The rapid growth of Vietnam’s economy over the past few years contributes a significant strain on the country’s physical infrastructure. With economic development expected to continue at a rapid pace, pressures on roads, ports and other infrastructure systems will increase. Vietnam’s underlying concern for the last 10 years is a failure to develop infrastructure, which is now become a bottleneck of economic growth.
In next ten years 2010 to 2020, demands for infrastructure investment will increase by 10%, But how the Vietnam government can mobilize such huge capital shortfall for infrastructure investment, while state budget deficit stands at high level for a very long time and the public debt is in high level and in fast increasing trend (the economist newspapers at http://www.economist.com). With these problems, Public-Private Partnerships (PPP) becomes the optimal solution to fill the shortfall of finance resource.
However, until now, there is still no legal concept of PPP or a separate law on PPP in Vietnam. The only current separated regulation for investment under BOT scheme (a kind of PPP model) is Circular No.108/ND-CP dated 27, November, 2009. The Vietnamese Government and relevant ministries recognize need to established PPP’s legal framework to raise capital from the private sector and from banks and credit institutions, regardless of whether they are under domestic or foreign. PPPs regulations, after one year of preparation by MPI and related ministries were issued on 15th November 2010 by Prime Minister.
Until now, there are only few researches have been conducted on risk management in PPP expressway project in Viet Nam. In order to help investors and policy makers to have a better perception on risk management in PPP expressway project in Vietnam, Mr. Vu Van Cao made a case study with the following objectives:
1. identify and assess the key risk in investment under PPP in Viet Nam;
2. how this key risk in investment under PPP in Vietnam are allocated in Ha Noi – Hai Phong expressway project through Project structure; and
3. recommendation for the Project Company to improve mitigation of critical Risk in Ha Noi – Hai Phong expresses way Project
Conclusion
Base on the results of analysis, it can be seen that risk allocation among related stakeholder is not so good and fair because Vietnamese government transfers all critical risks to Project Company and to road users which causes BOT project long period concession; and the Project Company have to take the financial burden leading to company bankruptcy.
Recommendations for Project Company (VIFIDI)
1. Establishing a specified team in charge to investigate the risks through BOT contract and to propose mitigation strategy;
2. Renegotiation with MOT on BOT contract provision on allocation of risks, which are assessed “cannot be accepted”;
3. Need to sharing risks, which are assessed “Accepted” with the third party;
4. Reevaluation of commercial viability of BOT project and recalculation of financial ratio of BOT project (ROE, NPV, and IRR) to reassess feasibility of the project; and
5. Propose to Government to give financial support to fund land acquisition and resettlement to reduce financial burden during construction period because (i) D/E ration level is too high 13.3) and can cause instability in financial situation when project comes into operation (recommended D/E ratio is 3 times following the PPP pilot regulations No. 71/2010/QD –TTg issued by Prime Minister on 9th November 2010); (ii) Concession period is too long (30.36 year) which causes long return for investors.
Recommendation for Ministry of Transportation (MOT) and GOV (Vietnam Government)
The Ha Noi – Hai Phong expressway is the first expressway project invested under BOT in Vietnam. The success of this project can be a good example to attract more private capital investment on expressway development under PPP model. Therefore, GOV and BOT must share the risks with project company and road user in order to help VIDIFI to implement the project successfully. Below are some recommendations for GOV and MOT to follow:
1. Most of the risks in Ha Noi – Hai Phong expressway project have been transferred to the road user and Project Company. It is proposed that the MOT and GOV fund to land acquisition and resettlement in order to reduce financial burden of Project Company and shorten the concession period;
2. GOV has to give Project company right to develop Land expressway to return their capital investment (profit from land development is expected 7.890 billion VND). Project Company needs more finance resources to fund land development project by itself. This causes unintentionally increasing financial burden on investors. Thus, instead of giving the Project Company the right to develop Land expressway to return capital investment, GOV should allow VIDIFI to increase toll rate of existing NHNo.5, and access to preferential loan with low interest rate and long payback period to reduce financial burden, shorten concession period and increasing feasibility of project.
Mr. Cao’s thesis abstract is copied and posted.
Abstract
Recent years in Vietnam, many Public Private Partnership (PPP) expressway projects have been being invested under PPP model. But the Risk management, which is critical factor of project success, is undervaluation by investors and policy maker. This project case study will contribute on increasing perception on risk management of the investors and policy makers in Vietnam. Project case study will indentify, classify and assess the risks in PPP expressway investment in Vietnam and specify the critical risks, for which the investors and policy makers must pay their attention. The investors and policy makers will understand how the above critical risks to be managed through case study of Ha Noi – Hai Phong expressway project. In the case study, the research will assess the risk allocation among three parties including investor (Project Company), public authorities and road users. The research will also propose recommendation for Project Company improving the risk management in case study.
Thursday, 13 January 2011
Wednesday, 12 January 2011
A Hybrid Stochastic/Mechanistic Model for Determining Bridge Condition Rating
Bridges like other infrastructures such as roads and dams require proper inspection and maintenance programs to reserve bridge structural integrity and to ensure public safety. The structural integrity decreases through time due to several factors such as material degradation, environmental attacks, and an increase in usage over time. The consequence of improper inspection and maintenance programs can cause catastrophic bridge failure.
Dr. Rajwanlop Kumpoopong made a research which focused on developing a hybrid deterioration model that combines the quantitative analysis of damage mechanisms and the stochastic process based on the concept of Markov chain. The proposed model enhances the existing Markov deterioration model in a more reliable condition prediction of bridge elements at the network-level since relevant variables which affect the deterioration of bridge elements are properly addressed. Only the hybrid deterioration model for bridge deck is developed in this research.
The main objective of this research was to develop the methodology for developing the hybrid deterioration model for bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. The methodology is then applied to develop the hybrid deterioration model for bridge deck under truck traffic condition in Thailand as a case study. The secondary objectives of this research were to: (1) study the effect of each truck category on the deterioration of bridge deck; (2) study the effect of upgrading regulatory truck weights on the deterioration of bridge deck; and (3) study the effect of overloaded truck for the transportation of sugarcane on the deterioration of bridge deck.
Conclusions
Bridge deck is the major bridge component that requires significant maintenance effort. The factor that contributes most to the deterioration process of bridge decks is concrete cracking which is directly related to the traffic volume and can be accelerated by increasing truck traffic. Bridge deck deterioration models in most recent bridge management systems are expressed in the form of probabilistic deterioration models such as the Markovian process. The transition probability matrix is developed to capture the deterioration mechanism of bridge decks.
The strength of the Markov deterioration model is its practicality when it is applied to forecast at the network-level bridge management. The condition of the bridge deck over time can simply be predicted through the multiplications of the initial state vector and the transition probability matrix. However, the Markov deterioration model has some weaknesses since the model may not reflect the actual condition of bridge decks. In the Markov chain models, relevant variables which affect the deterioration process of bridge decks, such as changes in traffic volume and environmental conditions are assumed to be constant throughout the analysis period. This may not be realistic and can result in the overestimation or underestimation of the forecasted bridge condition.
This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management.
In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
His dissertation abstract is copied and posted below.
ABSTRACT
The concept of Markov chain has been widely used to predict the condition of bridge deck. The transition probability matrices, which are mostly developed by inspection data and experts’ opinion, are used to capture the deterioration of bridge deck. The Markov deterioration model developed by this approach although states deterioration in probabilistic sense may not be reliable because relevant variables which affect the deterioration of bridge deck such as changes in traffic volume and environmental conditions are not explicitly emphasized in the model. Concrete cracking which can be accelerated by increased truck traffic is the factor that contributes most to the deterioration of bridge deck and should be addressed in the deterioration model. This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The methodology is presented through the development of hybrid deterioration model for Thailand Department of Highways (DOH) bridge deck. In the presentation, the effect of each truck category and the effect of upgrading regulatory truck weights on the deterioration of DOH bridge deck are discussed. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
Dr. Rajwanlop Kumpoopong made a research which focused on developing a hybrid deterioration model that combines the quantitative analysis of damage mechanisms and the stochastic process based on the concept of Markov chain. The proposed model enhances the existing Markov deterioration model in a more reliable condition prediction of bridge elements at the network-level since relevant variables which affect the deterioration of bridge elements are properly addressed. Only the hybrid deterioration model for bridge deck is developed in this research.
The main objective of this research was to develop the methodology for developing the hybrid deterioration model for bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. The methodology is then applied to develop the hybrid deterioration model for bridge deck under truck traffic condition in Thailand as a case study. The secondary objectives of this research were to: (1) study the effect of each truck category on the deterioration of bridge deck; (2) study the effect of upgrading regulatory truck weights on the deterioration of bridge deck; and (3) study the effect of overloaded truck for the transportation of sugarcane on the deterioration of bridge deck.
Conclusions
Bridge deck is the major bridge component that requires significant maintenance effort. The factor that contributes most to the deterioration process of bridge decks is concrete cracking which is directly related to the traffic volume and can be accelerated by increasing truck traffic. Bridge deck deterioration models in most recent bridge management systems are expressed in the form of probabilistic deterioration models such as the Markovian process. The transition probability matrix is developed to capture the deterioration mechanism of bridge decks.
The strength of the Markov deterioration model is its practicality when it is applied to forecast at the network-level bridge management. The condition of the bridge deck over time can simply be predicted through the multiplications of the initial state vector and the transition probability matrix. However, the Markov deterioration model has some weaknesses since the model may not reflect the actual condition of bridge decks. In the Markov chain models, relevant variables which affect the deterioration process of bridge decks, such as changes in traffic volume and environmental conditions are assumed to be constant throughout the analysis period. This may not be realistic and can result in the overestimation or underestimation of the forecasted bridge condition.
This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management.
In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
His dissertation abstract is copied and posted below.
ABSTRACT
The concept of Markov chain has been widely used to predict the condition of bridge deck. The transition probability matrices, which are mostly developed by inspection data and experts’ opinion, are used to capture the deterioration of bridge deck. The Markov deterioration model developed by this approach although states deterioration in probabilistic sense may not be reliable because relevant variables which affect the deterioration of bridge deck such as changes in traffic volume and environmental conditions are not explicitly emphasized in the model. Concrete cracking which can be accelerated by increased truck traffic is the factor that contributes most to the deterioration of bridge deck and should be addressed in the deterioration model. This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The methodology is presented through the development of hybrid deterioration model for Thailand Department of Highways (DOH) bridge deck. In the presentation, the effect of each truck category and the effect of upgrading regulatory truck weights on the deterioration of DOH bridge deck are discussed. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
Tuesday, 11 January 2011
CEIM-SET Congratulates the Graduates of 114th Batch
We would like to congratulate the new graduates who received their diploma during the 114th AIT Graduation Ceremony on December 17, 2010. The names of graduands and their Thesis/Project title are listed below:
DOCTOR OF PHILOSOPHY DEGREE (CEIM)
1. Rajwanlop Kumpoopong
A Hybrid Stochastic/Mechanistic Model for Determining Bridge Condition Rating
MASTER OF ENGINEERING DEGREE (CEIM)
1. Kittichai Kanjanakantika
Risk Factors Affecting Business Diversification in a Real Estate Company
2. Vuong Hai Khoa
Supply Chain Management: A Case Study of Construction Companies in Vietnam
3. Tinn Withayawaragul
Relationship Between Project Phases and Stock Performance: A Study in Stock Exchange of Thailand (SET)
MASTER OF ENGINEERING DEGREE (PROFESSIONAL)
(Area of Specialization: Project Management in Construction)
1. Nguyen Chau Dieu An
Project: A Critical Appraisal of Briefing Clients in the Construction Process: A Case Study of Residential Project
2. Hoang Thi Hai Anh
Project: Risk Management in Price Adjustment Contract: A Case Study of a Construction Project in Vietnam
3. Dang Tuan Anh
Project: Risk Management of Basement Construction Affecting Adjacent Buildings: A Case Study of Construction Project in Ho Chi Minh City, Vietnam
4. Truong Thai Binh
Project: Owner's Involvement in the Preliminary Stage of Real Estate Development: A Project Case Study in Vietnam
5. Nguyen Phan Hoa Binh
Project: Integrated Project Management Assessment for a Development Property Project at the Capital Fund in Vietnam
6. Le Nam Binh
Project: Owner's Project Schedule Management for High-Rise Office Building Projects: A Case Study of the Construction Project of Petrovietnam Finance Centre in Danang City
7. Nguyen Hung Cuong
Project: Delay in Planning, Design and Construction: A Case Study of Residential Development Project in Ho Chi Minh City
8. Le Ngoc Diep
Project: Risks Affecting Construction Cost in Vietnam
9. Do Tran My Thuy
Project: Risk Management in the Design of Large-Scale Construction Projects: Case Studies of an Urban Area and a Highrise Building Project
10. Truong Ngoc Dung
Project: Effectiveness of Feasibility Study Analysis in an Apartment Building Project: A Case Study of a Two Towers-Twenty Six Storey Apartment Project in Ho Chi Minh City
11. Nguyen Duy Thien Giang
Project: Claim Management and Analysis: Case Study of a High Rise Building Project
12. Trinh Thi Thu Ha
Project: Environmental Impacts Assessment in Nam Ly Bridge - Ho Chi Minh City, Vietnam
13. Vo Si Hoai
Project: Schedule Planning and Control in an Engineering, Procurement and Construction Project: The Case of a City Hall Project
14. Le Quang Khanh
Project: Owner's Organization Project Management Maturity: The Case of Petrolimex Saigon
15. Nguyen Trung Kien
Project: Project Owner's Quality Management System - The Case of Sails Tower Project
16. Tran Thanh Liem
Project: Project Management Life Cycle and Risk Management in a New Residential Development Project in Vietnam: The Case Study of the Fifth Street New Residential Project (D2D's Company) and its Secondary Project (Berjaya-D@D Join Venture Company)
17. Nguyen Cao Bao Luat
Project: Design Management in a Design-Build Project Based on the Design Team of Contractor Perspective
18. Vo Dinh Nguyen
Project: Project Management Practice in a Small and Medium Vietnamese Contractor: The Case of Nhat Dang Company
19. Do Huu Phuoc
Project: Owner's Project Life Cycle Approach: The Case of Rubber Plantation Project in a Vietnam Rubber Company
20. Tran Duc Quang
Project: Project Organizational Structure Roles and Responsibility - The Case of Marriott Five-Star Hotel
21. Chona Salvatus Salvahan
Project: Minimizing the Impact of Change Order to Project Costs
22. Nguyen Duy Duc Thu
Project: A Feasibility Study of a Curtain Wall Testing Company in Hanoi
23. Nguyen Le Thuan
Project: Owner's Project Control Strategy
24. Le Mien Thuy
Project: Method and Effectiveness of a Feasibility Study for an Apartment Project: The Case of Carina Plaza Building
25. Nguyen Thu Trang
Project: Application of Fidic Contract in a Bridge Project: The Case of Can Tho Bridge
26. Tran Thi Thien Trang
Project: Assessment of Risks on the Design Management Aspects in Luxury Hotel Development Projects: The Case of Le Meridien Saigon Hotel
27. Nguyen Duc Trong
Project: Organizational Project Management Structure in a Real Estate Developer Company: The Case of Namlong Corporation
MASTER OF SCIENCE DEGREE (PROFESSIONAL)
(Area of Specialization: Project Management in Construction)
1. Mr. Nguyen Duc Thanh
Project: Risk Factors in Vietnam Power Plant Projects: A Case Study of Nhon Trach Power Plant and Camau Gas Power Fertilise Projects
2. Tran Van Trung
Project: The Delay Factors in EPC Contracts in Vietnam: The Case of Uong Bi Thermal Power Plant
3. Mr. Vo Quoc Vinh
Project: Contractual Risks of SME Contractors - A Case Study a of Mechanical and Electrical Contractor
Monday, 10 January 2011
Greetings from CEIM/MPM
Dr. B. H. W. Hadikusumo, Dr. Chotchai Charoenngam and the CEIM/MPM staff wish you a blessed and bountiful year 2011!
Friday, 29 October 2010
Design Management for Architectural Project: A Case Study of PVMTC – Petrovietnam Building Project
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Thursday, 14 October 2010
Success factors for financial sustainability of toll road project in China
The rapid growth of the Chinese economy calls for massive development of infrastructure and assets. Over the past 10 years a national trunk highway system and a network of urban and provincial expressways have emerged in China (World Bank, 2003). A World Bank (2003) research estimated that highway investments in China significantly increased in the late 1990s and reached 2.5 percent of GDP. Still, an estimated $75-100 billion needs to be invested in highway construction over the next 15 years. Toll road is one of infrastructure project that has high ability to attract private investment since it is able to recover directly the costs of its operation and construction through toll charges. While this brings a lot of opportunities to project stakeholders, it also contains various risks that can bring the result that the real project outcomes are very much lower than the expected.
Ms. Truong Thi My Thanh made a study which main objective was to develop the model of success factors for Chinese toll roads to achieve financial sustainability in planning and executing stages and recommend proper consideration from key stakeholders to ensure that toll road project can be sustainable and more attractive to private investment. To complete the main objectives, following sub objectives were explored:
1. Investigate the cost and financial performance of toll roads in China to find out significant attributes influence on the difference of estimated and actual outcomes
2. Investigate the impact of above factors to project finance for short term and long term sustainability.
3. To propose the model for financial sustainability of toll roads in China and provide recommendations for policy makers, international lending institutes and toll road developers as required consideration in planning stage to enhance the certain of financial condition and control the financial sustainability in executing stage.
Conclusions
Toll road is one of infrastructure project that has high ability to attract private investment since it is able to recover directly the costs of its operation and construction through toll charges. Toll road development can be attractive to investors and lenders only if the financial and economic benefit can be met. Financial sustainability is the essential part of this entire criterion, with many attributes should be considered. It is true that the financial sustainability of toll road depends on the performance of all stakeholders involve in project from initial phase to the end of project life cycle. Planning and executing stages are the most important and have high impact to project financial sustainability. Proper considerations to the significant attributes in these two stages need to be taken from involved stakeholders to ensure that long-term survival and sustainability are achieved.
The purpose of studying toll road performance and the impact to financial sustainability is to (1) indentify the significant factors impact to project financial sustainability in planning and executing stages, and (2) recommend proper consideration from key stakeholders to ensure that toll road project can be sustainable and more attractive to private investment.
The study was carried out by examining seven Chinese toll roads with different development model. The focus was to investigate toll road development model, the participation of stakeholders and the risks they had to face with. After that, in-depth analysis is on (1) financial sources (2) financial usages and investment cost variation (3) revenue base (4) operating performance (5) financial benefit and (6) financial sustainable situation. Those attributes were investigated in combination with the involvement of key stakeholders related to projects. A qualitative research was prepared where the data collection techniques are case studies.
From the analysis, the factors impact to project financial sustainability can be divided into five levels (1) Policy support (2) Regional development (3) Fund raising model (4) Project development (5) Financial structure. All these factors are essentially important for project developer’s consideration.
Policy support: This factor covers four significant attributes (1) Government assurance (2) Land acquisition and resettlement policy (3) Toll rate structure and tolling adjustment and (4) Penalty regulation for truck over load. Government assurance provides the legal support to negotiate with ADB/WB to get the loan. The policy support for land acquisition activities reduces the risks of delay and cost overrun. Additionally, the proper toll rate setting and fixed frequency of tolling adjustment ensure the certainty of revenue stream and help toll road developer can foresee the profit. Lastly, the strictly penalty is needed for truck over loading to reduce the maintenance cost of toll roads.
Regional development: Financial sustainability extremely depends on the certainty of project revenue stream which significantly impacted by master plan of regional development. The study found that appropriate point time of investment base on socio-economic situation ensures proper traffic flow after toll road start to operate. Additionally, toll road projects constructed in combination with the upgrading of local toll road network and industrial zones promise the high traffic growth rate and higher revenue stream in the future.
Fund raising model: The study found out that securitisation model for Chinese toll road development has the highest level of long term financial sustainability, because the local government provides very high level of grant and subsidy. Government build and operate model has quite high ability of financial sustainability but lower than securitisation model. Project establishes very high level of contingencies budget even the total cost will increase. Additionally, local government subsidise the over budget of construction cost, hence there will no increase in short term debt and current liabilities. Cooperative joint venture model of toll road in China has lowest level of financial sustainability since it uses very high debt to equity ratio; the debt mostly comes from domestic bank with high interest rate and high interest during construction. Project is developed separately with the improvement of local road network and the expansion of industrial zones because there is limited source of fund of investors.
Project development: It was found that four significant problems closely go along with the development of toll road project, they are inappropriate preparing in feasibility study, improper land acquisition planning, delay in land acquisition implementation and not timely approval of works variations and equipment procurement from ADB/WB. Changes between feasibility design and detailed design because of improper feasibility preparation was the most significant reason caused civil work and land acquisition cost overrun. Resettlement plan, compensation standard and the difference in acquiring temporary and permanent land was carried out ineffectively caused over budget of land cost. Limited budget contributes to the delay of land acquisition activities. The delay of project completion also involved with the insufficient feedback on report ADB/WB required from project executing agency hence delay in resolving problems and difficulties that occurred during project implementation.
Financial structure: This factor covered five significant attributes; they were (1) Debt to equity ratio of capital investment, (2) Government grant, (3) Source of debt, (4) Source of equity and (5) emergency budget for financial consumption overrun. It was found that the D/E split which was used to develop toll road project in China mostly based on the financial health of local government rather than the ability to generate revenue of project itself. The grant from central government was just used to improve some section of feeder roads, hence the amount mostly based on the length and socio-economic condition of the projects while grant from local government was significantly based on the benefit that local government could receive from project. The result showed that the amount of ADB/WB loan had very high impact to financial structure of investment capital since it reduces the debt from domestic bank and the percentage of grant. The study also found out that local government was not yet successful to attract private participation since equity from private sectors still played minor part of investment capital. When project got construction cost overrun project owners used three sources of emergency budget cover investment overrun, they were short term loan from domestic banks, local government subsidy and contingencies budget. Government build and operate model used highest contingencies budget and received fully support in the context of subsidy from local government. Whereas cooperative joint venture model had to find the loan from domestic bank since it used low contingencies budget and not received any subsidy from local government.
Recommendations for critical factors model
The development model for financial sustainability of Chinese toll road has been structured in considering long term and short term impact. Based on the findings from the information of diverse situation, the model has been structured on policy support, regional development, organisational model, project development and financial structure levels. The recommendations for key stakeholders involves in toll road project have also been provided to enhance the financial sustainability of toll road development. The applicability of critical factors model will help policy makers, toll road developers and international lending organisation (ADB and WB) to foresee the sustainability of financial condition of toll road in planning stage through proper master plan for regional development, policy support and effective organisational model. Additionally, the findings also help toll road developers to control and enhance the financial sustainability in executing stage through the risk mitigation instrument in each development step, proper financial structure of investment capital and appropriate sources of fund as emergency budget for financial consumption overrun. Lastly, the applicability of the findings not only used for Chinese toll road developers but for stakeholders in other emerge economy countries as well.
Ms. Truong Thi My Thanh made a study which main objective was to develop the model of success factors for Chinese toll roads to achieve financial sustainability in planning and executing stages and recommend proper consideration from key stakeholders to ensure that toll road project can be sustainable and more attractive to private investment. To complete the main objectives, following sub objectives were explored:
1. Investigate the cost and financial performance of toll roads in China to find out significant attributes influence on the difference of estimated and actual outcomes
2. Investigate the impact of above factors to project finance for short term and long term sustainability.
3. To propose the model for financial sustainability of toll roads in China and provide recommendations for policy makers, international lending institutes and toll road developers as required consideration in planning stage to enhance the certain of financial condition and control the financial sustainability in executing stage.
Conclusions
Toll road is one of infrastructure project that has high ability to attract private investment since it is able to recover directly the costs of its operation and construction through toll charges. Toll road development can be attractive to investors and lenders only if the financial and economic benefit can be met. Financial sustainability is the essential part of this entire criterion, with many attributes should be considered. It is true that the financial sustainability of toll road depends on the performance of all stakeholders involve in project from initial phase to the end of project life cycle. Planning and executing stages are the most important and have high impact to project financial sustainability. Proper considerations to the significant attributes in these two stages need to be taken from involved stakeholders to ensure that long-term survival and sustainability are achieved.
The purpose of studying toll road performance and the impact to financial sustainability is to (1) indentify the significant factors impact to project financial sustainability in planning and executing stages, and (2) recommend proper consideration from key stakeholders to ensure that toll road project can be sustainable and more attractive to private investment.
The study was carried out by examining seven Chinese toll roads with different development model. The focus was to investigate toll road development model, the participation of stakeholders and the risks they had to face with. After that, in-depth analysis is on (1) financial sources (2) financial usages and investment cost variation (3) revenue base (4) operating performance (5) financial benefit and (6) financial sustainable situation. Those attributes were investigated in combination with the involvement of key stakeholders related to projects. A qualitative research was prepared where the data collection techniques are case studies.
From the analysis, the factors impact to project financial sustainability can be divided into five levels (1) Policy support (2) Regional development (3) Fund raising model (4) Project development (5) Financial structure. All these factors are essentially important for project developer’s consideration.
Policy support: This factor covers four significant attributes (1) Government assurance (2) Land acquisition and resettlement policy (3) Toll rate structure and tolling adjustment and (4) Penalty regulation for truck over load. Government assurance provides the legal support to negotiate with ADB/WB to get the loan. The policy support for land acquisition activities reduces the risks of delay and cost overrun. Additionally, the proper toll rate setting and fixed frequency of tolling adjustment ensure the certainty of revenue stream and help toll road developer can foresee the profit. Lastly, the strictly penalty is needed for truck over loading to reduce the maintenance cost of toll roads.
Regional development: Financial sustainability extremely depends on the certainty of project revenue stream which significantly impacted by master plan of regional development. The study found that appropriate point time of investment base on socio-economic situation ensures proper traffic flow after toll road start to operate. Additionally, toll road projects constructed in combination with the upgrading of local toll road network and industrial zones promise the high traffic growth rate and higher revenue stream in the future.
Fund raising model: The study found out that securitisation model for Chinese toll road development has the highest level of long term financial sustainability, because the local government provides very high level of grant and subsidy. Government build and operate model has quite high ability of financial sustainability but lower than securitisation model. Project establishes very high level of contingencies budget even the total cost will increase. Additionally, local government subsidise the over budget of construction cost, hence there will no increase in short term debt and current liabilities. Cooperative joint venture model of toll road in China has lowest level of financial sustainability since it uses very high debt to equity ratio; the debt mostly comes from domestic bank with high interest rate and high interest during construction. Project is developed separately with the improvement of local road network and the expansion of industrial zones because there is limited source of fund of investors.
Project development: It was found that four significant problems closely go along with the development of toll road project, they are inappropriate preparing in feasibility study, improper land acquisition planning, delay in land acquisition implementation and not timely approval of works variations and equipment procurement from ADB/WB. Changes between feasibility design and detailed design because of improper feasibility preparation was the most significant reason caused civil work and land acquisition cost overrun. Resettlement plan, compensation standard and the difference in acquiring temporary and permanent land was carried out ineffectively caused over budget of land cost. Limited budget contributes to the delay of land acquisition activities. The delay of project completion also involved with the insufficient feedback on report ADB/WB required from project executing agency hence delay in resolving problems and difficulties that occurred during project implementation.
Financial structure: This factor covered five significant attributes; they were (1) Debt to equity ratio of capital investment, (2) Government grant, (3) Source of debt, (4) Source of equity and (5) emergency budget for financial consumption overrun. It was found that the D/E split which was used to develop toll road project in China mostly based on the financial health of local government rather than the ability to generate revenue of project itself. The grant from central government was just used to improve some section of feeder roads, hence the amount mostly based on the length and socio-economic condition of the projects while grant from local government was significantly based on the benefit that local government could receive from project. The result showed that the amount of ADB/WB loan had very high impact to financial structure of investment capital since it reduces the debt from domestic bank and the percentage of grant. The study also found out that local government was not yet successful to attract private participation since equity from private sectors still played minor part of investment capital. When project got construction cost overrun project owners used three sources of emergency budget cover investment overrun, they were short term loan from domestic banks, local government subsidy and contingencies budget. Government build and operate model used highest contingencies budget and received fully support in the context of subsidy from local government. Whereas cooperative joint venture model had to find the loan from domestic bank since it used low contingencies budget and not received any subsidy from local government.
Recommendations for critical factors model
The development model for financial sustainability of Chinese toll road has been structured in considering long term and short term impact. Based on the findings from the information of diverse situation, the model has been structured on policy support, regional development, organisational model, project development and financial structure levels. The recommendations for key stakeholders involves in toll road project have also been provided to enhance the financial sustainability of toll road development. The applicability of critical factors model will help policy makers, toll road developers and international lending organisation (ADB and WB) to foresee the sustainability of financial condition of toll road in planning stage through proper master plan for regional development, policy support and effective organisational model. Additionally, the findings also help toll road developers to control and enhance the financial sustainability in executing stage through the risk mitigation instrument in each development step, proper financial structure of investment capital and appropriate sources of fund as emergency budget for financial consumption overrun. Lastly, the applicability of the findings not only used for Chinese toll road developers but for stakeholders in other emerge economy countries as well.
Thursday, 7 October 2010
Quality Management in Construction Projects: A Case Study of Quality Management in Construction Projects of an Oil and Gas Company
Currently, although businesses involved in construction activities apply quality management systems, but in practice there are a lot of poor works that worry people and society. Consequences of poor quality will damage property and waste money of business and community, and it also cause danger to people.
To ensure the effective application of quality management for construction projects, it requires the strong commitment of business leaders and implementation of multiple solutions. Applying this effective quality management will bring many potential benefits for businesses. Mr. Le Van Thong made a research which main objectives were: (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 are the useful tools to avoid and mitigate problems and to improve quality performances of the following projects. They are the principles that management use to achieve effective cost control, quality control, schedule control etc. Many civil and industry construction Corporations, companies in developed countries have been applied the successful Quality Management and got more profits and reduced lost time and cost for reworks. They recognize the importance of the Quality Management and have responsibilities 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 implementation quality management:
After implementation of the quality management, there are some achieved results as below:
1. 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.
2. 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
1. The performance of Quality Management must be carried out permanently in the company to prevent all budget overrun, progress slow, reworks maybe happening from the existing projects and future projects.
2. The performance of Quality Management must be concerned from the top management to everybody in the company.
3. Examine the quality control methods being used to determine if the contractor is properly controlling design activities in design-build contracts.
4. Examine the quality control methods being used to determine if the contractor is properly controlling construction activities.
5. Make certain that the necessary changes are made in the contractor's QC system, if excessive construction deficiencies occur.
6. Assist the contractor in understanding and implementing the contract requirements.
7. Examine ongoing and completed work.
8. 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.
9. Develop and maintain an effective QC system.
10. Perform all control activities and tests.
11. 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 fact, 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 cannot 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.
To ensure the effective application of quality management for construction projects, it requires the strong commitment of business leaders and implementation of multiple solutions. Applying this effective quality management will bring many potential benefits for businesses. Mr. Le Van Thong made a research which main objectives were: (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 are the useful tools to avoid and mitigate problems and to improve quality performances of the following projects. They are the principles that management use to achieve effective cost control, quality control, schedule control etc. Many civil and industry construction Corporations, companies in developed countries have been applied the successful Quality Management and got more profits and reduced lost time and cost for reworks. They recognize the importance of the Quality Management and have responsibilities 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 implementation quality management:
After implementation of the quality management, there are some achieved results as below:
1. 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.
2. 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
1. The performance of Quality Management must be carried out permanently in the company to prevent all budget overrun, progress slow, reworks maybe happening from the existing projects and future projects.
2. The performance of Quality Management must be concerned from the top management to everybody in the company.
3. Examine the quality control methods being used to determine if the contractor is properly controlling design activities in design-build contracts.
4. Examine the quality control methods being used to determine if the contractor is properly controlling construction activities.
5. Make certain that the necessary changes are made in the contractor's QC system, if excessive construction deficiencies occur.
6. Assist the contractor in understanding and implementing the contract requirements.
7. Examine ongoing and completed work.
8. 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.
9. Develop and maintain an effective QC system.
10. Perform all control activities and tests.
11. 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 fact, 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 cannot 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.
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