Recently, the oil and gas prices increase day by day which makes difficulties for developing countries to have a stable economic condition. In addition, the demand for oil and gas all over the world is increasing, therefore the services required in developing new offshore facilities and its exploration also increases.
In developing the facilities for an offshore oil and gas field such as platform, normally Oil and Gas Companies (hereinafter referred as the Project Company) sign an EPC (Engineering, Procurement and Construction) contract with the EPC contractor through the international bidding tender. The major factors for executing an EPC project are the contract clauses which are normally generally stipulated, with unclear understanding and interpretation when having disputes between the contractor and the project company.
In the past, risk management has been an important tool to control safety-related risks. However, we see the shift away from the traditional compliance and insurance-motivated risk management to one that is closely linked to business performance and long-term society commitment. In order to minimize the interfaces and risks between the separated contractor and the project company during the execution of an oil and gas project, the oil and gas companies normally prefer to award and sign an EPC contract with the EPC contractor, however this project delivery method will take a lot of time to make clarification, explanation and get the mutual agreement on the contract clauses between the contractor and the project company. The following problems are normally involved with the EPC contract clauses:
1. Take time to make the clarification and finalization before contract signing;
2. Wrong understanding and interpreting of stipulated clauses in the contract;
3. Conflict between contractor and the project company during project execution
An EPC contract is generally applied for developing the oil and gas project. In case of problems or disputes during the project execution, then these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract. Mr. Nguyen Duc Thanh made a case study which objectives were focused in the issues related to EPC contract: (1) to study the contract of EPC project and contractual risks; (2) to study contractual problems occurring in a project; and (3) to propose a recommendation for improvement
Conclusion
The research study summarized the concern and the risks we often meet when executing EPC oil and gas project in Vietnam. It also mentioned and suggested effective solutions that can be performed to avoid or overcome the obstacles in contractor management.
The literature review sections introduced and covered the form, phases and activities for general EPC project. It also listed advantages or disadvantages and challenges when we apply EPC model to manage project, especially managing Vietnam EPC project. The advantages under investor’s point of view of EPC contract model in respect of following:
- Reduction in project management works for an investment owner;
- Reduction in risks of difference between design and construction;
- Costs for an EPC package are easier to estimate and control because it is lump sum contract.
The chapter also raised reason which case EPC should be applied in Vietnam such as:
- Project with multiple options of construction methods;
- Projects in which whose design and equipment production cannot be separated
- And in case a project has urgent progression.
In two case studies revealed that through collecting related document and attending as one of duty to solve these problems, Risk in Vietnam appeared in oil and gas projects normally come from what parties haven’t defined or stipulated in contracts. Moreover, maybe some contractors want to expand profit as much as possible, so they change some conditions except in some case which is compulsory for pushing project schedule.
According to studies and data statistic, client needs to play as interface when many contractors participated in project. It requests a professional team to monitor, assess and can hold point the whole activity of contractors. Schedule is always updated and mobilization plan of employee and equipments must comply with master schedule.
Through the review of literature on EPC model and risk in EPC contract, it is proposed that solutions of effective EPC risk management needed as stated below:
The problems often appear in the execution stage of the project and we have difficulty in avoiding them. However, we can ignore or minimize the problems through understanding by clarifying the term and the scope of work in contract. In addition, these problems can be predicted or determined to happen in the next phases which can’t solve at this time, therefore we need to stipulate them in the contract on how to find the solutions to control, monitor or solve.
In conclusion, for each EPC project, the risks are not the same. The risks depend on whole EPC project such as: scope of work, material specifications, equipment style and requirements of client. Therefore, risks management application for the kinds of EPC projects will be different. So, application should be considered via EPC project style.
His thesis abstract is copied and posted below.
Abstract
Oil and gas projects are established intensely to satisfy the energy demand on the world. In an EPC contracts help provide ‘turnkey ‘systems for companies. This is where a single point of contract is given which includes the design work, engineering procurement, installation works, commissioning, start up, supply chain materials, testing activities. Due to this single point of responsibility, almost all the risk is transferred from the owner to the contractor. In this contract, there are guaranteed completion dates, performance, clear division of obligations and liabilities. EPC projects which are also known as turnkey project service face many challenges to stay in the competitive within the industry business environment despite of the efforts made towards compressing activities by phase overlapping, in order to reduce time scale and to obtain better EPC projects. These project challenges lead to cost overrun and schedule delay. Understanding the function of EPC Project Risk Management is important to protect interest of both parties and to engage tools and techniques to allocate risks between the owners and contractors.
Most projects are bound to be affected risks such as construction risks, operational risks, financial and economic risks, legal risks etc. All these risks are interrelated and have a chain effect in overall start-up and commissioning. Common delays and cost overruns can have severe effects and causes as a primary effect on construction risks. Therefore it is important in a project when structuring EPC contract. EPC contract comes many new risks that are often severe due to the complex nature and high cost frequently associated with this type of project involved
By finding out and analyzing the problems happening in Nhon Trach power Project and Ca Mau Project, through collecting data and assessing status of project in each phase, the research study aim to identify and analyze problems that often occurring as well as resolutions and try to suggest solutions which are effective to solve the problems.
Solutions to manage Risk in EPC project was developed as a result of the research case study which is helpful for Vietnam oil and gas projects wishing to overcome obstacles by avoiding or minimizing these risk.
Wednesday, 2 February 2011
Friday, 28 January 2011
Risk Management in Low-Income Housing Project Development in Ho Chi Minh City
Ho Chi Minh City (HCMC) is the one of the cities having highest population in Vietnam. Currently, migrants account for 21 percent of total population, and the average migration rate increases from 0.02% (1979-1989) to 0.84 (1989-1999) and reaches 2.33% (1999-2004) (Thanh, 2006). Most of people migrate to HCMC in order to get better employment opportunity, education condition, medical care, and so on (Thanh, 2006).
In order to increase housing supply for the poor, government has implemented different policies in various periods. However, housing supply for the poor is still low compared to demand. This market segment is still risky for developer (MOC, 2009).
Mr. Le Quoc Tuan made a case study which main objective was to propose the possible solution to manage the risks in low-income housing (LIH) project development. In order to achieve his main objective, the following objectives were needed to accomplish: (1) investigate the risk factors in each project phase during the implementation low-income housing project development, and (2) propose the recommendation to manage the risk factors in low-income housing project development.
Conclusion
In order to satisfy the first objective, the researcher reviewed book, journal, previous thesis, guideline, newspaper and so on to identify risk factors and then arranged them in four phases of project which are planning, financing, construction, and selling. After that, these risk factors were verified by 5 experts including deputy directors, government officials, and academician. Finally, the verified risk factors were analyzed through case study. The second objective, which was recommendation to manage risks, was made based on analysis case study and study literature.
It was found out that there are eight key risks for developer when investing in low-income housing project which are (1) complicated legislation procedure to get approval (2) low-profit margin controlled by government (3) unrealistic government support policy (4) risk in land acquisition from landowner (5) lack of fund to developers (6) inappropriate building standard (7) revenue risk due to ineffective demand (8) delay in selling housing unit.
Recommendation
The recommendations were made based on the risk analyses, suggestions from interviewees, and from literature review. The recommendations are presented as in the table below.
His thesis abstract is copied and posted
Abstract
Demand on low-cost housing for the poor in urban area of Vietnam is very high due to its high population, and high urbanization rate. Even though Government implemented many policies since 2009 in order to attract developers, the supply in low-income housing is still low compared to its demand. So far only 31 out of 263 registered low-income housing projects have been implementing. According to Ministry of Construction (2009), this market segment is still risky for developers. However, there are few researches on risk management specific in low-income housing projects. The purpose of this study is to propose recommendation to manage risks in low-income housing project development in Ho Chi Minh City.
This study used case study to conduct its two objectives. The first objective is to investigate risk factors in each phase of low-cost housing development. Researcher reviewed book, journal, previous thesis, guideline, newspaper and so on to identify 48 risk factors and then arranged them in four phases of project which are planning, financing, construction, and selling. After that, these risk factors were verified by 5 experts including deputy directors, government officials, and academician. Finally, the twelve verified risk factors will be analyzed through case study in Ho Chi Minh City. The second objective is to make recommendation to manage risks. The recommendation was made based on analysis of case study and study of literature.
The study found that developers are facing 8 risk factors and 12 risk sub-factors which are (1) complicated legislation procedure to get approval (2) low-profit margin controlled by government (3) unrealistic government support policy (4) risk in acquisition of land from landowner (5) lack of fund to developers (6) inappropriate building standard (7) revenue risk due to ineffective demand (8) delay in selling housing unit. Some recommendations to manage the risk are: (1) establish one independent government agency responsible for legislation issues, land acquisition, select the target low-income people, and guarantee for the output (3) government channels the fund borrowed from international agency such as World Bank, Asian Development Bank to developers with favorable interest rate or government guarantee for developers to borrow fund from bank (4) lower building standard.
In order to increase housing supply for the poor, government has implemented different policies in various periods. However, housing supply for the poor is still low compared to demand. This market segment is still risky for developer (MOC, 2009).
Mr. Le Quoc Tuan made a case study which main objective was to propose the possible solution to manage the risks in low-income housing (LIH) project development. In order to achieve his main objective, the following objectives were needed to accomplish: (1) investigate the risk factors in each project phase during the implementation low-income housing project development, and (2) propose the recommendation to manage the risk factors in low-income housing project development.
Conclusion
In order to satisfy the first objective, the researcher reviewed book, journal, previous thesis, guideline, newspaper and so on to identify risk factors and then arranged them in four phases of project which are planning, financing, construction, and selling. After that, these risk factors were verified by 5 experts including deputy directors, government officials, and academician. Finally, the verified risk factors were analyzed through case study. The second objective, which was recommendation to manage risks, was made based on analysis case study and study literature.
It was found out that there are eight key risks for developer when investing in low-income housing project which are (1) complicated legislation procedure to get approval (2) low-profit margin controlled by government (3) unrealistic government support policy (4) risk in land acquisition from landowner (5) lack of fund to developers (6) inappropriate building standard (7) revenue risk due to ineffective demand (8) delay in selling housing unit.
Recommendation
The recommendations were made based on the risk analyses, suggestions from interviewees, and from literature review. The recommendations are presented as in the table below.
His thesis abstract is copied and postedAbstract
Demand on low-cost housing for the poor in urban area of Vietnam is very high due to its high population, and high urbanization rate. Even though Government implemented many policies since 2009 in order to attract developers, the supply in low-income housing is still low compared to its demand. So far only 31 out of 263 registered low-income housing projects have been implementing. According to Ministry of Construction (2009), this market segment is still risky for developers. However, there are few researches on risk management specific in low-income housing projects. The purpose of this study is to propose recommendation to manage risks in low-income housing project development in Ho Chi Minh City.
This study used case study to conduct its two objectives. The first objective is to investigate risk factors in each phase of low-cost housing development. Researcher reviewed book, journal, previous thesis, guideline, newspaper and so on to identify 48 risk factors and then arranged them in four phases of project which are planning, financing, construction, and selling. After that, these risk factors were verified by 5 experts including deputy directors, government officials, and academician. Finally, the twelve verified risk factors will be analyzed through case study in Ho Chi Minh City. The second objective is to make recommendation to manage risks. The recommendation was made based on analysis of case study and study of literature.
The study found that developers are facing 8 risk factors and 12 risk sub-factors which are (1) complicated legislation procedure to get approval (2) low-profit margin controlled by government (3) unrealistic government support policy (4) risk in acquisition of land from landowner (5) lack of fund to developers (6) inappropriate building standard (7) revenue risk due to ineffective demand (8) delay in selling housing unit. Some recommendations to manage the risk are: (1) establish one independent government agency responsible for legislation issues, land acquisition, select the target low-income people, and guarantee for the output (3) government channels the fund borrowed from international agency such as World Bank, Asian Development Bank to developers with favorable interest rate or government guarantee for developers to borrow fund from bank (4) lower building standard.
Thursday, 27 January 2011
Risk Management in the Design of Large - Scale Construction Projects: Case Studies of an Urban Area and a High-rise Building Project
Problems in the design of large-scale construction projects may come from many stakeholders: Owner, Designer, Project Management Consultant and external environment.
There are many kinds of problem arising from the Owner such as (i) sometimes they can’t finalize what they really expect in their project. The requirements are very vague and just base on their feeling; (ii) the structure is not well-organized. Everybody can give out opinions but no one makes decision; (iii) when employing the consultants, owners don’t have the right model of project team structure. The consultants are not put in the right position with proper scope of works and obligation.
The problems of Project Management Consultant are that sometimes they can’t fulfill their duty in assisting Client to conclude their requirements reasonably and to arrange the project team structure in a right way or can’t define the procedure of working and making decisions. Also, they can’t well manage the project team to shorten the time, eliminate the error, and reduce the cost. The project working environment is not efficient and effective because people in the team are not aware of the other member’s duties or how to contact them. In other words, many Project Managers in Viet Nam nowadays are just the Post Men.
As to Designer, most of their problems come from the unclear design contract without necessary conditions binding relevant parties to their commitment. This weak point becomes more serious especially to the large projects owned by many organizations and involve in many parties with different cultures, different customs and constructive understanding.
Last but not least, problems may emerge from the external environment, such as laws, regulations or market. These factors form an uncertain circumstance which needs to be well identified, and planned the measures to deal with.
Mr. Do Tran My Thuy made a case study which objectives were to: (1) identify the key risks affecting time, cost or quality during design process; (2) find out how to mitigate these risks through contract conditions, communication or some other management tools. Also, to define the role, responsibility of three parties: Owner, Project Management Consultant and Designer in mitigating these risks; and (3) identify the activities and required documents in each step of Design process.
Conclusion
In the design of large-scale projects which involved many investors and many professors in different fields, there are usually 12 risks relating to 3 groups of stakeholders such as Owners, Project team and external environment. Two among these risks are from the external environments which are “unpredictable response from Authorities” and “changes by unforeseeable causes”. These are difficult to be prevented, so the mitigation is just the negotiation between Owner and Designer on how to share the consequences if the risks happen. Ten reminders can be prevented or mitigated through a proper working process and three kinds of document.
A proper working process is the one which creates the reliable bases for the Owner to make proper decisions.
Three kinds of document are Design service contract, Design Brief and Project Management Plan. The purpose of these documents is to set out a clear, impartial working environment for all parties in the project. Depending on the specific situation of the project, each document can be amended a little bit, but there are some critical issues in these documents which are necessary to be considered and discussed carefully by the Owner, Designer and Project Management Consultant. The role and responsibility of these three parties during the design process are also found. Details of the finding are summarized in figure 4-1. Apart from these preparations, another tool to mitigate the risk is Communication. Communication should also be planned through three aspects: communication method, communication form and critical points to communicate.
Recommendation
The Project Manager should consider the steps shown in the table to prepare for large-scale construction projects.
His thesis abstract is copied and posted.
Abstract
Managing risks in construction project has been recognized as one of the key factors in the process leading to the success in term of time, cost and quality of a project. However, until now most researches in risk management have focused on the construction phase, rather than design phase. This paper aims to identify the risks in the design of large-scale construction projects and find out how to mitigate these risks. Through the two case studies in two different types of projects (one Urban Area project and one Building project), twelve risks are identified and risk mitigation are proposed. It is concluded that to mitigate these risks, the Project Manager should pay attention in several issues. Firstly, the Pre-design phase at the beginning of each project can not be omitted. This important phase results in a Design Brief and Project Management Plan which together with the Design Service contract made stronger commitments of parties. Secondly, FIDIC- white book which is usually used as the standard form in Architectural Design practice in Viet Nam nowadays needs to be added or amended some conditions. Lastly, communication also needs to be planned and implemented in a right way.
There are many kinds of problem arising from the Owner such as (i) sometimes they can’t finalize what they really expect in their project. The requirements are very vague and just base on their feeling; (ii) the structure is not well-organized. Everybody can give out opinions but no one makes decision; (iii) when employing the consultants, owners don’t have the right model of project team structure. The consultants are not put in the right position with proper scope of works and obligation.
The problems of Project Management Consultant are that sometimes they can’t fulfill their duty in assisting Client to conclude their requirements reasonably and to arrange the project team structure in a right way or can’t define the procedure of working and making decisions. Also, they can’t well manage the project team to shorten the time, eliminate the error, and reduce the cost. The project working environment is not efficient and effective because people in the team are not aware of the other member’s duties or how to contact them. In other words, many Project Managers in Viet Nam nowadays are just the Post Men.
As to Designer, most of their problems come from the unclear design contract without necessary conditions binding relevant parties to their commitment. This weak point becomes more serious especially to the large projects owned by many organizations and involve in many parties with different cultures, different customs and constructive understanding.
Last but not least, problems may emerge from the external environment, such as laws, regulations or market. These factors form an uncertain circumstance which needs to be well identified, and planned the measures to deal with.
Mr. Do Tran My Thuy made a case study which objectives were to: (1) identify the key risks affecting time, cost or quality during design process; (2) find out how to mitigate these risks through contract conditions, communication or some other management tools. Also, to define the role, responsibility of three parties: Owner, Project Management Consultant and Designer in mitigating these risks; and (3) identify the activities and required documents in each step of Design process.
Conclusion
In the design of large-scale projects which involved many investors and many professors in different fields, there are usually 12 risks relating to 3 groups of stakeholders such as Owners, Project team and external environment. Two among these risks are from the external environments which are “unpredictable response from Authorities” and “changes by unforeseeable causes”. These are difficult to be prevented, so the mitigation is just the negotiation between Owner and Designer on how to share the consequences if the risks happen. Ten reminders can be prevented or mitigated through a proper working process and three kinds of document.
A proper working process is the one which creates the reliable bases for the Owner to make proper decisions.
Three kinds of document are Design service contract, Design Brief and Project Management Plan. The purpose of these documents is to set out a clear, impartial working environment for all parties in the project. Depending on the specific situation of the project, each document can be amended a little bit, but there are some critical issues in these documents which are necessary to be considered and discussed carefully by the Owner, Designer and Project Management Consultant. The role and responsibility of these three parties during the design process are also found. Details of the finding are summarized in figure 4-1. Apart from these preparations, another tool to mitigate the risk is Communication. Communication should also be planned through three aspects: communication method, communication form and critical points to communicate.
Recommendation
The Project Manager should consider the steps shown in the table to prepare for large-scale construction projects.
His thesis abstract is copied and posted.
Abstract
Managing risks in construction project has been recognized as one of the key factors in the process leading to the success in term of time, cost and quality of a project. However, until now most researches in risk management have focused on the construction phase, rather than design phase. This paper aims to identify the risks in the design of large-scale construction projects and find out how to mitigate these risks. Through the two case studies in two different types of projects (one Urban Area project and one Building project), twelve risks are identified and risk mitigation are proposed. It is concluded that to mitigate these risks, the Project Manager should pay attention in several issues. Firstly, the Pre-design phase at the beginning of each project can not be omitted. This important phase results in a Design Brief and Project Management Plan which together with the Design Service contract made stronger commitments of parties. Secondly, FIDIC- white book which is usually used as the standard form in Architectural Design practice in Viet Nam nowadays needs to be added or amended some conditions. Lastly, communication also needs to be planned and implemented in a right way.
Tuesday, 25 January 2011
Claim Management And Analysis: A Case Study Of High Rise Building Project
Normally, the success of construction claim management is the satisfaction of all parties involved in the project. This success must be started from the preparation of each claim such as entitlement, cost and documentation.
Normally, there are two parts of each entitlement for each claim. The first one must set up the legal / law as well as other data base on which normally extracted from the construction contract document. In case there are conflicts, the entitlement must be separated into many branches so that they can be understood easily in a logical express. The second one must describe the variation of the work and express the action of the contractor to each change, especially in quantity and quality.
The cost section is normally based on the available cost in the signed contract. The costs of each work must be considered carefully because they can affect the relationship between each party. In the contract, cost is always limited such as “can not be changed in case the total variation is smaller than 0.2% of contract amount for example”, etc. It is necessary to breakdown and explain the party how the cost is developed in this section.
Documentation seems to be the most important for the success of a construction claim. Generally, all the documents which involve to the claim such as variation order, drawings, contract, specification, etc must be included in this section. Project manager, site manager, engineers, consultant, lawyers and others are always involve supporting for the full success of this documentation.
Base on the above analysis, expert can pick out the weak points and strong points of each company for claim management and they can improve them. The guidelines below would be helpful to companies to improve their claim management :
• The project design and handling must be integrated in claim management
• Make the tight communication inside your company about the claim situations
• Prepare and check carefully the documentation which will support for the claim
• Reviewing all signed contract to check if they are feasible contracts or not
• Have an expert in making decision for the strategic claim
The following normally are the most related potential problems which affect the project entitlement, cost and document in construction claim:
• Scope definition is incomplete and inadequate
• Lack of integrating and understanding of each scope of work
• Not tight contract document
• Not enough condition from the client to support the contractor to execute the work
• Catch up the schedule by accelerating
• Acceleration of contractor without submitting claim to the client
• Delays
• Changes in work because of imperfect contract drawings lead to the disruption
According to Keith Pickavance (2008), “Poor quality of project documentation leads to poor factual evidence and present serious difficulties in identifying the rights of the parties.”
Lack of communication normally leads to the delay of the project and also shows that the project management is bad.
Mr. Giang Thien Duy Nguyen made a case study which objectives were to: (1) study claims in high rise building construction progress; (2) study what analysis method is used for claim; and (3) study the prepare effective claim analysis frame work.
Conclusions
In this study, the framework on claim analysis is designed. This study helped the claimant understand clearly about the claim documentation, the way to prepare a claim, the method to calculate the quantity – cost - profit – overhead, etc. The design documents are the most important thing during construction progress. The fewer the errors, the fewer the missing information, therefore fewer claims. So, the Client just should sign consultant contract with a very experienced Project Management company.
Furthermore, the Contractor’s ability is also very important. Their experience will help the Project Management foresee what would be the errors, and what information should be adjusted instantly. Their experience will both PM and Client to reduce the cost of the project by properly proposing method statement as well as cheaper but good quality material.
Recommendations
• In general, a tight contract such as the signed contract of the above project seems to be unfair with the contractor because of the clause “Contractors have to arrange and execute themselves to complete the project, no claim of weather condition be admitted by the PM, by the Client”, because in fact, contractor can not complete their mission if the weather condition is of disadvantage.
• Claim framework as well as procedure of claim approval should be applied but not in all cases. It’s up to each project character, it’s up to the relationship between the Client, the PM and the Contractor. Personally, the applied solution of the above project (using “technical meeting book”) is highly appreciated. This solution helps all parties speed up the schedule and everything can be solved quickly and fairly.
• Any how, the documentation, the factual support for the claim, etc should be prepared carefully so that every parties can review those easily and also for easy contract liquidation later.
• Careful preparation of all related document will help parties to avoid disputes.
• The level of project manager of the Client, and of the Project management is also very important. Their experience will help all the claims if any, be solved and be approved without disputes.
• Once again, a successful project is a project which brings benefit to all parties involve in the project. Therefore, before the problem starts, all parties must try their best to solve them first.
His thesis abstract is copied and posted.
Abstract
High rise project budget increased, project delayed in construction can be caused by a number of changes in a project such as scope change, extra work, lost productivity, acceleration, contract termination, etc. Many factors by many parties cause those matters. However, in general, cost & schedule control are really complicate. Non-critical activity does not make the affect to the project schedule, does not make the delay, and does not impact to the project amount. On contrary, the delay of a critical activity will make the project delay and impact the project amount also. The delay caused by critical activity will cause the damage to other parties. The reason of delay does not origin from any party but origin from no party (e.g. bad weather conditions). Base on those factors, each party can claim each other to protect the right of them. So, for a high rise building project, what should we do with a claim, when will we claim, how claim can be calculated, etc, that is main content of this case study.
Normally, there are two parts of each entitlement for each claim. The first one must set up the legal / law as well as other data base on which normally extracted from the construction contract document. In case there are conflicts, the entitlement must be separated into many branches so that they can be understood easily in a logical express. The second one must describe the variation of the work and express the action of the contractor to each change, especially in quantity and quality.
The cost section is normally based on the available cost in the signed contract. The costs of each work must be considered carefully because they can affect the relationship between each party. In the contract, cost is always limited such as “can not be changed in case the total variation is smaller than 0.2% of contract amount for example”, etc. It is necessary to breakdown and explain the party how the cost is developed in this section.
Documentation seems to be the most important for the success of a construction claim. Generally, all the documents which involve to the claim such as variation order, drawings, contract, specification, etc must be included in this section. Project manager, site manager, engineers, consultant, lawyers and others are always involve supporting for the full success of this documentation.
Base on the above analysis, expert can pick out the weak points and strong points of each company for claim management and they can improve them. The guidelines below would be helpful to companies to improve their claim management :
• The project design and handling must be integrated in claim management
• Make the tight communication inside your company about the claim situations
• Prepare and check carefully the documentation which will support for the claim
• Reviewing all signed contract to check if they are feasible contracts or not
• Have an expert in making decision for the strategic claim
The following normally are the most related potential problems which affect the project entitlement, cost and document in construction claim:
• Scope definition is incomplete and inadequate
• Lack of integrating and understanding of each scope of work
• Not tight contract document
• Not enough condition from the client to support the contractor to execute the work
• Catch up the schedule by accelerating
• Acceleration of contractor without submitting claim to the client
• Delays
• Changes in work because of imperfect contract drawings lead to the disruption
According to Keith Pickavance (2008), “Poor quality of project documentation leads to poor factual evidence and present serious difficulties in identifying the rights of the parties.”
Lack of communication normally leads to the delay of the project and also shows that the project management is bad.
Mr. Giang Thien Duy Nguyen made a case study which objectives were to: (1) study claims in high rise building construction progress; (2) study what analysis method is used for claim; and (3) study the prepare effective claim analysis frame work.
Conclusions
In this study, the framework on claim analysis is designed. This study helped the claimant understand clearly about the claim documentation, the way to prepare a claim, the method to calculate the quantity – cost - profit – overhead, etc. The design documents are the most important thing during construction progress. The fewer the errors, the fewer the missing information, therefore fewer claims. So, the Client just should sign consultant contract with a very experienced Project Management company.
Furthermore, the Contractor’s ability is also very important. Their experience will help the Project Management foresee what would be the errors, and what information should be adjusted instantly. Their experience will both PM and Client to reduce the cost of the project by properly proposing method statement as well as cheaper but good quality material.
Recommendations
• In general, a tight contract such as the signed contract of the above project seems to be unfair with the contractor because of the clause “Contractors have to arrange and execute themselves to complete the project, no claim of weather condition be admitted by the PM, by the Client”, because in fact, contractor can not complete their mission if the weather condition is of disadvantage.
• Claim framework as well as procedure of claim approval should be applied but not in all cases. It’s up to each project character, it’s up to the relationship between the Client, the PM and the Contractor. Personally, the applied solution of the above project (using “technical meeting book”) is highly appreciated. This solution helps all parties speed up the schedule and everything can be solved quickly and fairly.
• Any how, the documentation, the factual support for the claim, etc should be prepared carefully so that every parties can review those easily and also for easy contract liquidation later.
• Careful preparation of all related document will help parties to avoid disputes.
• The level of project manager of the Client, and of the Project management is also very important. Their experience will help all the claims if any, be solved and be approved without disputes.
• Once again, a successful project is a project which brings benefit to all parties involve in the project. Therefore, before the problem starts, all parties must try their best to solve them first.
His thesis abstract is copied and posted.
Abstract
High rise project budget increased, project delayed in construction can be caused by a number of changes in a project such as scope change, extra work, lost productivity, acceleration, contract termination, etc. Many factors by many parties cause those matters. However, in general, cost & schedule control are really complicate. Non-critical activity does not make the affect to the project schedule, does not make the delay, and does not impact to the project amount. On contrary, the delay of a critical activity will make the project delay and impact the project amount also. The delay caused by critical activity will cause the damage to other parties. The reason of delay does not origin from any party but origin from no party (e.g. bad weather conditions). Base on those factors, each party can claim each other to protect the right of them. So, for a high rise building project, what should we do with a claim, when will we claim, how claim can be calculated, etc, that is main content of this case study.
Monday, 24 January 2011
Friday, 21 January 2011
A Critical Appraisal Of Client Briefing Process In Construction: A Case Study Of Residential Project
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.
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.
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.
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