend the business into the upstream petrochemical industry, e.g. production of PTA;
Stable and long term local supply of staple fiber to the domestic downstream textile industry including the improvement of quality due to close cooperation between domestic companies.
Normally, for building a polyester plant the Owner will sign an EPC (Engineering, Procurement and Construction included pre – Commissioning and Commissioning and training) contract with an EPC contractor. In the petrochemical and polyester industry, there is not any EPC Contractor in Vietnam who can execute a full EPC project, therefore the EPC contractor is selected and awarded by the international bidding. 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 owner. 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.
The sensitive clauses in the EPC contract are also needed to focus in order to minimize the conflicts and risks between the EPC contractor and the Owner. This study will also discuss on point of view and how to managing the EPC contract of Dinh Vu Polyester project and focus 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 polyester project;
iii. To study the actual Dinh Vu polyester project Contract implementation.
Thursday, 29 July 2010
Wednesday, 28 July 2010
Quality Management System For Manufacturers And Contractors Of Pre-Cast Pile Foundation In Vietnam
Recently, Vietnam has kept highly economic growth in both public and private sectors. Therefore so many construction projects including buildings, factories and infrastructures have been invested to meet the country’s economic demands. Realizing the benefits of quality management, both investors and contractors attempt to improve the quality of the local construction industry.
Quality has been found as the most key components of project success. Deficiencies and errors in construction will require reworks or will result in failures after a product has been delivered to a customer. Such failures may result in claims, customer dissatisfaction, or dire consequences to the user.
So far, there are so many projects with piled foundation in Vietnam construction industry, especially building projects. Some serious problems in building foundation have been found with too much settlement of foundation. One of the most serious mistakes in both designing and construction of piled foundation was the collapsed 12-storey building in Shanghai City, China in March 2009. After those problems, not only owner, designer and consultants but also contractors are more and more concerned about quality management system.
The negative impact of indirect rework on profits can have serious consequences on projects’ and an organizations’ costs. For example, once design errors or omissions are identified in contract documentation, rework will occur. This process may continue to magnify until ultimately, the design firm finds itself in serious financial difficulties due to the prolonged impact of an unheeded increase in rework costs, coupled with a declining professional image and low morale.
Therefore, quality management system for the piling foundation works is really necessary for all of owner, designer, contractor and manufacturer to assure quality and prevent any unexpected hazards.
Mr. Pham Quoc Hung made a research which major objectives were to; (1) study quality management system in manufacturer of pre-cast pile and contractor of piling works for construction of project’s foundation; and (2) recommend the framework of quality management system and project quality plan based on a lesson learnt from these real cases study.
Conclusion
In order to assure the quality of construction works, it is first the contractors who determine the quality of construction project. The quality management program aims to find the most efficient way of managing the quality of work as to satisfy customers’ requirements. This study applied a framework of QMS using ISO9000 for manufacturer of pre-cast PC pile and PQP using ISO9000 for piling construction works in Vietnam.
The case studies have been conducted to investigate the construction methods and processes associated with quality assurance. The framework of QMS as presented in the report has been developed based on existing standards and regulations.
In these case studies, all major processes and detailed instructions for fabrication of pre-cast PC pile and construction of piling works have been presented. These are guidelines for contractors who implemented the QMS and PQP to achieve quality targets in construction.
The case studies found out significant tangible and intangible benefits for manufacturer of pre-cast PC pile and for contractor of piling construction project when applying QMS and PQP using ISO9000.
The most common problems related to managing quality often occurred during construction implementation and developments are found as follows:
Table 1: Problem and solution on implementing QMS and PQP
Recommendations for improvement
After understanding how the manufacturer of PC pile and contractor of piling construction project implement the QMS and PQP using ISO9000 Approach, recommendations for improvement can be as follows:
1) It is very important to have available resources with continual training and improving for better applying the QMS and the PQP. It helps the manufacturer and contractor of pre-cast piling foundation to always run smoothly for ensuring the quality targets.
2) So many benefits in implementation and development of QMS and PQP using ISO9000, some problems occurring can be reduced and eliminated with more detailed supervision and instructions.
3) ISO9000 is a framework for processing paper. However, other factors can be very important to contribute good quality products such as:
- Company culture from the beginning;
- Company strategy led by commitment of strong management;
- Company vision and policy in concentrating on satisfaction of customers and employees;
- The trend to exist in highly competitive condition forces the company to ensure its quality products;
- All company people have the same targets on quality.
His thesis abstract is copied and posted.
Abstract
ISO9000 has become more and more popular to apply for every modern business organization on all over the world. ISO9000 is considered as the most effective ways to apply for quality managing system of any company.
The study discussed the quality management system for manufacturer and contractor related to implementing construction services of pre-cast pile foundation:
- QMS using ISO9000 of the pre-cast pile manufacturing factory;
- Project quality plan with QMS using ISO9000 of piling contractor.
The main objective of this study is to recommend and develop a framework of quality management system using ISO9000 for pile manufacturer and project quality plan for piling contractor that can be effectively used to manage the performance of highway contractors in Vietnam.
An exploratory approach shall be adopted by reviewing the available literature to develop a quality management system (QMS) for pile manufacturer and project quality plan (PQP) for piling contractor and find out how is the applicability and effectiveness of this QMS and PQP in a real case study projects. The case study projects are aimed to answer following questions:
- Are the QMS and PQP applicable?
- Are the QMS and PQP effective and how is the effectiveness?
- What and how are the tangible and intangible benefits of the QMS and the PQP?
- What are the benefits and problems and impacts in implementation and development of the QMS and the PQP?
In case study, all important processes of pre-cast pile manufacturing and piling works have been clearly identified and developed with full details of guidelines for applying to achieve quality targets and satisfaction of customers.
Report of the findings and suggestions can show much more effectiveness of using ISO9000 for QMS and PQP in pre-cast pile manufacturer and piling contractor with their limited resources to achieve much better quality outcomes.
Quality has been found as the most key components of project success. Deficiencies and errors in construction will require reworks or will result in failures after a product has been delivered to a customer. Such failures may result in claims, customer dissatisfaction, or dire consequences to the user.
So far, there are so many projects with piled foundation in Vietnam construction industry, especially building projects. Some serious problems in building foundation have been found with too much settlement of foundation. One of the most serious mistakes in both designing and construction of piled foundation was the collapsed 12-storey building in Shanghai City, China in March 2009. After those problems, not only owner, designer and consultants but also contractors are more and more concerned about quality management system.
The negative impact of indirect rework on profits can have serious consequences on projects’ and an organizations’ costs. For example, once design errors or omissions are identified in contract documentation, rework will occur. This process may continue to magnify until ultimately, the design firm finds itself in serious financial difficulties due to the prolonged impact of an unheeded increase in rework costs, coupled with a declining professional image and low morale.
Therefore, quality management system for the piling foundation works is really necessary for all of owner, designer, contractor and manufacturer to assure quality and prevent any unexpected hazards.
Mr. Pham Quoc Hung made a research which major objectives were to; (1) study quality management system in manufacturer of pre-cast pile and contractor of piling works for construction of project’s foundation; and (2) recommend the framework of quality management system and project quality plan based on a lesson learnt from these real cases study.
Conclusion
In order to assure the quality of construction works, it is first the contractors who determine the quality of construction project. The quality management program aims to find the most efficient way of managing the quality of work as to satisfy customers’ requirements. This study applied a framework of QMS using ISO9000 for manufacturer of pre-cast PC pile and PQP using ISO9000 for piling construction works in Vietnam.
The case studies have been conducted to investigate the construction methods and processes associated with quality assurance. The framework of QMS as presented in the report has been developed based on existing standards and regulations.
In these case studies, all major processes and detailed instructions for fabrication of pre-cast PC pile and construction of piling works have been presented. These are guidelines for contractors who implemented the QMS and PQP to achieve quality targets in construction.
The case studies found out significant tangible and intangible benefits for manufacturer of pre-cast PC pile and for contractor of piling construction project when applying QMS and PQP using ISO9000.
The most common problems related to managing quality often occurred during construction implementation and developments are found as follows:
Table 1: Problem and solution on implementing QMS and PQP
Recommendations for improvement
After understanding how the manufacturer of PC pile and contractor of piling construction project implement the QMS and PQP using ISO9000 Approach, recommendations for improvement can be as follows:
1) It is very important to have available resources with continual training and improving for better applying the QMS and the PQP. It helps the manufacturer and contractor of pre-cast piling foundation to always run smoothly for ensuring the quality targets.
2) So many benefits in implementation and development of QMS and PQP using ISO9000, some problems occurring can be reduced and eliminated with more detailed supervision and instructions.
3) ISO9000 is a framework for processing paper. However, other factors can be very important to contribute good quality products such as:
- Company culture from the beginning;
- Company strategy led by commitment of strong management;
- Company vision and policy in concentrating on satisfaction of customers and employees;
- The trend to exist in highly competitive condition forces the company to ensure its quality products;
- All company people have the same targets on quality.
His thesis abstract is copied and posted.
Abstract
ISO9000 has become more and more popular to apply for every modern business organization on all over the world. ISO9000 is considered as the most effective ways to apply for quality managing system of any company.
The study discussed the quality management system for manufacturer and contractor related to implementing construction services of pre-cast pile foundation:
- QMS using ISO9000 of the pre-cast pile manufacturing factory;
- Project quality plan with QMS using ISO9000 of piling contractor.
The main objective of this study is to recommend and develop a framework of quality management system using ISO9000 for pile manufacturer and project quality plan for piling contractor that can be effectively used to manage the performance of highway contractors in Vietnam.
An exploratory approach shall be adopted by reviewing the available literature to develop a quality management system (QMS) for pile manufacturer and project quality plan (PQP) for piling contractor and find out how is the applicability and effectiveness of this QMS and PQP in a real case study projects. The case study projects are aimed to answer following questions:
- Are the QMS and PQP applicable?
- Are the QMS and PQP effective and how is the effectiveness?
- What and how are the tangible and intangible benefits of the QMS and the PQP?
- What are the benefits and problems and impacts in implementation and development of the QMS and the PQP?
In case study, all important processes of pre-cast pile manufacturing and piling works have been clearly identified and developed with full details of guidelines for applying to achieve quality targets and satisfaction of customers.
Report of the findings and suggestions can show much more effectiveness of using ISO9000 for QMS and PQP in pre-cast pile manufacturer and piling contractor with their limited resources to achieve much better quality outcomes.
Wednesday, 21 July 2010
Delay Causes In The Construction Of The Refinery Projects In Vietnam: A Case Study On The Dung Quat Refinery Project
During the execution of construction project, project completion on time was commonly considered the key of project’s success. Project time can be evaluated as the vital factor in project management point of view because it affects directly on the profit of project if project time delay happens. The perception of project time management in construction industry has been applied in Viet Nam for recent years. Vietnam carried out the open-door policy to attract the investment from FDI (Foreign direct investment) projects. For this reason, it is essential to collaborate with oversea business and knowledge for Vietnam’s construction industry. However, many problems have been revealed due to the deficiency of the proficiencies in project management, such as:
- Project delays take place usually in the development projects due to deficient transmission among other parties, weather condition, social policy or other factors. It is surmised that about from 70% to 80% of projects of the PetroVietnam have the problems with time project delays.
- Even projects were finished on time; there are still many claims during the execution project.
Besides, the implementation of the project time management in construction industry in Viet Nam and PetroVietnam does not still achieve the effectiveness. Annually, the Vietnam Government still import large amount fuel for consumer and the result of the refinery project delays causes the huge loss of total investment and balance foreign currency of the Government.
Ms. Nguyen Thi Thu Huong made a study which main objectives were to: (1) identify delay causations in the refinery construction projects which were completed up to now or under construction; and (2) develop a framework to control and prevent delays in the remaining or under construction projects of the Refinery construction project.
Conclusion
Time delays in construction industry are a global phenomenon. The consequences of this research indicate that project delays have commonly occurred in most of construction project and the refinery construction project is no exception. Therefore, the results of this study provided a framework for project managers can better understand to reduce the incidences of delays during the refinery construction project, particularly in planning, implementation, monitoring and controls.
Delay causes in the Dungquat refinery project:
It is found that there are many delay causes seriously affecting on time extension and cost of the Dung quat refinery project. The impact of delays and appropriate response strategies and solutions to control delays are summarized in this study.
The impact of delays on time can be realized by the comparison between project schedule and the real situation. The Dungquat refinery project was started in 1999 but up to now the Refinery still not operation with full capacity. Throughout the research, the refinery construction project can be considered a case study to illustrate the success in control and prevent delays causation. Figure below shows the attempt to control and prevent delays during the construction of the refinery construction project.
Framework to control and prevent delays for future refinery projects
In order to significantly prevent and control delays in the future refining construction projects, the guidelines having the most potential were considered. The result from the real situations showed that delays could be prevented and controlled by carrying out several important strategies during the implementation of the project. Vietnam Government and Petrovietnam have been summarizing all of the difficulties and mistakes during implementation time to construct the Dungquat refinery, therefore we can avoid delaying time when construct the incoming refinery projects.
The problems need to solve when investing in the refinery project:
1. Making good planning & control for the project.
2. Management of escalation in material prices.
3. Contractor’s finance controlling.
4. Management of site clearance work.
5. Management contractors’ ability.
6. Establish communication system between the partners.
7. Building standard system for every process.
8. Surveying, collecting and deal with all of the information about weather and geological conditions of the site and other problem relating the site to make good decisions for constructions of the project.
Her thesis abstract is copied and posted.
ABSTRACT
In general, project completed with destined time, cost, and quality is the basic target of construction project management. The Dung Quat Refinery (DQR) construction project is a great and vital grassroots refining construction project in Viet Nam. DQR project is located in Dung Quat Economic Zone, Binh Son Distric, Quang Ngai province. Total cost estimation is around 2.5 billions USD, 100% invested by Vietnamese Government through Petrovietnam. The construction phase was started in 2005 and planned to complete on 2009. Regretfully, the refinery could not be finished within intended time, budget and resources. Until now, whole refinery has not passed all performance tests yet.
Normally, time delay always happened in big construction projects in Vietnam. With the purpose to solve this problem, it was found that several approaches have been affected project time completion. There are many factors found as the major source leading to manage project time completion affectively.
This report summarized the delay causes factors involved in the Dung Quat Refinery project during construction stage. This research will be conducted by using qualitative research; the data will be collected to analyze the facing problems. It was discovered from this study that there were many factors causing project time delays in the project. From the case study, effective solutions for controlling the delays will be investigated and be proposed for precious experiences to control and prevent delays in other construction projects in the future.
- Project delays take place usually in the development projects due to deficient transmission among other parties, weather condition, social policy or other factors. It is surmised that about from 70% to 80% of projects of the PetroVietnam have the problems with time project delays.
- Even projects were finished on time; there are still many claims during the execution project.
Besides, the implementation of the project time management in construction industry in Viet Nam and PetroVietnam does not still achieve the effectiveness. Annually, the Vietnam Government still import large amount fuel for consumer and the result of the refinery project delays causes the huge loss of total investment and balance foreign currency of the Government.
Ms. Nguyen Thi Thu Huong made a study which main objectives were to: (1) identify delay causations in the refinery construction projects which were completed up to now or under construction; and (2) develop a framework to control and prevent delays in the remaining or under construction projects of the Refinery construction project.
Conclusion
Time delays in construction industry are a global phenomenon. The consequences of this research indicate that project delays have commonly occurred in most of construction project and the refinery construction project is no exception. Therefore, the results of this study provided a framework for project managers can better understand to reduce the incidences of delays during the refinery construction project, particularly in planning, implementation, monitoring and controls.
Delay causes in the Dungquat refinery project:
It is found that there are many delay causes seriously affecting on time extension and cost of the Dung quat refinery project. The impact of delays and appropriate response strategies and solutions to control delays are summarized in this study.
The impact of delays on time can be realized by the comparison between project schedule and the real situation. The Dungquat refinery project was started in 1999 but up to now the Refinery still not operation with full capacity. Throughout the research, the refinery construction project can be considered a case study to illustrate the success in control and prevent delays causation. Figure below shows the attempt to control and prevent delays during the construction of the refinery construction project.
Framework to control and prevent delays for future refinery projects
In order to significantly prevent and control delays in the future refining construction projects, the guidelines having the most potential were considered. The result from the real situations showed that delays could be prevented and controlled by carrying out several important strategies during the implementation of the project. Vietnam Government and Petrovietnam have been summarizing all of the difficulties and mistakes during implementation time to construct the Dungquat refinery, therefore we can avoid delaying time when construct the incoming refinery projects.
The problems need to solve when investing in the refinery project:
1. Making good planning & control for the project.
2. Management of escalation in material prices.
3. Contractor’s finance controlling.
4. Management of site clearance work.
5. Management contractors’ ability.
6. Establish communication system between the partners.
7. Building standard system for every process.
8. Surveying, collecting and deal with all of the information about weather and geological conditions of the site and other problem relating the site to make good decisions for constructions of the project.
Her thesis abstract is copied and posted.
ABSTRACT
In general, project completed with destined time, cost, and quality is the basic target of construction project management. The Dung Quat Refinery (DQR) construction project is a great and vital grassroots refining construction project in Viet Nam. DQR project is located in Dung Quat Economic Zone, Binh Son Distric, Quang Ngai province. Total cost estimation is around 2.5 billions USD, 100% invested by Vietnamese Government through Petrovietnam. The construction phase was started in 2005 and planned to complete on 2009. Regretfully, the refinery could not be finished within intended time, budget and resources. Until now, whole refinery has not passed all performance tests yet.
Normally, time delay always happened in big construction projects in Vietnam. With the purpose to solve this problem, it was found that several approaches have been affected project time completion. There are many factors found as the major source leading to manage project time completion affectively.
This report summarized the delay causes factors involved in the Dung Quat Refinery project during construction stage. This research will be conducted by using qualitative research; the data will be collected to analyze the facing problems. It was discovered from this study that there were many factors causing project time delays in the project. From the case study, effective solutions for controlling the delays will be investigated and be proposed for precious experiences to control and prevent delays in other construction projects in the future.
Tuesday, 20 July 2010
Marine Facility Design And Its Impact On Project Cost In Refinery Projects: A Case Study Of Nghi Son Refinery And The Petrochemical Complex Project
Most construction projects begin with recognition of a need for a new facility. Long before designers start preparing drawings and certainly well before field construction can commence, considerable thought must go into broad-scale planning. Elements of this phase include conceptual analyses, technical and economic feasibility studies, and environmental impact report.
For example, location is fundamental to planning for a new industrial plant. Where can the plant be located to provide desirable, nearby employment for an adequate supply of skilled and productivities workers? What are the present and projected costs and customs associated with the labor force? Depending on the natural raw materials input and its products, will the plant have access to the most appropriate and economical forms of transportation, via air, water, highway, rail or pipeline? Does the local provide access to raw material and to market? Are there adequate sources of energy, including gas, oil, and electricity; and are there convenient communication facilities? What political or institutional factors may ease or impede development and operation of facility? What will be the sociological and economic impact of this plant on the community? What will be environmental impact? What do all these factors taken as a whole, mean for the technical and economic feasibility of the project? Perform the feasibly study to ensure the effectively of the project.
The problem in getting a project started involves:
• Design concerned by possibility that owners spend a lot of time and money
• Uncertainty as to what the Scope of the project should be
• Worries about how much would be the cost
Construction projects, especially refinery project have a lot of items to study and to design including marine facilities, which affect the cost. Mr. Le Tu Anh made a research to study how design and selection of an optimal location for marine facility of refinery project affects the project cost.
Conclusions
The Nghi Son refinery and petrochemical complex Project has been studied for long time. In this research, the author proposed the following:
First, the research must be performed and then economic analyses need to be established. The data may use for analyzing the base on the Primary design of marine facilities.
Second, the projects begin with recognition of a need for a new facility. Long before designers start preparing drawings and certainly well before field construction can commence, considerable thought must go into broad-scale planning. Elements of this phase include conceptual analyses, technical and economic feasibility studies. All the factors taken as a whole mean for the technical and economic feasibility of the project. The costs of the marine facilities are estimated. The research shown the optimal design and show its impact to the project cost. The owner determines time, money and scope of the items.
Finally, an analysis on the result of the plan shows that the project is well planned and this project brings high advantage to owner.
His thesis abstract is copied and posted.
Abstract
The refining industry is one of the key industries playing a very important role in the development of the national economy. In addition to ensuring the national energy security, i.e. the supply of strategic energies such as LPG, gasoline, kerosene, jet fuel, diesel, etc, the establishment and development of this industry with the building of refineries will pave the way for the other related industries such as petrochemical industry, basic chemicals production, petroleum products transportation, storage, trading and distribution.
Additionally, the existing of the refineries will definitely bring about positive benefits in the socio-economic fields as well as the national security and defense, making contributions to speeding up the process of industrialization and modernization as proposed by the Government of Vietnam.
Therefore, this thesis deals with how design and selection of a optimal location for marine facility of refinery project to reduce project cost.
For example, location is fundamental to planning for a new industrial plant. Where can the plant be located to provide desirable, nearby employment for an adequate supply of skilled and productivities workers? What are the present and projected costs and customs associated with the labor force? Depending on the natural raw materials input and its products, will the plant have access to the most appropriate and economical forms of transportation, via air, water, highway, rail or pipeline? Does the local provide access to raw material and to market? Are there adequate sources of energy, including gas, oil, and electricity; and are there convenient communication facilities? What political or institutional factors may ease or impede development and operation of facility? What will be the sociological and economic impact of this plant on the community? What will be environmental impact? What do all these factors taken as a whole, mean for the technical and economic feasibility of the project? Perform the feasibly study to ensure the effectively of the project.
The problem in getting a project started involves:
• Design concerned by possibility that owners spend a lot of time and money
• Uncertainty as to what the Scope of the project should be
• Worries about how much would be the cost
Construction projects, especially refinery project have a lot of items to study and to design including marine facilities, which affect the cost. Mr. Le Tu Anh made a research to study how design and selection of an optimal location for marine facility of refinery project affects the project cost.
Conclusions
The Nghi Son refinery and petrochemical complex Project has been studied for long time. In this research, the author proposed the following:
First, the research must be performed and then economic analyses need to be established. The data may use for analyzing the base on the Primary design of marine facilities.
Second, the projects begin with recognition of a need for a new facility. Long before designers start preparing drawings and certainly well before field construction can commence, considerable thought must go into broad-scale planning. Elements of this phase include conceptual analyses, technical and economic feasibility studies. All the factors taken as a whole mean for the technical and economic feasibility of the project. The costs of the marine facilities are estimated. The research shown the optimal design and show its impact to the project cost. The owner determines time, money and scope of the items.
Finally, an analysis on the result of the plan shows that the project is well planned and this project brings high advantage to owner.
His thesis abstract is copied and posted.
Abstract
The refining industry is one of the key industries playing a very important role in the development of the national economy. In addition to ensuring the national energy security, i.e. the supply of strategic energies such as LPG, gasoline, kerosene, jet fuel, diesel, etc, the establishment and development of this industry with the building of refineries will pave the way for the other related industries such as petrochemical industry, basic chemicals production, petroleum products transportation, storage, trading and distribution.
Additionally, the existing of the refineries will definitely bring about positive benefits in the socio-economic fields as well as the national security and defense, making contributions to speeding up the process of industrialization and modernization as proposed by the Government of Vietnam.
Therefore, this thesis deals with how design and selection of a optimal location for marine facility of refinery project to reduce project cost.
Monday, 19 July 2010
Managing The Precommissioning And Commissioning Phase In Epc Contract: A Case Study Of The Dung Quat Refinery Project, Quang Ngai, Vietnam
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.
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.
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.
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