PPP models have been applied in many countries around the world and some infrastructure sectors are more conductive to PPP than others. In which, the power sector and transport sector have received most PPP model. There are ranges of reasons including better potential for cost recovery, higher political commitment due to the sector’s importance for country economic growth etc. Nevertheless, this does not mean that PPP in other sectors is without prospects. With appropriate modalities, support for capacity development, and political commitment to sector reform, PPP is feasible in others sectors as well.
Urban development plays important role in country development; the possible good of urbanization can solve many problems such as housing, environment, infrastructure systems etc. As infrastructure development project, a huge budget needed to urbanize. Mr. Nguyen Thanh Trong made case study to carry out the way to apply PPP model in urban development project, especially in Mekong delta in Vietnam base on real project which has been implemented in Soc Trang province in Vietnam.
The main objectives of his study were to: (1) study existing regulations and law affecting PPP project in Vietnam; (2) study theories and standard guideline and its applications of PPP in urban development projects; (3) analyze PPP Soc Trang province project in terms of structure, risk, law compliance and financing structure and compare to the theory and the standard guideline in order to find out the successful and problems in the project; and (4) propose recommendation for improvement
Conclusion
It is estimated that urban area of Vietnam account for 70% of economic growth and contain around 30% of the population, it is believed that urban development will occur quickly to meet the social demand. The private sector is encouraged to be more involved in urban development by providing resources. In order to have more private sector participation, government supports and clear understanding among the stakeholders, especially in term of risk perceptions, such as potential risks, possible sources of risks as well as risk management strategy are very important.
This project case study had analyzed the success of the project in terms of land acquisition and resettlement, approval from Government Agencies, participation of private sector and also social benefits.
Land acquisition: The success of land acquisition based on proposed compensation land price by the government is equal to actual market land price. In addition, the land owner will receive 10% residential land area in the resettlement sub-project in the line with total land area affected by project.
Approval from Government Agencies: It takes short time for getting approval from Government Agencies due to the procedures to carry out the project strictly with Law on housing and the necessary to implementation project.
Participant of private sector: The most successful of participation of private sector in this project are:
Government offices have a little knowledge about private –public partnership and recognize the important role of private sector in supporting economic growing of the province.
Private sector’s constant skepticism toward the government will be gradually reduced.
Social benefits: The project has maximized the land resource for economic development, changing the value of agriculture land with low productivity by residential land with high value.
Local government orient, regulate and control initiative to stabilize the real estate market in order to overcome the spontaneous development, not follow the urban master planning of the city.
On the other hand, this project case study has identified what kind of government problems including the sources of problem in order to help determine the most strategy solution base on Good Project Governance (GPG) concept and the guideline of WB.
The main problem related to government responsibility in this project is no contract between Public agency and private sector. Without contract, many problems can be encountered in this project, such as:
- The fairness was not achieved.
- Government supporting was not achieved.
- Clear mechanism was not achieved.
- Risks identification was not achieved.
The second problem in this project is no financial modeling, so all key drivers underpinning, and variables likely to impact upon the financial performance of project are not identified. There are no financial feasibility assessment models which can become valuable management tools in all anticipated operating circumstances.
Base on this case study, the lesson that can be drawn is that urban development projects which carried out through PPP approach will be successful when achieving two conditions:
- Urban master plan must be suitable with short term and long term purpose and satisfy with varying demands;
- Advisers must be hired in order to design adaptation mechanisms to new or unforeseen circumstance.
Recommendation for further research
Urban development project always has short term as well as long term purposes and its life cycle is very long, so during its life cycle there are many policies, decisions of local government will impact directly in the efficiency of the project.
For instance, in this project, the local government is implementing an investment concentrated administrative building project adjacent to this project, therefore, in the near future; the value of residential land in this project will be increased. So it is very necessary to research the impact of local government‘s policies on the efficiency of project in order to identify the way of sharing risks and benefits between public sector and private sector in PPP project.
His thesis abstract is copied and posted.
Abstract
For procuring public works projects, Public Private Partnership is a well established methodology in Vietnam for recent years, especially in infrastructure projects. Due to supplying the private sector’s expertise, efficiency, innovation, risk sharing, financing etc. into public project, the quality of public facilities and services can be uplifted.
Public Private Partnership models have been applied in many countries around the world and some infrastructure sectors are more conductive than others, especially it is hardly to find urban development project carried out base on Public Private Partnership approach.
In order to compare with other procurement method, it is important to understand the local situation by an analysis of the project conducted to date. Lessons learn can be applied to other projects or to derived in to legal framework. This project case study will carry out the way to apply Public Private Partnership model in urban development project.
The aim and objectives of this study were achieved via a understanding literature review, deep case study analysis in term of successful and problems encountered and recommendation for improvement.
Tuesday, 2 August 2011
Wednesday, 27 July 2011
Tuesday, 26 July 2011
Resources Allocation Strategy for Construction Safety at Hydropower Project
Huge scale project such as hydropower projects takes a very long time to fully finish. The construction process is extremely complicated with so many risks involved. Therefore, it is necessary to carry out research to identify, evaluate as well as the monitor the risk sources; to strengthen the control of the potential accidents, to prevent and respond to the severe accidents and to allocate the resources effectively for the construction safety programs during the process of the construction of hydroelectric projects.
Mr. Pye Phyo Maung made a case on Shwegyin Hydropower Project in Myanmar which objectives were: (1) to identify and evaluate hazardous level of the accidents that may occur at the various works of the Hydropower Projects, based on the risk factors which may cause the accidents; incorporated with the former history of accidents cases and experts’ experiences by using LEC method, and then to evaluate the rating of each type of works with respect to the resources allocation strategy at the Hydropower Projects by using the resulted accident hazardous levels from LEC method; and (2) by applying AHP method, to analyze and calculate prioritization of the most effective safety programs with the resources allocation strategies through the specification of the relevant weight of each safety program for the construction safety at Hydropower Projects
Conclusion
For objective number 1.
Based on the analysis results from LEC method indicated that the resulted hazardous levels of accident types were different for each construction work such as follows:
For scaffolding work, the resulted hazardous level (resulted D; it was calculated by averaging all hazardous levels of related risk factors) for each accident type is:
a. “Falling from height place” is level 1 which means “extremely hazardous”.
b. “collapse” and “object hitting”, the resulted hazardous level is also level 1.
c. “fire” and “electric shock”, the hazardous level is level 2 which means very hazardous”
d. “others”, the hazardous level is level 3 which means “quite hazardous”.
For concrete work, the resulted hazardous level of:
a. “electric shock”, “uncontrollable contact between men and materials such as cranes, various types of vehicles” and “others” is level 1.
b. “fire” and “impact from equipment and materials handling”, the resulted hazardous level is level 2.
c. “objects hitting”, the resulted hazardous level is level 3.
For excavation work, the resulted hazardous level of:
a. “earth collapsing”, “mining hazards such as the use of explosives”, “uncontrollable contact between men and materials such as cranes, excavator etc”, “inherent engineering hazards such as the presence of injurious gases, toxic dusts” is level 1.
b. “electric shock” and “others”, the resulted hazardous level is level 2.
For embankment work, the resulted hazardous level of:
a. “embankment collapsing”, “uncontrollable contact between men and materials such as vehicles, cranes etc”, “falling from high places”, and “electric shock” is the level 1.
b. “impact from equipment and materials handling”, the resulted hazardous level is level 2.
c. “others”, the resulted level 3.
For plant installation work, the resulted hazardous level of:
a. “hazards associated with erection the heavy materials such as turbines, boiler plant etc” and “electric shock” is level 1.
b. “uncontrollable contact between men and materials such as vehicles, cranes etc”, “impact from equipment and materials handling” and “Fire”, the resulted hazardous level is level 2.
c. “Others”, the resulted hazardous level is level 3.
According to the data analysis results, the rating of Excavation Work is “1” which means that the overall hazardous level of all types of accident at Excavation Work is the highest. In other words, it means that Excavation Work is the first priority with respect to the resource allocation for construction safety. For Embankment Work, the rating is “2”. For Scaffolding Work and Concrete Work, the rating is “3”. For Plant Installation Work, the rating is “4”, and it is the lowest. These rating of construction works can also be applied for the pair-wise comparisons of those works in the second level of AHP hierarchy.
For the objective number 2.
The data analysis results from AHP method showed the scores of Safety Programs for Prioritization of resource allocation. These scores are the effectiveness of each safety program on all types of construction work at Hydropower Project. Safe Practices and Procedures, Health and Safety Rules and Responsibilities are equal, and they have the highest scores for priority.
Moreover, Joint Health and Safety Committee, Workplace Hazardous Materials Information System, Training, Worker Orientation and Emergency Procedures are nearly equal and have middle scores for priority. Furthermore, First Aid and Medical Services, Inspections and Hazard Assessments, Reporting and Investigating Accidents, Health and Safety Promotion are also nearly equal and have the lowest scores for priority.
By applying these resulted scores, the decision makers can easily decide how to allocate resources on each type of the effective safety programs in the cases of implementing, monitoring, evaluating, adjusting those programs for the Hydropower Projects. In conclusion, there are many evidences that AHP method has been used in many areas such as strategic planning, resource allocation, source selection, business/public policy, program selection and many more. In this thesis, it is obvious that Analytical Hierarchy Process method can also be used in the case of resources allocation for construction safety at Hydropower Projects.
His thesis abstract is copied ang posted.
Abstract
For most of Hydropower Projects, the scale is very huge, rather long time is required in order to finish the projects, and the construction process is also very complicated, involved with very high risks. For the successful promoting health and safety, planning, organization, leadership, control, evaluation, inspecting, investigating, recording, analyzing and reporting are in the important role. An effective safety program includes all these parts. It is needed to be designed to make the most of available time and resources in preventing accidents and occupational disease. Therefore, it is urgent to make a research on how to allocate resources effectively for the construction safety at Hydropower Projects. This study is especially dedicated for identifying and evaluating hazardous level of the accidents that may occur at the various works of the Hydropower Projects, by using LEC method, based on the risk factors which may cause the accidents and then evaluating the rate of each type of works with respect to the resources allocation strategy at the Hydropower Projects by using the resulted accident hazardous levels. Then, it is dedicated to analyze and calculate prioritization of the most effective safety programs with the resources allocation strategies through the specification of the relevant weight of each safety program resulted from AHP method. To cope with those objectives, AHP method and LEC method are major tools in this Thesis. The result reveals that Safe Practices and Procedures, Health and Safety Rules and Responsibilities are equal, and they have the highest scores for priority. Moreover, Joint Health and Safety Committee, Workplace Hazardous Materials Information System, Training, Worker Orientation and Emergency Procedures are nearly equal and have middle scores for priority. Furthermore, First Aid and Medical Services, Inspections and Hazard Assessments, Reporting and Investigating Accidents, Health and Safety Promotion are also nearly equal and have the lowest scores for priority. These results are in the meaning of the effectiveness of the safety programs on the overall works at Hydropower Projects. By applying these resulted scores, the decision makers can easily decide how to allocate resources on each type of the effective safety programs in the cases of implementing, monitoring, evaluating, adjusting those programs for the Hydropower Projects.
Mr. Pye Phyo Maung made a case on Shwegyin Hydropower Project in Myanmar which objectives were: (1) to identify and evaluate hazardous level of the accidents that may occur at the various works of the Hydropower Projects, based on the risk factors which may cause the accidents; incorporated with the former history of accidents cases and experts’ experiences by using LEC method, and then to evaluate the rating of each type of works with respect to the resources allocation strategy at the Hydropower Projects by using the resulted accident hazardous levels from LEC method; and (2) by applying AHP method, to analyze and calculate prioritization of the most effective safety programs with the resources allocation strategies through the specification of the relevant weight of each safety program for the construction safety at Hydropower Projects
Conclusion
For objective number 1.
Based on the analysis results from LEC method indicated that the resulted hazardous levels of accident types were different for each construction work such as follows:
For scaffolding work, the resulted hazardous level (resulted D; it was calculated by averaging all hazardous levels of related risk factors) for each accident type is:
a. “Falling from height place” is level 1 which means “extremely hazardous”.
b. “collapse” and “object hitting”, the resulted hazardous level is also level 1.
c. “fire” and “electric shock”, the hazardous level is level 2 which means very hazardous”
d. “others”, the hazardous level is level 3 which means “quite hazardous”.
For concrete work, the resulted hazardous level of:
a. “electric shock”, “uncontrollable contact between men and materials such as cranes, various types of vehicles” and “others” is level 1.
b. “fire” and “impact from equipment and materials handling”, the resulted hazardous level is level 2.
c. “objects hitting”, the resulted hazardous level is level 3.
For excavation work, the resulted hazardous level of:
a. “earth collapsing”, “mining hazards such as the use of explosives”, “uncontrollable contact between men and materials such as cranes, excavator etc”, “inherent engineering hazards such as the presence of injurious gases, toxic dusts” is level 1.
b. “electric shock” and “others”, the resulted hazardous level is level 2.
For embankment work, the resulted hazardous level of:
a. “embankment collapsing”, “uncontrollable contact between men and materials such as vehicles, cranes etc”, “falling from high places”, and “electric shock” is the level 1.
b. “impact from equipment and materials handling”, the resulted hazardous level is level 2.
c. “others”, the resulted level 3.
For plant installation work, the resulted hazardous level of:
a. “hazards associated with erection the heavy materials such as turbines, boiler plant etc” and “electric shock” is level 1.
b. “uncontrollable contact between men and materials such as vehicles, cranes etc”, “impact from equipment and materials handling” and “Fire”, the resulted hazardous level is level 2.
c. “Others”, the resulted hazardous level is level 3.
According to the data analysis results, the rating of Excavation Work is “1” which means that the overall hazardous level of all types of accident at Excavation Work is the highest. In other words, it means that Excavation Work is the first priority with respect to the resource allocation for construction safety. For Embankment Work, the rating is “2”. For Scaffolding Work and Concrete Work, the rating is “3”. For Plant Installation Work, the rating is “4”, and it is the lowest. These rating of construction works can also be applied for the pair-wise comparisons of those works in the second level of AHP hierarchy.
For the objective number 2.
The data analysis results from AHP method showed the scores of Safety Programs for Prioritization of resource allocation. These scores are the effectiveness of each safety program on all types of construction work at Hydropower Project. Safe Practices and Procedures, Health and Safety Rules and Responsibilities are equal, and they have the highest scores for priority.
Moreover, Joint Health and Safety Committee, Workplace Hazardous Materials Information System, Training, Worker Orientation and Emergency Procedures are nearly equal and have middle scores for priority. Furthermore, First Aid and Medical Services, Inspections and Hazard Assessments, Reporting and Investigating Accidents, Health and Safety Promotion are also nearly equal and have the lowest scores for priority.
By applying these resulted scores, the decision makers can easily decide how to allocate resources on each type of the effective safety programs in the cases of implementing, monitoring, evaluating, adjusting those programs for the Hydropower Projects. In conclusion, there are many evidences that AHP method has been used in many areas such as strategic planning, resource allocation, source selection, business/public policy, program selection and many more. In this thesis, it is obvious that Analytical Hierarchy Process method can also be used in the case of resources allocation for construction safety at Hydropower Projects.
His thesis abstract is copied ang posted.
Abstract
For most of Hydropower Projects, the scale is very huge, rather long time is required in order to finish the projects, and the construction process is also very complicated, involved with very high risks. For the successful promoting health and safety, planning, organization, leadership, control, evaluation, inspecting, investigating, recording, analyzing and reporting are in the important role. An effective safety program includes all these parts. It is needed to be designed to make the most of available time and resources in preventing accidents and occupational disease. Therefore, it is urgent to make a research on how to allocate resources effectively for the construction safety at Hydropower Projects. This study is especially dedicated for identifying and evaluating hazardous level of the accidents that may occur at the various works of the Hydropower Projects, by using LEC method, based on the risk factors which may cause the accidents and then evaluating the rate of each type of works with respect to the resources allocation strategy at the Hydropower Projects by using the resulted accident hazardous levels. Then, it is dedicated to analyze and calculate prioritization of the most effective safety programs with the resources allocation strategies through the specification of the relevant weight of each safety program resulted from AHP method. To cope with those objectives, AHP method and LEC method are major tools in this Thesis. The result reveals that Safe Practices and Procedures, Health and Safety Rules and Responsibilities are equal, and they have the highest scores for priority. Moreover, Joint Health and Safety Committee, Workplace Hazardous Materials Information System, Training, Worker Orientation and Emergency Procedures are nearly equal and have middle scores for priority. Furthermore, First Aid and Medical Services, Inspections and Hazard Assessments, Reporting and Investigating Accidents, Health and Safety Promotion are also nearly equal and have the lowest scores for priority. These results are in the meaning of the effectiveness of the safety programs on the overall works at Hydropower Projects. By applying these resulted scores, the decision makers can easily decide how to allocate resources on each type of the effective safety programs in the cases of implementing, monitoring, evaluating, adjusting those programs for the Hydropower Projects.
Monday, 25 July 2011
Red Book FIDIC Contract Management and Problems
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.
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.
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.
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