Since 1986, when the economic and social reform program
in Vietnam had begun, the country becomes one of the fastest growing economies
in South East Asia, being the fourth in the list in terms of growth after
China, Singapore and Hong Kong. The foreign investment increased by nearly 75%
in 2008 reaching USD25Billion.
The construction industry contributes around 9% to
the country’s GDP. Since 2008, there are
1,406 projects amounting to USD18Billion that have given the licensed. This
proved that construction industry in Vietnam has boomed. How to manage the
construction effectively and efficiently is not only the owner’s essential
requirement but also the responsibility of the contractor. This demands special
knowledge and experience of project managers.
However, according to recent survey, many commercial
buildings had encountered problems such as delay, quality and, dispute about
payment, which are very significant. Some of the projects have terminated or
the owner sued the contractor because of the dispute in construction contract. Therefore,
the contract management is very important to avoid the risk.
The
construction contract should be clear from the very beginning until the
completion of the project. The causes of delay that usually occur during the
project completion include:
• Error in hand-over of full power of the
construction site within time requirement from the date of agreement
• Error in sending late full designs and construction
drawings when needed or even during the start of the construction works. In
some projects, the delays happened because of the engineer’s or architect’s late
approval on sample or construction drawings.
• Error in supplying equipment and materials
that was supposed-to-be supplied by the owner to the contractor.
• Error in coordination and getting the work done
by other parties so as not to hinder the general contractor’s works.
Thus, skill weakness from
employer side in managing the contract is the cause of project cost overrun
compared with estimated cost. It may rise from the mistake of project inception
preparation such as:
• Error
in defining the scope of work.
• The
change in drawings and specifications from owner.
• Error
in preparing the BOB (quantity, unit price)
• Variations in construction contract
document.
In order to find-out
all the problems related to construction project which might affect the contract
administration, Mr. Bui Duy Khanh made a case study on Contract Management
Strategy for Design-Bid-Build Project of the
Exhibition and Convention Center Project. The objectives of his study
were to: (i) investigate the exiting practices of project client in Vietnam in
managing contract; and (ii) propose recommendations and develop a process of
contract administration by using SECC case study.
In order to accomplish these objectives, he also
studied the general literature in the multi-disciplinary fields of Construction
Contract Management such as Procurement Contract; Construction contract; and Contract
administration.
Conclusions
This research tried to find out the major aspects that has effect
to contract management. Moreover, this also focused on responsibility of
parties, and solutions that can be applied to manage the contract. This case
study also tried to find out the strengths and weaknesses of contract managing
procurement by analyzing the main aspects of contract management from tender
phase and construction phase.
- Tender preparation - For SPCC this
procedure involves coordination of work of several staff from Project,
Contract, Piling, Survey, M&E team. PDD and CDD need to train and support
their staff to work together until the parts of this procedure are fully integrated.
- Tender invitation - This process
involves a number of coordinated steps between different groups that need to
complete within a time limit determined by the Tender Schedule. Co-operation
and support by all groups is essential to achieve all the targets required in
this procedure Tender evaluation
- Procurement
of contract: Management contract in construction industry: Separate
contract method
The main aspects of managing contractor would base on fee
that related to a percentage of the total cost of the project under his control
or alternatively a fixed lump-sum contract. The managing contractor will not
usually carry out any of the construction work himself but coordinate and be
responsible for the letting of a series of work packages.
- Type of
contract: Lump-sum contract - The Contract for all Tender Packages will be
lump sum contract form in accordance with the stipulations of Article-49 of the
Vietnam Law on Tendering (No.61-2005-QH11)
- Contract
conditions - The general conditions of contract will be the FIDIC
(International Federation of Consulting Engineers) which describe the
performance of execution of the contract, the rights and duties of the parties
to the contract and the role of Project Manager in the contract
- Payment
process - The process of checking and certifying involves a number of
coordinated steps between different groups, which need to complete within the
time specified in the Contract
- Extension
of times for completion
- Contract
report
- Change
order - Contract Variations may legally apply to all Lump Sum Construction
contracts which use the FIDIC General Conditions of Contract and where the original scope or quality of the
works are proposed to be changed, therefore changing the original Contract
Value. This procedure refers specifically to the FIDIC-1999 edition.
Each variation to the contract
will cause either an increase or decrease on the Contract Sum, and may or may
not lead to a claim for Extension of Time.
SPCC must coordinate all parties
to act quickly in the processing of a variation claim and approval so that
delays on schedule and payments have minimized.
- Price
escalation
- Claim
- Distribution,
and
- specific
point of project:
o
The management company is the general
management: design, biding, contract management, supervision, and project
management.
o
Many
extra works because designer project.
o
Separate contract method: Strengths and weakness
o
Lump sum
contract, DBB procurement method: Strengths and weakness
Recommendations
In order to manage the contract of the project successfully
by using separate contract method, the owner has to view these points:
·
The owner
has to have in-house expert or the project is managed by a professional
management company
·
The owner (or project manager) has to choose
quality sub contractor to do specific works.
·
The owner has to clarify scope of works and
responsibilities of every contractor in
the contract
In
DBB project, the owner has to pay attention to these problems
·
The owner has to choose experience design
company to avoid construction extra works from the lack of details in drawing.
·
The
contract manager has to set up “provisional sum” in contract to deal the price
for extra works in construction period.
Within a limited time, the study did
not cover all aspects of Contract Administration including contract clause
managing or the legal relevant administration that are very important for
contract manager. The study focused only on assisting the owner by applying
activities in tender phase and construction phase.
The case study was conducted to
find out some critical factors of contract administration in the SECC project.
It had not pointed out the typical key factors of the construction industry in
Vietnam. A broader survey, and a detailed investigation was not implemented to
get information accurately and reliable result.
Moreover, it is necessary for the
owner to manage their project with full guidance of contract administration
including details process in each phase of the project. Thus, the author wishes
to develop a processing of Contract Management not only for DBB, but also for
other kinds of construction delivery.
ABSTRACT
In construction project, the contract management is the
most important to every project
such as owners, contractors, vendors. Thus, the appropriate contract administration
for contract management is very important to determine the practical of any
construction project.
In period of construction industry, the traditional
delivery known as DBB delivery is popularly using in commercial and industrial
projects. According to construction industry development, nature of
construction project are increasing in size and becoming more complex that led
to professional in management system. There for, this study conducts to assist
the project owner understanding and implementing contract administration in
Vietnam.
The Case study conducts to analysis cases on management
the DBB of commercial building projects which are increasing on demand of
trading services market, domestic and foreign investments in Vietnam by using
SECC cases study (a project of PMH and SPCC). The objectives are emphasized on
how the owner manage the contract of project
The study show the advantage of SPCC model project
management also contract management . that a detailed process of contract
administration should be developed that investigate the contract management for
company.
