Briefing is a communication process combined with record system to publish a set of documents to the design team. It is a process of developing a deep understanding about the client's needs, and it is a continuous interaction and involvement of the client where in this process, the role of professional team is very important. Through good briefing and grasping what the real needs are, client and professional consultants can work more effectively and productively on project and make decisions confidently.
Since Vietnam’s construction industry is attracting investors impressively by the possibility of its profitability, therefore, the development of strategies for international construction demands is very essential to meet the client’s objectives in terms of function, quality, value, time, and cost certainly. In contrary, Vietnam’s big problem is the lacking of skilled person to meet the requirement of construction project which lead to late delivery and over budget. Oftentimes, requirements and demands from clients are not collected adequately to provide solutions and the result is inappropriate.
Ms. Nguyen Chau Dieu An made a case study which objectives were to: (1) review the concepts, definitions of client and client briefing in construction in order to understand the client’s expectation through the client’s briefing process; (2) review the methods for strategic client briefing and other relevant literature on client briefing; (3) present the problems of briefing in a specific project in Vietnam and its solutions; and (4) propose a framework of briefing for next project.
Conclusions
Briefing has long been recognized as an important and essential part in the international construction process. It has a substantial contribution to the success of a project. However, briefing has not been acknowledged in the formal way by client and consultant in Vietnam construction industry. Client and consultants are not aware of the importance of the briefing process and most of them have not been trained with the factors related to the client’s brief.
The literature study shows the essential activities and interactive relationships involving the client organization and the design team as they progress through each phase of the project. It provides valued information to achieve assessments and project objectives.
Some problems in this study revealed that architect is stuck by not admitting what a paramount briefing and clarifies elements which important roles play in a successful project.
To know the client’s objective through the briefing process, the literature has been reviewed on the concepts of the briefing process, the definitions of a client, client’s expectations and the client briefing process within the construction. The investigation tried to understand the expectation of clients through the client’s briefing process.
To apply techniques of briefing process for architect, exploring different methodologies and tools that can be used to establish client’s demand and expectation on construction project such as questionnaire development, need analysis, briefing content, and communication.
To understand the administrative and official process impacting on the briefing process, involvement of client, stockholders, end user, and consultant during the process is very essential. Managing changes of requirement, recording verbal communication, and making decision are factors in briefing administration which has impacts towards the success or failure of project.
Aside form these, this research also provides the methods to the briefing process to get requirements from client such as empowering client, managing project, parties’ involvement, team building and using computer system, communication skill, and record system.
Although there are still some problems in Vietnam construction industry, this study has been achieved by the conclusion that the industry will be focused on a briefing process especially in application methods of briefing, training and proper acknowledgment of a brief to get efficiency and profitability from the project.
Recommendation
Recommendation to improve briefing process in Vietnam construction industry
Perceive role of briefing:
Need to train all parties involved in a project, be aware of how important the briefing is, the role of briefing in a project and contribution of briefing to the success of a project. Through a better briefing, an architect can get what the real client’s wants and client’s expectation. Even the clients will be able to make decisions related to investment with great confidence.
Understand briefing process:
Briefing process is an interactive process between the client and professional teams and briefing happens continuously during a construction process. Briefing process needs many techniques, tools to get requirements and demands from client such as team building, getting information, analyzing, managing changes of requirement, recording, and communicating.
Apply different techniques in construction:
Find out various techniques to apply in a briefing process such as using computer system to improve communication between client and professional team (Science & Engineering Research Council) includes general approach, questionnaire development, data analysis, and system contents.
Her thesis abstract is copied and posted.
Abstract
Client briefing plays a crucial role in success of a construction project. A successful briefing can achieve the target time, cost and quality for a project and make decision on project confidently. Although there are many attempts to approach client’s requirement and needs for a project, it is still not collected adequately to make appropriate solutions in design. In Vietnam, client briefing is not considered an important process and architects usually focus on design without paying any attention what their client really wants.
The objective of this research are to provide a basic knowledge of briefing process which is not consider as a integral process in construction process in Vietnam, present research, analysis of problems of briefing in a project and recommend a briefing framework in order to avoid client’s frequent changes and control information collected systematically.
This Project Report has taken a general view of Briefing Process in theory and analyzing a case study that applied in VN to find out reasons of failure, lack of briefing techniques. The report points out that a framework of briefing need to be established for identification what a client really wand and clarification of client’s demands.
Friday, 21 January 2011
Thursday, 20 January 2011
Risk Management in Price Adjustment Contract: A Case Study of a Construction Project in Vietnam
During the past years, Vietnam’s construction projects used lump-sum contract and fixed unit price contract as the universal contracts. The lump-sum contract has advantages of easy acceptance of work and contract payment. If the Contractor implements the drawing and specs correctly as agreed, they would be paid 100% without any dependence on increase or decrease of the original work in the contract, or any price fluctuation in the market. While fixed unit price contract has advantages of enabling all parties to quickly implement contract payment. That is because the unit price is already fixed no matter what the real price in the market. The remained problem is determining the volume of work under actual situation. This part is quite easy to carry out and unlikely to cause argument.
However, both of these two contract forms revealed their big disadvantages in "price-storm" from the end of 2007 through the end of 2008. At that time, prices of fuels and materials such as gas, petroleum, steel, cement, brick, sand, stone, electric cable, wood, glass increased suddenly. Some materials increased the price three times. This is not the first time that contractors encounter problem of price fluctuation. At present, the price is gradually approaching the global price. Therefore, construction projects during this period were affected significantly by the “price-storm” and many contractors face risk of bankruptcy.
To solve this problem, the Prime Minister launched document 164/TTg-CN on January 29, 2008 saying “...deal with construction cost in lump-sum contracts”. After that, some authorized institutions like Ministry of Construction and Department of Construction launched many documents to guide adjusting form’s contractual prices of lump-sum contracts and fixed unit price contracts to contract price based on adjustable price form. The purpose of these documents is to solve the difficulties for Contractors and hasten projects implement.
After this event, contract price based on adjustable price form (volume under actual situation and cost adjusted under conditions in the contract) was preferred to use for many projects. However, most of this type of contract only has a very general content as “adjustment under guidance of the Government in case of price fluctuation” without any specific scope and methods to adjust. The result is, during the process of implementing the contract, there were many arguments on determining the adjusted unit price to pay the Contractor. Until now, many projects cannot execute price adjustment.
Mrs. Hoang Thi Hai Anh made a research in which she wanted to point out the problems in signing and implementation of the contract that has contract price based on adjustable price form of a project in Ho Chi Minh City, Vietnam.
Conclusions
Form and lump-sum or unit price contract is no longer suitable for big construction projects especially those with long construction time due to fluctuation in price of materials in Vietnam as well as in other countries. Using contracts under adjusted cost now is encouraged by the Government. However, during contract signing, all parties need to bring out their own rules clearly and specifically, and have to commit to obey those rules. Through the case study, there are two reasons revealed which lead to troubles when implementing the contract such as:
1. The Contractor intentionally proposed low price to win the tender. However, they misunderstood the meaning of the contract under adjusted cost. They think that although the price bid was low, still, they will be paid according to real price on the market during the time of payment, where actually, price adjustment is just to supplement fluctuated price between the time of signing and paying the contract, not dependent on if the tender price is high or low.
2. The Client was passive and did not foresee difficulties when paying the contract. They also relied too much on Government guidelines. Before planning the contract, they did not put forth conditions in relation with adjustment price such as adjusted scope, formulas, and bases to determine adjusted cost.
Recommendations
In the long term, the contractors need to know how to protect themselves and have to consider carefully when receiving the tender to implement the contract accurately. They should also be fair to accept loss. All parties need to learn experiences from developed countries to apply international rules in construction contracts. At the same time, they should also be more active and fearless to bring out conditions for cost adjustment with appropriate characteristics, scale and schedule for each project.
Her thesis abstract is copied and posted.
Abstract
Risk management in construction contract is always important items helping reduce the arising damage or disputes and is a solid basis to force the parties to fulfill their responsibilities in the contract.
In the contract, payment issues are always the core issues and often controversial if it's not really clear. Contract price adjustment due to price fluctuation is quite outstanding issue in Vietnam from 2008 to now; it has made the authorized agencies issue up to ten guiding documents within only one year to settle the problems during contract performance. With my own experiences, in this report I would like to talk about the popular errors while preparing the terms of payment of contract, especially the contracts in which form of contract price is based on adjustable price of the State-funded projects in Vietnam.
I do hope that my ideas shared above will help the Contractors and the Clients of the similar projects minimize the risks in the construction contract.
However, both of these two contract forms revealed their big disadvantages in "price-storm" from the end of 2007 through the end of 2008. At that time, prices of fuels and materials such as gas, petroleum, steel, cement, brick, sand, stone, electric cable, wood, glass increased suddenly. Some materials increased the price three times. This is not the first time that contractors encounter problem of price fluctuation. At present, the price is gradually approaching the global price. Therefore, construction projects during this period were affected significantly by the “price-storm” and many contractors face risk of bankruptcy.
To solve this problem, the Prime Minister launched document 164/TTg-CN on January 29, 2008 saying “...deal with construction cost in lump-sum contracts”. After that, some authorized institutions like Ministry of Construction and Department of Construction launched many documents to guide adjusting form’s contractual prices of lump-sum contracts and fixed unit price contracts to contract price based on adjustable price form. The purpose of these documents is to solve the difficulties for Contractors and hasten projects implement.
After this event, contract price based on adjustable price form (volume under actual situation and cost adjusted under conditions in the contract) was preferred to use for many projects. However, most of this type of contract only has a very general content as “adjustment under guidance of the Government in case of price fluctuation” without any specific scope and methods to adjust. The result is, during the process of implementing the contract, there were many arguments on determining the adjusted unit price to pay the Contractor. Until now, many projects cannot execute price adjustment.
Mrs. Hoang Thi Hai Anh made a research in which she wanted to point out the problems in signing and implementation of the contract that has contract price based on adjustable price form of a project in Ho Chi Minh City, Vietnam.
Conclusions
Form and lump-sum or unit price contract is no longer suitable for big construction projects especially those with long construction time due to fluctuation in price of materials in Vietnam as well as in other countries. Using contracts under adjusted cost now is encouraged by the Government. However, during contract signing, all parties need to bring out their own rules clearly and specifically, and have to commit to obey those rules. Through the case study, there are two reasons revealed which lead to troubles when implementing the contract such as:
1. The Contractor intentionally proposed low price to win the tender. However, they misunderstood the meaning of the contract under adjusted cost. They think that although the price bid was low, still, they will be paid according to real price on the market during the time of payment, where actually, price adjustment is just to supplement fluctuated price between the time of signing and paying the contract, not dependent on if the tender price is high or low.
2. The Client was passive and did not foresee difficulties when paying the contract. They also relied too much on Government guidelines. Before planning the contract, they did not put forth conditions in relation with adjustment price such as adjusted scope, formulas, and bases to determine adjusted cost.
Recommendations
In the long term, the contractors need to know how to protect themselves and have to consider carefully when receiving the tender to implement the contract accurately. They should also be fair to accept loss. All parties need to learn experiences from developed countries to apply international rules in construction contracts. At the same time, they should also be more active and fearless to bring out conditions for cost adjustment with appropriate characteristics, scale and schedule for each project.
Her thesis abstract is copied and posted.
Abstract
Risk management in construction contract is always important items helping reduce the arising damage or disputes and is a solid basis to force the parties to fulfill their responsibilities in the contract.
In the contract, payment issues are always the core issues and often controversial if it's not really clear. Contract price adjustment due to price fluctuation is quite outstanding issue in Vietnam from 2008 to now; it has made the authorized agencies issue up to ten guiding documents within only one year to settle the problems during contract performance. With my own experiences, in this report I would like to talk about the popular errors while preparing the terms of payment of contract, especially the contracts in which form of contract price is based on adjustable price of the State-funded projects in Vietnam.
I do hope that my ideas shared above will help the Contractors and the Clients of the similar projects minimize the risks in the construction contract.
Wednesday, 19 January 2011
Environmental Impacts Assessment of Nam Ly Bridge – Ho Chi Minh City, Viet Nam
Given Vietnam’s newfound prominence in Asia as the “The New Land of Opportunity”, people search for every opportunity to develop the economy and to satisfy the increasing demands especially in construction of infrastructure. When people gets profit in exchange of other use of land, water and other natural resources, there will be an equal impact in the environmental condition both natural and social.
The question is how to reduce these changes, while still aiming for economic growth.
Ms. Trinh Thi Thu Ha made a case study which main objectives were to: (1) study environmental impacts assessment methods; (2) compare of the Viet Nam’s policies and ADB’s policies in EIA; and (3) study environmental impacts assessment of construction project in Viet Nam
Conclusion
EIA is one of the policy tools that are used to evaluate project proposals. It is also a relatively recent development when compared to use of economic appraisal methods in Viet Nam.
Most of the construction projects in Vietnam which will invest funds from many different capitals are required to comply with laws and regulations to implement the project, and EIA must be researched in Preparation stage and presented in the Appraisal stage.
The contents of the EIA is usually consists of 9 parts such as: Introduction; Description of the Project; Description of the Environment; Alternatives; Anticipated Environmental Impacts and Mitigation Measures; Economic Assessment; Environmental Management Plan; Public Involvement and Disclosure; and Conclusions.
The EMP explains how the measures will be managed, who will implement them, and when and where they will be implemented.
During project implementation, the clients must implement properly the approved content of the EIA to ensure that the negative impacts have been mitigated so that the environment and the community have been protected for the sustainable development objectives.
There are differences between Vietnamese policies and the sponsors’ policies for EIA in Vietnam. With ODA projects, World Bank and Asian Development Bank have also established regulations and guidelines to ensure that EIA applies to projects funded. Possible policies and activities required them in different way, but the process is relatively the same for the building and approving the EIA. In Vietnam, in addition to the applicable policies of the sponsors for the project, the EIA also have to establish compliance with current policies of the government of Vietnam.
However, if there are differences between the policies of Vietnam and the donor's policies, they must apply the policies of the donors, which is required in the loan terms.
Recommendations:
1. Adjustment or harmonization of policies and laws in the implementation of EIA, without gaps to the policies of the donors (ADB, World Bank, etc.).
2. The Government should establish training programs for students of the EIA and raise awareness and capacity about the protection and management for environmental leaders, department managers and community;
3. Establish public databases and share the parameters of environmental quality for other projects in Vietnam;
4. There should be public participation during the implementation of EIA. The project must be publicly reviewed and evaluated by the public.
5. Full finance for the EIA study.
Her thesis abstract is copied and posted.
Abstract
The demands of people increase rapidly while the resources are limited. To satisfy the increasing demands, people search for every opportunity to develop the economy. Because of that, investing for construction of infrastructure is a need to develop economic regions, is a progress in the development of the society.
When human bring in financial to change the patterns of use of land, water and other natural resources, they will receive back profit from economy development, but will also change the other elements of the environment like natural condition and social.
Reducing the burden of environmental impacts is necessary if development is to become sustainable. Environment Impact Assessment (EIA) has become of ever increasing importance as a tool for development decision-making.
Environmental impact assessment, as a national instrument, shall be undertaken for proposed activities that are likely to have a significant adverse impact on the environment and are subject to a decision of a competent national authority.
In practice, EIA is applied primarily to prevent or minimize the adverse effects of major development proposals.
The question is how to reduce these changes, while still aiming for economic growth.
Ms. Trinh Thi Thu Ha made a case study which main objectives were to: (1) study environmental impacts assessment methods; (2) compare of the Viet Nam’s policies and ADB’s policies in EIA; and (3) study environmental impacts assessment of construction project in Viet Nam
Conclusion
EIA is one of the policy tools that are used to evaluate project proposals. It is also a relatively recent development when compared to use of economic appraisal methods in Viet Nam.
Most of the construction projects in Vietnam which will invest funds from many different capitals are required to comply with laws and regulations to implement the project, and EIA must be researched in Preparation stage and presented in the Appraisal stage.
The contents of the EIA is usually consists of 9 parts such as: Introduction; Description of the Project; Description of the Environment; Alternatives; Anticipated Environmental Impacts and Mitigation Measures; Economic Assessment; Environmental Management Plan; Public Involvement and Disclosure; and Conclusions.
The EMP explains how the measures will be managed, who will implement them, and when and where they will be implemented.
During project implementation, the clients must implement properly the approved content of the EIA to ensure that the negative impacts have been mitigated so that the environment and the community have been protected for the sustainable development objectives.
There are differences between Vietnamese policies and the sponsors’ policies for EIA in Vietnam. With ODA projects, World Bank and Asian Development Bank have also established regulations and guidelines to ensure that EIA applies to projects funded. Possible policies and activities required them in different way, but the process is relatively the same for the building and approving the EIA. In Vietnam, in addition to the applicable policies of the sponsors for the project, the EIA also have to establish compliance with current policies of the government of Vietnam.
However, if there are differences between the policies of Vietnam and the donor's policies, they must apply the policies of the donors, which is required in the loan terms.
Recommendations:
1. Adjustment or harmonization of policies and laws in the implementation of EIA, without gaps to the policies of the donors (ADB, World Bank, etc.).
2. The Government should establish training programs for students of the EIA and raise awareness and capacity about the protection and management for environmental leaders, department managers and community;
3. Establish public databases and share the parameters of environmental quality for other projects in Vietnam;
4. There should be public participation during the implementation of EIA. The project must be publicly reviewed and evaluated by the public.
5. Full finance for the EIA study.
Her thesis abstract is copied and posted.
Abstract
The demands of people increase rapidly while the resources are limited. To satisfy the increasing demands, people search for every opportunity to develop the economy. Because of that, investing for construction of infrastructure is a need to develop economic regions, is a progress in the development of the society.
When human bring in financial to change the patterns of use of land, water and other natural resources, they will receive back profit from economy development, but will also change the other elements of the environment like natural condition and social.
Reducing the burden of environmental impacts is necessary if development is to become sustainable. Environment Impact Assessment (EIA) has become of ever increasing importance as a tool for development decision-making.
Environmental impact assessment, as a national instrument, shall be undertaken for proposed activities that are likely to have a significant adverse impact on the environment and are subject to a decision of a competent national authority.
In practice, EIA is applied primarily to prevent or minimize the adverse effects of major development proposals.
Tuesday, 18 January 2011
Planning for Improving Efficiency of Housing Project’s Development Process
The increase in housing demand and the high cost of land in big cities in Vietnam such as Hanoi and Ho Chi Minh create a huge market for high-rise housing projects. However, development of these housing projects face many obstacles such as low income, high inflation, high bank interest rate, high land price, increasing construction materials and labor cost. In addition, the long project development period due to lack of transparency in local regulations and authority submission procedure also makes the investment projects less efficient. It requires the project managers / project planners having a good understanding on Vietnam law and regulations, and good planning skills to improve the development process of housing projects.
According to the 2009 Governmental Investment Project Assessment Report by Ho Chi Minh City People’s Committee, there are 1,177 projects completed until the end of the year 2009, which are currently equal to 20% of 5,886 operational projects in Ho Chi Minh City. However, 65% of the projects were delayed and only 20 projects achieved the 30% target progress. The obvious reasons for these are:
1. Weak financial capacity of the project owners.
2. Lack of experienced project managers and project management human resources.
3. Long period for authority submission and lack of transparency of Vietnam law and regulations.
4. Land clearance and resettlement
Mr. Bui Quang Huy made a study to investigate the basic requirements by Vietnam law and regulations, the common practice of housing development projects in Vietnam complying with Vietnam law and regulations; and to find out a more efficient process for developing a housing project in Vietnam.
Conclusions:
- The housing development industry has its own characteristics. Every single activity in the project development process has to comply with local law and regulations. Hence, the good understanding about local law and regulations is very useful for developers in their business. The success of the case project in this study also greatly depends on the understanding about local law and regulations beside the project management knowledge.
- The old practice of housing project development process complying with Vietnam law and regulation is not efficient, it takes 60 – 78 months to finish the project from the feasibility study and planning phase to handing over and obtaining the ownerships for the house buyers. The longer the project development period is, the more costly the investment in housing projects. Besides, Vietnam population and housing demand are developing very fast, the supply could not satisfy the demand. Hence, the housing price could not be reduced and a major part of people with low and medium income cannot afford to buy houses. It causes a lot of social issues in Vietnam.
- With the improved housing development process proposed, it takes 45 – 57 months to finish the project. If we only consider the Project Launching Preparation phase, 15 – 21months would be saved, then it takes 12 -15 months in the improved process instead of 27 - 36 months of the old process. This is a valuable improvement. The investment in housing project becomes more efficient when the developers can recycle their investment faster and cut down financial cost in housing projects. It helps to increase the supply of housing products and reduce house price.
- Besides the understanding about Vietnam market, the knowledge from lean production and last planner theory also offers a basis for evaluating the whole development process of housing projects and identify waste times in the process. The project manager/ planner should examine and schedule the project with all constituent and continuous activities as a whole. By implementing that, it will make the timing of whole project period more efficient, rather than only taking care of shortening the period of its individual activities. The application of lean theory is absolutely suitable for the current situation of Vietnam housing market. It helps to shorten the project development period and make the process more efficient by ignoring waste time. There are no additional costs to apply these theories.
Recommendations:
- In general, when the understanding about local law and regulations is very important in housing project development, the developers should continuously update and study local law and regulations, especially, the new issuances.
- A good relationship with government also helps developers in their submission works. This relationship could be created by contributing to society and maintaining the good image in the local market. The developers should properly deliver what they committed to the government and buyers.
- The developers are recommended to maintain their efforts in evaluating the working and project development process to find any problems for improvement, not only waste of time, but also any other wastes such as cost, manpower, etc.
- Lastly, the good schedule should never achieve the good actual result if it is not well controlled. The control system also needs to be established to monitor the execution of the project to ensure it is carried out in accordance with the plan.
His thesis abstract is copied and posted.
Abstract
Vietnam is a developing country, it means that the country need a lot of knowledge for development, especially in the field of construction project management.
Some “old men” think that all the construction projects are similar, about the process, technology and method, especially housing development projects. They are actually not similar, there are many projects carried out in such a way of wasting time and cost; and achieving bad quality.
In this study, a more efficient process for housing development project is introduced. Hopefully, it could help the project managers / planners schedule and execute their projects strictly complying with the local law and regulations, in shorter cycle without any additional costs for advanced technology and materials.
This study also affirms that there is always inefficiency in project development process of every construction projects. The project managers should always spend enough efforts to identify wastes and improve them. This is helping the projects, the company and the country, in a wider angle of view.
According to the 2009 Governmental Investment Project Assessment Report by Ho Chi Minh City People’s Committee, there are 1,177 projects completed until the end of the year 2009, which are currently equal to 20% of 5,886 operational projects in Ho Chi Minh City. However, 65% of the projects were delayed and only 20 projects achieved the 30% target progress. The obvious reasons for these are:
1. Weak financial capacity of the project owners.
2. Lack of experienced project managers and project management human resources.
3. Long period for authority submission and lack of transparency of Vietnam law and regulations.
4. Land clearance and resettlement
Mr. Bui Quang Huy made a study to investigate the basic requirements by Vietnam law and regulations, the common practice of housing development projects in Vietnam complying with Vietnam law and regulations; and to find out a more efficient process for developing a housing project in Vietnam.
Conclusions:
- The housing development industry has its own characteristics. Every single activity in the project development process has to comply with local law and regulations. Hence, the good understanding about local law and regulations is very useful for developers in their business. The success of the case project in this study also greatly depends on the understanding about local law and regulations beside the project management knowledge.
- The old practice of housing project development process complying with Vietnam law and regulation is not efficient, it takes 60 – 78 months to finish the project from the feasibility study and planning phase to handing over and obtaining the ownerships for the house buyers. The longer the project development period is, the more costly the investment in housing projects. Besides, Vietnam population and housing demand are developing very fast, the supply could not satisfy the demand. Hence, the housing price could not be reduced and a major part of people with low and medium income cannot afford to buy houses. It causes a lot of social issues in Vietnam.
- With the improved housing development process proposed, it takes 45 – 57 months to finish the project. If we only consider the Project Launching Preparation phase, 15 – 21months would be saved, then it takes 12 -15 months in the improved process instead of 27 - 36 months of the old process. This is a valuable improvement. The investment in housing project becomes more efficient when the developers can recycle their investment faster and cut down financial cost in housing projects. It helps to increase the supply of housing products and reduce house price.
- Besides the understanding about Vietnam market, the knowledge from lean production and last planner theory also offers a basis for evaluating the whole development process of housing projects and identify waste times in the process. The project manager/ planner should examine and schedule the project with all constituent and continuous activities as a whole. By implementing that, it will make the timing of whole project period more efficient, rather than only taking care of shortening the period of its individual activities. The application of lean theory is absolutely suitable for the current situation of Vietnam housing market. It helps to shorten the project development period and make the process more efficient by ignoring waste time. There are no additional costs to apply these theories.
Recommendations:
- In general, when the understanding about local law and regulations is very important in housing project development, the developers should continuously update and study local law and regulations, especially, the new issuances.
- A good relationship with government also helps developers in their submission works. This relationship could be created by contributing to society and maintaining the good image in the local market. The developers should properly deliver what they committed to the government and buyers.
- The developers are recommended to maintain their efforts in evaluating the working and project development process to find any problems for improvement, not only waste of time, but also any other wastes such as cost, manpower, etc.
- Lastly, the good schedule should never achieve the good actual result if it is not well controlled. The control system also needs to be established to monitor the execution of the project to ensure it is carried out in accordance with the plan.
His thesis abstract is copied and posted.
Abstract
Vietnam is a developing country, it means that the country need a lot of knowledge for development, especially in the field of construction project management.
Some “old men” think that all the construction projects are similar, about the process, technology and method, especially housing development projects. They are actually not similar, there are many projects carried out in such a way of wasting time and cost; and achieving bad quality.
In this study, a more efficient process for housing development project is introduced. Hopefully, it could help the project managers / planners schedule and execute their projects strictly complying with the local law and regulations, in shorter cycle without any additional costs for advanced technology and materials.
This study also affirms that there is always inefficiency in project development process of every construction projects. The project managers should always spend enough efforts to identify wastes and improve them. This is helping the projects, the company and the country, in a wider angle of view.
Monday, 17 January 2011
Project Management Practice in Small and Medium Vietnamese Contractor: A Case Study of Nhat Dang Company
In the last ten years, Viet Nam economy is one of the fastest growing economies in the world. Along with this economic development is the boosts in construction industry which mostly involve are small and medium construction enterprise. These SMEs are comprised of small number of employees and have limited total assets. According to Vietnam’s Decree 56/2009/NĐ-CP, SMEs are divided into three levels based on the total assets and number of employees such as:
- Micro enterprises: under 10 employees.
- Small enterprises: total assets are under 20 billion VND and number of employees is from 10 to 200 peoples.
- Medium enterprises: total assets are from 20 to 100 billion VND and number of employees is from 200 to 300 peoples.
With limited financial and human resources, SME contractors are unable to win big projects or operate many projects at the same time. SMEs also easily encounter cash shortage problem. According to Ling et al. (2009), one of the weaknesses of Vietnamese contractors is lack of project management ability. Almost all performed projects in Vietnam encountered delay, low quality or cost overrun due to low project management capability of the owners and contactors. Most SMEs are founded by an engineer or architect, who had worked for a bigger company and who is well-experienced in construction but not in management. With limited financial capacity, SMEs cannot hire good project manager resulting to poor project management capability.
The requirement of strong project management ability is becoming more essential for Vietnamese SME contractors since more projects have participation of foreign owners, consultants or main contractors, where requirement of schedule and quality performance are very strict. But how could SME contractors do it effectively with limited resources is still a question.
Mr. Vo Dinh Nguyen made a project study which objectives were to: (1) investigate project management functions of a small construction company; (2) identify strengths and weaknesses of project management of the company; and (3) propose recommendations for improvement of project management functions in small construction company.
Conclusion
By reviewing related theory of project management and analyzing the operation practice of Nhat Dang Company, the strengths and weaknesses of the company in certain areas of project management are summarized in table below.
Project management is not just limited in these aspects and to have a more general view of company management capability; other areas of project management knowledge should also be studied. These include:
- Project scope management;
- Project human resource management;
- Project communications management; and
- Project integration management.
Base on identified strengths and weaknesses, the case study proposed solutions to improve project management competency of the company in studied areas. Some solutions that require more resources should be planned to apply when the management capability reach a higher level. They may be useful for some Vietnamese SME contractors which are in the same situation but may be unsuitable for others. Some essential solutions that the company needs to achieve to ensure their operations are:
- Full utilization of earned value technique for better schedule and cost control.
- Develop an advance resource requirement plan for each project.
- Establish the project spending plan and funding requirement and follow the plan in operation.
- Carry out the project risk management process.
- Enhance the role of the project team.
Another weakness that the company management has is the lack of measuring, recording and analyzing the results of management processes for improvement. A useful model for continuous improvement is the Plan – Do - Check – Act cycle as show in figure below.
Plan : Define the goal and processes to achieve it
Do : Implement processes
Check : Measure the process and results against defined values to find out variations.
Act : Analyze variations and determine necessary actions to improve future operations.
This model is helpful and can be applied in any process of management, any organization for improving management competence.
His abstract is copied and posted.
Abstract
Project management plays a very important role in the management of construction enterprises. Although being the major element in Vietnam construction industry, most of Vietnamese SME contractors are still weak in project management capability. Improving project management capabilities are essential needs for survival and development of SME contractors.
This report reviews theory of project management in areas of time, cost, quality, procurement and risk management. Necessary processes and knowledge for those project management functions are identified and analyzed.
By analyzing past performance and practice of project management in Nhat Dang construction company, a typical SME contractor in Ho Chi Minh City, the report point out strengths and weaknesses in project management of the company. Necessary solutions for improvements of project management functions are proposed. These solutions can be applied to similar small construction companies either.
- Micro enterprises: under 10 employees.
- Small enterprises: total assets are under 20 billion VND and number of employees is from 10 to 200 peoples.
- Medium enterprises: total assets are from 20 to 100 billion VND and number of employees is from 200 to 300 peoples.
With limited financial and human resources, SME contractors are unable to win big projects or operate many projects at the same time. SMEs also easily encounter cash shortage problem. According to Ling et al. (2009), one of the weaknesses of Vietnamese contractors is lack of project management ability. Almost all performed projects in Vietnam encountered delay, low quality or cost overrun due to low project management capability of the owners and contactors. Most SMEs are founded by an engineer or architect, who had worked for a bigger company and who is well-experienced in construction but not in management. With limited financial capacity, SMEs cannot hire good project manager resulting to poor project management capability.
The requirement of strong project management ability is becoming more essential for Vietnamese SME contractors since more projects have participation of foreign owners, consultants or main contractors, where requirement of schedule and quality performance are very strict. But how could SME contractors do it effectively with limited resources is still a question.
Mr. Vo Dinh Nguyen made a project study which objectives were to: (1) investigate project management functions of a small construction company; (2) identify strengths and weaknesses of project management of the company; and (3) propose recommendations for improvement of project management functions in small construction company.
Conclusion
By reviewing related theory of project management and analyzing the operation practice of Nhat Dang Company, the strengths and weaknesses of the company in certain areas of project management are summarized in table below.
Project management is not just limited in these aspects and to have a more general view of company management capability; other areas of project management knowledge should also be studied. These include:
- Project scope management;
- Project human resource management;
- Project communications management; and
- Project integration management.
Base on identified strengths and weaknesses, the case study proposed solutions to improve project management competency of the company in studied areas. Some solutions that require more resources should be planned to apply when the management capability reach a higher level. They may be useful for some Vietnamese SME contractors which are in the same situation but may be unsuitable for others. Some essential solutions that the company needs to achieve to ensure their operations are:
- Full utilization of earned value technique for better schedule and cost control.
- Develop an advance resource requirement plan for each project.
- Establish the project spending plan and funding requirement and follow the plan in operation.
- Carry out the project risk management process.
- Enhance the role of the project team.
Another weakness that the company management has is the lack of measuring, recording and analyzing the results of management processes for improvement. A useful model for continuous improvement is the Plan – Do - Check – Act cycle as show in figure below.
Plan : Define the goal and processes to achieve it
Do : Implement processes
Check : Measure the process and results against defined values to find out variations.
Act : Analyze variations and determine necessary actions to improve future operations.
This model is helpful and can be applied in any process of management, any organization for improving management competence.
His abstract is copied and posted.
Abstract
Project management plays a very important role in the management of construction enterprises. Although being the major element in Vietnam construction industry, most of Vietnamese SME contractors are still weak in project management capability. Improving project management capabilities are essential needs for survival and development of SME contractors.
This report reviews theory of project management in areas of time, cost, quality, procurement and risk management. Necessary processes and knowledge for those project management functions are identified and analyzed.
By analyzing past performance and practice of project management in Nhat Dang construction company, a typical SME contractor in Ho Chi Minh City, the report point out strengths and weaknesses in project management of the company. Necessary solutions for improvements of project management functions are proposed. These solutions can be applied to similar small construction companies either.
Friday, 14 January 2011
Minimizing Impact of Change Order to Projects Cost
Contract Management is a vast scope particularly in construction industry wherein a single contract normally finishes from months to years. Managing a contract in any construction project is a tedious task. All pertinent documents must be monitored, diligently recorded and filed before, during and after construction. Changes in construction as we know are inevitable but can be properly managed and controlled. Deviation from the contract, often called change order or variation order are changes brought about by the owner or changes due to site conditions, damages or weather. These changes may not directly affect the contract in terms of time and cost, but both parties must be knowledgeable as to how to control and protect the owner and contractor from any changes necessary in the construction and implementation of the project. In order to manage such changes or variation orders, proper guidelines must be followed.
Knowing and carefully reviewing the contract, following the proper variation procedure and constantly taking in to consideration the risks that may bring about if poor records of everyday activities particularly on change orders would be taxing if the Contractor claims.
Ms. Chona S. Salvahan made a study which objectives were to: (1) identify changes occurring in a residential apartment project. Identify the type, causation and resolution; and (2) identify proper procedure, develop methodology and documentation to control and manage variation or change orders. Identifying the type of change order will help formulate a procedure adapt to the variation.
Conclusion
Based on the case study, the residential apartment project garnered change order that were classified into five (5) categories such as:
1. Addendums – included additional packages outside the scope of the original contract and are entirely different work but necessary for the project.
2. Price Fluctuation – included price adjustments to construction materials used on site specifically on concrete, reinforcement bars, sand and cement used for structural works on site.
3. Variation due to Design Change – these changes may have resulted from design revisions, defects in drawings or contract documents and differing site conditions grouped into main building works and external works package.
4. Damages – were from re-works items or damages due to negligence of other contractors and sub-contractors.
5. Deductions or Omission – included items that were not installed on site and items that were cancelled and were redundant to the design
Variations that were considered under Extra Work are the three (3) Addendums to the contract. While variations directly requested by the Owner to improve serviceability and aesthetic of the building are considered Additional works. One example is the supply and installation aluminum louver to cover the condensing unit of air-conditioning in every apartment. This additional work is considered Directed Change because the instruction to change or add is from the project owner. Other variations resulted from factor that influence the change were considered constructive change as well as Price Fluctuation, Damages and Omissions were all under different situations during implementation of the project.
Factors that contributed to the change were clearly specified in this study. These events in the construction that caused changes generated even before the main building works started. Continuing to the construction, another set of variations emerge during implementation. At this stage, causes may have been different from the causes during the pre-construction stage. Towards completion of the project, changes still occur, seeing the defects and the need to add or enhance serviceability of the development. Current procedure is useful but can be developed to improve processing period and administer each changes lessening the probable effect to the whole project particularly on the cost.
Below are the suggested stages of processing procedure for better time table of change order settlement:
Validation – where entitlement is agreed and analyzing the effect of the change to project cost and schedule.
1. Evaluation – verifying and gathering data to substantiate the claim. It is also the time of determining the true cost of the variation order thru investigation, review of quantities and considerations in estimates. It is also at this time that both parties should concur and agree on quantity, measurement and total cost in order to save time and will only proceed to the next whenever disagreement on cost arises.
2. Negotiation – only and only if both parties cannot arrive into agreement on price, quantities, measurement or methods should resort to this step where the top management is involve in order settling amicably.
3. Final Approval – time when both parties are satisfied with the evaluation, change order is prepared for final documentation and approval.
Special concerns have to be met particularly of this project. Many of the units have already been sold and were committed to deliver to the tenant on specific dates. The project has no luxury of extending the time thru which in trying to satisfy the commitment of the Owner, the construction restrained the project from achieving a more quality and a more organized method in implementing the project. Change order management helped control the changes incurred during construction but not totally eliminate the potential changes. It may prevent these changes to accumulate and later when accumulated can become a bigger claim for the contractor which is more tedious, complicated and time consuming task to process.
Furthermore, prior to implementation and part of Change Order Management is the adding change clause in the contract, formulating variation procedure and setting or allocating time for settlement process. The deliberate inclusion of change clause is similarly important to control probable change order in a construction project. As observed, the other 3 main sources of change on site were the following:
Differing site conditions resulted from defects in the construction of substructure. The previously installed piles were displaced and because of this the foundation design has to be checked and revised. The owner was compelled to review and revise if necessary the whole structural building.
Defects in contract documents where a number of items were not in the drawings or specification but necessary to install or construct on site.
Owner direction or instructions where the rest of the variations were directed by the owner either thru modification of design drawings or changes had to be added for aesthetic reasons. A lot of variations were requested by the owner or unit buyers.
Recommendation
In order to manage Change Order, both parties should identify their right to vary, the Owner right to include change clause to protect their benefit. These change clauses must be anticipated during planning and before composition of the contract. Therefore a meticulous study of the drawings, site conditions and other factors that may affect arise change in the contract and construction. Clear definition of scope of work would minimize the risk of misinterpretation and misjudgment of the work. In a way, changes would be avoided and if items were not included in the contract, it can be easily identified and agreed on. More so, clear distinction of the methods and procedure to use in claiming variations and the authority issuing the VO. This will clearly guide the contractor on how, what and who to talk to in case a change would occur.
Her thesis abstract is copied and posted.
Abstract
Construction industry is often described as a volatile industry which can be true in implementing a project. Construction itself is more often unpredictable due to the different situations a project may face. Changes may occur in the preparation, during construction and even upon completion of the project. The veracity of inconsistent nature of construction, change management procedures must be considered to minimize the effects particularly to project cost, time schedule and overall quality of the project.
Recently, the high turn in of foreign investors and Vietnamese nationals living abroad inspired a number of Developers to venture in High End Apartments. The big challenge for the Vietnam Construction industry is to advance the management styles to cope up with challenges faced in a project. Procedures in managing contract and change orders are viewed to know the effectiveness and liability ensuing steps observed. Disruptions in cash flow and programme when mitigated and handled correctly may create confidence in handling changes that transpire in any project.
However, knowledge and skill in managing this challenging changes and observing effective procedures may eventually create a norm in Project Management system in the industry where tradition of strong relationship among Owner and Contract still prevails.
Knowing and carefully reviewing the contract, following the proper variation procedure and constantly taking in to consideration the risks that may bring about if poor records of everyday activities particularly on change orders would be taxing if the Contractor claims.
Ms. Chona S. Salvahan made a study which objectives were to: (1) identify changes occurring in a residential apartment project. Identify the type, causation and resolution; and (2) identify proper procedure, develop methodology and documentation to control and manage variation or change orders. Identifying the type of change order will help formulate a procedure adapt to the variation.
Conclusion
Based on the case study, the residential apartment project garnered change order that were classified into five (5) categories such as:
1. Addendums – included additional packages outside the scope of the original contract and are entirely different work but necessary for the project.
2. Price Fluctuation – included price adjustments to construction materials used on site specifically on concrete, reinforcement bars, sand and cement used for structural works on site.
3. Variation due to Design Change – these changes may have resulted from design revisions, defects in drawings or contract documents and differing site conditions grouped into main building works and external works package.
4. Damages – were from re-works items or damages due to negligence of other contractors and sub-contractors.
5. Deductions or Omission – included items that were not installed on site and items that were cancelled and were redundant to the design
Variations that were considered under Extra Work are the three (3) Addendums to the contract. While variations directly requested by the Owner to improve serviceability and aesthetic of the building are considered Additional works. One example is the supply and installation aluminum louver to cover the condensing unit of air-conditioning in every apartment. This additional work is considered Directed Change because the instruction to change or add is from the project owner. Other variations resulted from factor that influence the change were considered constructive change as well as Price Fluctuation, Damages and Omissions were all under different situations during implementation of the project.
Factors that contributed to the change were clearly specified in this study. These events in the construction that caused changes generated even before the main building works started. Continuing to the construction, another set of variations emerge during implementation. At this stage, causes may have been different from the causes during the pre-construction stage. Towards completion of the project, changes still occur, seeing the defects and the need to add or enhance serviceability of the development. Current procedure is useful but can be developed to improve processing period and administer each changes lessening the probable effect to the whole project particularly on the cost.
Below are the suggested stages of processing procedure for better time table of change order settlement:
Validation – where entitlement is agreed and analyzing the effect of the change to project cost and schedule.
1. Evaluation – verifying and gathering data to substantiate the claim. It is also the time of determining the true cost of the variation order thru investigation, review of quantities and considerations in estimates. It is also at this time that both parties should concur and agree on quantity, measurement and total cost in order to save time and will only proceed to the next whenever disagreement on cost arises.
2. Negotiation – only and only if both parties cannot arrive into agreement on price, quantities, measurement or methods should resort to this step where the top management is involve in order settling amicably.
3. Final Approval – time when both parties are satisfied with the evaluation, change order is prepared for final documentation and approval.
Special concerns have to be met particularly of this project. Many of the units have already been sold and were committed to deliver to the tenant on specific dates. The project has no luxury of extending the time thru which in trying to satisfy the commitment of the Owner, the construction restrained the project from achieving a more quality and a more organized method in implementing the project. Change order management helped control the changes incurred during construction but not totally eliminate the potential changes. It may prevent these changes to accumulate and later when accumulated can become a bigger claim for the contractor which is more tedious, complicated and time consuming task to process.
Furthermore, prior to implementation and part of Change Order Management is the adding change clause in the contract, formulating variation procedure and setting or allocating time for settlement process. The deliberate inclusion of change clause is similarly important to control probable change order in a construction project. As observed, the other 3 main sources of change on site were the following:
Differing site conditions resulted from defects in the construction of substructure. The previously installed piles were displaced and because of this the foundation design has to be checked and revised. The owner was compelled to review and revise if necessary the whole structural building.
Defects in contract documents where a number of items were not in the drawings or specification but necessary to install or construct on site.
Owner direction or instructions where the rest of the variations were directed by the owner either thru modification of design drawings or changes had to be added for aesthetic reasons. A lot of variations were requested by the owner or unit buyers.
Recommendation
In order to manage Change Order, both parties should identify their right to vary, the Owner right to include change clause to protect their benefit. These change clauses must be anticipated during planning and before composition of the contract. Therefore a meticulous study of the drawings, site conditions and other factors that may affect arise change in the contract and construction. Clear definition of scope of work would minimize the risk of misinterpretation and misjudgment of the work. In a way, changes would be avoided and if items were not included in the contract, it can be easily identified and agreed on. More so, clear distinction of the methods and procedure to use in claiming variations and the authority issuing the VO. This will clearly guide the contractor on how, what and who to talk to in case a change would occur.
Her thesis abstract is copied and posted.
Abstract
Construction industry is often described as a volatile industry which can be true in implementing a project. Construction itself is more often unpredictable due to the different situations a project may face. Changes may occur in the preparation, during construction and even upon completion of the project. The veracity of inconsistent nature of construction, change management procedures must be considered to minimize the effects particularly to project cost, time schedule and overall quality of the project.
Recently, the high turn in of foreign investors and Vietnamese nationals living abroad inspired a number of Developers to venture in High End Apartments. The big challenge for the Vietnam Construction industry is to advance the management styles to cope up with challenges faced in a project. Procedures in managing contract and change orders are viewed to know the effectiveness and liability ensuing steps observed. Disruptions in cash flow and programme when mitigated and handled correctly may create confidence in handling changes that transpire in any project.
However, knowledge and skill in managing this challenging changes and observing effective procedures may eventually create a norm in Project Management system in the industry where tradition of strong relationship among Owner and Contract still prevails.
Thursday, 13 January 2011
Risk Management in PPP Expressway Project in Vietnam: Ha Noi – Hai Phong Expressway Project Case Study
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.
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.
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