Subcontractor Management In Pipeline Construction Project

Nowadays, a large portion of a construction project is usually performed by subcontractors. Subcontractor plays an important role to the success of project. In order to manage the subcontractor, the main contractor should manage the quality, schedule, cost and safety of the subcontractor and have the ways to improve subcontracting practice which are seldom debated.

Project succeeds because of good subcontractor management in term of procurement, scheduling, cost, quality and safety aspects.

Mrs. Pham Thi Thuy Giang made a case study which main objective is to know the effectiveness of subcontractor management in the pipeline construction project.

Conclusions

The use of subcontractors in the construction industry has greatly increased in recent years. Technology, size, and scale of construction projects are tending to be more specific and complex. Increasing in sophisticated technology-based products has required a high degree of design, manufacture, installation, and commissioning skills that have not been readily available to the industry’s clients, as the skill base has moved away from the main contractor’s organization. As a result, main contractor prefers to subcontract the work because of insufficient resources or expertise in a specific area.

There are many of subcontractor companies that have the necessary expertise to undertake work satisfactorily and, as a consequence, are able to give their clients the service they require. Therefore, main contractor needs to develop a strategy that allows him to manage subcontractor effectively and efficiently.

This is a large project, and the main contractor hired an international subcontractor. The main factor that made subcontractor management successful can summarize in the figure below.



Recommendation for subcontractor management improvement

After recognizing how main contractors managed their subcontractors, the recommendation for improvement can be reliably proposed as follows:

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

2) Main contractor should monitor subcontractor’s schedule by developing a system or adopting advanced technology software that allows main contractor to track causes of schedule variance.

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

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

Her 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 main 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 Main contractor is leak of management subcontractor and it caused many difficulties and conflicts during performance, management of projects.

The most difficulty of subcontractor management is deviation scope of work between subcontractors, controlling schedule and interfacing between subcontractors.

In managing project subcontractors, a main contractor must determine the items of work to be subcontracted, select subcontractors, set subcontract agreements, and control the subcontractors during construction.

MPM students visited Hyundai E&C and GS Headoffice in Seoul Korea

Master of Project Management in Construction (MPM) Students visited Hyunday E&C and GS during MPM Field Trip to South Korea 1-6 August 2010.

As part of MPM learning activities, we visited large international construction company Hyundai E&C and GS. The purpose of this visits is to learn their new development, strategy and research.

Many thanks to Hyunday E&C and GS!

Professor Garry Griggs from Stanford University Teaching MPM Students

Professor Garry Griggs (Stadford University) and Dr BHW Hadikusumo (Asian Institute of Technology) in front of AIT Vietnam Office.

Professor Garry Griggs teaching APPLIED PROJECT MANAGEMENT IN HIGHWAY PROJECT in MPM Program.

On 8-10 August 2010, we invited Professor Garry Griggs (Consulting Professor of Stanford University) to teach Applied Project Management in Highway Project. Professor Garry was the President of Parsons Brinckerhoff Infrastructure, a reputable international consulting firm. And, now he is teaching in Stanford University as a Consulting Professor.

Many thanks Professor Griggs, MPM students are very happy to learn your teaching and toughts about Project Management.

Subcontractor Management in LPG Truck Loading Projects

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.

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.

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.

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.