Subcontracting in the construction is a fast-growing industry in recent years. Technology, scale and size of construction project become more specific and complex. Therefore, main contractors often sign the work to subcontractor because of deficient resource or expertise in the specific area.
Normally main contractor only perform works in which they are strong while the other works are being subcontracted. Subcontractor management is importance factor for success of project. Even though a large portion of a construction project is usually performed by subcontractors, the issues concerning about the subcontracting practice are rarely acceptable (acknowledged) and the ways to improve subcontracting practice are seldom debated.
Project delays because of many reasons such as: poor communication, lack of resources and other factors. Most of vast projects usually have problem with time and cost control.
Mr. Vu Van Ngu made a case study to know how main contractors manage subcontractors including procurement, cost, quality, scheduling and safety aspects.
Conclusion
In this case, there are many factors influence subcontractor management such as tender preparation, subcontractor selection, contract with subcontractor, subcontractor scheduling management etc. The most importance factor in this case is tender document preparation. The tender document had been prepared but it was insufficient and unclear. The causes of this are poor design document and assignment of inexperience person to prepare tender document. Due to insufficient and unclear tender document, the subcontractor evaluation and subcontractor selection were influenced, and consequence of further sequences occurred.
The main contractor and subcontractor have responsibility in management of project scheduling, project quality, project cost and project safety. However the role of subcontractor is most important. If the selected subcontractors have past experience for the project, have good management system, have enough capability to carry out the project such as equipment, tools, labor, and then they can complete the project by themselves. Main contractor only supports subcontractor, it can’t replace management of subcontractor. The main contractor usually subcontracts because of its incapability to carry out the whole project.
Recommendation
Based on the problems mentioned, it can be concluded that the management of subcontractor almost depends on the Main contractor organization such us their capabilities, their experience and their management system. For example if their people don’t have experience and capability, the problems below normally happen:
1. They can’t prepare the tender document properly; this leads to difficulty in subcontractor evaluation.
2. They can’t select right subcontractor but they based on their feelings and not base on the actual requirement wrote down in the tender documents and biding submission of the bidder. The subcontractor selection actually is a sensitive issue.
3. They can’t prepare sufficient contract in which all risks have to be considered, possible events mentioned together with solving solution.
4. They can’t manage the subcontractor’s schedule because they don’t know how to control it.
5. They can’t monitor and control the quality of the project because they don’t know exactly the quality requirements applied for the project.
6. They can’t control the cost and safety of subcontractor.
In tender document for tendering:
1. The tender document is very important for bidders in preparation of the required document. The main contractor should assign competent person to carry out this works and all tender documents should be reviewed carefully before issue. If Main contractor do not have people who have enough experience, main contractor should hire expert from outside.
2. When preparing the scope of work, main contractor have to check and understand thoroughly all the contents of detailed design. Any missing content or unclear content/ differences should be explained, added in tender document or request subcontractor to check and propose their solution/ methodology in submitted documents as option.
3. The evaluation form is very important. It should be reviewed carefully by a well-experienced people. It should indicate key factors base on which they can evaluate and chose the right subcontractor.
4. In order to use for further reference, those documents should be stored in systematic manner.
In subcontractor selection:
1. Member of evaluation team should be selected. They have to read and understand project configuration and all project requirements. He/ she should know what major factors influence to project. What are the minor factors which can be discussed, clarified, adjusted in negotiation step?
2. In addition, member of evaluation team have to understand requirements in the legal documents such as law, decree etc
3. Member of evaluation team should have negotiation skill, should be flexible, shouldn’t be rigid during negotiation, should know how to ask subcontractor to understand capabilities and past experience of subcontractor which they0 intend to select.
4. Member of evaluation team should have equitable behavior.
In Subcontractor contract:
1. During negotiation, all responsibilities of each party should be detailed and cleared.
2. The scope of work should be cleared. Any ambiguous issues if any shall be raised and discussed until both parties understand the same meaning.
3. Payment term, milestone should be defined in detailed. Any documents which are necessary for payment should be specified.
4. Main contractor and subcontractor should predict situations for impact cost, impact schedule and set out feasible rules for implementation.
5. Main contractor should assign a person to manage contract ensuring the contract is controlled according to commitment between parties.
In subcontractor scheduling management:
1. The main contractor should assign personnel to control project schedule (Project schedule controller), update and report to project manager every week or when necessary. Base on report of inspector, project schedule controller should calculate achieved schedule and comparison with targeted schedule. The calculation result will be evidence for giving necessary solution.
2. The inspector of main contractor should go to the site regularly to inspect and record exactly the quantity done by subcontractor.
3. The main contractor should review carefully the schedule of subcontractor to make sure it is feasible and includes any possible risks.
4. A solution to settle delaying schedule of subcontractor should be given in the contract, the main contractor can take over subcontractor responsibility to recover project schedule when subcontractor is not able to catch schedule.
In subcontractor quality management:
1. The main contractor shall assign experience inspectors to control quality of project.
2. The design document provided by client should be detailed, sufficient, indicate criteria and standard applied. The design document of subcontractor should be reviewed and approved by main contractor when necessary.
3. Main contractor should check and approve construction procedures, specially inspection and test plan (ITP) content in the procedures.
4. Main contractor should require subcontractor set up quality team and control quality by themselves.
In subcontractor cost management:
1. The payment should be based on completed quantity; this quantity should be controlled strictly.
2. Any impact cost should be checked, approved, and controlled strictly.
In subcontractor safety management:
1. The safety should by emphasized at the start of the project and maintain throughout the project.
2. The safety should be reminded regularly.
3. The risk assessment is always useful.
4. The permit to work should be applied for hazardous work.
His thesis abstract is copied and posted.
Abstract
Because of the increased project complexity and the highly competitive nature of the construction industry, a construction project often is executed by several subcontractors. Hence, effectively managing the numerous subcontractors involved in a construction project becomes a crucial challenge for the general contractor in ensuring timely project completion with acceptable quality.
Managing subcontractors does not simply involve asking them to allocate resources (labor, material, and machinery/equipment) into the jobsite whenever an activity is scheduled, and then pushing them to speed up the work without a clear consciousness of schedule risk. Factors (or uncertainties) such as weather, labor, site conditions, material delivery, and equipment breakdown can influence the time performance of subcontractors, affecting total project duration.
But almost General Contractor is leak of management sub-contractor and it caused many difficulties and conflicts during performance, management of projects.
The most difficulty of sub-contractor management is deviation scope of work between sub-contractors, controlling schedule and interfacing between subcontractors.
In managing project subcontractors, a general contractor must determine the items of work to be subcontracted, select subcontractors, set subcontract agreements, and control the subcontractors during construction.
Wednesday, 25 August 2010
Monday, 23 August 2010
Owner’s Project Cost Management Approach: A Case Study of Underground Oil Storage Cavern Project in Vietnam
Over the past few decades, the Vietnam economy has grown very fast at the average rate of 7% per year. In line with the grow rate of the economy, the number of the projects with advance technology have been applied in Vietnam to meet the demand for new infrastructure in the modernized and industrialized period.With this kind of project, the project complexity shall be the great challenges to the organization performing it or the project owner.
As per local media, most giant projects first applied in Vietnam and performed by Vietnamese organization were delayed, cost overrun or not financially vital due to many reasons in which lacking appropriate cost management approach for those is really rampant.
Mr. Nguyen Sinh Khang made a study expecting that his report shall provide the respective project owner with some cost management approach.
The main objectives of his study were: (1) study the issues in cost management of construction project especially of underground oil storage cavern project in Vietnam; and (2) provide recommendations on how the problems can be managed and the frame work for owner’s project cost management approach covering whole span of the project from pre-contact stage to post-contract stage
Conclusions
For the project especially large-scale and complex project like underground oil storage cavern, the cost overrun shall occur due to three reasons such as: incomplete and inadequate drawings and specifications, the Owner’s change to project requirements and changes from Contractor. In spite of the efforts made by Owner, Owner’s Consultants and Contractors, there are considerable factors that made cost overrun inevitable and numbers of the factors are out of their responsibility and ability.
The followings are the Owner’s common factors that cause the problem in cost management of the project:
- Lack of management policy on report and control practices
- Improper estimating techniques and/or standards leading to impractical budget
- Fault sequence commencement and completion of activities and/or events
- Unexpected material cost escalation
- Poor scope of work definition or inadequate WBS (Work Breakdown Structure)
- Selecting Contractor with the lowest tender price
- Improper planning system resulting in ineffective action or cost
- Improper comparison of actual cost and planned cost
- Unexpected and unplanned technical issues
- Delays and disruption resulting prolongation cost
The conclusions for above mentioned problems shall be made as follows:
1. For Owner’s Cost management of pre-contract stage:
- The Owner normally selects Consultant or Contractor who proposes lowest bid regardless of experience, quality or expertise;
- Scope of work of Consultant or Contractor is poorly planned and defined;
- Low accuracy is inherent in the approved cost estimate;
- Tight approved budget is included in the overall scheme;
- Value engineering (VE) is not carried out during design phases especially in the initial phase of the project.
2. For Owner’s procurement strategies:
- Traditional method of procurement based on the clear separation of design and construction is deployed.
- Price-based, lump-sum and specification contract in which Contractor is required to estimate the quantities and subsequently to calculate tender sum based on the owner’s drawings and specifications is deployed.
- Risk access is not carried out for decision making especially in selection of project delivery system.
3. For Owner’s Cost management of post-contract stage:
Owner’s cost-management and monitoring procedure lacks the following characteristics:
- Cost is not forecasted before decision making
- Cost-recording system is not cost-effective to operate
- Actual cost is not subject to variance analysis
- Time and quality do not implicate in the cost
Change management – Valuing variations:
- The proper recording system for changes is not established and applied
- Traditional method of valuing variation which is based the valuation on the rates or prices specified in Bill of Quantity (BofQ) or schedule. Normally, those rates or prices were quoted at the time of tender.
Changes to the project arise due to:
- Inadequate briefing from the owner
- Inconsistent and late instruction from the Owners
- Incomplete design
- Lack of careful planning at design stage
- Lack of coordination of specialist design work
- Late clarification of complex details
Claim management:
- The delay claims on extension of time and cost of prolongation from Contractor is not solved effectively and in amicable way.
The Contractor often submits the claims due to the main following reasons :
- Inadequate time and planning before project commencement
- Inviting the tender on incomplete drawings
- Introducing extensive changes to the project
- Inadequate site investigation – deep basement; pilling, earthwork, tunneling or unforeseen ground condition
- Extensive changes to contract standard form
- Owner’s inference with the timing and sequence of construction
Recommendation for management improvement
For the project with the similar condition as one in the case study, the recommendation shall be made as follows:
1. Value-for-money mechanism should be in place to evaluate quality and price of the bid.
2. For any contract, the scope of work should be clearly defined.
3. Proper methods with the different degree of accuracy for each stage of the project shall be used.
4. The budget should be used positively to ensure that the design stays within the scope of the original scheme.
5. The factors to be considered during cost estimate shall be:
a. Land acquisition including legal fees
b. Owner’s organization cost allocated to the project
c . Site investigation
d. Insurances
e. Consultant’s fees including engineering
f. Equipment procurement and installation
g. Construction cost
h. Taxes
i. Contingencies and risks
j. Financing and legal cost
6. Comprehensive value management (VM) should be in place all the time.
7. Design and Build shall be deployed.
8. Price-based bill of quantity (BofQ) with milestone payments is applied.
9. Some risk management procedures should be in place all the time to access the risks so that unacceptable risks could be transferred to relevant Contractor or Insurer by contractual commitment. Who-life costing technique could be used where possible.
10. Costs should be forecasted before decisions are made to allow consideration of all possible actions
11. Cost-recording system should be simple and cost-effective to operate
12. Actual costs should be subject to variance analysis to determine the reasons for any deviation leading to cost overrun
13. The costs implication of time and quality should be incorporated into the decision making process
14. Parties should keep comprehensive and detail records of the factors relevant to the variation
15. Change consequences shall be mitigated by:
a. Setting up clear project objectives
b. Timely change instructions
c. Practically-completed design
d. Adequate planning at design stage
e. Adequate coordination of specialist design work
f. Timely clarification of complex details
16. The variation valuation procedure in which the parties need to have skilled negotiation and be prepared to adopt a give-and-take attitude in order to bring a satisfactory claim settlement.
17. Parties should keep comprehensive and detail records of the factors relevant to the variation.
18. The variation valuation procedure in which the parties need to have skilled negotiation and be prepared to adopt a give-and-take attitude in order to bring a satisfactory claim settlement.
19. Owner’s project management team should be equipped with knowledge of construction technology, construction law, term and conditions of the contract, contract administration, project-planning system and negotiation skill.
20. The following actions shall be required to avoid the claims:
a. Adequate plan made by competent Owner’s engineer and/or Consultant
b. Availability of verified and completed drawings and specifications prior to bid
c. Minimize and eliminate the unnecessary changes to the project;
d. Application of Value Engineering and/or Whole-life Costing and/or Risk Access techniques to analysis the changes to project;
e. Comprehensive site investigation in which the scope of site investigation shall be given by Consultant or Engineer who use site investigation data for engineering works;
f. Usage of relevant contract standard form set forth by recognized organization such as FIDIC, ICI ..etc.
g. Relevant Coordination procedure between Owner and Contractor.
His abstract is copied and posted.
ABSTRACT
As the same context of the projects which were first applied technology, construction methods or project size in the developed countries, the project of this kind or the likes in Vietnam cannot meet or exceed the stakeholder expectations due to many unforeseen reasons.
The role of the organization performing project of this kind of project is of great importance because its performance could bring the success or failure to these projects. In Vietnam, the regular phenomenon is that project planning and control of this kind of project is always under expectation due to the lack of project management competence from the organization performing project especially lack of appropriate cost management approach. Those shall have bad consequences to the direct or indirect stakeholders. Therefore, to be equipped with the most adaptable project planning and control system for this kind of project is required by and from the organization performing project and project team member also.
As mentioned above, the need of workable cost management approach for the project of this kind is critical. This report shall therefore address this development by underlining, prioritizing and specializing some aspects of owner’s construction project cost management approach and shall give some recommendations on or suggest some guidelines for this kind of project and specific project as descriptions in case study.
As per local media, most giant projects first applied in Vietnam and performed by Vietnamese organization were delayed, cost overrun or not financially vital due to many reasons in which lacking appropriate cost management approach for those is really rampant.
Mr. Nguyen Sinh Khang made a study expecting that his report shall provide the respective project owner with some cost management approach.
The main objectives of his study were: (1) study the issues in cost management of construction project especially of underground oil storage cavern project in Vietnam; and (2) provide recommendations on how the problems can be managed and the frame work for owner’s project cost management approach covering whole span of the project from pre-contact stage to post-contract stage
Conclusions
For the project especially large-scale and complex project like underground oil storage cavern, the cost overrun shall occur due to three reasons such as: incomplete and inadequate drawings and specifications, the Owner’s change to project requirements and changes from Contractor. In spite of the efforts made by Owner, Owner’s Consultants and Contractors, there are considerable factors that made cost overrun inevitable and numbers of the factors are out of their responsibility and ability.
The followings are the Owner’s common factors that cause the problem in cost management of the project:
- Lack of management policy on report and control practices
- Improper estimating techniques and/or standards leading to impractical budget
- Fault sequence commencement and completion of activities and/or events
- Unexpected material cost escalation
- Poor scope of work definition or inadequate WBS (Work Breakdown Structure)
- Selecting Contractor with the lowest tender price
- Improper planning system resulting in ineffective action or cost
- Improper comparison of actual cost and planned cost
- Unexpected and unplanned technical issues
- Delays and disruption resulting prolongation cost
The conclusions for above mentioned problems shall be made as follows:
1. For Owner’s Cost management of pre-contract stage:
- The Owner normally selects Consultant or Contractor who proposes lowest bid regardless of experience, quality or expertise;
- Scope of work of Consultant or Contractor is poorly planned and defined;
- Low accuracy is inherent in the approved cost estimate;
- Tight approved budget is included in the overall scheme;
- Value engineering (VE) is not carried out during design phases especially in the initial phase of the project.
2. For Owner’s procurement strategies:
- Traditional method of procurement based on the clear separation of design and construction is deployed.
- Price-based, lump-sum and specification contract in which Contractor is required to estimate the quantities and subsequently to calculate tender sum based on the owner’s drawings and specifications is deployed.
- Risk access is not carried out for decision making especially in selection of project delivery system.
3. For Owner’s Cost management of post-contract stage:
Owner’s cost-management and monitoring procedure lacks the following characteristics:
- Cost is not forecasted before decision making
- Cost-recording system is not cost-effective to operate
- Actual cost is not subject to variance analysis
- Time and quality do not implicate in the cost
Change management – Valuing variations:
- The proper recording system for changes is not established and applied
- Traditional method of valuing variation which is based the valuation on the rates or prices specified in Bill of Quantity (BofQ) or schedule. Normally, those rates or prices were quoted at the time of tender.
Changes to the project arise due to:
- Inadequate briefing from the owner
- Inconsistent and late instruction from the Owners
- Incomplete design
- Lack of careful planning at design stage
- Lack of coordination of specialist design work
- Late clarification of complex details
Claim management:
- The delay claims on extension of time and cost of prolongation from Contractor is not solved effectively and in amicable way.
The Contractor often submits the claims due to the main following reasons :
- Inadequate time and planning before project commencement
- Inviting the tender on incomplete drawings
- Introducing extensive changes to the project
- Inadequate site investigation – deep basement; pilling, earthwork, tunneling or unforeseen ground condition
- Extensive changes to contract standard form
- Owner’s inference with the timing and sequence of construction
Recommendation for management improvement
For the project with the similar condition as one in the case study, the recommendation shall be made as follows:
1. Value-for-money mechanism should be in place to evaluate quality and price of the bid.
2. For any contract, the scope of work should be clearly defined.
3. Proper methods with the different degree of accuracy for each stage of the project shall be used.
4. The budget should be used positively to ensure that the design stays within the scope of the original scheme.
5. The factors to be considered during cost estimate shall be:
a. Land acquisition including legal fees
b. Owner’s organization cost allocated to the project
c . Site investigation
d. Insurances
e. Consultant’s fees including engineering
f. Equipment procurement and installation
g. Construction cost
h. Taxes
i. Contingencies and risks
j. Financing and legal cost
6. Comprehensive value management (VM) should be in place all the time.
7. Design and Build shall be deployed.
8. Price-based bill of quantity (BofQ) with milestone payments is applied.
9. Some risk management procedures should be in place all the time to access the risks so that unacceptable risks could be transferred to relevant Contractor or Insurer by contractual commitment. Who-life costing technique could be used where possible.
10. Costs should be forecasted before decisions are made to allow consideration of all possible actions
11. Cost-recording system should be simple and cost-effective to operate
12. Actual costs should be subject to variance analysis to determine the reasons for any deviation leading to cost overrun
13. The costs implication of time and quality should be incorporated into the decision making process
14. Parties should keep comprehensive and detail records of the factors relevant to the variation
15. Change consequences shall be mitigated by:
a. Setting up clear project objectives
b. Timely change instructions
c. Practically-completed design
d. Adequate planning at design stage
e. Adequate coordination of specialist design work
f. Timely clarification of complex details
16. The variation valuation procedure in which the parties need to have skilled negotiation and be prepared to adopt a give-and-take attitude in order to bring a satisfactory claim settlement.
17. Parties should keep comprehensive and detail records of the factors relevant to the variation.
18. The variation valuation procedure in which the parties need to have skilled negotiation and be prepared to adopt a give-and-take attitude in order to bring a satisfactory claim settlement.
19. Owner’s project management team should be equipped with knowledge of construction technology, construction law, term and conditions of the contract, contract administration, project-planning system and negotiation skill.
20. The following actions shall be required to avoid the claims:
a. Adequate plan made by competent Owner’s engineer and/or Consultant
b. Availability of verified and completed drawings and specifications prior to bid
c. Minimize and eliminate the unnecessary changes to the project;
d. Application of Value Engineering and/or Whole-life Costing and/or Risk Access techniques to analysis the changes to project;
e. Comprehensive site investigation in which the scope of site investigation shall be given by Consultant or Engineer who use site investigation data for engineering works;
f. Usage of relevant contract standard form set forth by recognized organization such as FIDIC, ICI ..etc.
g. Relevant Coordination procedure between Owner and Contractor.
His abstract is copied and posted.
ABSTRACT
As the same context of the projects which were first applied technology, construction methods or project size in the developed countries, the project of this kind or the likes in Vietnam cannot meet or exceed the stakeholder expectations due to many unforeseen reasons.
The role of the organization performing project of this kind of project is of great importance because its performance could bring the success or failure to these projects. In Vietnam, the regular phenomenon is that project planning and control of this kind of project is always under expectation due to the lack of project management competence from the organization performing project especially lack of appropriate cost management approach. Those shall have bad consequences to the direct or indirect stakeholders. Therefore, to be equipped with the most adaptable project planning and control system for this kind of project is required by and from the organization performing project and project team member also.
As mentioned above, the need of workable cost management approach for the project of this kind is critical. This report shall therefore address this development by underlining, prioritizing and specializing some aspects of owner’s construction project cost management approach and shall give some recommendations on or suggest some guidelines for this kind of project and specific project as descriptions in case study.
Wednesday, 18 August 2010
Risk Management in Pipeline Operation Management: A Case Study of Petrovietnam Gas Pipeline System
Recently, the gas industry in Vietnam boost so fast. Some pipeline company start to learn and apply the new gas technology and even new gas pipeline management from some developed countries. Therefore, many problems and issues could be updated and maintained to improve the skill and knowledge in pipeline risk management.
After some years, pipeline shall be surfaced more risk from physical deterioration and environmental factors. Thus, the risk pipeline management system must be done well to extend the gas pipeline lifetime expectancy and made more profitable to the company.
Mr. Trieu Quoc Tuan made a case study which main objectives were to: (1) study the issues in pipeline risk management in recent international best practices; (2) review a case study of the pipeline risk management practices in a Vietnam pipeline company; and (3) provide recommendations and propose some key point that can be applied to Vietnam Pipeline Company to improve the effectiveness of pipeline management.
Conclusion
Gas transmission by pipeline was developed years ago in Vietnam. The application and the right way of setting up the risk management strategy may not be that professional.
Throughout this case study, the status of risk in general of pipeline operation was reviewed using risk assessment index model, and it was revealed that the company’s organization has to improve its competence to manage the pipeline risk.
The investment of risk management system and application of the modern international standard on the pipeline risk management is necessary.
His thesis abstract is copied and posted.
Abstract
Pipelines are generally the most economical way to transport large quantities of oil or natural gas over states or even country. In order to extend its life expectancy, a pipeline risk management has become more important nowadays.
Pipeline operation risk can be very high depending on how effective an organization is in managing its pipeline transmission system. Even the slightest defect on pipeline surface can bring great amount of oil and gas leakage. This is also the main reason why explosion and fire accident rates are increasing rapidly in the world. It will but human lives risk, pollution concern to environment as well as bring damage to millions dollars worth of property and asset.
It is definitely a necessity for a pipeline professional to keep learning and be aware of the updated pipeline risk management to ensure a more efficient and safer as well as profitable pipeline operation.
In this report, by the dimension of this study, the author would like to discuss about pipeline risk management and some issues of pipeline risk management recommendations in author’s experiences in a case study.
After some years, pipeline shall be surfaced more risk from physical deterioration and environmental factors. Thus, the risk pipeline management system must be done well to extend the gas pipeline lifetime expectancy and made more profitable to the company.
Mr. Trieu Quoc Tuan made a case study which main objectives were to: (1) study the issues in pipeline risk management in recent international best practices; (2) review a case study of the pipeline risk management practices in a Vietnam pipeline company; and (3) provide recommendations and propose some key point that can be applied to Vietnam Pipeline Company to improve the effectiveness of pipeline management.
Conclusion
Gas transmission by pipeline was developed years ago in Vietnam. The application and the right way of setting up the risk management strategy may not be that professional.
Throughout this case study, the status of risk in general of pipeline operation was reviewed using risk assessment index model, and it was revealed that the company’s organization has to improve its competence to manage the pipeline risk.
The investment of risk management system and application of the modern international standard on the pipeline risk management is necessary.
His thesis abstract is copied and posted.
Abstract
Pipelines are generally the most economical way to transport large quantities of oil or natural gas over states or even country. In order to extend its life expectancy, a pipeline risk management has become more important nowadays.
Pipeline operation risk can be very high depending on how effective an organization is in managing its pipeline transmission system. Even the slightest defect on pipeline surface can bring great amount of oil and gas leakage. This is also the main reason why explosion and fire accident rates are increasing rapidly in the world. It will but human lives risk, pollution concern to environment as well as bring damage to millions dollars worth of property and asset.
It is definitely a necessity for a pipeline professional to keep learning and be aware of the updated pipeline risk management to ensure a more efficient and safer as well as profitable pipeline operation.
In this report, by the dimension of this study, the author would like to discuss about pipeline risk management and some issues of pipeline risk management recommendations in author’s experiences in a case study.
Tuesday, 17 August 2010
Engineering, Procurement and Construction (EPC) Contracts Performance in Oil and Gas Industry: A Case Study of Delay in Commissioning Activity of EPC
Oil & gas prices fluctuated in 2007 to 2009 due to global financial crisis. This crisis affects almost all countries both in economic and social aspects. In turn, every economic fluctuation strongly affects oil and gas prices. The demand for oil and gas is increasingly growing despite of having some economic crisis. Some emerging countries would like to explore and exploit activities in nations where potentials for oil and gas are found.
Today oil and gas companies prefer to sign the EPC contracts than other forms of contracts so that they will be able to avoid and reduce any conflicts in execution of contracts due to interfaces and risks between project companies and contractors and easy to control the projects in every aspects.
Mr. Hoang Huu Cam made a study which focused on the delay for commissioning of GDC project that had occurred during the execution of EPC contract of Phu My GDC project in Ba Ria Vung Tau province, Viet Nam. His study also focused in the following topics:
1. An agreement signed by and between Petrovietnam (PVN) and Electricity of Viet Nam (EVN) had been executed instead of off-take agreement signed between PVGC (the Owner) and Phu My Fertilizers Plant, Phu My Power Plant 1 and Phu My Power Plant 2.2 (the customers of the Owner).
2. When the construction of GDC project was completed on time as planned schedule and ready for commissioning, but three above projects had been under construction. As a result of this, GDC project had no customers to supply gas to do the commissioning activity at that time and had to wait for six months.
3. The owner had to give an extension of time to the EPC contractor who suffered from the delay to take standby time of 6 months for commissioning.
4. The Owner had to compensate a standby charge as a Change Order to EPC contractor.
5. The Owner had to make compensation as a standby charge to Certifying Agent, Germanischer Lloyd.
6. A Gas Supply Agreement signed between PVGC and BP was on the take or pay basis, therefore PVGC had to pay an amount of money for BP within 6 months of standby time.
EPC contracts are often used in medium and large scale oil and gas projects in Viet Nam since 1990s. According to international practices, in case of any disputes or problems happened in the execution of EPC contracts, those problems and disputes shall be referred to clauses of EPC contracts and settled by arbitration in accordance with the signed contractual clauses and conditions. In Vietnam, some projects are usually built to meet the socio-economic issues and often guided by the Government. So it has a bit difference between the Vietnamese and international practice. The aim of Mr. Cam’s study focused on the following issues with regard to GDC Project’s EPC contract:
1. Delay in commissioning activity.
2. Consequences of the delay.
a) Extension of Time for Completion to EPC Contractor.
b) Compensation for EPC Contractor.
c) Compensation for Certifying Agent.
d) Compensation for BP.
Conclusion
The successful factors of the Project
There were two factors resulted in success of the GDC project. The most important factor was tendering process and selecting the right EPC Contractor for the right works. The EPC Contractor, DWE, has much experience in engineering, procurement and construction. Besides, the Sub-contractor, Petrovietnam Engineering & Construction Company (PVECC) is one of the leading contractors in oil and gas industry of Vietnam.
Another factor was that the project management was very good during construction period. The EPC Contractor applied the latest project management knowledge for the project at that time and the Project Company was very satisfactory to this matter. Through this project, with the purpose of “on-job-training” both Subcontractor’s and the Project Company personnel obtained much experience and project management knowledge from EPC Contractor.
Adversely Impacted Factors on GDC Project
The first thing PVGC faced with was that it had less authority to control the relationships between the project’s stakeholders as well as responsibilities between them. This happened because a substantial part was mechanism in economic and business activities in Vietnam. Over 20 years of “Doi Moi” process, Vietnam has pursued a Socialist Oriented Market Economy which is a model that has no existence in the world so far. Vietnam has been seeking its own way on the road of development and protection of the country. Hence Vietnam has a lot of things to do in the process of global economy integration. Vietnam also became a member of World Trade Organization in 2006 and it needs time to change its existing legal system and business environment. These changes will create an equal and fair business environment for every enterprise including all businesses in all economic sectors.
Recommendations
Today although EPC Contracts are popularly used for medium and large projects in infrastructure and in oil and gas sector, but the success of applying the form of EPC Contracts are still dependent on both jurisdictions and practices where they are used for. In countries where jurisdictions are very stable and stringent, the application of EPC Contracts is easier and more advantageous than that in countries where jurisdictions and legal systems are less stable and tight.
Recommendations based on the case study and analysis
For the project company, PVGC:
- PVGC must have a program summarizing all projects that have been done and analyzing its adverse factors in order to prevent similar situations occurred in future projects.
- PVGC should make a proposal submitted to PVN and EVN to ask them to speed up their gas customers to catch up with the construction schedules planned during GDC construction period.
- PVGC should set up a risk management program for each project from the beginning up to the completion of the project.
- In order to minimizing any loss which may be incurred in the future projects when having a participation of any foreign company as stakeholder, PVGC should have a closer relationship with its customers and have some agreement like off-take agreement.
For the EPC Contractor, DWE:
Because the DWE was the foreign EPC Contractor, therefore the EPC Contractor had to scrutinize the local legal system, practices and the economic mechanism in order to evaluate and foresee any situation it may face within the construction period. The following issues needed to be taken before signing the EPC contract, these are sometimes called contract signing checklist.
1. Review your Bid: DWE should review its Bid carefully before starting the signing of EPC contract.
2. Review complete plan: Before signing EPC contract; DWE should review all plans including sub-contractor’s plan, and the plans of other parties involved in the project.
3. Another aspect the EPC Contractor should study laws, regulations and other statutory documents that may affect the EPC Contractor during its execution of EPC Contract.
His thesis abstract is copied and posted.
Abstract
Engineering, Procurement and Construction (EPC) Contract is widely used today in the world in general and in Vietnam in particular. Especially in oil and gas industry EPC contract is getting more and more popular and is often involved in medium and large scale oil & gas projects. According to an EPC Contract a contractor has obligation to hand over a complete facility or complex to a Owner (or client) who needs 'turn a key' to begin operating the facility, therefore EPC Contract is now and then called “turnkey contract. Besides delivering a complete facility or complex, the contractor shall deliver that facility or the complex at a guaranteed price until a guaranteed date and he has to undertake the construction work to satisfy designated specifications, requirements or to the specified level. Any failure of his obligations to comply with any specifications or requirements will often bring the contractor to bear monetary loss and liability.
Vietnam Oil & Gas Group had an early stage to get an application of EPC Contract forms in 1990s when Vietnam had suffered the United States of America’s economic trade embargo against all of its social and economic aspects. All EPC contracts that were used in oil and gas projects in Vietnam at that time always had foreign participations or involvement on those projects and most EPC contractors who undertook the projects were foreigners. After United States of America lifting its economic and trade embargo against Vietnam to date, the use of EPC contracts has been spreading to various industries and sectors, especially for ODA (Official Development Assistance) projects such as infrastructure projects where capital had been funded by foreign countries, regional and international financial institutions. The uses of EPC contracts are very common in energy projects like power generation plants in recent years in Vietnam.
However, there is still debate on the use of EPC contracts in Vietnam, because of Vietnam’s legal system, practices in construction industry and other matters.
This study will only be focusing on the use of one of EPC Contracts in the oil and gas sector in Vietnam – Phu My Gas Distribution Center (hereinafter referred to as GDC) and state the advantages, disadvantages and problems of EPC contracts applicable in oil & gas projects in Vietnam. How to resolve the problems in exercising EPC contracts and measures to be taken to prevent the problems will also be raised in this study.
Today oil and gas companies prefer to sign the EPC contracts than other forms of contracts so that they will be able to avoid and reduce any conflicts in execution of contracts due to interfaces and risks between project companies and contractors and easy to control the projects in every aspects.
Mr. Hoang Huu Cam made a study which focused on the delay for commissioning of GDC project that had occurred during the execution of EPC contract of Phu My GDC project in Ba Ria Vung Tau province, Viet Nam. His study also focused in the following topics:
1. An agreement signed by and between Petrovietnam (PVN) and Electricity of Viet Nam (EVN) had been executed instead of off-take agreement signed between PVGC (the Owner) and Phu My Fertilizers Plant, Phu My Power Plant 1 and Phu My Power Plant 2.2 (the customers of the Owner).
2. When the construction of GDC project was completed on time as planned schedule and ready for commissioning, but three above projects had been under construction. As a result of this, GDC project had no customers to supply gas to do the commissioning activity at that time and had to wait for six months.
3. The owner had to give an extension of time to the EPC contractor who suffered from the delay to take standby time of 6 months for commissioning.
4. The Owner had to compensate a standby charge as a Change Order to EPC contractor.
5. The Owner had to make compensation as a standby charge to Certifying Agent, Germanischer Lloyd.
6. A Gas Supply Agreement signed between PVGC and BP was on the take or pay basis, therefore PVGC had to pay an amount of money for BP within 6 months of standby time.
EPC contracts are often used in medium and large scale oil and gas projects in Viet Nam since 1990s. According to international practices, in case of any disputes or problems happened in the execution of EPC contracts, those problems and disputes shall be referred to clauses of EPC contracts and settled by arbitration in accordance with the signed contractual clauses and conditions. In Vietnam, some projects are usually built to meet the socio-economic issues and often guided by the Government. So it has a bit difference between the Vietnamese and international practice. The aim of Mr. Cam’s study focused on the following issues with regard to GDC Project’s EPC contract:
1. Delay in commissioning activity.
2. Consequences of the delay.
a) Extension of Time for Completion to EPC Contractor.
b) Compensation for EPC Contractor.
c) Compensation for Certifying Agent.
d) Compensation for BP.
Conclusion
The successful factors of the Project
There were two factors resulted in success of the GDC project. The most important factor was tendering process and selecting the right EPC Contractor for the right works. The EPC Contractor, DWE, has much experience in engineering, procurement and construction. Besides, the Sub-contractor, Petrovietnam Engineering & Construction Company (PVECC) is one of the leading contractors in oil and gas industry of Vietnam.
Another factor was that the project management was very good during construction period. The EPC Contractor applied the latest project management knowledge for the project at that time and the Project Company was very satisfactory to this matter. Through this project, with the purpose of “on-job-training” both Subcontractor’s and the Project Company personnel obtained much experience and project management knowledge from EPC Contractor.
Adversely Impacted Factors on GDC Project
The first thing PVGC faced with was that it had less authority to control the relationships between the project’s stakeholders as well as responsibilities between them. This happened because a substantial part was mechanism in economic and business activities in Vietnam. Over 20 years of “Doi Moi” process, Vietnam has pursued a Socialist Oriented Market Economy which is a model that has no existence in the world so far. Vietnam has been seeking its own way on the road of development and protection of the country. Hence Vietnam has a lot of things to do in the process of global economy integration. Vietnam also became a member of World Trade Organization in 2006 and it needs time to change its existing legal system and business environment. These changes will create an equal and fair business environment for every enterprise including all businesses in all economic sectors.
Recommendations
Today although EPC Contracts are popularly used for medium and large projects in infrastructure and in oil and gas sector, but the success of applying the form of EPC Contracts are still dependent on both jurisdictions and practices where they are used for. In countries where jurisdictions are very stable and stringent, the application of EPC Contracts is easier and more advantageous than that in countries where jurisdictions and legal systems are less stable and tight.
Recommendations based on the case study and analysis
For the project company, PVGC:
- PVGC must have a program summarizing all projects that have been done and analyzing its adverse factors in order to prevent similar situations occurred in future projects.
- PVGC should make a proposal submitted to PVN and EVN to ask them to speed up their gas customers to catch up with the construction schedules planned during GDC construction period.
- PVGC should set up a risk management program for each project from the beginning up to the completion of the project.
- In order to minimizing any loss which may be incurred in the future projects when having a participation of any foreign company as stakeholder, PVGC should have a closer relationship with its customers and have some agreement like off-take agreement.
For the EPC Contractor, DWE:
Because the DWE was the foreign EPC Contractor, therefore the EPC Contractor had to scrutinize the local legal system, practices and the economic mechanism in order to evaluate and foresee any situation it may face within the construction period. The following issues needed to be taken before signing the EPC contract, these are sometimes called contract signing checklist.
1. Review your Bid: DWE should review its Bid carefully before starting the signing of EPC contract.
2. Review complete plan: Before signing EPC contract; DWE should review all plans including sub-contractor’s plan, and the plans of other parties involved in the project.
3. Another aspect the EPC Contractor should study laws, regulations and other statutory documents that may affect the EPC Contractor during its execution of EPC Contract.
His thesis abstract is copied and posted.
Abstract
Engineering, Procurement and Construction (EPC) Contract is widely used today in the world in general and in Vietnam in particular. Especially in oil and gas industry EPC contract is getting more and more popular and is often involved in medium and large scale oil & gas projects. According to an EPC Contract a contractor has obligation to hand over a complete facility or complex to a Owner (or client) who needs 'turn a key' to begin operating the facility, therefore EPC Contract is now and then called “turnkey contract. Besides delivering a complete facility or complex, the contractor shall deliver that facility or the complex at a guaranteed price until a guaranteed date and he has to undertake the construction work to satisfy designated specifications, requirements or to the specified level. Any failure of his obligations to comply with any specifications or requirements will often bring the contractor to bear monetary loss and liability.
Vietnam Oil & Gas Group had an early stage to get an application of EPC Contract forms in 1990s when Vietnam had suffered the United States of America’s economic trade embargo against all of its social and economic aspects. All EPC contracts that were used in oil and gas projects in Vietnam at that time always had foreign participations or involvement on those projects and most EPC contractors who undertook the projects were foreigners. After United States of America lifting its economic and trade embargo against Vietnam to date, the use of EPC contracts has been spreading to various industries and sectors, especially for ODA (Official Development Assistance) projects such as infrastructure projects where capital had been funded by foreign countries, regional and international financial institutions. The uses of EPC contracts are very common in energy projects like power generation plants in recent years in Vietnam.
However, there is still debate on the use of EPC contracts in Vietnam, because of Vietnam’s legal system, practices in construction industry and other matters.
This study will only be focusing on the use of one of EPC Contracts in the oil and gas sector in Vietnam – Phu My Gas Distribution Center (hereinafter referred to as GDC) and state the advantages, disadvantages and problems of EPC contracts applicable in oil & gas projects in Vietnam. How to resolve the problems in exercising EPC contracts and measures to be taken to prevent the problems will also be raised in this study.
Monday, 16 August 2010
Quality Management in Construction Projects: A Case Study of Quality Management in Construction Projects of an Oil and Gas Company
In recent years, Vietnam faces some big problems on the quality of performance during construction, causing damage to people and property. The reason was the lack of strict management on quality design and design verification in some works. The quality management in on site construction does not comply with state regulations and technical supervision.
Quality in construction may be better understood by its characterization: “meeting the requirements of the contractor as to provision of contract plans, specifications and other documents prepared in sufficient detail to permit the constructor, to prepare price proposals or competitive bids, timely decisions by the owner and design professional on authorization and processing of change orders, fair and timely interpretation of contract requirements from field design and inspection staff, and contract for performance of work on reasonable schedule which permits a reasonable.”
Quality in the construction project is also characterized by complete and open communication among all project parties, selection of qualified organizations and personnel by owner for all phases of the project, change orders in publicly bid projects within a predetermined budget, rapid resolution of conflicts and disagreement, and absence of litigation (ASCE 1988).
Providing quality in the construction of a project costs less, is safer to the public and site personnel and minimizes disagreements and subsequent litigation. Quality in construction results in significant benefits for the constructor (ASCE 1988).
Currently, although businesses involved in construction activities will apply quality management systems, but in practice there are lots of poor works that worries people and society. Consequences of poor quality can be damage to property and waste of money on business and community. It may also cause danger to people.
To ensure the effective application of quality management for construction projects, it requires strong commitment of business leaders and implementation of multiple solutions. Effective quality management can bring many potential benefits for businesses.
Mr. Le Van Thong made a study which main objectives were as follows: (1) Determination of quality management activities in the construction in the Oil and Gas Company; and (2) to discuss and review the effectiveness of quality management in construction of the Oil and Gas Company
Conclusions
Quality management system has been applied by PTSC companies in their projects. It brings success to the company for many years now, and became a famous company in the international market in oil and gas technical services industry in Vietnam. They have useful tools to avoid and mitigate problems and to improve quality performances with their projects. They have principles that, management is used to achieve effective cost control, quality control, schedule control etc. Many civil and industrial construction companies in developed countries have been applied successful Quality Management and got more profits, reduced time overrun and cost for reworks. They recognized the importance of the Quality Management, to identify, assess, prevent and manage all breakdowns and risks to projects, damage to property and working environment.
The quality improvement programs establish actions for achieving the objectives and targets, in line with the policy commitment of continuous improvement. When establishing targets, the following will be taken into consideration:
- Who do? How? Who supervise the provision of information; as executive / coordination / control is assigned in advance and all agents involved must comply.
- The system clearly and closely flexibility have created a positive consequence of works completed on schedule, ensure quality and safety.
Effectiveness of the quality management implementation:
After quality management implementation, there are some achieved results as listed below:
- Quality Assurance is to obtain completed construction that meets all contract requirements. Assurance is defined as a degree of certainty. Quality assurance personnel continually assure that the contractor's works comply with contract requirements.
- Quality Control is the successful execution of a realistic plan to ensure that the required standards of quality construction will be met. In QC, the contractor defines procedures to manage and control his own, designer of record, consultant, architect-engineer, all subcontractor and all supplier activities so that the completed project complies with contract requirements. For design-build contracts, this includes providing and maintaining a Design Quality Control plan as a part of the overall contract QC plan. This plan, as a minimum, must assure that all documents are reviewed by a technically competent, independent reviewer specifically named in the plan. This review cannot be performed by the same designers that produced the product. The design QC plan must be managed by a Design QC Manager who has verifiable engineering or architectural design experience or is a registered engineer or architect. The Design QC Manager is under the supervision of the QC Manager.
Recommendations
- The performance of Quality Management must be carried out permanently in the company to prevent all budget overrun, slow progress, reworks that might be happening from the existing projects and future projects.
- The performance of Quality Management must be a concerned from the top management to each one in the company.
- Examine the quality control methods being used to determine if the contractor is properly controlling design activities in design-build contracts.
- Examine the quality control methods being used to determine if the contractor is properly controlling construction activities.
- Make certain that the necessary changes are made in the contractor's QC system, if excessive construction deficiencies occur.
- Assist the contractor in understanding and implementing the contract requirements.
- Examine ongoing and completed work.
- Produce the quality specified in the plans and specifications and for design-build contracts in the Request for Proposal, as well as the contractor's accepted proposal.
- Develop and maintain an effective QC system.
- Perform all control activities and tests.
- Prepare acceptable documentation of QC activities.
His thesis abstract is copied and posted.
Abstract
In an organization or business will have a lot of construction projects, any project also is importance. Ensure the quality of the project is very important for each organization. Aware of that, the quality management has been applied widely in their construction projects. But how apply the successful model of quality management for a construction project that is still a big question.
Organizations in Vietnam as some other countries, in face, the signers disclaim the possibility of anticipating and detailing everything in the construction documents. Second, it is unstable for the construction environment. The complexity and size of project vary. Working conditions can not be somewhat control. The employee is variable; its composition, motivation and size change. Cooperation between contractor and subcontractors is problematic. Those will affect the quality management of construction projects and it makes the project to delay, re-work and increase cost.
So, how to manage the quality of the construction project effectively? This thesis will research about quality management in construction project through theory and real case that is applied in PTSC Production Services Company.
Quality in construction may be better understood by its characterization: “meeting the requirements of the contractor as to provision of contract plans, specifications and other documents prepared in sufficient detail to permit the constructor, to prepare price proposals or competitive bids, timely decisions by the owner and design professional on authorization and processing of change orders, fair and timely interpretation of contract requirements from field design and inspection staff, and contract for performance of work on reasonable schedule which permits a reasonable.”
Quality in the construction project is also characterized by complete and open communication among all project parties, selection of qualified organizations and personnel by owner for all phases of the project, change orders in publicly bid projects within a predetermined budget, rapid resolution of conflicts and disagreement, and absence of litigation (ASCE 1988).
Providing quality in the construction of a project costs less, is safer to the public and site personnel and minimizes disagreements and subsequent litigation. Quality in construction results in significant benefits for the constructor (ASCE 1988).
Currently, although businesses involved in construction activities will apply quality management systems, but in practice there are lots of poor works that worries people and society. Consequences of poor quality can be damage to property and waste of money on business and community. It may also cause danger to people.
To ensure the effective application of quality management for construction projects, it requires strong commitment of business leaders and implementation of multiple solutions. Effective quality management can bring many potential benefits for businesses.
Mr. Le Van Thong made a study which main objectives were as follows: (1) Determination of quality management activities in the construction in the Oil and Gas Company; and (2) to discuss and review the effectiveness of quality management in construction of the Oil and Gas Company
Conclusions
Quality management system has been applied by PTSC companies in their projects. It brings success to the company for many years now, and became a famous company in the international market in oil and gas technical services industry in Vietnam. They have useful tools to avoid and mitigate problems and to improve quality performances with their projects. They have principles that, management is used to achieve effective cost control, quality control, schedule control etc. Many civil and industrial construction companies in developed countries have been applied successful Quality Management and got more profits, reduced time overrun and cost for reworks. They recognized the importance of the Quality Management, to identify, assess, prevent and manage all breakdowns and risks to projects, damage to property and working environment.
The quality improvement programs establish actions for achieving the objectives and targets, in line with the policy commitment of continuous improvement. When establishing targets, the following will be taken into consideration:
- Who do? How? Who supervise the provision of information; as executive / coordination / control is assigned in advance and all agents involved must comply.
- The system clearly and closely flexibility have created a positive consequence of works completed on schedule, ensure quality and safety.
Effectiveness of the quality management implementation:
After quality management implementation, there are some achieved results as listed below:
- Quality Assurance is to obtain completed construction that meets all contract requirements. Assurance is defined as a degree of certainty. Quality assurance personnel continually assure that the contractor's works comply with contract requirements.
- Quality Control is the successful execution of a realistic plan to ensure that the required standards of quality construction will be met. In QC, the contractor defines procedures to manage and control his own, designer of record, consultant, architect-engineer, all subcontractor and all supplier activities so that the completed project complies with contract requirements. For design-build contracts, this includes providing and maintaining a Design Quality Control plan as a part of the overall contract QC plan. This plan, as a minimum, must assure that all documents are reviewed by a technically competent, independent reviewer specifically named in the plan. This review cannot be performed by the same designers that produced the product. The design QC plan must be managed by a Design QC Manager who has verifiable engineering or architectural design experience or is a registered engineer or architect. The Design QC Manager is under the supervision of the QC Manager.
Recommendations
- The performance of Quality Management must be carried out permanently in the company to prevent all budget overrun, slow progress, reworks that might be happening from the existing projects and future projects.
- The performance of Quality Management must be a concerned from the top management to each one in the company.
- Examine the quality control methods being used to determine if the contractor is properly controlling design activities in design-build contracts.
- Examine the quality control methods being used to determine if the contractor is properly controlling construction activities.
- Make certain that the necessary changes are made in the contractor's QC system, if excessive construction deficiencies occur.
- Assist the contractor in understanding and implementing the contract requirements.
- Examine ongoing and completed work.
- Produce the quality specified in the plans and specifications and for design-build contracts in the Request for Proposal, as well as the contractor's accepted proposal.
- Develop and maintain an effective QC system.
- Perform all control activities and tests.
- Prepare acceptable documentation of QC activities.
His thesis abstract is copied and posted.
Abstract
In an organization or business will have a lot of construction projects, any project also is importance. Ensure the quality of the project is very important for each organization. Aware of that, the quality management has been applied widely in their construction projects. But how apply the successful model of quality management for a construction project that is still a big question.
Organizations in Vietnam as some other countries, in face, the signers disclaim the possibility of anticipating and detailing everything in the construction documents. Second, it is unstable for the construction environment. The complexity and size of project vary. Working conditions can not be somewhat control. The employee is variable; its composition, motivation and size change. Cooperation between contractor and subcontractors is problematic. Those will affect the quality management of construction projects and it makes the project to delay, re-work and increase cost.
So, how to manage the quality of the construction project effectively? This thesis will research about quality management in construction project through theory and real case that is applied in PTSC Production Services Company.
Wednesday, 11 August 2010
The Communication In Design Process Between The Employers And Consultants
Construction industry in Vietnam has grown up quickly since 5 years ago. The Vietnam government is striving to attract foreign investment by altering the Foreign Investment Law and developing the tax system in the country. This has caused the development of the global construction since 2006.
Professional construction management is a major force for change in conventional practice, predominantly to manage the design process in a better way. By Pareto approach, if we can find out and solve the design changes and design errors, every rework in construction can be solved.
Design is a complex process that combines with varieties of special knowledge, such as aesthetic, technology, economic, management. Within the modern period, architecture design has borders with as many as twenty – one different disciplines and fields. The knowledge is diversified and fractured into many sub-disciplines.
From its own characteristics and disciplines, it has many problems by itself. How to solve and avoid these problems? The answers come from the nature of design process which comprises of stages such as interpretation, generation, comparison and choice.
At any point, for moving to another step, it is necessary to interact and evaluate it to understand the original problem, and so the process is continually cycling between and within the parts of the thinking process. For the thinking process move smoothly and the problems are solved thoroughly, the designer needs to have a good strategy of communication with perfect communication tools. As the practice of management and nature of design characteristics had proved, communication is a priority issues to solve all problems of design.
Ms. Tran Thi Nguyen Cat made a study which focused on the communication between Employers and Consultants in design process. The objective of her study is to investigate the communication during design process which involved the following:
1. Develop the framework to investigate the communication practice between owners and consultants during design process.
2. Investigate the communication problems with regards to:
- The expectation between the employer and the consultant
- The project organization in terms of the communication roles and responsibilities on the managerial levels and the effects of project team leader backgrounds on communication.
- The stages of design process.
3. Prepare the recommendations for input of communication in design process.
Conclusion
The Design and Construction in Vietnam is in state of globalization. The relationships in the project organization are more and more complicated, so the role of communication in design process is considered. In this study, it focused on the communication interface between the employer and the consultant design team, and among the consultants in term of function, timescale, finance and aesthetics. In there, the communication problems that can exist between expectation and realization in design process are considered, such as:
Problems between employer’s expectation and foreign consultant’s expectation.
Problems between employer’s expectation and local consultant’s service delivery.
Problems between foreign consultant’s expectation and local consultant’s service delivery.
Problems between interior design consultant’s service delivery and local consultant’s service delivery.
Problems between the design progress and construction progress.
These problems happen because of the main reasons such as:
Lack of understanding of client requirement by design team
Insufficient input brief by design team
Inappropriate composition of client briefing team
Lack of expertise by client team leader and briefing team
Form of brief inappropriate for communication of requirements
Inappropriate design team experience as a whole
By using the frameworks, the components to investigate the communication problems in the relationship between the employer and consultant during the design process are as follows:
a) The communication problems in project organization regarding to
The communication roles and responsibilities of the levels of managers
The effects of project team leader backgrounds on communication
b) The communication problems at each stage of design process.
Throughout the frameworks of research and defining the communication problems, the recommendations have developed to achieve the success:
Find out the barriers of communication. These barriers should be taken out and innovated to improve the communication skill.
The communication roles and responsibilities have to set levels according to the levels of organization. These roles and responsibilities have to be clear and obvious. The intra- and inter-communication frequently need confirmation and delegation in appropriation, to avoid the lack of information.
The backgrounds of project team leaders at each stage of design process have to be appropriated to the scope of work.
The most important agenda of communication at each stage needs to be discussed in sequence carefully and formally. It cannot move to the next stage until the previous stage is thoroughly understood and approved.
The table below is the list of the key communication problems, recommendation to solve it and also show the person who create most problems.
The list of key communication problems and their solutions
For achieving the design success, the communication management takes an important role. Based on the investigation, the communication problems and the recommendations of communication management have been proposed. In this study, the tools of communications are not concentrated. However, for improving the communication skill, both employer and consultant need to develop a complete procedure of communication.
A further study should be:
Tools of communications in design process.
Procedure of communications in design process including the design checklist establishment in Vietnamese case.
Her thesis abstract is copied and posted.
Abstract
Design is the activity of turning a ‘need’ into a solution, a ‘concept’ into a reality throughout the process of human interaction, consequently, the result contains the interpretations, perceptions and suggestions of the people involved. During the design process, communication acts will occur in many channels, but in there, the main channel deciding the success of project is the communication between employer and consultants.
By reviewing the issues and knowledge regarding to communication between employer and consultant in design process, the frameworks to investigate the communication problems are establish. The literature is reviewed in two fields, one are about the communication problems and the source of communication failure, one are about the design process including the organization, leadership, tactic for developing a project culture.
Throughout a case study of the office building project in Ho Chi Minh city, Vietnam, the communication problems that exist in the interface between employer and consultants during design process will be investigate and analyze based on the frameworks. The frameworks of investigation are related to the expectation between employer and consultants; the communication roles and responsibilities of the levels of managers; the affects of project team leader backgrounds on communication; the communication at each stage of design process. In according to the common problems would happen in practice, some proposed recommendations will be discussed to improve the communication management in design process.
Professional construction management is a major force for change in conventional practice, predominantly to manage the design process in a better way. By Pareto approach, if we can find out and solve the design changes and design errors, every rework in construction can be solved.
Design is a complex process that combines with varieties of special knowledge, such as aesthetic, technology, economic, management. Within the modern period, architecture design has borders with as many as twenty – one different disciplines and fields. The knowledge is diversified and fractured into many sub-disciplines.
From its own characteristics and disciplines, it has many problems by itself. How to solve and avoid these problems? The answers come from the nature of design process which comprises of stages such as interpretation, generation, comparison and choice.
At any point, for moving to another step, it is necessary to interact and evaluate it to understand the original problem, and so the process is continually cycling between and within the parts of the thinking process. For the thinking process move smoothly and the problems are solved thoroughly, the designer needs to have a good strategy of communication with perfect communication tools. As the practice of management and nature of design characteristics had proved, communication is a priority issues to solve all problems of design.
Ms. Tran Thi Nguyen Cat made a study which focused on the communication between Employers and Consultants in design process. The objective of her study is to investigate the communication during design process which involved the following:
1. Develop the framework to investigate the communication practice between owners and consultants during design process.
2. Investigate the communication problems with regards to:
- The expectation between the employer and the consultant
- The project organization in terms of the communication roles and responsibilities on the managerial levels and the effects of project team leader backgrounds on communication.
- The stages of design process.
3. Prepare the recommendations for input of communication in design process.
Conclusion
The Design and Construction in Vietnam is in state of globalization. The relationships in the project organization are more and more complicated, so the role of communication in design process is considered. In this study, it focused on the communication interface between the employer and the consultant design team, and among the consultants in term of function, timescale, finance and aesthetics. In there, the communication problems that can exist between expectation and realization in design process are considered, such as:
Problems between employer’s expectation and foreign consultant’s expectation.
Problems between employer’s expectation and local consultant’s service delivery.
Problems between foreign consultant’s expectation and local consultant’s service delivery.
Problems between interior design consultant’s service delivery and local consultant’s service delivery.
Problems between the design progress and construction progress.
These problems happen because of the main reasons such as:
Lack of understanding of client requirement by design team
Insufficient input brief by design team
Inappropriate composition of client briefing team
Lack of expertise by client team leader and briefing team
Form of brief inappropriate for communication of requirements
Inappropriate design team experience as a whole
By using the frameworks, the components to investigate the communication problems in the relationship between the employer and consultant during the design process are as follows:
a) The communication problems in project organization regarding to
The communication roles and responsibilities of the levels of managers
The effects of project team leader backgrounds on communication
b) The communication problems at each stage of design process.
Throughout the frameworks of research and defining the communication problems, the recommendations have developed to achieve the success:
Find out the barriers of communication. These barriers should be taken out and innovated to improve the communication skill.
The communication roles and responsibilities have to set levels according to the levels of organization. These roles and responsibilities have to be clear and obvious. The intra- and inter-communication frequently need confirmation and delegation in appropriation, to avoid the lack of information.
The backgrounds of project team leaders at each stage of design process have to be appropriated to the scope of work.
The most important agenda of communication at each stage needs to be discussed in sequence carefully and formally. It cannot move to the next stage until the previous stage is thoroughly understood and approved.
The table below is the list of the key communication problems, recommendation to solve it and also show the person who create most problems.
The list of key communication problems and their solutions
For achieving the design success, the communication management takes an important role. Based on the investigation, the communication problems and the recommendations of communication management have been proposed. In this study, the tools of communications are not concentrated. However, for improving the communication skill, both employer and consultant need to develop a complete procedure of communication.
A further study should be:
Tools of communications in design process.
Procedure of communications in design process including the design checklist establishment in Vietnamese case.
Her thesis abstract is copied and posted.
Abstract
Design is the activity of turning a ‘need’ into a solution, a ‘concept’ into a reality throughout the process of human interaction, consequently, the result contains the interpretations, perceptions and suggestions of the people involved. During the design process, communication acts will occur in many channels, but in there, the main channel deciding the success of project is the communication between employer and consultants.
By reviewing the issues and knowledge regarding to communication between employer and consultant in design process, the frameworks to investigate the communication problems are establish. The literature is reviewed in two fields, one are about the communication problems and the source of communication failure, one are about the design process including the organization, leadership, tactic for developing a project culture.
Throughout a case study of the office building project in Ho Chi Minh city, Vietnam, the communication problems that exist in the interface between employer and consultants during design process will be investigate and analyze based on the frameworks. The frameworks of investigation are related to the expectation between employer and consultants; the communication roles and responsibilities of the levels of managers; the affects of project team leader backgrounds on communication; the communication at each stage of design process. In according to the common problems would happen in practice, some proposed recommendations will be discussed to improve the communication management in design process.
Tuesday, 10 August 2010
Factors Causing Delay In Construction Projects: A Case Study Of Commercial Construction Project In Ho Chi Minh City
When Vietnam got the WTO membership in July, 2006, it has gained greater opportunities than ever before for investment from international company and global integration, FDI has continued to rise since 1997 and it increased sharply in 2008. The development of economic always brings about the development of construction industry. In fact, the rate of construction project is increasing quickly in recent years. So, how to manage them effectively and efficiently is not only the owner’s essential requirement but also the responsibility of construction industry, this demands special knowledge and experience from project managers. However, according to recent survey, a numbers of commercial building which had the delay problems are very significant.
In commercial construction building, factors of time and quality are prioritized. Investors would have significant financial damage if their project had problems on quality and delays. The time, cost, quality and scopes of work are core factors contributing to a project success. Managing well these factors is project manager’s top priority task. There are many documents and studies of project management which have been conducted, so project managers have a lot of chances to access huge knowledge and experiences and apply them to their job. However, depending on the type of construction works, the actual circumstances and the knowledge and experiences are utilized differently. Mr. Phan Hong Hoan made a study which main purposes were to: (1) develop framework to investigate delay problems affecting on schedule in commercial building construction; (2) investigate the delay problems so that the critical delay problems can be identified; (3) propose solutions to prevent the critical delay problems from occurring during construction execution stage.
Conclusions
Delay problem is the thorny question in construction industry not only in Viet Nam but also all over the world. The cause of delay in construction stage arises from countless factors. The problem cannot be solved thoroughly, if these factors are not identified and restricted or eliminated. However, the restriction of time and finance doesn’t allow project manager to solve all influencing factors, so it is necessary to identify the critical factors.
This study developed the framework which is very practical to find out the critical factors causing the serious delay problems in construction building stage. The impact level of these factors on construction duration can be different from this project to another project, but the method to evaluate them is similar. So this approach can be applied to almost construction building.
Case study is analyzed to illustrate the systematic method to investigate and identify the delay problems and their causes in SECC, a project concerned with international contractors, consultant.
The investigation result of delay problems in SECC showed that there were many factors leading to the delay of the SECC. The severities of these elements are arranged in order of priority. Below is the table of top critical factors:
Basically, the results of the investigation showed that most fundamental source of the top critical factors was derived from the following basic elements:
- The Government’s legal regulation in importing has been inefficient and not clear.
- PM in SECC has shortcomings and weaknesses especially in risk evaluation or project planning and human management.
- Contractor’s construction organization is not really efficient and effective.
- The shortage of engineers and workers having experience and highly professional, is contractors’ inextricable questions, especially the contractors for the project which has scale and high technology specification such as SECC.
- Legal regulation in construction industry is not really strict, so the collusion among parties likely to be existent, it makes contractor collection process unfair. So some contractors having financial competence were chosen.
- Collaboration between investors and designers in the design phase plays an important role in reducing the design changes during construction.
Recommendation for project management improvement
Based on the conclusion above, human factors is one of the original delay problems. There are many potential solutions for fore-mentioned problems; however, the really effective solution depends significantly on specific situations of each construction building. The following texts relies on individual perception, these propositions need to be analyzed and studied deeper in another research or need to be verified before these assumptions become official statements.
- Build an ideology for project manager, engineers, architects etc so that they can recognize delay problems which will lead to large losses as well as the project completion on time. Simultaneously, top management should establish a fair reward and punishment policy which has to be strictly applied.
- Wage policy should meet the minimum standard of living. This will reduce the pressure of economic and help managers focus on their work fully and integrally.
- It is necessary to build up the relationship between benefits from the project
completed on schedule and the benefits of project manager and participants. This will be a motivation for them to have positive outlook to work actively.
- Each individual responsibilities and rights must be clearly defined; this will limit the avoidance of responsibility, the dodge of work and bureaucracy to a minimum.
- The working conditions should be improved gradually aiming at building proper working atmosphere; this will help work done more effectively.
- The human resource training towards professionalism in the management and professional ethic improvement need to be set out and prioritized.
- The procedures of legal regulation in imports and some other areas have remained very limited and inadequate. To be the member of WTO is a challenge which forces Viet Nam to improve this legal procedure. This legal process not only in import-export but also in the other fields must be clear and transparent. This will help project planners to have the basis to plan for their projects accurately. If this procedure is not improved soon, Viet Nam will be left behind, compared to other countries in the region and we, ourselves, will be faced with great damages.
- Consultant’s managerial skill is weak; it is not be able to satisfy the size and the demand of project. It is not only necessary to promote professionalism in the work of quantity estimates and design, but also very strict in choosing the consultant, designer and the basic of collecting consultant must rely on their capacity. Simultaneously, the responsibility must be assigned to definite individual.
- Project management has been a new concept in construction section in Viet Nam. So almost project managers were not professionally educated, instead engineers or architects who used to work many years in construction field are usually assigned as a project manager.
- The project management training should be paid more attention in the future. It should be the main goal in Construction University. It is not only reduces delay problem but also enhances the success probability of construction project. Not only project manager must be educated professionally, but also their capacity has to comply with the assigned duty.
- The collusion between supervisor, stakeholder and contractor can be existent. This intricate question not only happens in Viet Nam but also in developing countries. To restrict this problem to a minimum, the wage policy should satisfy actual living standard, and award and punish policy should be impartial.
His thesis abstract is copied and posted.
Abstract
In construction industry, a project is known to be successful when it meets three fundamental criteria such as finishing on time within the budget, the prescribed quality requirements such as satisfying customer’s demand and adapt safety in operation stage. Unfortunately, many commercial construction projects in Ho Chi Minh City have problems of project management leading to their delay. Investigating these problems has become project manager’s indispensable demand.
In general, the problems involved with project delays are solvable. In making effort to solve these problems, the critical factors influencing negatively on construction duration need to be discovered. Hence, it is very important to establish a systematical approach that will be used as a tool for the investigation.
This report will assess and analyze key factors causing the delay problems in construction project in Ho Chi Minh city. The qualitative method, basically is based on the principle of assessing the risk level of factors impacting negatively on the progress of the project, and it is conducted to fulfill the objective of the study. Case study is brought out to discus about delay problems in the Exhibition and convention Center Project (SECC).
Finally, some solutions dealing with project delay problems in construction executing stages are proposed.
In commercial construction building, factors of time and quality are prioritized. Investors would have significant financial damage if their project had problems on quality and delays. The time, cost, quality and scopes of work are core factors contributing to a project success. Managing well these factors is project manager’s top priority task. There are many documents and studies of project management which have been conducted, so project managers have a lot of chances to access huge knowledge and experiences and apply them to their job. However, depending on the type of construction works, the actual circumstances and the knowledge and experiences are utilized differently. Mr. Phan Hong Hoan made a study which main purposes were to: (1) develop framework to investigate delay problems affecting on schedule in commercial building construction; (2) investigate the delay problems so that the critical delay problems can be identified; (3) propose solutions to prevent the critical delay problems from occurring during construction execution stage.
Conclusions
Delay problem is the thorny question in construction industry not only in Viet Nam but also all over the world. The cause of delay in construction stage arises from countless factors. The problem cannot be solved thoroughly, if these factors are not identified and restricted or eliminated. However, the restriction of time and finance doesn’t allow project manager to solve all influencing factors, so it is necessary to identify the critical factors.
This study developed the framework which is very practical to find out the critical factors causing the serious delay problems in construction building stage. The impact level of these factors on construction duration can be different from this project to another project, but the method to evaluate them is similar. So this approach can be applied to almost construction building.
Case study is analyzed to illustrate the systematic method to investigate and identify the delay problems and their causes in SECC, a project concerned with international contractors, consultant.
The investigation result of delay problems in SECC showed that there were many factors leading to the delay of the SECC. The severities of these elements are arranged in order of priority. Below is the table of top critical factors:
Basically, the results of the investigation showed that most fundamental source of the top critical factors was derived from the following basic elements:
- The Government’s legal regulation in importing has been inefficient and not clear.
- PM in SECC has shortcomings and weaknesses especially in risk evaluation or project planning and human management.
- Contractor’s construction organization is not really efficient and effective.
- The shortage of engineers and workers having experience and highly professional, is contractors’ inextricable questions, especially the contractors for the project which has scale and high technology specification such as SECC.
- Legal regulation in construction industry is not really strict, so the collusion among parties likely to be existent, it makes contractor collection process unfair. So some contractors having financial competence were chosen.
- Collaboration between investors and designers in the design phase plays an important role in reducing the design changes during construction.
Recommendation for project management improvement
Based on the conclusion above, human factors is one of the original delay problems. There are many potential solutions for fore-mentioned problems; however, the really effective solution depends significantly on specific situations of each construction building. The following texts relies on individual perception, these propositions need to be analyzed and studied deeper in another research or need to be verified before these assumptions become official statements.
- Build an ideology for project manager, engineers, architects etc so that they can recognize delay problems which will lead to large losses as well as the project completion on time. Simultaneously, top management should establish a fair reward and punishment policy which has to be strictly applied.
- Wage policy should meet the minimum standard of living. This will reduce the pressure of economic and help managers focus on their work fully and integrally.
- It is necessary to build up the relationship between benefits from the project
completed on schedule and the benefits of project manager and participants. This will be a motivation for them to have positive outlook to work actively.
- Each individual responsibilities and rights must be clearly defined; this will limit the avoidance of responsibility, the dodge of work and bureaucracy to a minimum.
- The working conditions should be improved gradually aiming at building proper working atmosphere; this will help work done more effectively.
- The human resource training towards professionalism in the management and professional ethic improvement need to be set out and prioritized.
- The procedures of legal regulation in imports and some other areas have remained very limited and inadequate. To be the member of WTO is a challenge which forces Viet Nam to improve this legal procedure. This legal process not only in import-export but also in the other fields must be clear and transparent. This will help project planners to have the basis to plan for their projects accurately. If this procedure is not improved soon, Viet Nam will be left behind, compared to other countries in the region and we, ourselves, will be faced with great damages.
- Consultant’s managerial skill is weak; it is not be able to satisfy the size and the demand of project. It is not only necessary to promote professionalism in the work of quantity estimates and design, but also very strict in choosing the consultant, designer and the basic of collecting consultant must rely on their capacity. Simultaneously, the responsibility must be assigned to definite individual.
- Project management has been a new concept in construction section in Viet Nam. So almost project managers were not professionally educated, instead engineers or architects who used to work many years in construction field are usually assigned as a project manager.
- The project management training should be paid more attention in the future. It should be the main goal in Construction University. It is not only reduces delay problem but also enhances the success probability of construction project. Not only project manager must be educated professionally, but also their capacity has to comply with the assigned duty.
- The collusion between supervisor, stakeholder and contractor can be existent. This intricate question not only happens in Viet Nam but also in developing countries. To restrict this problem to a minimum, the wage policy should satisfy actual living standard, and award and punish policy should be impartial.
His thesis abstract is copied and posted.
Abstract
In construction industry, a project is known to be successful when it meets three fundamental criteria such as finishing on time within the budget, the prescribed quality requirements such as satisfying customer’s demand and adapt safety in operation stage. Unfortunately, many commercial construction projects in Ho Chi Minh City have problems of project management leading to their delay. Investigating these problems has become project manager’s indispensable demand.
In general, the problems involved with project delays are solvable. In making effort to solve these problems, the critical factors influencing negatively on construction duration need to be discovered. Hence, it is very important to establish a systematical approach that will be used as a tool for the investigation.
This report will assess and analyze key factors causing the delay problems in construction project in Ho Chi Minh city. The qualitative method, basically is based on the principle of assessing the risk level of factors impacting negatively on the progress of the project, and it is conducted to fulfill the objective of the study. Case study is brought out to discus about delay problems in the Exhibition and convention Center Project (SECC).
Finally, some solutions dealing with project delay problems in construction executing stages are proposed.
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