A RISK MANAGEMENT FRAMEWORK FOR HIGHWAY

CONSTRUCTION COMPANIES IN VIETNAM

By

Pham Quang Cuong

Abstract

             

Highway construction industry is long known to contain more risks than many other industries because of the effect of a variety of uncontrollable factors and the severe competition degree. However currently in Vietnam the understanding of highway construction companies about risk management is very poor, lacking of a clear identification of risks and the methods to deal with these risks systematically. The purpose of this study is to identify and rank the risks facing the highway construction companies as well as to determine the risk responses that effectively help the contractors to handle them.

This research is based on quantitative method, using questionnaire for data collection and utilizing SPSS software to analyze the data.

The respondents in this research are directors and experienced project managers from sixty different contractors. The respondents are asked to assess the risks and the degree of the application of risk responses in their company as well as to provide the information related to the corporate performance. The risks afterwards are ranked in terms of probability of occurrence, severity and impact and then the risk responses with strong correlation with corporate performance are pointed out.

The outcome of data analysis is the ranking of risks that will help increase the attention of the Vietnamese contractors to the critical ones which might threaten their project success.

The effective risk responses with strong correlation with project performance are listed and are put into the relevant stages of project life cycle to form the risk response framework.

This framework can be considered as an action guide that the highway construction companies should apply as strong as they can to make their projects more secured against the risks.

Executive summary

Rationale of research

This research has been conducted to develop frame work for risk management in high way construction projects in Vietnam.

Objectives of study

To identify major risks & emerging risk to highways contractors, risk responses and its relation with company’s corporate performance and to develop a framework for highway contractors.

Methodology  

The exploratory research method is used to study risk management in highway construction companies, through literature review, case study from Vietnam.

Findings and conclusion

The first objective is to assess the risks in terms of probability of occurrence; severity and impact, afterwards the ranking of risks are made in order to increase the contractors’ awareness towards critical ones. The second objective is to examine the application of risk responses which are developed through a deep literature review and interviews with Vietnamese experts. The risk responses will be evaluated based on the belief that the contractors with good performance will have better responses to risks and in turn, the good risk responses will enhance the performance of the contractors at both project level and corporate level.

As a result the correlation between the application of risk responses and the corporate performance is analyzed and the ones with the correlation coefficient larger than 0.7 are pointed out. The final objective is to put the effective risk responses into the relevant stages of project cycle to form the risk response frame work that can be applied by highway contractors to their projects.

Critical risks

The analysis result reveals the fact that the unstable economic conditions and the macroeconomic factors such as high inflation (rank 1), high interest rate (rank 2) are putting a lot of difficulties upon the highway contractors. Other big concerns come from the owners including Delay in delivering the site (rank 3), delay in progress payment (rank 4) and financial difficulties (rank 5). In top 15 of critical risks, there are some risks resulted from the poor management of the contractors themselves including Shortage of cash flow (rank 6), Too low bidding price under competition (rank 7), Inappropriate construction methods (rank 9), Poor performance of sub-contractors and suppliers (rank 10) and Poor quality and rework (rank 11). Consultants are an important party in projects and they contribute some significant risks to the work of contractors namely Site condition discrepancy (rank8) and Delay in testing and acceptance procedure of supervisors (rank 13).

Effective risk responses and risk response framework

The risk responses that can be applied to deal with every single risk are discussed in depth and the effective one which have the strong correlation with the corporate performance are pointed out. These risk responses are grouped into action categories and are put into the relevant stages of project lifecycle with the hope to provide a more systematic approach to these risks. The data analysis and the interview with experienced experts during data collection reveal many weaknesses of the contractors that make them vulnerable to risks. The cost estimate is the first thing that requires the more careful consideration and preparation of the contractors because it directly relates to the chance of winning the contract and the profitability of their work.

The contract content is another problem to the contractors because if the contractual clauses are provided poor and unclear they will become the source of many risks in the next stages. In the opinions of many respondents the contract in highway projects are still in a very low level in comparison with the contractual form suggested by FIDIC. The quality of construction planning and the tight construction control play the important role to mitigate or even eliminate the impact of many risks especially the on-site risks. 

INVITATION FOR SEMINAR           @

Asian Institute of Technology in Vietnam (AITVN)

Master Program in Project Management in Construction (MPM)

BIM – Will it transform the industry,or will it be business as usual?

by

Dr. Henrik Linderoth

Associate Professor

School of Technology and Society

University of Skövde

Date: Friday, 13 July 2012

Time: 09.00 - 12.00 hrs.

Venue: Room A1.1, 45 Đinh Tien Hoang, Ben Nghe Ward, Dist. 1, HCMC (Opposite to HTV broadcast station)

Vietnam 

Abstract

The emergence of new technologies has always triggered visionary ideas of changes of the state of art in organizations, industries and society. However, what we know from research is that changes do emerge, but often not as fast as expected and not in the directions predicted in the visionary ideas. In this sense BIM – Building information models – is no exception. The transformative capacity of BIM and its potential benefits has been discussed for two decades, but it is only during the last few years a more encompassing deployment of BIM can be witnessed. However, challenges still exist for management before any deeper impacts on the industry will be achieved. The challenges to solve can be viewed as layers of challenges in at least four categories: technical, legal, organizational and managerial. During the seminar these challenges will be discussed and I will draw parallels with a similar process in the health care sectors that I have studied for ten years. It appears that at the bottom line is the issue: Who are the beneficiaries and who has the power to shape the process?

All interested persons are cordially invited. For further details, please contact Ms. Nguyen Le Tuong at (+84) 01 265 285 168 or (+84) 08 39107423 (117) - email: ngletuong@aitcv.ac.vn. 

LEAN CONSTRUCTION: DEVELOPMENT OF ASSESSMENT CRITERIA & IMPLEMENTATION STRATEGY FOR INDIAN CONTRACTOR COMPANIES

By

Ranjeet Sandeep Pundlik

Abstract

             

The construction industry in India is one of the highest contributors to the national economy for over the past five decades and is one if the biggest in terms of generating employment in the nation after agriculture industry. This industry is a victim of low productivity, poor performance, lack of mechanization & sophistication, lack of skilled labors, shortage of professionally qualifies employees, cost over runs and delays. Lean construction is a recent development in the field of construction which aims for waste reduction and value generation for the client by increasing the efficiency of the construction processes by improving the processes and flows in the construction activities. Lean construction is successfully implemented by various companies the western countries and is also an important topic for researchers across many universities in the west. So this study aims to develop a system for the construction contractors in India to be able to use and incorporate the techniques of this domain of construction. The research has broadly identified 12 lean principles applicable to construction, especially in India. Development of a Generic model for the lean functioning of the departments of a construction contractor companies was done and lead to the identification of 33 lean practices in the five departments of the contractor companies. This lead to the development of assessment criteria for the lean compliance of the departments of the contractor companies in India. This model and criteria, after being verified and validated by 3 academic and 2 professional experts in India, was used for collection of data of compliance from 4 Indian Contractor companies, functioning in Central India. Detailed analysis of the working of each department of each company has been done to determine the strength & weakness of each department and also determine the reasons of non-compliances of the practices.

After the detailed analysis process, a strategy for the implementation of these lean practices in the departments of the contractor firms in India has been developed. The three stage strategy, along with the weaknesses and non-compliance reasons can be used together to combat the problems for implementation and hence the lean practices can be successfully implemented by Indian Contractor Companies.

Executive summary

Rationale of research

This research has been conducted to develop assessment criteria and implementation strategy of lean construction for Indian contractor companies

Objectives of study

To develop a model for assessment of departmental functioning of contractor companies and perform detailed analysis to find strengths and weakness, to propose implementation of lean practices in contractor companies.

Methodology  

The exploratory research method is used to study lean practices in Indian construction industry, through literature review, expert verification and by studying four cases from Indian construction industry..

Findings and conclusion

Development of the generic model and assessment criteria for the lean functioning of the departments of a construction contractor company

The first objective of the study was to develop a model and assessment criteria with the use of the lean principles for the lean functioning of the departments of a contractor construction company. The research started with the investigation and identification of the lean principles and their selection and segregation as per the applicability to the field of construction, primarily to the construction contractor companies. 12 lean principles were identified along with their lean features & effects. After that, a model of general functioning was made for contractor companies. Now, for the purpose of incorporating the lean practices into the model, the features & effects of the lean principles were converted as the objectives for the general practices so as to make them lean and after this the lean practices were incorporated to generate the final lean functioning model for a construction contractor company. This completed the development of a generic lean functioning model for construction Contractor Company. The practices identified in the model were then incorporated into a tabular form to generate the checklist or the assessment criteria with few more additions for the purpose of assessment of the contractor companies as the second objective of the study.

Assessment and detailed analysis of the functioning of the departments of the contractor companies

This developed model and criteria was verified and validated by a panel of 5 experts in India to check the relevance and applicability of the practices as per the Indian construction industry and scenario. This process generated a final model and criteria to be used for the assessment of the companies in India. A case study protocol was developed in this process and 6 companies were contacted for data collection. Finally, 4 companies out of them were selected and proceeded for data collection based on the criteria of company selection, as explained in chapter 3. Primary and secondary data collection was done in India and then the data analysis was started after coming back to Thailand. A detailed analysis of all the practices was done as per the compliance status of the practices. All the practices for each of the case was described and synthesized to obtain the strengths and weaknesses of the practices of each department of each company. During summarizing the lean practices for the four cases, it was observed that there were 8 practices which were compiled in all the four companies, whereas 10 practices out of 33 which were not compiled in any of the four companies. Reasons of non-compliance were primarily determined for the practices which were not complied in any of the four companies and were analyzed in depth. This also lead to tabulate the department wise reasons of non-compliance as per the four cases considered and are as the last part of chapter

Recommendations

·         The initiation and support for the top management level for the improvement of the basic processes including the ones which do not require much of the expertise training etc. Some academic-industry knowledge exchange programs can be organized. The top management should establish a system of involving the operational staff in problem solving, decision making, planning etc. Some permanent and trusted staffs are to be chosen who can be trained to be the last planners etc. The procurement department also has to make a database of trusted suppliers for the long term relationships ad partnering in the next stages.

·         The second or the preparatory stage is for the preparation of the company’s staff and systems for the implementation of the lean practices. Development of formats, guidelines have to be done in this stage. The companies can use and modify the formats proposed by the researcher as per their needs. Skill development sessions, knowledge exchange sessions, professional training sessions, preparation of related contractual arrangements etc should be organized for the trusted employees selected in the above stage for the capacity building of the company.

·         Application of the systems developed in the above stages. Trained staff should be in touch with the professionals for continuous improvements. Incentive based system can be practiced for some site practices like hygiene & housekeeping, safety compliance, adherence to the guidelines laid, performance etc.

APPLICATION OF THE LAST PLANNER SYSTEM IN THE INDIAN

BUILDING CONSTRUCTION INDUSTRY

By

Senjam Romero Singh

Abstract

             

India is fast moving forward with the recent pace of economic boom that it witnessed. Its economy has been rapidly developing with respect to the various sectors. With a rising GDP and a Government Policy directed towards the development of Infrastructure, the construction

Industry is also witnessing a boom. The construction industry contributes to about 7.80% of the GDP. However, due to the use of the age old traditional method of planning and project control most of the projects in India have been suffering from schedule and cost overrun of as much as 50% in certain sectors. In order to avoid a loss in GDP the construction Industry has to find ways and means to adopt project control systems that results in removal of unnecessary wastage. The Last Planner System (LPS) should be adopted in the Indian Construction

Industry for the removal of wastage and better achievements of the project goals considering its wide application all over the world.

As India has its own unique problems and characteristics the LPS has to be remodeled to better suit its need. In this research work attempts have been made to provide a LPS model that addresses the issue keeping the core ideas and concept in mind.

Case Study research with an experimental setting has been used to achieve the research

objectives. Experiment and data collection has been carried out on two projects being undertaken by a small and a large scale industry that represents the different scale of construction. An attempt has also been made to provide an implementation strategy that can be effectively used in application of the LPS concept in the country.

Executive summary

Rationale of research

This research has been conducted to develop a model for Indian construction industry to for productivity improvement through Last Planner System.

Objectives of study

To develop a simple working model of the Last Planner System to be adopted in Indian Construction Industry. To implement the LPS model and study its effect on the productivity and plan reliability and to improve the LPS model and suggest an implementation strategy

Methodology

The exploratory research method is used to study productivity management in Indian construction industry, through literature review ,expert verification and by studying two cases from Indian construction industry..

Findings and conclusion

The Last Planner System Model used in the two case studies was designed based on studies of the characteristics of the Indian Construction Industry and the feedbacks received from the Experts who were consulted to verify the model and the construct of the experiment. The refined Model was then used for the experiment. This satisfies our first objective.

The model which was put into experiment has produced some positive result. The model used was able to solve certain problems related to wastage of time spent waiting for resources on site during execution of the activities in the projects. The project participants were confident that if the Last Planner System was applied in the projects and considerable amount of time was spent in gathering experience in its use, it can solve most of the problems related to unreliable planning that does not consider the ground realities in the site and problems related to resource allocation thereby avoiding wastage of time in waiting. Removing these two problems will remove unnecessary overtime and extra commitment of resources. A smoother work flow will lead to increase in motivation and commitment in the project participants. The

Last Planner System is hence considered effective for application in the Indian Building Construction projects. This satisfies our Second objective.

All the feedback received from the experiment participants and the observation made during experiment has led to an improvement in the Last Planner Model and development of an implementation strategy.

Recommendations

·         Maintenance of written guidelines of the implementation of the Last Planner System by each company based on the company structure and policy and the lesson learnt gained from experience in using the LPS. Roles and responsibility of each individual should be clearly defined.

·         The Last planner should be a group headed by the site engineer who will closely coordinate work with the supervisors and the work crew leader.

·         Root cause analysis should be done at each PEP meeting to discuss the incompletion of assignments of the previous week.

·         Incentives schemes should be adopted to further motivate the Last Planner group to release reliable weekly plans.

INVITATION FOR SEMINAR           @

School of Engineering and Technology,

Asian Institute of Technology,Bangkok

BIM – Will it transform the industry,or will it be business as usual?

by

Dr. Henrik Linderoth

Associate Professor

School of Technology and Society

University of Skövde

Date: Friday, 6 July 2012

Time: 13.00 - 16.00 hrs.

Venue: Room E220, 2^nd Floor of South Academic Building

Abstract

The emergence of new technologies has always triggered visionary ideas of changes of the state of art in organizations, industries and society. However, what we know from research is that changes do emerge, but often not as fast as expected and not in the directions predicted in the visionary ideas. In this sense BIM – Building information models – is no exception. The transformative capacity of BIM and its potential benefits has been discussed for two decades, but it is only during the last few years a more encompassing deployment of BIM can be witnessed. However, challenges still exist for management before any deeper impacts on the industry will be achieved. The challenges to solve can be viewed as layers of challenges in at least four categories: technical, legal, organizational and managerial. During the seminar these challenges will be discussed and I will draw parallels with a similar process in the health care sectors that I have studied for ten years. It appears that at the bottom line is the issue: Who are the beneficiaries and who has the power to shape the process?

All interested persons are cordially invited. Doctoral and master’s students of Construction, Engineering and Infrastructure Management Field are expected to attend.  For further details, 

please contact Ms. Woranuch at 02-524-6060.

FEASIBILITY STUDY REPORT FOR URBAN

INFRASTRUCTURE PROJECT

USING LOAN FROM OFFICIAL DEVELOPMENT ASSISSTANCE (ODA).

A CASE STUDY OF LAOCAI CITY DEVELOPMENT PROJECT

FUNDED BY WORLD BANK

by

Nguyen Viet Cuong

Abstract

The development of socio-economic infrastructure plays a very important role in the country developing strategy, it is a major factor to help developing country reducing the poverty. The fund for the infrastructure development can be from many sources: private sector, counterpart, mixed credit and ODA loan…In order to meet the huge demand on infrastructure project development, the preparations of project investment such as project feasibility study is specially paid attention by Project Management Units.

Furthermore, with the project using the loan from international Donors, the feasibility study is not limited in project financial aspects like loss or profit, it also studies the other social aspect such as safeguard policies, economic benefits, benefit to the residents within project… The project feasibility study report therefore also be considered as approved factor for the Donor to give the loan.

The purpose of this study is to identify the process to prepare a feasibility study report for the urban infrastructure development project using the loan from World Bank. this process of preparing feasibility study report need to be followed the government instruction as well as complying with the World Bank regulation.   

Executive summary  

Rationale of research

This research has been conducted to indentify the course of action to prepare feasibility study report for the urban infrastructure development project using loan from World Bank.

Objectives of study

To prepare feasibility study report following guidelines of five funding agencies (Asian development Bank, French Agency, World Bank, Japan Bank for International Cooperation, German Bank for Reconstruction) to identify risk of unrealistic FS report preparation and to analyze problem during preparation of FS report.

Methodology

In this research methods are followed in accordance with the five funding agencies i-e step by step completion of FS report from collection of data to provincial people approval and World Bank non-objection letter.

Findings and conclusion

Apart from the project financial advantages, the significant advantage from project implementation is that the Project Owner and project shareholders particularly the Consultants are approached to the international standards in project preparation and implementation. Report helps in making decision of either invest or not to invest for construction.

The project shareholders, at any time during project implementation, must take note on the compliance of Donor’s guidelines, as World Bank specialists supervises strictly the project implementation to ensure the effectiveness of fund usage and development criteria are complied.

The project FS report has to be prepared in compliance with both Lender’s guideline and Governmental rule and regulation. This appears to be the biggest challenge for the Project Owner and FS Consultant, that why the selection of FS Consultant need to be always considered carefully with the Non-objection from the Donors.

The other issues such as the sustainable development and Community Awareness in sanitation and environment, institution and capacity building also need to be considered carefully and differently from the normal construction investment project

During the FS preparation stage, the difficulties will be occurred due the lack of experience in project management from project owner to this new concept of total project development, thus, the improvement of project communication and information sharing must be paid attention to avoid the unnecessary delay.

Recommendations

The FS report is more difficult and complicated when compared with commercial project report. The main procedure and guidelines are defined by donor agency and lenders criteria, so I can only give my recommendations to prepare reliable FS report using World Bank loan in particular.

·         Project management unit should be set up at early stage; matrix structure under control of provincial leader.

·         The more accurate data, the more reliable report will be so need of proper survey team and procedure.

·         As FS report preparation will be in direct supervision of World Bank so consultant need to have experience of working with WB and have experience in development of similar projects.

·          As FS preparation team is different from presentation team to World Bank expert, so there is need of proper communication system among stakeholders it can be done by telecom conference with minute notes. 

Seminar on Improving Construction Project Management Competitiveness
Project Management Competencies and Total Quality Management - Six Sigma Approach

By

Dr. Hadikusumo, AIT

Mr. Wiboon Tachapaisankul, Quality Specialist Consulting Director Massbiz Co., Ltd.

The seminar was conducted @ AITVN Can Tho, and Ho Chi Minh city, Vietnam on June 16 and 17, 2012 with over 110 participants.

During the seminar, Mr. Wiboon shared information about Six Sigma overview with its framework, basic QC and introduction of Six Sigma tools, and essential guideline with certain examples of Six Sigma being application in the construction industry was presented as well.

The second part of seminar was conducted by Dr. BHW Hadikusmo with the presentation  about roles of project management in large construction projects and competitiveness of construction companies.

Presentation from Dr. Hadikusumo

 Presentation from Mr. Wiboon

Seminar participants