Cash Flow Projection Management for Small – Medium Sized Vietnamese Contractors

While a construction company is doing one or more contracts at the same time, a project manager must be able to answer the following issues:

i) The amount of money at a particular time:

            + How much is the minimum and maximum amount of money that has to be available?

            + How much money do we have and spend?

            + How to get that money?

+ From where?

ii) The suggestion in preparation of improving the performance to reduce insolvency.

iii) With that maximum amount of money that we can prepare, supposed, clients want to accelerate the schedule, so what is the longest duration for the project, and to do that, how much money the clients have to give us and when?

Pham Thi Ngoc Hien made a case study which objectives were to:

1. study the theory of project cash flow management in construction

2. synthesize the project management issues related to cash flow projection

3. apply project cash flow management into a case.

Conclusions

1. Theory of cash flow

(a) This study is useful and limited to small and medium- sized projects. In large project the number of variables should be large and complex and takes long-time duration, it needs deeper research with the help of computer software and take into account the analysis on the value of time and money and the effects of inflation. However, in the large project that consists of many smaller subprojects, these financing solutions may help bring the requirements and paybacks which are used as information or inputs to large projects.

(b) Adequate cash flow management benefits not only in cost control and assists profit acquisition for contractors but also contribute to other management skills. Individual project net cash flows contribute to and from the organizational cash flow which directly relates to the financial health of the organization. The key aspect to cash flow is to understand the way project cash flows layer over each other to generate organizational cash flow. A secondary aspect is to understand that organizational cash flow is dependent on the individual project profiles. Manipulation of these layered profiles has the capacity to change the organizational. In turn it is the overall management of a portfolio of net cash flow which determines the success of the whole organization. The aim of cash flow projection is to maintain the positive or at least manageable cash flow. In cash flow projection, the management of the timing of payments is most important to the effective management.

© Cash flow management helps the contractor in inspecting project financing issues, resource usage and can be a useful tool to prove with banks.

(d) Combining the cash flow management and earned value technique, a project can be, a project can track the real status of progress, detect any early cost deviation, suggest payment strategy and be a factor that affects the scheduling for the coming projects.

2. Project management issues related to cash flow management

(a) Cash flow forecast should be made at all phases of the construction process. Cash flow can be contributed to tendering stage to decide the agreement of the contract payment terms and schedule, decide whether to accept or reject the bid; to construction stage to determine capital have to be available at a time, track the real status of the project ,set out a financial plan to recover costs; and  retainage management.

(b) In project scheduling problems resources-constrained issue is generally considered essential for contractors as a means; furthermore there is an involving of cash flow in project scheduling. Contractor thus can evaluate appropriate project schedules under associated constraints, and arrange activities and resources.

© A company level cash flow model must be based on cash flows of all the company’s individual projects. The use of cash flow management at company level or project level helps the company to be in active position in any financial related decisions.

3. Applying project cash flow management theory into a case study

(a) In portfolio project, cash flow contractor should avoid accepting the schedule and payment that caused the cash outflow and inflow of projects at the same time. Although following an abundant cash inflow. This cause a load at a time and an abundant at other.

(b) Small to medium contractor should consider cash management as rational and idiographic evaluation in integration with empirical evaluation rather than only empirical process which focused solely on the project margin.

© The contractor doesn’t need to have a large working capital to run the operation of projects, just managing well the cash flow.

Abstract

Cash is the most important of all business’s resources. Many construction companies fail not because of technique or skills but the insufficient cash flow management (Singh and Lakanathan, 1992; Navon, 1994b). In progress-payment contracts, the contractor is paid for the work performed based on progress reports made at specified intervals. The owner holds back a percentage of the payments until the project are completed. The insufficient of time and amount of money contractor receives from client and pay to their supports causes the financial problems. This study provides concepts and tools that can be applicable during the construction phase based on the planned earned value and the actual incurred cost on a project from a general contractor’s viewpoint as the cash flow projection’s role integration to project management. Combining the cash flow and earned value technique, a project can track the real status of progress, detect any early cost deviation, suggest payment strategy, adjusting the planned schedule and be a factor that affects the scheduling for the coming projects.

Keywords: Percentage, Payments, Project, Insufficient, Construction, Lakanathan, Schedule, Technique

AIT Expert seminar: Managing Megaprojects in Developing Countries

Seminar

MANAGING MEGAPROJECTS IN DEVELOPING COUNTRIES
Prof. Christian Brockman, University of Applied Science, Bremen, Germany
08 Nov 2013
AITVN, Ho Chi Minh city, Vietnam

On 08 Nov 2013 at AITVN Ho Chi Minh city, Vietnam, the Professional Master program in Project Management in Construction (MPM) organized the seminar  MANAGING MEGAPROJECTS IN DEVELOPING COUNTRIES, presented by Prof. Christian Brockman from University of Applied Science, Bremen, Germany. During seminar, professor Brockman shared about Qatar Integrated Railway Project with a volume of 35 billion US dollars as practical experience,  the complexity concept of megaprojects, integration management for construction projects, and the mind frame to build a management model for megaprojects. Participants raised many questions and also discussed interestingly with his sharing.

We would like to send the thankfulness to Prof. Brockman for his useful presentation and all participants for your coming and contribution to the success of our seminar.

The next similar seminar will be organized in Can Tho on Thursday, 14 November 2013. 

Some Main Factors Affecting Quality of Construction Projects

An owner usually states this objective in this way “I want a good job, on time and within budget”. These generalized objectives can be achieved if:

1.       The owner definition of GOOD is known, is communicated to other team members and is completely understood.

2.      The owner’s time schedule and budget are realistic.

3.      All project participants properly fulfill their roles.

In recent years, Vietnam have been investing and constructing many big projects from many different sources of capital: national budget, ODA, and public private capital. In there, Vietnam people play critical roles in deciding and conducting those projects, and some specific achievements should they have obtained such as: spacious buildings, new-tech modern bridges, and high technology industry zones.

However, we have to admit the fact that there have been some of those projects received rather much claims or comments from public. On the other hand, some of construction works have had disadvantages and are unsuitable to current demands. In circumstances, the schedules of those projects are always the question mark for users.

For examples: Last few years, on public information means, it has been easy to hear many issues in critical projects of Ho Chi Minh City such as: Urban Drainage System project and East – West Avenue project.

Those above problems had shown us the fact that the Quality issue has not been properly cared by Vietnam Project Management teams. What are the main factors affecting Project Quality and how it influences in each phase of project life cycle?

By analyzing the framework of Project Quality Management in its life-cycle, Pham Xuan Thinh wanted to raise out some main factors affecting the Quality of a construction project.

Based on that framework, the author will dissect the Quality management of a specific constructed project named: “Expanding Phase III Port – Petroleum Technical Service Base in Vung Tau, Vietnam” and specify the issues which impacts on conformance to quality requirements of this one.

And the final objective of the study is to find out the best solution of each issue and recommend to relevant subjects in some similar projects.

Conclusion

As discussed, quality in construction is directly related to time and cost, and vice-versa. A poor quality managed project can result in extra cost and time extensions, while a poor time and cost controlled project can affect the conformance of requirements. Therefore, it is vital to understand the client’s requirements in terms of cost, quality and time.

Management has to be aware of customer’s requirements and be responsible for creating the right environment for a stewarded and progressive improvement. It also has to produce realistic estimates that match these requirements.

In Vietnam, the project managers completely have awareness of the importance of Quality management and its efficiency for success of the project. However, they find difficulties to conform factors: cost, time, quality with Client’s requirements.

In author’s opinion, there are some existing main reasons which have to change and improve drastically if one likes to have good project management:

1. Lack of Communication.

2. Responsibilities are not assigned clearly enough to all members: client, design professional, consultancy, project manager, and constructor.

3. Cost estimate in national norm is not appropriate with actual case.

4. Complex legal procedures.

Abstract

The concepts and practices of Quality management in construction industry have been used and applied widely in Viet Nam also for long time ago. But how can apply sufficiently in managing Viet Nam construction projects still have some issues for discussion.

In the industrialization, modernization and global integration and in particular construction industry, Vietnamese authority agencies and project management teams have been finding out the best solution to execute projects efficiently. So far, we have had many definitions of project quality management, ways of understanding as well as applying it into each real case.

Look at some recent construction projects and some initial achievements we have obtained, Project Quality management has been promoting considerably. However, we have to continue improving and adjusting to modern management model. To do that task, the project team has to know and understand The Factors influencing Quality of Construction projects and what are consequences and how to solve? 

Quality Management in Soil Improvement Projects: A Case Study of a Power Plant Project in Vietnam

In Vietnam, the concept and quality management in construction have been used in recent years. Nevertheless, many problems have been exposed because of the lack of managerial skills and competencies as well as the internal capacities of construction organization for satisfying the rapid increase of construction project.

Projects delay happened normally in the majority of development projects due to poor communication, resource mobilization or other factors. According to recent survey, more than 80% of projects have problems with time management and quality project.

Not having a good quality management process has significant on the Client and Contractor as well as to Consultant Client, Sub-contractor. If the performance of the projects is not managed successfully, the parties are likely to fail to meet its goals that they had for the project associated with the quality management. Such failures may include the delay in schedule, cost overruns, quality, and safety and so on.

Quality management is a key to the successful management of quality management in construction project and is a managerial philosophy involving all member of an organization in term of meeting expectation of client. Tran Tuan Binh made a case study which main objective is to develop a framework to access and analyze quality management in order to make decision related to oil, gas and quality management in construction.

     

This study focused on several specific objectives as follow:

1. To identify the quality management in construction

2. To conduct quality management for project construction

The purpose of this research was to study quality management for construction project.

1. To study implementation of PVMPC quality management in construction

2. To state problems that occurred in the execution of quality project.

3. To give out some recommendations to treating principle soil improvement

4. To learn lessons from PVMPC project.

Conclusion

The quality management in construction project is very important and necessary in soil improvement project. Quality management considered in this study is appropriate and applicable in soil improvement of power plant project in Vietnam.

The purpose of project quality management in construction is to manage the quality in order to achieve the objective of the project such as time, cost, quality, safety and environment. In particular, quality management helps people involved as project manager.

Quality management in construction is setting priorities, allocating resources and implementing actions and process to evaluate the risk of project and reduce the cost.

Quality management utilizes knowledge and experienced people to analyze for the better decision making. It supplies better decision for the whole stage of project such as Project conceptual, Project planning, Project execution, Project terminations prevent or avoid risk.

 Management in construction is a very important part of project management process; it is a fundamental to achieve good product.

Concerning with the application of quality management in construction project, this study focused on two main objectives: (1) to identify the quality factor in the construction (2) to conduct a quality management study in soil improvement of power plant.

 

Recommendation

Considering the quality management application in soil improvement of Power Plan project, for the most effective quality management in construction, recommendation for improvement can be as follows:

In Vietnam, the project managers completely have awareness of the importance of quality management in soil improvement and its efficiency for success of the project. However, they find difficulties to conform factor: cost, time, quality with Client’s requirements.

In Author’s opinion, there are some existing main reasons which had to change and improve well if good project management is the goal:

1. Lack of Communication

2. Responsibilities are not assigned clearly enough to all members: client, design      consultancy, project manager, construction.

3. Cost estimate in national norm is not appropriate with actual case.

4. Complex legal procedures.

In conclusion, a good soil improvement quality management for every stages: engineering, procurement, construction, installation, hook up, pre-commissioning and commissioning in hand is very important. However, how to manage and control efficiently and effectively the performance of QMS can lead to success or failure of any projects especially the complicated and big projects in oil & gas governed by soil improvement quality management.

Abstract

In construction project, quality management is a very important sector using particular method to achieve the best practices in the project of company. Quality management is a systematic approach to managing unexpected issues circumstances related to a threat through a sequence of human activities including: Quality identification, Quality classification, and Quality control and Quality improvement

In the organization, there are some ways of quality management such as quality management in construction, quality management in operation and quality management in business.

The purpose of Quality management is to reduce risks. It may refer to numerous types of threats caused by environment, technology, human, and organization and politic. On the other hand it involves all means available for human, or in particularly, for a quality management entity.

The Green Building: Issues, Approach and Implementation

Sustainable development is the new trend in the world due to the need of human’s responsibilities to the environment, and green building in construction industry is also a part of this. However, this area is still a new thing for developing countries as Vietnam. There are many people talking about the green or sustainability but it’s very difficult to understand it thoroughly, what is it really and how to implement in each case.

At present, the demand and force of developing a green building is high.

Basically, the concept and guidelines for green building are very good but there are some reasons and factors that affect the projects which are the following:

1.       The market

2.      Finance

3.      Politics

4.      The resource

5.      The techniques, technologies and system

6.      The real-life experience

           

The aim of the green building is to reduce the negative impact to the environment. In other word, it’s also to conserve the natural resource. In order to achieve this aims, the projects must be designed as well as it can maximize the energy saving and minimize the cost for construction by using less energy & water.

As the result, all stakeholders of the project need to understand thoroughly what the green is and how to implement it during the project life cycle – especially from the concept to design stages that will affect strongly the next stages.

Furthermore, one building can only be called the green once it is certificated by an independent third party with a rating system.

Nguyen Huynh Trung Hai made a case study which objectives were to:

So in this report, the objectives of this study are:

1.       identify what drives green projects

2.      understand the basis of popular green building rating systems – especially the BCA Green Mark system (Singapore)

3.      study barriers and benefits of green building project in Vietnam; and to suggest the solutions for the barriers.

4.      propose a framework to implement green building in Vietnam.

Conclusions

1. The Green building in Vietnam construction industry

Based on all issues and problems, it can be said that green building will be the trend and good strategy for all developers, consultants and others in Vietnam.  The benefits that can get with green buildings are as follows:

1. long-term economic

2. productivity

3. the marketing

Moreover, the biggest benefits are the good supporting for environment and health for people’s working and living.

For BCA Green Mark’s (Singapore) green building assessment, it can be considered as a good and suitable system to apply in Vietnam. In BCA, the main requirements and criteria for the building are:

1. Energy efficiency

2. Water efficiency

3. Environmental protection

4. Indoor environment quality

5. Other green feature

2. The challenges in implementing the Green building

          Aside from the benefits mentioned above, the implementation in every country might have different challenges. In Vietnam, it will become more difficult due to lack of the knowledge in terms of technique and technologies because of no previous green building like this.

           Among the challenges, the key issue is the higher cost for the green project. Moreover, at this time, the economy going down, so this issue is really serious and it’s very difficult to attract the investors and others who want to join in the green building. In general, some main barriers in green building are:

1. Lack of technical and technology

2. Initial cost

3. Real life experience and non-educated green for people    

           Therefore, project management and the whole project team should have good project plans to lead the project based on the owner and market needs.

3. What drives green projects?

From the case study and literature review, there are some main factors that will drive the Green building to success such as: the owner’s project requirements and motivation, use the concept of commission and integrated design process, effective execution.

Recommendations

1. For the green building in this report

After studying the theories and the case study with the problems, issues and how to implement the green building in Vietnam, the recommendations for effective green building are as follows:

i) In the developing country as Vietnam, the green building is the new knowledge for most of people. Moreover, within the economic condition, the higher cost will be the serious barrier to attract the developers and other. So the problem is what the way to solve this issue. The most effective solution is the support from the government and community in term of the money. They can be the good tax and special permit with short time approval to encourage the developers and others.

ii) Vietnamese construction law should have the basic requirements to catch up the environment issues as the global trend.

iii) The government and community have to find the way to popularize the green concept for all residence understanding it basically.

iv) With the tropical weather and environment, Vietnam has a lot of natural material such as bamboo, refined brick… with very cheap price, present everyplace and can be reused to avoid the impact to the environment. So we have to consider this in spite of using the import material.

v) Combine the concept of eco-design – more concern about the aspects of architectural design – and the technique, technologies – concern about the mechanical aspect -  will make the green building more effective.

vi) The developer should select the good project team with the green experience and local condition that will affect the project to avoid, reduce and eliminate the risk for the project.

vii) All participants who want to join in the green building should start to think about the green with the long-term benefits. Especially this will be the key for the developers who understand what they want and invest their money directly into the projects.

viii) All project team should study for their own knowledge of the green building.

Finally, the green building requires high quality. Moreover, with very complicated parties involved, the project management and project team should have a clear, concise organization, roles, duties and responsibilities to avoid confusions and conflicts. Otherwise, the overrun of time and cost will happen.

Abstract

Nowadays, the sustainable development is the necessary and urgent trend for the global environment. Acting as one of the main parts of economic, construction industry also take part in responsibility for protecting the environment through the building designed with low-impact to environment. With the green building, there are many benefits to the environment and as the result; it’s also good for human working and living in life. Because of  the limitation of time and scope, this report only try to explore the main issues in the implementation of green building assessment system – especially the BCA Green Mark – in construction environment in Vietnam. Maybe the BCA Green Mark implemented for the case in this study is not popular in the world as other such as LEED, BREEAM, CASBEE… but at least it can explore the typical issues in the green building. From that case, we can learn some helpful lessons and use them as the historical data and references for other green buildings.

Project Materials Management for Telecom Steel Towers Vietnam

As Vietnam economy grows, the telecommunication industry also has develop to satisfy the demands for using the internet, voice, fax, data, multimedia, and entertainment of individual, community, and company etc. One of the important things in the telecommunication industry is infrastructure which has difficulty in erection for self support steel towers. Several problems have to consider. However, we need to analyze carefully the real cases for erecting the self support steel towers for telecom based on conditions in Vietnam which two main problems are:

1. Difficult geographical and topography conditions to access the construction sites to deliver materials.

2. Difficulties of fabricating the steel on site

These problems are different for each project because every project has particular geography and topography. The problems not only happen for purchasing and managing materials but also transporting materials to site. Nguyen Huu Phuc made a research to find out an effective project materials management for erecting self support steel towers for telecom based on real conditions in Vietnam.

Conclusions

The project material management is a major function in construction to assure quality, cost and schedule of project. The contractors can reduce project cost and can make more profit from project if he is good in project material management.

An effective material management is not only good in techniques for planning, monitoring and control of processes, materials and products at the site, office and factory but also is  good function to avoid the most frequently occurring problem and the most frequently occurring place or step of problems.

The planning is the first step to do the project material management. It is a blueprint to set up sound basis for project life cycle. Due to data of planning, the activities for processes behind the planning were determined. Thus, planning is major figures to get the success of project. If the actual work does not meet the requirement of the planning for schedule or budget, the project will fail.

The appropriate organization in construction for each project and for the success depends on personal skills of members and their geographical location in the department or on the site. The skills of members in organization are very important to do their tasks.

One more thing, the purchasing in the project must connect between planning for requirement and ordering of demand for material and equipment on the site. The purchasing ensures that materials and equipment are supplied with competitive price, on work schedule and has good quality. In purchasing, the relationship with suppliers and performance of suppliers are keys to have the effective material management.

For the transportation, the company can save the cost throughout the negotiated agreements or special agreement such as special scope of transportation work or special duty of transporters or special for handling and packaging. In addition, the survey for conditions of transportation also has the main role to eliminate the risk in the traffic.

The activities for monitoring and controlling of estimation, ordering, checking of the performance and surplus on the site are supported by requirement planning and actual work on the site. It affects project productivity and other factors in the project. Solving procedures for improving the site monitoring and controlling are requirements that the project manager must be consider.

According to the contract, the quality is always the most important provision. It involves all material management cycle and affects all project phase. Accordingly, quality assurance and control related with all responsible of contractor, suppliers and owner.

Recommendations

In order to improve actions and processes for project management in the future, from this study, some proposals are given to correct activities and reduce cost for materials in construction such as:

1. A plan for short interval planning, monthly planning and project planning should be written down and communicated to the related people. In planning for material management, the material that it has the high value, when comparison with project cost, must be cared first. The information for planning must be detailed and must comply with the scope. Besides, historical data and job review should be collected to help us to learn from past successes and failure. It is a tool to plan with accurate data to implement the work on site.

2. Top leader must support the organization for project material management and have the members with appropriate skill based on the scope of work. The individual must know his responsibility and his role in the organization.

3. The evaluated suppliers must be checked carefully not only with their history but also their performance in the present. The price, quantity, quality, delivery time, the rights and penalties must be defined clearly in the contract with suppliers.

4. The materials for the project must be tested to meet the standard on the sources before using on the site. When the site manager receives these materials, they must check again to ensure the quality of material that they use for work. In addition, the procedure work must be inspected and review to ensure the quality of products.

5. The communication for the organization and other parties must set up with appropriate ways to connect all related people. With good communication processes, the contacts of related people will be come easily to avoid the refusing actions.

6. For further study, the study should research deeply on material cost variance and behaviors of workers when they use the materials on the site to get more effective material management.

Abstract

The reported project relate materials management in construction and applications for erecting of steel towers based on real conditions of Viet Nam to identify an effective process of the project materials management for erecting steel towers in Viet Nam.

With using qualitative approach, the report explains more detail about project materials management when using the single case study to maintain the real conditions of materials management in the project to analyse the situations to find the problems and solution for it.

In this report, the documents will summarize the knowledge for the project materials management in project materials planning, in project materials logistic management, in supplier management, in project materials monitoring and controlling and focus on some problems in erecting of steel towers in Viet Nam.

Based on the knowledge for the project materials management and the case study, what are the advantages for the project materials management and the disadvantages are faced in erecting the steel towers in Viet Nam. For example: location, scope, size, transportation....

Besides, the analyses also provide some figures to prove the knowledge for the materials management in a logical and discuss about some effective materials management to find the conclusions. And then, the recommendations are established for the effective process in the future.

AIT Seminar Invitation: Managing Megaprojects in Developing Countries