Why FIDIC red book is very essential for contract management especially for ADA funded projects in Vietnam? Mr. Pham Thanh Trung made a case study in the Project of Wastewater Disposal in Provincial Towns, Programme South, Can Tho which 2 primary objectives were to: (1) study FIDIC Red Book contract structure and contract management related; and (2) analyze the problems occurring in the application of FIDIC Red Book contract to this project, with perception looking from Vietnam law system, Engineer and Contractor and finally to propose recommendations.
Conclusions
The fundamental problems occurred during the application of FIDIC Red Book in this case study project include: choosing the wrong contract form, rejecting the main contents in FIDIC Red Book such as measurement and variations, contract price adjustment, and contract volume. In addition, the specific requirement in particular conditions did not clearly defined about responsibilities, procedures, manners and processes.
The study also helped the Employer to understand about their roles in the project’s delivery; involvement in preparing a management team with knowledge and experience, controlling the work of contractor as well as the Engineer, defining conflict between FIDIC Red Book and Vietnam Law system and provide solutions to resolve them.
Recommendation to improve the effectiveness in application of FIDIC Red Book
To apply FIDIC Red Book Conditions effectively in ODA projects in Vietnam, from this case study, the author come-up with the following conclusions:
1. FIDIC Red Book strongly recommends that the complete design shall be prepared by independent and impartial Engineers whom have enough experiences and skills.
2. The General Conditions for every project should be followed strictly from FIDIC Red Book, especially with some important clauses as Clause 12 Measurement and evaluation, Clause 13 Variations and adjustments and Clause 14 Contract price and payment.
3. The Particular Conditions should be included any changes or additional clauses which the parties have decided to include for adaptation of the local and project requirements. The Particular Conditions must ensure clear responsibilities, procedures, manners and processes for all requirements.
4. When any problems occur, all members of construction project should be closely followed to regular basis procedures, such as Sub-Clause 3.5 Determinations, Sub-Clause 2.5 Employer’s claims, Sub-Clause 20.1 Contractor’s claims etc. Besides, they should be considered to all events, circumstances and factors affecting to the problems. For this purpose, the documentation work is very important to timely record, collect and store every information as well as evidences of events.
His thesis abstract is copied and pasted below:
Abstract
In recent years, ODA has become an important resource to help the Vietnamese government develop infrastructure, education and environmental improvements. Many important projects using ODA funds have been completed and operate effectively, contributing to the economic and social development.
Besides the positive aspects of this project model, there are so many limitations and shortcomings during the implementation process which led to ineffective projects. Limitations, shortcomings are source from site clearance, lack of management experience to run the project. Besides, these project models are requiring complying with the Conditions of the sponsors, and these regulations are direct to protect the interest of sponsors.
One of the document are usually apply by sponsors is FIDIC red book contract. In original, this document is an appropriate regulation for every construction contract follow international regular. However, during the applied, the sponsors and their consultant usually adjust and add more sub clause in particular Conditions for their advantage.
Within this writing, I would be analyzed the problems occurred during the project implementing which follow the FIDIC contract. Includes attitude and solutions of the sponsor, the consulting units, the client and the contractor, and the direct effects due to these problems cause. From the standpoint of a project manager, combine with existing management rules, I would like to suggest solutions to process problems to ensure harmony and efficiency of the project.
Monday, 25 July 2011
Thursday, 21 July 2011
Project Management in New Urban Project
Can Tho City is one of the five central cities, a center of economics, politics, culture, education - training of the Mekong River delta. It is a young city in the process of urbanization to become a powerful modern industrial city in 2020. As reported by Can Tho Department of Construction new urban projects are being invested and constructed with a total area of 1700 ha.
Although the urbanization in Can Tho City is very important and developing quite quickly, the process of implementation of its new urban projects raises some serious problems to be taken into consideration. According to the recent report of Can Tho Department of Construction, new urban projects in Can Tho city are encountering problems such as:
1. Most projects were small in scope; the planning was not consistent and modern. There were many limitations in managing planning and projects.
2. There was not sufficient care and attention to quality control and costs management. The work of examination and inspection was not done strictly.
3. The investment for new urban areas faced many problems and risks such as: changes in policies from the government, shortage in financial resources, the ups and downs of the real-estate market, changes in material prices.
4. The safety management in construction was limited, which was not frequently checked to assure safety at work.
5. The progress of most new urban residential areas was especially all late in comparison to the original plan. Usually, each project was from 3 to 5 years longer than the plan.
Mr. Huynh Thanh Su made a case study Hung Phu New Urban Area Project in Can Tho City which objectives were to: (1) study the project management theories applicable in urban project development; (2) study the existing project management process of new urban development; and (3) analysis the effectiveness of the existing project management process in terms of project management functions, process and outcomes (i.e. cost, quality and schedule)
Conclusion
Industrialization has taken place very fast and strongly all over the world in general and in Vietnam in particular, and it will continue to happen even faster in the future. Constructions works, projects for urban development and new urban areas expand every day. These projects have played major role in improving people’s living environment. However, there has been inadequate attention on researching and applying theories and process of project management in new urban areas for each particular place at a specific time. Therefore, this research paper aims at studying theories in project management in developing cities and the process of managing new urban areas in Vietnam. From the analysis of the quality of project management (managing time, costs, quality and risks) in this case study; the following conclusions were drawn:
Objective 1: Studying theories on project management with the application on new urban projects.
This is done mainly through the study of all documents to accumulate knowledge and methods of project management that were studied previously. From this, main functions of project management and the process of project management in different stages are identified. From all of these, strengths, weaknesses and specific suggestions for real project management tasks are proposed.
Objective 2: Studying the management process for new urban areas in Vietnam.
New urban areas are developing very fast in big cities in Vietnam. The study on current legal documents, mechanism, local policies, the procedure and process of new urban management which have been applied into a specific project can help us find out strengths, weaknesses of the managing process for the management of new urban.
From this, it can be concluded that projects for new urban area development in Vietnam are rather complicated with regards to their investment procedure and process. Although project managing procedures in recent years have become clearer and stricter, in reality, however, its application seems to show many limitations that need to be improved.
3. Objective 3: Analyzing the effectiveness of project management process.
Through the analysis of some major tasks in project management e.g. time, costs, quality and risks, in Hung Phu new urban area, the following conclusions were drawn:
a) In terms of time management:
The whole time for the project was 8 years, which was much slower than the time set in the FS (3 years). Almost all items in the project were slower than in the planned timeframe. The main reason was identified, which was the delay in land clearance (about 7 years after the project initiated) and the uncertainty in financial resources for the implementation of the project. All of these show that there were many limitations in the work of planning and setting the timeframe for the project that needs to be improved.
b) In terms of costs management:
Although the investor implemented the costs management following the current regulations, the estimated costs for the whole project were not accurate due to the delay and the extension of time for the project (the total capital and costs). Therefore, there was a shortage of capital for construction and payment in the stage of execution.
c) In terms of quality management:
In general, project quality management has been implemented in accordance with all the current regulations. However, due to the fact that the examination for all conditions for starting the project (the land clearance must be finished before the project started) was not done well, as well as the poor work of checking the contractors’ ability, the duration of the whole project was much longer, which increased the costs of the whole project and also the product price and affected the quality of the whole project.
d) Risks management:
Although risks have been identified, analyzed, evaluated and plans to deal with them have been developed, the work of risks management for the whole project was not professional and effective.
However, in general, the whole project has gained certain success in financial aspects including: turnover, profit which increased many times in comparing with the expected amount in the FS and all other financial criteria were all positive. The project has successfully developed a new urban area that can meet the demands for housing and urban sustainable development in Can Tho City (social effects). To gain this success, the project management plays a very important role.
His thesis abstract is copied and posted.
Abstract
This thesis paper aims at studying theories in project management that have been studied previously with their application first of all in the management of new urban areas in Vietnam in general and in the case study, Hung Phu New urban area project in Can Tho City.
The thesis analyses the tasks of project management in Hung Phu Project with a focus on the management of time, costs, quality and risks in comparison with theories in project management, from which suggestions for better management tasks for new urban projects are proposed.
From the case study of Hung Phu project, it can be seen that the task of time management was not done properly and effectively due to the problems in land clearance. This, in turn, affected the costs, products prices and the general quality of the whole project.
The thesis proposes that a profound understanding of all legal documents related to the task of project management and to the specific project is of great importance. In addition, the management of time for the project can be seen as the key factor that brings effectiveness to the management of costs, quality and risks of each project. This requires that the work of land clearance should be paid more attention to as this is considered as the number one cause for any delays and lateness of a project.
Although the urbanization in Can Tho City is very important and developing quite quickly, the process of implementation of its new urban projects raises some serious problems to be taken into consideration. According to the recent report of Can Tho Department of Construction, new urban projects in Can Tho city are encountering problems such as:
1. Most projects were small in scope; the planning was not consistent and modern. There were many limitations in managing planning and projects.
2. There was not sufficient care and attention to quality control and costs management. The work of examination and inspection was not done strictly.
3. The investment for new urban areas faced many problems and risks such as: changes in policies from the government, shortage in financial resources, the ups and downs of the real-estate market, changes in material prices.
4. The safety management in construction was limited, which was not frequently checked to assure safety at work.
5. The progress of most new urban residential areas was especially all late in comparison to the original plan. Usually, each project was from 3 to 5 years longer than the plan.
Mr. Huynh Thanh Su made a case study Hung Phu New Urban Area Project in Can Tho City which objectives were to: (1) study the project management theories applicable in urban project development; (2) study the existing project management process of new urban development; and (3) analysis the effectiveness of the existing project management process in terms of project management functions, process and outcomes (i.e. cost, quality and schedule)
Conclusion
Industrialization has taken place very fast and strongly all over the world in general and in Vietnam in particular, and it will continue to happen even faster in the future. Constructions works, projects for urban development and new urban areas expand every day. These projects have played major role in improving people’s living environment. However, there has been inadequate attention on researching and applying theories and process of project management in new urban areas for each particular place at a specific time. Therefore, this research paper aims at studying theories in project management in developing cities and the process of managing new urban areas in Vietnam. From the analysis of the quality of project management (managing time, costs, quality and risks) in this case study; the following conclusions were drawn:
Objective 1: Studying theories on project management with the application on new urban projects.
This is done mainly through the study of all documents to accumulate knowledge and methods of project management that were studied previously. From this, main functions of project management and the process of project management in different stages are identified. From all of these, strengths, weaknesses and specific suggestions for real project management tasks are proposed.
Objective 2: Studying the management process for new urban areas in Vietnam.
New urban areas are developing very fast in big cities in Vietnam. The study on current legal documents, mechanism, local policies, the procedure and process of new urban management which have been applied into a specific project can help us find out strengths, weaknesses of the managing process for the management of new urban.
From this, it can be concluded that projects for new urban area development in Vietnam are rather complicated with regards to their investment procedure and process. Although project managing procedures in recent years have become clearer and stricter, in reality, however, its application seems to show many limitations that need to be improved.
3. Objective 3: Analyzing the effectiveness of project management process.
Through the analysis of some major tasks in project management e.g. time, costs, quality and risks, in Hung Phu new urban area, the following conclusions were drawn:
a) In terms of time management:
The whole time for the project was 8 years, which was much slower than the time set in the FS (3 years). Almost all items in the project were slower than in the planned timeframe. The main reason was identified, which was the delay in land clearance (about 7 years after the project initiated) and the uncertainty in financial resources for the implementation of the project. All of these show that there were many limitations in the work of planning and setting the timeframe for the project that needs to be improved.
b) In terms of costs management:
Although the investor implemented the costs management following the current regulations, the estimated costs for the whole project were not accurate due to the delay and the extension of time for the project (the total capital and costs). Therefore, there was a shortage of capital for construction and payment in the stage of execution.
c) In terms of quality management:
In general, project quality management has been implemented in accordance with all the current regulations. However, due to the fact that the examination for all conditions for starting the project (the land clearance must be finished before the project started) was not done well, as well as the poor work of checking the contractors’ ability, the duration of the whole project was much longer, which increased the costs of the whole project and also the product price and affected the quality of the whole project.
d) Risks management:
Although risks have been identified, analyzed, evaluated and plans to deal with them have been developed, the work of risks management for the whole project was not professional and effective.
However, in general, the whole project has gained certain success in financial aspects including: turnover, profit which increased many times in comparing with the expected amount in the FS and all other financial criteria were all positive. The project has successfully developed a new urban area that can meet the demands for housing and urban sustainable development in Can Tho City (social effects). To gain this success, the project management plays a very important role.
His thesis abstract is copied and posted.
Abstract
This thesis paper aims at studying theories in project management that have been studied previously with their application first of all in the management of new urban areas in Vietnam in general and in the case study, Hung Phu New urban area project in Can Tho City.
The thesis analyses the tasks of project management in Hung Phu Project with a focus on the management of time, costs, quality and risks in comparison with theories in project management, from which suggestions for better management tasks for new urban projects are proposed.
From the case study of Hung Phu project, it can be seen that the task of time management was not done properly and effectively due to the problems in land clearance. This, in turn, affected the costs, products prices and the general quality of the whole project.
The thesis proposes that a profound understanding of all legal documents related to the task of project management and to the specific project is of great importance. In addition, the management of time for the project can be seen as the key factor that brings effectiveness to the management of costs, quality and risks of each project. This requires that the work of land clearance should be paid more attention to as this is considered as the number one cause for any delays and lateness of a project.
Tuesday, 19 July 2011
Project Life Cycle Risk Management Plan In An Urban Railway Development Project
The common problems in any urban rail projects are procurement which involves huge investment cost and risks treatment in construction and operation of long project life cycle.
HCMC Urban Railway Construction Project is the first Urban Rail Project in Vietnam and there is no good project model available in Vietnam in terms of big scale underground development, urban rail system, legal framework as well as no rail operator.
In addition, in completing this project, big capital is needed and inviting sponsor or investor involves lots of potential risks in Urban Rail PPP project since there is no law and regulation on PPP investment. Therefore, there is no good contractual sample in PPP opportunity in Urban Railway Project. The contractual risk management of concessionaire for Urban Rail in Vietnam shall be considered for the future, because the SPV or Concessionaire will face unforeseeable risks during construction and operation in its Project Life Cycle.
Mr. Gentaku Goto made a case on the Urban Railway Development Applied in Vietnam. His objectives were to: (1) study how to identify, provide treatment Major Risks to be occurred in Project Life Cycle of Urban Railway Project especially in Construction and Operation Phase; (2) study effective Contractual Risk Management in Public Private Partnership of Railway Development Project; and (3) study Key Success Factors and Risks of Urban Railway PPP Project in Vietnam and provide possible solution.
Conclusion
Through literature review and Case study, there are several findings which are useful for Risk Management Plan in the PLC of Urban Rail PPP. Conclusion and findings are summarized below.
Objective # 1
Critical Risks in the PLC of Urban Railway Investment are:
1. There is a tendency that risks can be identified in plan stage of the RMP, while system requirement shall be clarified in this stage. In case study, through preparation of the preliminary design and tender document and basic cost estimate, major risks are identified.
2. It seems that risks are allocated in the contract for its treatment (risk mitigation, avoidance, transfer, allocation, etc.,), while system requirement shall be apportioned into the contract as legal document.
3. Contract document is not a perfect RMP tool, but just a tentative basis of continuous risk management plan. During execution stage, uncertainty in the system requirement shall be continuously and verified to meet the requirement and for further risk treatment.
4. Upon Completion of Execution, System Acceptance shall be made in order to meet the System Requirement. After all uncertainties in the System Requirement are solved, such System is accepted and validated for commencement of the Railway Operation.
5. Risk management in the PLC shall focus on 5W + 3H e.g. When in the PLC stage? Where is the Scope of Work? What kinds of risks are identified? How much is the impact? How often it likely to occur? How much is the severity? To which way such risk will affect to other, and how to treat such Risk?
6. Legal and Political risks always interfere with the project progress in all stages in the PLC, in terms of feasibility of the investment, financial and taxation, construction quality, environment, traffic issues.
7. Project cost increases to VND 47 trillion due to change of demand, design requirement, safety improvement etc. It requires the approval by the National Assembly, one of the biggest Legal Risks, causing over 1 year delay of the project progress. Such delay will cause further cost increase.
8. The major reasons of the cost increase comprises of exchange fluctuation risk (46%), 30% demand increase risk (31%), allocation of future risk in contingency and escalation (29%), price increase for material, labor and equipment (20%), improvement of safety, reliability and convenience (19%).
9. Exchange rate fluctuation is the biggest risk and is commonly occurred in project investment in Vietnam, which should be avoided and eliminated by financer, because such risk factor affects cost increase of VND 12.0 trillion out of total cost estimate of VND47.0 trillion. If this risk is successfully eliminated, National Assembly approval may not need to wait because VND 35.0 trillion is the border line in terms of Law and Regulation (Resolution 49). JICA, as financer of mega project, may be required for big decision making for granting exchange rate fluctuation amount, for risk avoidance purpose, with some barter from Vietnamese side.
10. Demand increases by 30% risk affects scale of facility and equipment in preliminary design causing the project cost increase such as necessity of bigger station box in both underground and elevated, more rolling stocks etc.
11. Contingency rate is increased for change order by 4% and for escalation by 25% in order to allocate risk factor in the future. Due to the risk evaluation in the preliminary design stage and tender stage, the general consultants evaluate more uncertainty in the future of the PLC.
12. Other than the above mentioned major influenced factors, price increase of oil and construction materials, and improvement of safety, reliability and convenience requirement also affect cost increase by 40%. Those kinds of risk factors are not able to be avoided due to requirement by the employer, financer and customer in the future.
13. Technical risks such as design error risk, system integration risk, maintenance risk are not critical because it can be managed by continuous risk management and verification.
14. Demand forecast for revenue calculation shall be less estimated rather than carefully estimated, because demand forecast were overestimated on the average by 65% for major urban rail project investments overseas. It will affect decision making on investment risk treatment, so more conservative investment and cash flow planning is required.
15. At last, establishment of SPV is also critical risk for HCMC City, because this is first urban rail operator and maintenance service provider, on behalf of host government.
For objective number 2:
1) More public means the government body has empowerment for owing assets, technology, know-how, man power, using tax fund, in more traditional and closed (monopoly) market.
2) More private means the Special Purpose Vehicle (SPV), as a private entity, is empowered for owning assets, technology, know-how, man-power, using private fund, in more flexible and competitive market.
3) Eight (8) major responsibility dimensions of PPP options (Ownership, Competitiveness, Strategy, Organization Structure, Personnel Staffing, Funding, Know-How, and Public Image) shall be evaluated for contracting out. If successfully utilize private technology, know-how, funding in competitive market, the project cost will be reduced and money for value will be achieved.
4) Through the stakeholder analysis, it is important that contractual relationship between major party as SPV and the other party shall be analyzed and major risks behind the relationship between the SPV and others are identified. To reduce uncertainty, it should be clearly defined scope of work, responsibility and obligation of parties, time frame, and budget.
5) Procurement of consultant, contractor, input supplier, and off taker etc, shall be done through tendering consisting of 5 steps (request for proposal (tender document), proposal, evaluation of proposal, contract negotiation, contract signing). During the process, risks are identified, mitigated, controlled and apportioned into the contract. The requirement consists of technical and financial.
6) Contractual document shall indicate budget, schedule, man power, scope of work, responsibility and obligation of the both contractual parties, payment condition and technical and other requirements and shall be a basis to continuously monitor the performance against the system requirements in the PLC.
7) Through the contract negotiation, the employer (or the contractor ) ‘s thinking shall be accessed in terms of risk management as below:
- insufficient contingency or budget
- limited study budget
- very limited scope of work (partial construction etc.,)
- procurement of contractor without consideration of quality assurance, safety and health assurance of labor
- misunderstanding that construction cost estimate is the ceiling amount assures the final completed cost estimate, while it actually is tentative estimation we suppose.
8) A clearly defined scope of work is essential, because the employer tends to understand expanded scope of work in case its definition is vague. Especially, if the employer, in many cases, does not understand limitation of the consultant (contractor), prior conditions and assumption for the work,
- service scope and period
- experience and specialty of expertise
- responsibility undertaken
Payment of fees to consultant (contractor) shall not be affected by the factor. The contractual parties cannot control within their capability such as delay or climate factors.
9) Procurement process of the consultant (contractor), its quality and capability shall be evaluated fairly and allocate enough, but not too much fees toward the scope of work. If enough remuneration fee is not secured by the employer:
- quality of the service will be terribly low and will cause bad reputation, losing employment, bankruptcy due to low cost bidding, uncompleted report and output etc.,
- it may cause cash flow problem, low quality outcome, increase of total project life cycle cost, increase of construction cost, further design required and downloaded during the construction stage etc.
10) The relationship between the employer and the consultant (contractor) shall not be against relationship and both sides should share same goal on the project, and objective and prospect shall co-exist.
11) Resources shall not be over-committed in the Contract because it will lower the quality in case committed resources are totally replaced by mobilizing cheaper resources such as young expert.
12) Quality oriented planning is required in the contract to satisfy quality requirement in consideration with understanding of scope of work, implementation plan, manning plan, appropriate scheduling and appropriate budget allocation.
13) Contractual risk shall be mitigated and avoided by doing the followings:
- to understand and carefully study obligation in the service contract
- to identify important but burdensome terms, and provide legal advice on such terms
- to negotiate to eliminate such burdensome terms
For objective number 3:
1) The consultant should understand the importance of performing with due diligence, efficiency and economy in order to meet requirement of money for value, service quality and provide enough performance toward amount of fee.
2) Huge transfer of facility from MAUR, the project owner, to O&M Company will suppose after completion of infrastructure and railway systems and equipment. There is big risk in huge transfer especially; O&M Company is newly established. Therefore, transfer of MAUR staff to new O&M Company as well as gradual transfer of railway facility from MAUR to O&M Company is recommended.
3) After completion and operation of the Railway System, the project will be audited by 3rd party auditor. It is essential for the Employer (as well as the General Consultant) to record effectively and periodically key monitoring indicators for explanation to 3rd party in terms of :
- Improvement of public services: time and accessibility from Ben Thanh to Cat Lai Interchange
- Life opportunity: Increase of population having accessibility less than 10 minutes walk to nearest station.
- Revitalization of region: Increase of Business Zone Area along rail line
- Increase of employment: Increment Ratio of Population working for the Firm along Rail Line.
- Local society: Increment of Sub-Contract Nos. and Value with Local Contractor in the Region.
- Safety : Reduction of Car/ Motorbike Accident along the rail line and city
- Environment : CO2 reduction at the point
4) Transparency operation of the project in the PLC should be ensured for design requirement, tender selection transparency, 3rd party verification on tender result, disclosure of project outline and explanation, construction procedure, documentation recording system, demand forecast and other survey result related to the rail line on website etc. In terms of railway operation, safety, accuracy, environmental friendly and financial validity shall be monitored and opened in website.
5) Performance specification for the project shall be clearly set in the employer’s requirement in tender document and agreed in the contract. After contracting, the contractor shall perform; verify their work to meet the system requirement. Finally, at the completion of work, the system requirement shall be validated through commissioning and testing and system acceptance by the authorized party for rail operation.
6) Legal & regulation requirement: it is important for all the stage to study legal requirement in terms of overall project management, design, tendering, construction quality, environment, operation, government permission, auditing and accounting, taxation, etc, as well as to know whose authority to approve it if the proposal is beyond the law and regulation. Those legal restrictions shall cause critical issues such as delay of schedule, cost increase, re-work, and finally the cancelation of the project. Considering severity, risk treatment shall be considered case by case.
7) Risk capital: Funding is ensured by HCMC People’s Committee for Urban Railway Line 1 for establishing Operation and Maintenance Company as the State Owned Enterprises by funding 100% government fund. In the future, RMP for Share Issued Privatization (SIP) is also needing long term strategy for privatization, because SIP is required huge transfer of assets, human resources, technology and know-how to private sector. It takes time to develop competitive and transparent market for rail operation services.
His abstract thesis is copied and posted.
Abstract
To obtain benefit from Urban Rail Investment, it takes several decades to show actual reasonability of the investment while huge capital expenditures are easily spent through the Project Life Cycle. Two theory approaches are taken in Literature Review and Case Study to apply Risk Management Plan in the Project Life Cycle in order to identify, handle, control, treat major risks which will be occurred in the Project Life Cycle of Urban Railway Investment including Design, Construction, Operation stages as well as to apply Public Private Partnership in Urban Rail in order to study effective Contractual Risk Management among the Stakeholders in Public Private Partnership of Railway Development Project.
The Case Study for Ho Chi Minh City Urban Railway Construction Project (Ben Thanh –Suoi Tien Section) Line 1 is analyzed in order to apply actual Risk Management Plan to breakdown Risk Factors of Project Delay and Cost Increase etc, and find our Key Success Factors of Urban Railway PPP Project in Vietnam. This research can hopefully be a hint to find out connection between Risk Factors in activities in the Project Life Cycle.
Keywords ; Risk Management, Project Life Cycle, Urban Railway, Public Private Partnership, Stakeholder Risk Management, Construction and Operation
HCMC Urban Railway Construction Project is the first Urban Rail Project in Vietnam and there is no good project model available in Vietnam in terms of big scale underground development, urban rail system, legal framework as well as no rail operator.
In addition, in completing this project, big capital is needed and inviting sponsor or investor involves lots of potential risks in Urban Rail PPP project since there is no law and regulation on PPP investment. Therefore, there is no good contractual sample in PPP opportunity in Urban Railway Project. The contractual risk management of concessionaire for Urban Rail in Vietnam shall be considered for the future, because the SPV or Concessionaire will face unforeseeable risks during construction and operation in its Project Life Cycle.
Mr. Gentaku Goto made a case on the Urban Railway Development Applied in Vietnam. His objectives were to: (1) study how to identify, provide treatment Major Risks to be occurred in Project Life Cycle of Urban Railway Project especially in Construction and Operation Phase; (2) study effective Contractual Risk Management in Public Private Partnership of Railway Development Project; and (3) study Key Success Factors and Risks of Urban Railway PPP Project in Vietnam and provide possible solution.
Conclusion
Through literature review and Case study, there are several findings which are useful for Risk Management Plan in the PLC of Urban Rail PPP. Conclusion and findings are summarized below.
Objective # 1
Critical Risks in the PLC of Urban Railway Investment are:
1. There is a tendency that risks can be identified in plan stage of the RMP, while system requirement shall be clarified in this stage. In case study, through preparation of the preliminary design and tender document and basic cost estimate, major risks are identified.
2. It seems that risks are allocated in the contract for its treatment (risk mitigation, avoidance, transfer, allocation, etc.,), while system requirement shall be apportioned into the contract as legal document.
3. Contract document is not a perfect RMP tool, but just a tentative basis of continuous risk management plan. During execution stage, uncertainty in the system requirement shall be continuously and verified to meet the requirement and for further risk treatment.
4. Upon Completion of Execution, System Acceptance shall be made in order to meet the System Requirement. After all uncertainties in the System Requirement are solved, such System is accepted and validated for commencement of the Railway Operation.
5. Risk management in the PLC shall focus on 5W + 3H e.g. When in the PLC stage? Where is the Scope of Work? What kinds of risks are identified? How much is the impact? How often it likely to occur? How much is the severity? To which way such risk will affect to other, and how to treat such Risk?
6. Legal and Political risks always interfere with the project progress in all stages in the PLC, in terms of feasibility of the investment, financial and taxation, construction quality, environment, traffic issues.
7. Project cost increases to VND 47 trillion due to change of demand, design requirement, safety improvement etc. It requires the approval by the National Assembly, one of the biggest Legal Risks, causing over 1 year delay of the project progress. Such delay will cause further cost increase.
8. The major reasons of the cost increase comprises of exchange fluctuation risk (46%), 30% demand increase risk (31%), allocation of future risk in contingency and escalation (29%), price increase for material, labor and equipment (20%), improvement of safety, reliability and convenience (19%).
9. Exchange rate fluctuation is the biggest risk and is commonly occurred in project investment in Vietnam, which should be avoided and eliminated by financer, because such risk factor affects cost increase of VND 12.0 trillion out of total cost estimate of VND47.0 trillion. If this risk is successfully eliminated, National Assembly approval may not need to wait because VND 35.0 trillion is the border line in terms of Law and Regulation (Resolution 49). JICA, as financer of mega project, may be required for big decision making for granting exchange rate fluctuation amount, for risk avoidance purpose, with some barter from Vietnamese side.
10. Demand increases by 30% risk affects scale of facility and equipment in preliminary design causing the project cost increase such as necessity of bigger station box in both underground and elevated, more rolling stocks etc.
11. Contingency rate is increased for change order by 4% and for escalation by 25% in order to allocate risk factor in the future. Due to the risk evaluation in the preliminary design stage and tender stage, the general consultants evaluate more uncertainty in the future of the PLC.
12. Other than the above mentioned major influenced factors, price increase of oil and construction materials, and improvement of safety, reliability and convenience requirement also affect cost increase by 40%. Those kinds of risk factors are not able to be avoided due to requirement by the employer, financer and customer in the future.
13. Technical risks such as design error risk, system integration risk, maintenance risk are not critical because it can be managed by continuous risk management and verification.
14. Demand forecast for revenue calculation shall be less estimated rather than carefully estimated, because demand forecast were overestimated on the average by 65% for major urban rail project investments overseas. It will affect decision making on investment risk treatment, so more conservative investment and cash flow planning is required.
15. At last, establishment of SPV is also critical risk for HCMC City, because this is first urban rail operator and maintenance service provider, on behalf of host government.
For objective number 2:
1) More public means the government body has empowerment for owing assets, technology, know-how, man power, using tax fund, in more traditional and closed (monopoly) market.
2) More private means the Special Purpose Vehicle (SPV), as a private entity, is empowered for owning assets, technology, know-how, man-power, using private fund, in more flexible and competitive market.
3) Eight (8) major responsibility dimensions of PPP options (Ownership, Competitiveness, Strategy, Organization Structure, Personnel Staffing, Funding, Know-How, and Public Image) shall be evaluated for contracting out. If successfully utilize private technology, know-how, funding in competitive market, the project cost will be reduced and money for value will be achieved.
4) Through the stakeholder analysis, it is important that contractual relationship between major party as SPV and the other party shall be analyzed and major risks behind the relationship between the SPV and others are identified. To reduce uncertainty, it should be clearly defined scope of work, responsibility and obligation of parties, time frame, and budget.
5) Procurement of consultant, contractor, input supplier, and off taker etc, shall be done through tendering consisting of 5 steps (request for proposal (tender document), proposal, evaluation of proposal, contract negotiation, contract signing). During the process, risks are identified, mitigated, controlled and apportioned into the contract. The requirement consists of technical and financial.
6) Contractual document shall indicate budget, schedule, man power, scope of work, responsibility and obligation of the both contractual parties, payment condition and technical and other requirements and shall be a basis to continuously monitor the performance against the system requirements in the PLC.
7) Through the contract negotiation, the employer (or the contractor ) ‘s thinking shall be accessed in terms of risk management as below:
- insufficient contingency or budget
- limited study budget
- very limited scope of work (partial construction etc.,)
- procurement of contractor without consideration of quality assurance, safety and health assurance of labor
- misunderstanding that construction cost estimate is the ceiling amount assures the final completed cost estimate, while it actually is tentative estimation we suppose.
8) A clearly defined scope of work is essential, because the employer tends to understand expanded scope of work in case its definition is vague. Especially, if the employer, in many cases, does not understand limitation of the consultant (contractor), prior conditions and assumption for the work,
- service scope and period
- experience and specialty of expertise
- responsibility undertaken
Payment of fees to consultant (contractor) shall not be affected by the factor. The contractual parties cannot control within their capability such as delay or climate factors.
9) Procurement process of the consultant (contractor), its quality and capability shall be evaluated fairly and allocate enough, but not too much fees toward the scope of work. If enough remuneration fee is not secured by the employer:
- quality of the service will be terribly low and will cause bad reputation, losing employment, bankruptcy due to low cost bidding, uncompleted report and output etc.,
- it may cause cash flow problem, low quality outcome, increase of total project life cycle cost, increase of construction cost, further design required and downloaded during the construction stage etc.
10) The relationship between the employer and the consultant (contractor) shall not be against relationship and both sides should share same goal on the project, and objective and prospect shall co-exist.
11) Resources shall not be over-committed in the Contract because it will lower the quality in case committed resources are totally replaced by mobilizing cheaper resources such as young expert.
12) Quality oriented planning is required in the contract to satisfy quality requirement in consideration with understanding of scope of work, implementation plan, manning plan, appropriate scheduling and appropriate budget allocation.
13) Contractual risk shall be mitigated and avoided by doing the followings:
- to understand and carefully study obligation in the service contract
- to identify important but burdensome terms, and provide legal advice on such terms
- to negotiate to eliminate such burdensome terms
For objective number 3:
1) The consultant should understand the importance of performing with due diligence, efficiency and economy in order to meet requirement of money for value, service quality and provide enough performance toward amount of fee.
2) Huge transfer of facility from MAUR, the project owner, to O&M Company will suppose after completion of infrastructure and railway systems and equipment. There is big risk in huge transfer especially; O&M Company is newly established. Therefore, transfer of MAUR staff to new O&M Company as well as gradual transfer of railway facility from MAUR to O&M Company is recommended.
3) After completion and operation of the Railway System, the project will be audited by 3rd party auditor. It is essential for the Employer (as well as the General Consultant) to record effectively and periodically key monitoring indicators for explanation to 3rd party in terms of :
- Improvement of public services: time and accessibility from Ben Thanh to Cat Lai Interchange
- Life opportunity: Increase of population having accessibility less than 10 minutes walk to nearest station.
- Revitalization of region: Increase of Business Zone Area along rail line
- Increase of employment: Increment Ratio of Population working for the Firm along Rail Line.
- Local society: Increment of Sub-Contract Nos. and Value with Local Contractor in the Region.
- Safety : Reduction of Car/ Motorbike Accident along the rail line and city
- Environment : CO2 reduction at the point
4) Transparency operation of the project in the PLC should be ensured for design requirement, tender selection transparency, 3rd party verification on tender result, disclosure of project outline and explanation, construction procedure, documentation recording system, demand forecast and other survey result related to the rail line on website etc. In terms of railway operation, safety, accuracy, environmental friendly and financial validity shall be monitored and opened in website.
5) Performance specification for the project shall be clearly set in the employer’s requirement in tender document and agreed in the contract. After contracting, the contractor shall perform; verify their work to meet the system requirement. Finally, at the completion of work, the system requirement shall be validated through commissioning and testing and system acceptance by the authorized party for rail operation.
6) Legal & regulation requirement: it is important for all the stage to study legal requirement in terms of overall project management, design, tendering, construction quality, environment, operation, government permission, auditing and accounting, taxation, etc, as well as to know whose authority to approve it if the proposal is beyond the law and regulation. Those legal restrictions shall cause critical issues such as delay of schedule, cost increase, re-work, and finally the cancelation of the project. Considering severity, risk treatment shall be considered case by case.
7) Risk capital: Funding is ensured by HCMC People’s Committee for Urban Railway Line 1 for establishing Operation and Maintenance Company as the State Owned Enterprises by funding 100% government fund. In the future, RMP for Share Issued Privatization (SIP) is also needing long term strategy for privatization, because SIP is required huge transfer of assets, human resources, technology and know-how to private sector. It takes time to develop competitive and transparent market for rail operation services.
His abstract thesis is copied and posted.
Abstract
To obtain benefit from Urban Rail Investment, it takes several decades to show actual reasonability of the investment while huge capital expenditures are easily spent through the Project Life Cycle. Two theory approaches are taken in Literature Review and Case Study to apply Risk Management Plan in the Project Life Cycle in order to identify, handle, control, treat major risks which will be occurred in the Project Life Cycle of Urban Railway Investment including Design, Construction, Operation stages as well as to apply Public Private Partnership in Urban Rail in order to study effective Contractual Risk Management among the Stakeholders in Public Private Partnership of Railway Development Project.
The Case Study for Ho Chi Minh City Urban Railway Construction Project (Ben Thanh –Suoi Tien Section) Line 1 is analyzed in order to apply actual Risk Management Plan to breakdown Risk Factors of Project Delay and Cost Increase etc, and find our Key Success Factors of Urban Railway PPP Project in Vietnam. This research can hopefully be a hint to find out connection between Risk Factors in activities in the Project Life Cycle.
Keywords ; Risk Management, Project Life Cycle, Urban Railway, Public Private Partnership, Stakeholder Risk Management, Construction and Operation
Monday, 18 July 2011
Project Management Strategies in Public Construction Project
The organization of PMU in public construction in Cantho City, Viet Nam is in initial development and in the process of improvement. There’s no enough manpower to do some functions and some people have to do many tasks at the same time. They are lack of knowledge and experience to operate and coordinate the project. During the project management process, they face organizational problem, poor quality, delay and so on. The Project Management and Project Management Unit is one issue which Cantho city pays much attention to.
Mr. Ta Chi Nhan made a case on Cantho University PMU And Dormitory Project Of Cantho University. The objectives of his study were to: (1) identify the project management functions practiced in PMU; (2) discuss the effectiveness of the project management functions in terms of project performance; (3) investigate the selected PMU order to analyze the strengths and the weaknesses of the management in practice; and propose recommendation for project management improvement.
Conclusions
After the review, analyses and study of the project management functions, practice in PMU and dormitory project of Can Tho University, it was revealed that project time management, cost, and procurement are applied. However, the risk and scope management function are not taken in to consideration.
The actual performance of this project is considered poor because the time completion was 7 months delayed and the cost overrun is about 120%. The reasons for the delay are as follows:
1. Construction contract between the owner and EPC contractor was unit-price contract which based on basic design. At that time, the technical design drawings and cost estimating are not clear. A lot of details were not specified as to what type and size. Therefore, the owner-supervisor has no sufficient information to supervise and the construction team has no sufficient information to implement. They had to wait for the design team to make a clear technical design.
2. Communication management plan is not good. The owner contacted with construction manager who did not have enough power to solve the problems from design to construction.
3. Supplying fund from state to the owner for project was untimely.
The reasons for cost overrun is because of unclear technical design and unit-price construction contract, the design team adjusted the design drawings and the owner had to pay for new specifications of doors, fences, electrical equipments, water supply equipments and so on.
The case study has also found out strengths and weaknesses of PMU in practice of project management in each area. With a general view through the three phases of this project (FS, design, construction), the following have been recognized:
- In terms of project time management, PMU was good at schedule development and control schedule in FS phase, but they could not control schedule in design and construction phase.
- In terms of project cost management, the strengths were that PMU applied good tools and technical, they hired verification consultant about cost, but PMU made a mistake in which type of contract when determining budget.
- In project quality management, PMU checked quality management system (quality plan, QA, QC) of construction team of EPC contractor and it was good. In contrast, performance quality control of design team of EPC contractor was not good. Major defect (lack of specifications in technical design) came from time for design shortly. As a result, PMU could not control quality of technical design.
- In project human resources management, the owner hired supervisors and had a good project team management.
- In FS phase, project communication management of PMU was good at communication plan (schedule, meeting plans), but in design and construction phase, flowcharts of the information flow in the project had problems.
- In terms of project procurement management, the owner and PMU selected good FS consultant, verification, supervise consultant by their dossier of proposals. In design and construction phase (EPC contractor), the owner and PMU conducted procurements (as unit-price contract) not good.
- In project safety management, PMU and the owner’ supervisor checked safety plan, safety plan execution, administration and reporting of contractor. They were good. But they have not examined health for staffs and workers.
- In project environmental management, contractor had environmental plan, assurance, and control good.
Recommendations
In order to help PMU in implementation project management functions better, government should add more policies, regulations and require implementation strictly such as follows:
a. The owner is not allowed to assign EPC contractor in unit-price contract which base on basic design.
b. The government should provide sufficient capital funds to keep the building schedule in accordance with the approved building schedule.
c. More policies and instructions for project management should be applied.
His thesis abstract is copied and pasted.
Abstract
For a successful construction project, good implementation of project management functions is required first and very important. In Vietnam today, the State invests in many public projects. Most of them, state establish project management Unit to manage project directly according to law and regulations of Vietnam.
This report review project management theory, management functions commonly applied in developed countries and developing countries, studying concurrent the project management functions according to laws and regulations of Vietnam.
The report studies a typical project management Unit in Can Tho city, identify and analyze the practical application of project management functions. Since then, the report reviews the strengths, weaknesses and suggests improvements for this project and can be applied to other similar projects.
Mr. Ta Chi Nhan made a case on Cantho University PMU And Dormitory Project Of Cantho University. The objectives of his study were to: (1) identify the project management functions practiced in PMU; (2) discuss the effectiveness of the project management functions in terms of project performance; (3) investigate the selected PMU order to analyze the strengths and the weaknesses of the management in practice; and propose recommendation for project management improvement.
Conclusions
After the review, analyses and study of the project management functions, practice in PMU and dormitory project of Can Tho University, it was revealed that project time management, cost, and procurement are applied. However, the risk and scope management function are not taken in to consideration.
The actual performance of this project is considered poor because the time completion was 7 months delayed and the cost overrun is about 120%. The reasons for the delay are as follows:
1. Construction contract between the owner and EPC contractor was unit-price contract which based on basic design. At that time, the technical design drawings and cost estimating are not clear. A lot of details were not specified as to what type and size. Therefore, the owner-supervisor has no sufficient information to supervise and the construction team has no sufficient information to implement. They had to wait for the design team to make a clear technical design.
2. Communication management plan is not good. The owner contacted with construction manager who did not have enough power to solve the problems from design to construction.
3. Supplying fund from state to the owner for project was untimely.
The reasons for cost overrun is because of unclear technical design and unit-price construction contract, the design team adjusted the design drawings and the owner had to pay for new specifications of doors, fences, electrical equipments, water supply equipments and so on.
The case study has also found out strengths and weaknesses of PMU in practice of project management in each area. With a general view through the three phases of this project (FS, design, construction), the following have been recognized:
- In terms of project time management, PMU was good at schedule development and control schedule in FS phase, but they could not control schedule in design and construction phase.
- In terms of project cost management, the strengths were that PMU applied good tools and technical, they hired verification consultant about cost, but PMU made a mistake in which type of contract when determining budget.
- In project quality management, PMU checked quality management system (quality plan, QA, QC) of construction team of EPC contractor and it was good. In contrast, performance quality control of design team of EPC contractor was not good. Major defect (lack of specifications in technical design) came from time for design shortly. As a result, PMU could not control quality of technical design.
- In project human resources management, the owner hired supervisors and had a good project team management.
- In FS phase, project communication management of PMU was good at communication plan (schedule, meeting plans), but in design and construction phase, flowcharts of the information flow in the project had problems.
- In terms of project procurement management, the owner and PMU selected good FS consultant, verification, supervise consultant by their dossier of proposals. In design and construction phase (EPC contractor), the owner and PMU conducted procurements (as unit-price contract) not good.
- In project safety management, PMU and the owner’ supervisor checked safety plan, safety plan execution, administration and reporting of contractor. They were good. But they have not examined health for staffs and workers.
- In project environmental management, contractor had environmental plan, assurance, and control good.
Recommendations
In order to help PMU in implementation project management functions better, government should add more policies, regulations and require implementation strictly such as follows:
a. The owner is not allowed to assign EPC contractor in unit-price contract which base on basic design.
b. The government should provide sufficient capital funds to keep the building schedule in accordance with the approved building schedule.
c. More policies and instructions for project management should be applied.
His thesis abstract is copied and pasted.
Abstract
For a successful construction project, good implementation of project management functions is required first and very important. In Vietnam today, the State invests in many public projects. Most of them, state establish project management Unit to manage project directly according to law and regulations of Vietnam.
This report review project management theory, management functions commonly applied in developed countries and developing countries, studying concurrent the project management functions according to laws and regulations of Vietnam.
The report studies a typical project management Unit in Can Tho city, identify and analyze the practical application of project management functions. Since then, the report reviews the strengths, weaknesses and suggests improvements for this project and can be applied to other similar projects.
Wednesday, 13 July 2011
Risk and Project Contract Management for Preventing and Solving Disputes in FIDIC Contract
Any project has to deal with problems/issues that can affect its objectives. These issues are sometimes predictable, but in some cases it is impossible to predict. Once it is predicted, the project team shall have proactive counter-measures, and thus limit the possible impact of risks. Risk management is the process of pre-defining risks that may occur in the project, analyzing, and finding appropriate measures for the purpose of increasing the opportunity of success and minimizing damage to the project. Regardless of the size and nature of the project, risk management should be implemented in accordance with the ordering process with the appropriate tools and effective solution.
It is essential to reinforce the capability of identifying risks and contract management in construction projects closely. The control and adjustment of risks are to carry out risk dealing with plans in reality in order to reduce and minimize risks of the project. Moreover, strict management of contract is the only way to prevent disputes and litigations of the project. It is wise that the parties should seek negotiation, discussion or conciliation once disputes occur. Using an amicable settlement approach is simple, effective and inexpensive while adopting claim and arbitration approach is more complicated, costly and time consuming.
Mr. Dang Thai Son made a case study on can tho bridge construction project to: (1) study issues on project risk management: implicit risks, the tenor and process of project risk management; (2) study issues on project contract management: signing and implementing the project contract, amending, canceling or terminating the contract; and (3) find approaches to mitigate risks as well as to prevent and resolve disputes, litigations in project contract.
Conclusion
Risks are unavoidable in construction projects, yet it is still possible to prevent them before and during a project. With such a length (15.85 km), Cantho Bridge was a typical example for risk management. The project has received full financial support from the Japanese government which is Twenty Four Billion Eight Hundred Forty Seven Million Japanese Yen (¥24,847,000,000). However, there was still delay in land requisition. Although only two local households did not agree on their compensation, they affected the progress of the project. In addition, shipping equipment and complex custom procedures also hindered the progress.
On the good side, the Contractor has implemented good management for best results. To start with, the Contractor designed a hierarchy of management with well-targeted goals as well as backup plans. This helped the project progress even in case of force majeure. Second, good management on quality and quantity also contributed to the success of this work. Various aspects of working requirements such as materials, equipment, construction methods and skilled labors were focused and well-prepared. Thirdly, the Contractor showed that environment was taken with extreme care so that almost no effects on the local landscape and ecosystem were done by pollution from the construction. This was done thanks to a third-party specializing in the field of environmental protection. Finally, the Contractor always followed the most important motto: "Safety first." The disastrous accident in foundation settlement showed the nature of risk on the one hand; but on the other hand, it showed that the Contractor prepared and implemented practical and helpful steps in preventing diseases and treating injuries to workmen. As a result, construction workers felt better and secure to continue their work and the project could be completed in due time.
After Cantho Bridge was completed, it has provided the researcher with practical experience in terms of capital, specific infrastructure conditions, hi-tech quality of the contractor and compensation negotiation. This study showed us that reality is always unexpected but with well-planned risk management, we can still handle and heal the uninvited damage to project effectively and in time so as to fulfill the project as pre-planned.
In conclusion, throughout the analysis, we see that Can Tho Bridge Construction Project achieved more successful factors than its constrained ones. This project obtained good delivery system from setting to closing out phase thanks to have good environments such as stable society economy and politics, favorably legal environment especially the great support from the project stakeholders: Financier (JIBIC), Owner, Consultant, Contractors, Suppliers and others (Local Authorities and so on).
Among the three Contract Packages, Package -1 and Package-2 achieved good target. Especially Package-2 completed all the works of the project on schedule without complaints even exceeding the progress compared to that set by the Ministry of Transport. Although Package-2 was a major item of the bridge and very complicated for construction, with all endeavors and efforts of the whole expatriates, engineers, staff and workers of the Main Contractor: Taisei-Kajima-Nippon Steel Joint Operation and his sub-contractors, finally they made good delivery system for the project.
However, the project suffered big delay from Package-3, the Contractor of this Package received many complaints from the Owner because he could not manage his work schedule, while the works of the other two Packages were successfully completed.
Once again, apart from the strengths achieved as analyzed in Chapter 3, there are many weaknesses that the project stakeholders should pay much attention to and should take them as valuable recommendations for future projects:
- Before carrying out the construction of any project, the Project Owner together with Local Authorities shall ensure land requisition to be well-executed and give right of access and site possession to the Contractor at appropriate time without any delay and obstruction from local residents.
- When making the estimation for a project, besides calculating an official capital source for the main items of the project, the project planner should carefully calculate an extra money fund for nearby existing land compensation including the crops. Therefore, the Project Owner will be able to get sufficient land area and provide further access to the Contractor for construction. Because the construction activities of the Contractor definitely affect to the neighboring structures of the inhabitants.
- The Project Owner should thoroughly consider selecting competent, qualified contractors who are healthy in finance and capable of high technology. Not to give the award to the bidder of the lowest price, and poor equipment and poor technology transfer.
It was time for Vietnamese Government and its subordinating Ministries consider carefully when deciding to select the bidder especially for foreign ones. Before inviting them for bidding, a well pre-qualified selection of experienced, prestigious and competent bidder list should be made and elimination of unqualified bidders from the list should be done. If doing so, the Government saves a lot of time and money for unreasonable loss and damage from rectification of defects and re-works.
His thesis abstract is copied and pasted.
Abstract
Risk management is an indispensable job because it will help the project reduce and minimize the extraordinary impacts occur which affect to the general objective of the project.
In this study, we should learn about the concept of risk with its two specific characteristics: probability of occurrence and degree of impact. In addition, the classification of risk is also a meaningful deed; each kind of risk is different, therefore, risk management issue is also totally different. To manage risk, a process of six steps can be applied. First, making risk management plan for general orientation of work and scope of performance to manage the risks. Then, carrying out risk determination, it means to list out the risks might occur in the project. Since then analyzing probability of occurrence and the degree of impact of the risks, Control and adjustment of risks are to implement the plan for dealing with actual risks.
Contract management is extremely important in the project management. Referring to the contract, the project manager will treat and adjust the relationship as well as contradiction between interests and liability of the parties concerned in the project. Therefore, being a project manager, he or she needs to master the sequence of steps of signing and implementing the project contract, the arising issues and conditions of alteration, omission or termination of project contract as well as the approaches to resolve and settle disputes in the contract. Once dispute arises, it is wise that the parties should seek for negotiation, discussion or conciliation. This approach is simple, effective and little cost while claim and arbitration approach is more complicated, costly and waste of time.
“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fee, expenses and waste of time.”
Abraham Lincoln
It is essential to reinforce the capability of identifying risks and contract management in construction projects closely. The control and adjustment of risks are to carry out risk dealing with plans in reality in order to reduce and minimize risks of the project. Moreover, strict management of contract is the only way to prevent disputes and litigations of the project. It is wise that the parties should seek negotiation, discussion or conciliation once disputes occur. Using an amicable settlement approach is simple, effective and inexpensive while adopting claim and arbitration approach is more complicated, costly and time consuming.
Mr. Dang Thai Son made a case study on can tho bridge construction project to: (1) study issues on project risk management: implicit risks, the tenor and process of project risk management; (2) study issues on project contract management: signing and implementing the project contract, amending, canceling or terminating the contract; and (3) find approaches to mitigate risks as well as to prevent and resolve disputes, litigations in project contract.
Conclusion
Risks are unavoidable in construction projects, yet it is still possible to prevent them before and during a project. With such a length (15.85 km), Cantho Bridge was a typical example for risk management. The project has received full financial support from the Japanese government which is Twenty Four Billion Eight Hundred Forty Seven Million Japanese Yen (¥24,847,000,000). However, there was still delay in land requisition. Although only two local households did not agree on their compensation, they affected the progress of the project. In addition, shipping equipment and complex custom procedures also hindered the progress.
On the good side, the Contractor has implemented good management for best results. To start with, the Contractor designed a hierarchy of management with well-targeted goals as well as backup plans. This helped the project progress even in case of force majeure. Second, good management on quality and quantity also contributed to the success of this work. Various aspects of working requirements such as materials, equipment, construction methods and skilled labors were focused and well-prepared. Thirdly, the Contractor showed that environment was taken with extreme care so that almost no effects on the local landscape and ecosystem were done by pollution from the construction. This was done thanks to a third-party specializing in the field of environmental protection. Finally, the Contractor always followed the most important motto: "Safety first." The disastrous accident in foundation settlement showed the nature of risk on the one hand; but on the other hand, it showed that the Contractor prepared and implemented practical and helpful steps in preventing diseases and treating injuries to workmen. As a result, construction workers felt better and secure to continue their work and the project could be completed in due time.
After Cantho Bridge was completed, it has provided the researcher with practical experience in terms of capital, specific infrastructure conditions, hi-tech quality of the contractor and compensation negotiation. This study showed us that reality is always unexpected but with well-planned risk management, we can still handle and heal the uninvited damage to project effectively and in time so as to fulfill the project as pre-planned.
In conclusion, throughout the analysis, we see that Can Tho Bridge Construction Project achieved more successful factors than its constrained ones. This project obtained good delivery system from setting to closing out phase thanks to have good environments such as stable society economy and politics, favorably legal environment especially the great support from the project stakeholders: Financier (JIBIC), Owner, Consultant, Contractors, Suppliers and others (Local Authorities and so on).
Among the three Contract Packages, Package -1 and Package-2 achieved good target. Especially Package-2 completed all the works of the project on schedule without complaints even exceeding the progress compared to that set by the Ministry of Transport. Although Package-2 was a major item of the bridge and very complicated for construction, with all endeavors and efforts of the whole expatriates, engineers, staff and workers of the Main Contractor: Taisei-Kajima-Nippon Steel Joint Operation and his sub-contractors, finally they made good delivery system for the project.
However, the project suffered big delay from Package-3, the Contractor of this Package received many complaints from the Owner because he could not manage his work schedule, while the works of the other two Packages were successfully completed.
Once again, apart from the strengths achieved as analyzed in Chapter 3, there are many weaknesses that the project stakeholders should pay much attention to and should take them as valuable recommendations for future projects:
- Before carrying out the construction of any project, the Project Owner together with Local Authorities shall ensure land requisition to be well-executed and give right of access and site possession to the Contractor at appropriate time without any delay and obstruction from local residents.
- When making the estimation for a project, besides calculating an official capital source for the main items of the project, the project planner should carefully calculate an extra money fund for nearby existing land compensation including the crops. Therefore, the Project Owner will be able to get sufficient land area and provide further access to the Contractor for construction. Because the construction activities of the Contractor definitely affect to the neighboring structures of the inhabitants.
- The Project Owner should thoroughly consider selecting competent, qualified contractors who are healthy in finance and capable of high technology. Not to give the award to the bidder of the lowest price, and poor equipment and poor technology transfer.
It was time for Vietnamese Government and its subordinating Ministries consider carefully when deciding to select the bidder especially for foreign ones. Before inviting them for bidding, a well pre-qualified selection of experienced, prestigious and competent bidder list should be made and elimination of unqualified bidders from the list should be done. If doing so, the Government saves a lot of time and money for unreasonable loss and damage from rectification of defects and re-works.
His thesis abstract is copied and pasted.
Abstract
Risk management is an indispensable job because it will help the project reduce and minimize the extraordinary impacts occur which affect to the general objective of the project.
In this study, we should learn about the concept of risk with its two specific characteristics: probability of occurrence and degree of impact. In addition, the classification of risk is also a meaningful deed; each kind of risk is different, therefore, risk management issue is also totally different. To manage risk, a process of six steps can be applied. First, making risk management plan for general orientation of work and scope of performance to manage the risks. Then, carrying out risk determination, it means to list out the risks might occur in the project. Since then analyzing probability of occurrence and the degree of impact of the risks, Control and adjustment of risks are to implement the plan for dealing with actual risks.
Contract management is extremely important in the project management. Referring to the contract, the project manager will treat and adjust the relationship as well as contradiction between interests and liability of the parties concerned in the project. Therefore, being a project manager, he or she needs to master the sequence of steps of signing and implementing the project contract, the arising issues and conditions of alteration, omission or termination of project contract as well as the approaches to resolve and settle disputes in the contract. Once dispute arises, it is wise that the parties should seek for negotiation, discussion or conciliation. This approach is simple, effective and little cost while claim and arbitration approach is more complicated, costly and waste of time.
“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fee, expenses and waste of time.”
Abraham Lincoln
Tuesday, 12 July 2011
Sustainable Construction: A Study of Drivers, Barriers and Design Practices in Building Projects in Thailand
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Monday, 11 July 2011
Project Organization and Responsibilities Management in Construction Project
The management of any project is also a series of difficult tasks and challenges because of the variation in the implementation process as well as in determining the final output.
On the basis of knowledge on "Organizational management in construction project", combined with the actual work being applied to the formulation of the organizational chart of project management and regulations functions, duties and powers of the divisions, departments on the gas pipeline project of Lot B-Omon (EPC contract-onshore part), Mr. Nguyen Viet Hien made a case to: (1) study the theories and practice of project organization structure and responsibilities; (2) study the existing practice of PVC in project structure and responsibilities; (3) discuss the effective of the structure and responsibilities in terms of communication, coordination, work performance, job satisfaction and productivity; and (4) propose recommendation for improvement.
Conclusions
With the knowledge learned from AIT and through research, the management and administration of construction gas pipeline project Block B-O Mon see the nature and importance of the stage of organization and assignments for various departments, and parts, individual, which is extremely large. It is crucial to the successful implementation and management of projects with high efficiency.
It is also found out that the managers face risk and volatility in process implementation, in managing any project which also set difficult tasks and challenges.
Although, currently the process technology and process for project management advanced models have been deployed and applied by the managers, the fact also showed that even when the detailed plan was map out, and using the method of operations are very professional, but can still the elements and issues adversely affect the success of the project.
Some key issues in the company's project management system are summarized such as follows:
1. Practice of project organization structure and responsibilities: In the organization chart, there are no parts forecasting, evaluation and control risks and remediation projects.
2. The theories of project organization structure and responsibilities: The organization charts applied the horizontal structures, so it’s lack of coordination/communication between the Site office with the Head office and between departments, sections of the Site office.
Below are some solutions for the effective structure and responsibilities in terms of communication, coordination, work performance, job satisfaction and productivity:
1. To set up or hire professionals perform forecasting, evaluation and control risks and remediation projects.
2. Increase manpower to form a coordination group; strengthen the communications.
3. Many non-standardized process: Implementation is based on practical experience, lack of standard documentation procedures, instructions, guides of implementation. Many useful tools and techniques are not applied in the process of project management. Project management officers are not trained and not equipped with modern management knowledge.
4. The establishment of planning and implementation process is not good. There is no specific planning for the management of projects. Work scope, or quality plan for each project work are also unclear. Control activities and implementation project of the project team members almost exclusively based on experience.
5. There are no standards and procedures, no formal system operations to measure and assess the level of success and failure of each stage, processes, projects and the implementation of project team members. So there is no firm foundation to plan for performance improvement of project managers.
6. There was a formal process to evaluate and audit procedures, guidelines and recommendations, implement improvements (in quality management system ISO 9001). However, due to limited knowledge and skills of staff in modern project management, it may not have much performance improvement as expected.
7. No procedures or guidelines for collecting information of subcontractors or suppliers on the project issues, the lessons learned to store in a convenient place for use in analyzing and managing projects in the future. So, there is also no official information about the history and lessons learned knowledge database system. All project documents, after completion of the project, needed to be kept in the library.
8. The specific issues such as lack of leadership skills and professional skills; lack of human resources; the corporate culture has no adequate attention; lack of equipment, instrument with new technology in construction; implement management and operating under the ISO was not good; missing parts management information and communication technology and project management software; lack of coordination between the site office with the Head office and departments, sections of the site office, have no best policies yet and the conditions for employees to work long- term attachment to the company; there are not parts forecasting, evaluation and control risks and remediation projects; and bonus issue may be addressed to encourage.
Recommendations
To manage and operate projects with high economic efficiency of the company should focus on improving a number of areas
1. Need to further strengthen the training of managers of modern construction projects for the company staff. The training includes knowledge and skills in project management for individuals, for organizations, and the experience in the administration and project management. It is needed that the introduction of management systems procedures and guidelines to the construction project management teams by international professional staff. The staffs need training and orientation on the management to further their vision, to appreciate better the importance and effectiveness of the project. Building management systems and common standards and procedures is necessary to guide the project team members to be more effective in managing the project.
2. The company should pay more attention on the process of planning the project to ensure that all work will be started and completed under his control.
3. The company needs to improve the system of formal procedures and guidelines to standardize all project management processes within the company. Guidance on the scope of each process is also needed. This helps to keep the consistency of quality and improve the effectiveness of management processes.
4. The company needs to improve and enhance the effectiveness of ISO9001 assessment and audit procedures used by auditor’s competent professionals, in construction project management, and training of project’s good and creative self-auditor.
5. The company must establish and apply the official standards, tools, guidance on measurement and evaluation of the success, failure of the project aim to gather experiences and lessons learned for the management projects in the future.
6. The company should develop a project management office or a center, where the project management staff can easily access the historical information and learned all the projects lessons, reference tools of modern project management and engineering. And besides, the company should develop procedures and guidelines for collecting, and storing the data. These works will be helpful for the management of future projects especially newcomers.
7. The specific issues such as: Training or hiring new people with sufficient skills to meet the work of construction projects to work in the project; Dealing with partners vulgar, may utilize and enlist the help up to the job of Investors and other stakeholders; Rent Contractors outside the work required to use new technology (HDD); Strengthening human resources and Establishment of ISO and IT management team in charge; Increase manpower to form a group: set up and manage and coordinate the process; Increase salary, Enhance cultural life, recreation... information to employees; Making the reward process, timely laborers on construction sites...
His thesis abstract is copied and posted.
Abstract
We know that with any country the development is also based on the platforms: There are firm infrastructures; there are perfect superstructures. Construction industry in the world in general and Vietnam in particular, in recent years had an integration process and booming. It is increasingly contributing to make the infrastructure more and more sustainable. It will set the stage for the construction and development of the country stronger in the future.
The operation and effective management of construction projects have special meaning for large construction enterprises: its highly profitable enterprise, for the country, it reduces the costs of the project, it saves time to perform construction projects, it ensures the quality, engineering, art, durableness and safety of the works ... Get to know the great significance that, and increasingly for the purpose of improving knowledge of general and personal knowledge of the executive management of construction projects under way to reach economic efficiency and the highest profit; How to implement the most advanced project, the best.
So I found myself out and register for the course of AIT MPM. With the knowledge learned through research and apply the "Project organization and responsibilities in construction project management - A case study of the gas pipeline project block B-Omon", I have prepared this thesis. It partly reflects the process of implementing the construction organization for the project. It is a solid foundation to establish the best prerequisites for the next stage of the project implementation process.
On the basis of knowledge on "Organizational management in construction project", combined with the actual work being applied to the formulation of the organizational chart of project management and regulations functions, duties and powers of the divisions, departments on the gas pipeline project of Lot B-Omon (EPC contract-onshore part), Mr. Nguyen Viet Hien made a case to: (1) study the theories and practice of project organization structure and responsibilities; (2) study the existing practice of PVC in project structure and responsibilities; (3) discuss the effective of the structure and responsibilities in terms of communication, coordination, work performance, job satisfaction and productivity; and (4) propose recommendation for improvement.
Conclusions
With the knowledge learned from AIT and through research, the management and administration of construction gas pipeline project Block B-O Mon see the nature and importance of the stage of organization and assignments for various departments, and parts, individual, which is extremely large. It is crucial to the successful implementation and management of projects with high efficiency.
It is also found out that the managers face risk and volatility in process implementation, in managing any project which also set difficult tasks and challenges.
Although, currently the process technology and process for project management advanced models have been deployed and applied by the managers, the fact also showed that even when the detailed plan was map out, and using the method of operations are very professional, but can still the elements and issues adversely affect the success of the project.
Some key issues in the company's project management system are summarized such as follows:
1. Practice of project organization structure and responsibilities: In the organization chart, there are no parts forecasting, evaluation and control risks and remediation projects.
2. The theories of project organization structure and responsibilities: The organization charts applied the horizontal structures, so it’s lack of coordination/communication between the Site office with the Head office and between departments, sections of the Site office.
Below are some solutions for the effective structure and responsibilities in terms of communication, coordination, work performance, job satisfaction and productivity:
1. To set up or hire professionals perform forecasting, evaluation and control risks and remediation projects.
2. Increase manpower to form a coordination group; strengthen the communications.
3. Many non-standardized process: Implementation is based on practical experience, lack of standard documentation procedures, instructions, guides of implementation. Many useful tools and techniques are not applied in the process of project management. Project management officers are not trained and not equipped with modern management knowledge.
4. The establishment of planning and implementation process is not good. There is no specific planning for the management of projects. Work scope, or quality plan for each project work are also unclear. Control activities and implementation project of the project team members almost exclusively based on experience.
5. There are no standards and procedures, no formal system operations to measure and assess the level of success and failure of each stage, processes, projects and the implementation of project team members. So there is no firm foundation to plan for performance improvement of project managers.
6. There was a formal process to evaluate and audit procedures, guidelines and recommendations, implement improvements (in quality management system ISO 9001). However, due to limited knowledge and skills of staff in modern project management, it may not have much performance improvement as expected.
7. No procedures or guidelines for collecting information of subcontractors or suppliers on the project issues, the lessons learned to store in a convenient place for use in analyzing and managing projects in the future. So, there is also no official information about the history and lessons learned knowledge database system. All project documents, after completion of the project, needed to be kept in the library.
8. The specific issues such as lack of leadership skills and professional skills; lack of human resources; the corporate culture has no adequate attention; lack of equipment, instrument with new technology in construction; implement management and operating under the ISO was not good; missing parts management information and communication technology and project management software; lack of coordination between the site office with the Head office and departments, sections of the site office, have no best policies yet and the conditions for employees to work long- term attachment to the company; there are not parts forecasting, evaluation and control risks and remediation projects; and bonus issue may be addressed to encourage.
Recommendations
To manage and operate projects with high economic efficiency of the company should focus on improving a number of areas
1. Need to further strengthen the training of managers of modern construction projects for the company staff. The training includes knowledge and skills in project management for individuals, for organizations, and the experience in the administration and project management. It is needed that the introduction of management systems procedures and guidelines to the construction project management teams by international professional staff. The staffs need training and orientation on the management to further their vision, to appreciate better the importance and effectiveness of the project. Building management systems and common standards and procedures is necessary to guide the project team members to be more effective in managing the project.
2. The company should pay more attention on the process of planning the project to ensure that all work will be started and completed under his control.
3. The company needs to improve the system of formal procedures and guidelines to standardize all project management processes within the company. Guidance on the scope of each process is also needed. This helps to keep the consistency of quality and improve the effectiveness of management processes.
4. The company needs to improve and enhance the effectiveness of ISO9001 assessment and audit procedures used by auditor’s competent professionals, in construction project management, and training of project’s good and creative self-auditor.
5. The company must establish and apply the official standards, tools, guidance on measurement and evaluation of the success, failure of the project aim to gather experiences and lessons learned for the management projects in the future.
6. The company should develop a project management office or a center, where the project management staff can easily access the historical information and learned all the projects lessons, reference tools of modern project management and engineering. And besides, the company should develop procedures and guidelines for collecting, and storing the data. These works will be helpful for the management of future projects especially newcomers.
7. The specific issues such as: Training or hiring new people with sufficient skills to meet the work of construction projects to work in the project; Dealing with partners vulgar, may utilize and enlist the help up to the job of Investors and other stakeholders; Rent Contractors outside the work required to use new technology (HDD); Strengthening human resources and Establishment of ISO and IT management team in charge; Increase manpower to form a group: set up and manage and coordinate the process; Increase salary, Enhance cultural life, recreation... information to employees; Making the reward process, timely laborers on construction sites...
His thesis abstract is copied and posted.
Abstract
We know that with any country the development is also based on the platforms: There are firm infrastructures; there are perfect superstructures. Construction industry in the world in general and Vietnam in particular, in recent years had an integration process and booming. It is increasingly contributing to make the infrastructure more and more sustainable. It will set the stage for the construction and development of the country stronger in the future.
The operation and effective management of construction projects have special meaning for large construction enterprises: its highly profitable enterprise, for the country, it reduces the costs of the project, it saves time to perform construction projects, it ensures the quality, engineering, art, durableness and safety of the works ... Get to know the great significance that, and increasingly for the purpose of improving knowledge of general and personal knowledge of the executive management of construction projects under way to reach economic efficiency and the highest profit; How to implement the most advanced project, the best.
So I found myself out and register for the course of AIT MPM. With the knowledge learned through research and apply the "Project organization and responsibilities in construction project management - A case study of the gas pipeline project block B-Omon", I have prepared this thesis. It partly reflects the process of implementing the construction organization for the project. It is a solid foundation to establish the best prerequisites for the next stage of the project implementation process.
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