Application Of Capital Structure Optimization Model For PPP Projects: The Case Study Of Civil Aviation Training Center Of Thailand

Civil Aviation has been recognized as one of the major developments of Thailand. Due to the establishment of the new infrastructure airport called “Suvarnabhumi”, the role of the aviation becomes more and more important to generate the national income. There have been numerous increases in the number of flights and passengers at the major airports in the recent years. All private Thai airlines have been allowed to operate all domestic routes as of September 2000, and international routes as of September 2001. Today, besides THAI Airway International, six private airlines are in operation and further deregulation is expected to allow more airlines to emerge. As a result, it claims for the need of the aviation training center to fulfill the requirement of the human resources for these developments. At present, most of the countries in the South-East Asia have to depend on the training centers of Australia for recruiting the human resources. So if Thailand can operate the aviation training center by itself, it will surely catch the attention of the neighboring countries and will get the good revenue from this project development.

Aviation training becomes one of the major issues as people are more and more interested in traveling by air. The development of the Aviation training centers is also essential to the Thailand due to the development of the new airport “Suvarnabhumi”. In another words, Thailand also becomes in the need of the human resources development in the aviation sector. However, the development of such a training center is not the easy task, especially concerning with the financing. It needs the assurance of the enough amounts of revenues and profits to overcome the project cost and expense. It also asks for the benchmarking with other institutes in the region to know what its competitive advantages that the institute has especially in the financing sector with the help of the proper financial model.

Many of the privatized infrastructure projects have the difficulties and problems in the financing structure. Financing engineering techniques and capital structuring skills are required to find the proper mix of debt and equity to achieve successful financing for the proposed project. There should be the systematic way of monitoring and controlling the financial condition in every project. There is the need for the development of the sound financial model for evaluating the financial viability of a privatized infrastructure project.

Mr. Aung Khin Tun made a study mainly aimed to investigate and synthesize application of capital structure model in the early stage Public Private Participation (PPP) projects development using modified parameters and variables. After the model has been developed, it was applied to determine the financial viability of capital investment program for the Civil Aviation Training Center of Thailand to enhance its service delivery. In accomplishing his main objective, the following sub-objectives had been accomplished: (1) to identify and adopt the financial indicators to be used in developing the financial model based on their applicability and characteristics; (2) to modify the capital structure optimization model to be used as fundamental criteria for investment decision making in the capital investment program; (3) to test the model and parameters thorough the scenario analysis using capital investment program of the Civil Aviation Training Center of Thailand (CATC); and (4) to recommend the consideration process for the project participants based on the investment degree in the equity levels.

CONCLUSIONS

Many capital investment programs have been developed across a wide range of industries with the help of privatization. Here, construction and financial risks are two major types of risks in these programs, where the capital structure affects not only the total life-cycle cost of the project that in turn affects its financial viability, but also affects the motivation and commitment of different participation to the success of the project. The evaluation of the financial viability of the project can help the participants to give the overall financial condition of the project on the long-term basis. In this research, the financial model to determine the optimal capital structure was developed for the investment decision making process. The model evaluates the program from the equity holder’s (often contractor) point of view. As a result, the model allows the decision makers to make early decision for capital structuring, hence association structuring to get the optimal capital structure.

From the result of the applicability of the financial model development for the capital investment program with the case study of Civil Aviation Training Center of Thailand (CATC), the following conclusions were formed.

1. With the easy input of parameters and variables, the financial model can come up with the useful figures and values to help the decision makers to know about the different scenarios.

2. The financial model developed reflects the characteristics of project finance and incorporates simulation and financial engineering techniques.

3. The model is mainly designed for the capital investment program, by taking accounts of the investment proportions of equity and debt structure, the concession period, and other items featured in the capital investment.

4. The model optimizes the capital structure and evaluates the financial viability of the investment program under construction and economic risks, and is subject to other constraints imposed by different participants such as minimum equity level and minimum DSCR.

5. In generating the model, Total Project Cost (TPC) is found as a function of equity with negative slope because less debt in capital structure means less interest during construction. Accordingly, TPC is a declining function of equity. As a result, more equity means less TPC, and thus less total investment cost for a project. This is one of the reasons why government favors high equity.

6. In determining the optimal equity level for the CATC Program, the maximum equity level that can satisfy the constraints and characteristics of DSCR, NPVp and IRR is selected.

7. Finally, the contribution of the financial model development will significantly facilitate both public and private sector in evaluating the capital investment program’s financial viability and collectively determining an optimal capital structure that safeguards their respective interests.

His thesis abstract is copied and posted.

ABSTRACT

The development of PPP projects has been growing rapidly, and numerous projects have been implemented around the world. Public-Private Participation (PPP), in other words, is the initiated combination of capital investment from the public sector and the private sector. One key aspect to the successful implementation of the PPP project in any country is the raising of finance by project sponsors. Financial engineering techniques and capital structuring skills are required to find the proper mix of debt and equity and to achieve successful financing for the proposed project. The objective of this research is to present a simplified model to determine the optimum equity level for decision-makers at the evaluation stage of the PPP project, which takes place after the completion of the feasibility study. The resulting model is the combination of optimization model developed in Microsoft Excel with the function of determining the optimal equity level from the equity holder’s point of view. To show versatility of the model, a real case study (Civil Aviation Training Center of Thailand) is conducted. Thus, this research is concerned with the determination of an equity funding level in PPP project development. There are different equity levels found in this kind of program, and there is a need for such a model to determine optimal capital structure, which would assist the project sponsors to ensure that the equity level necessary for optimal capital structure is available prior to the project implementation stage.

Risk Approaches For Making Go/No-Go Decisions By Thai Consulting Engineering Firms

Thai construction situation was fast moving before the 1997 crisis, but after the crisis, most of the consulting engineering firms are faced with many difficulties to reconstruct their firms. Most clients are afraid of unstable situations and so investments in construction business slowed down. Nowadays, however, there is more supply than demand in the Thai consulting engineering environment (Consulting Engineers Association of Thailand, CEAT, 2005). The numbers of consulting engineering firms in the current situation are more than before the crises because the foreign consulting firms, joint venture consulting firms are expanding their business in Thailand.

Moreover, most Thai consulting engineering firms are finding international projects especially in Southern Asia or developing countries now-a-days. One of the reasons is that there are not many jobs for consulting firm since the Suvarnabhumi international airport construction finished. Moreover, the globalization of international construction markets provides tremendous opportunities for consultants to expand into new foreign markets by allowing local firms to compete internationally (Construction Industry Institute CII, 1993). International projects involve not only the uncertainties that arise in domestic construction projects, but also those from the complex risks that are particular to international transactions (Lee and Walters, 1989: Hill International, 1995). Not only domestic/local projects but also international/oversea projects, risks associated with different projects are paramount. In the context of doing business successfully in local and international construction markets, consulting engineering firms need reliable risk analysis, risks reduction or mitigation strategies and decision making tools to make consistent strategic Go/No-go or take/not-take entry decisions.

Go/No-go decisions by consulting engineering firms are very complex due to the risk and uncertainty about many factors. Not only in local markets but also in international markets, risks have to be considered clearly before making go/no go decisions to the projects. No clear rules can be found in considering go/no-go decisions. In this problem domain, decisions are commonly made based upon intuition and past experience. If consultants make wrong decisions, they have to face a large loss in term of time, cost and other resources. Once appropriate go-decisions are made, consultants would get expected profit, potential projects, relationship etc.

Ms. Nang Kham Kyi Oo made a research which aimed to solve those problems by risk management, such as risk identification, risk analysis and risks reduction or mitigation strategies. The importance of risk factors that are concerned with go/no go decision making will be identified and evaluated, and then the importance of those risk factors on the profitability or consultant fee will be discussed. Then the risks reduction strategies will be identified and their effectiveness to local and international projects will be found.

The objectives of her research are: (1) to identify the major risk factors associated with local/domestic and international/oversea projects when making go/no-go decisions and the major risks factors affecting the profitability of a consulting engineering firm; (2) to rank the importance of the identified factors on go/no go decision making and on profitability; and (3) to identify the risk reduction or mitigation strategies being used in industry and determine the effectiveness of those factors on local/domestic and international/oversea projects.

Conclusion
The conclusion of this research based on the work carried out and the result of analysis are shown in figures in brief.


According to analysis, figure 1, the top five risks considered as important by Thai consulting firms before taking a project within Thailand are as follows. 1) Client’s cash flow, 2) impractical designs, 3) incorrect & insufficient design information, 4) lack of skilled staff and 5) current workload. Consulting firms can prepare to manage risks if they know which factors are most important in real life. Thus, design risk (risk 2 and 3) is very important.

Profit is the live blood for every consulting firm. But there are many factors that can reduce profit. Sometimes consultants do not know which factors must take in first priority. Figure 1 shows the top five risks affecting profitability in domestic projects. They are 1) Client’s cash flow, 2) unreasonable time, 3) payment schedule, 4) enough resources and lack of skilled staff. Knowing those factors which are affecting their profitability, firms can find the way to reduce the impact of the risks and can increase their profit absolutely.

Figure 1 also shows the effectiveness of top five risk mitigation strategies in domestic projects that can reduce the impact of risks considered in decision making and profitability for Thai consulting engineering firms. To diminish the impact of those risks, there are six risk mitigation factors considered as most effective for consulting firms. Not only these five mitigation factors, but also all factors have their own effectiveness. Therefore, consulting firms should assign mitigation factors and should practice as possible as they afford.

International/Overseas Projects

In figure 2, the top five risks considered by Thai consulting firms before handling international projects are shown. The importance indexes of each risk are calculated and rank in terms of the highest indexes. According to the result after analysis, most of risks are to be considered as important. Consulting firms should do risk management carefully before entering international consulting markets.

Similar to the top five risks considered in making go/no-go decision, most of risks are measured as important risks affecting profitability. All factors in domestic projects are included in international projects. The detailed are shown in figure 2. Not only these factors but also other uncountable risks are essential for international projects. Consulting firms must always aware the factors that can make their profit low down and find to increase the intensity of profit.

Figure 2 shows top risk mitigation strategies in international projects that can reduce the impact of risks considered to engineering consulting firms. As there are many risks involved in international practices, most of them are important to be considered. As discussed earlier, the sample size for international projects is quite small. Moreover international projects are more risky than local projects. Therefore, most mitigation factors are given high scores and considered to have the same effectiveness. As per figure 2, five mitigation factors are for design risks, four are for technical risks, four are for project risks, and two factors in cultural risks, one each are for economic risk and client risk. In conclusion, most mitigation strategies are effective for Thai consulting firms doing projects outside Thailand. Consulting firms should be careful in considering risks before accepting projects in order not to make wrong decisions that may affect their profitability adversely.

Her thesis abstract is copied and posted.

ABSTRACT

It is very crucial for Thai consulting engineering firms making take/do not take or go/no-go decisions to on projects not only for domestic/local but also for international/overseas projects. The reason is that there are a lot of risks involved in both local and oversea projects. Due to reduced demand in the Thai consulting environment, most large Thai consulting firms are venturing to overseas markets. However small and medium sized Thai consulting firms are still in local markets. Because of low demand and much competition, they have to accept lower consultant fee and it will affect their profitability. They accept a project with low profit because they need to work; need to retain the staff and for the company itself. Consequently, companies face a lot of risks when deciding whether or not to handle a project. This research aimed to help Thai consulting firms in making decisions before accepting projects by approaching risk identification (knowing which factors is most important) and risk mitigation strategies (how to reduce the impact of risks).

To achieve the objectives of the study, risks were divided into nine main categories with sub-risk factors under each main category for identification of the important factors for making decisions and the important factors affecting profitability. To reduce those factors, risk mitigation strategies are suggested for the nine main risk categories. Statistical hypothesis was done using the T-test to find out the differences in perception among two groups: Thai consulting firms doing only local projects and those doing both local and oversea projects. For this purpose, questionnaire survey was done on managing directors, board of directors, upper level management and engineers. Moreover, interviews were also conducted with three large consulting firms to know the detailed opinion and ideas.

Since the sample of consulting firms involved in oversea projects is quite small, detailed discussions for oversea project was not done. According to the importance indexes, top five risk factors and top five risk mitigation strategies considered to be most important when handling local projects are discussed in detailed. Moreover, the hypothesis was tested and showed that there are four significant factors considered in making decision, six significant factors affecting profitability and five significant factors for effectiveness in mitigation strategies among the two groups.

Technology Selection Practices In Building Construction Projects Through The Perspectives Of Design Consultants

Choosing the right type of technology to integrate into a building design is not an easy task and any miscalculations or incorrect selections can lead to increased energy costs, lower that average outputs, and insufficient amount of services or comfort for users. Problems in decision making are most notable in design phase for new construction where designers attempt to match building & product specifications, and installation phase for existing buildings.

This is categorized into 4 contexts, where the choice between using new technology and existing technology runs a thin line, more often than not, determined by architects & engineering consultants through Costs, Quality and Brand name of technology (Tuominen, 2001);
- Conceptual design
- Schematic detailing
- Design development stages
- Existing conditions for technology installation in building (requirements & performance),

This narrows a building designs scope that doesn’t allow for embracing different brand name products which may or may not provide better functions and services.

A recognized feature of building design practice is the need to make Changes to previous aspects of design as process continues. Iteration is often used where earlier details at one level must be adjusted or changed when more detailed issues are addressed, and when these changes in design occur there is often the need for change in technology specifications to meet the new design details.

Only in standardized design situations can effective technology selection and procurement be done without back tracking or making changes, such as in residential building and hotels (Garud, 1997).

In retrospect, preliminary meetings between myself and Architects & Engineers from design firms based in Bangkok, Thailand, has revealed that “Many Designers choose Technology products from suppliers and manufacturers whom they have a good working relationship with, or have used their technology in past projects”. It was also revealed that Designers in the construction industry are reluctant to embrace new suppliers or manufacturers in the market, as their products are untested for success or failure in construction projects and there is high risk in embracing these new technologies.

As mentioned previously, the development of technology for buildings and infrastructures has become one of the fastest growing markets in today’s economy, with multitude of products becoming more increasingly available to clients, designers and the general public alike. With this choice and availability comes the most commonly asked question in technology selection: Which One?

In today’s markets, Costs and Brand name alone cannot be seen as good measures for technology selection. A wide range of parameters must be considered, some of which include product lifecycle, maintenance and spare parts, certification and governmental standards, etc. Therefore, taking all these parameter into account, the problem becomes apparent;

“There is a need for suitable Decision-making & Selection Methods / Techniques for choosing the most appropriate M&E building technology systems for any one given construction project.”

In addressing the problem of choosing the right type of technology for any building project, and considering all factors which affect technology design & development, Mr. James Suvanaphen made a research which the core objectives were to: (1) investigate Current Technology selection practices in the construction industry; (2) design a Process & Decision model portraying an efficient selection technique; and (3) examine effectiveness of both models from its use by a Design professional.

To assess the success or failure of the both Process & Decision model on a Design project by way of Survey feedback on its usefulness from potential users, i.e.; Architects and Engineers.

This study focused on the trends of current technology in Building construction, looks at its usage compared with existing technology, and attempts to portray an efficient technique in technology selection for the benefit of any one construction project, in terms of financial costs, innovation, procurement and sustainability.

One of the main purposes of supplementing the Process model is to create guidelines for Consultants in selecting M&E equipment for various Building projects, through development of a Technology Comparator; a technology awareness tool that consultants can use to determine feasibility of using different M&E technologies in projects by looking at parameters such as design, functions, procurement, etc (This term is later referenced as the Decision Model)

Outcome of Model implementation in the Construction industry

The final analysis of this research study involves examining the feasibility of both the Process & Decision model when used by Architects and Engineers in the Construction Industry of Thailand. This analysis is concurrent with the 3rd objective of CHP 1 to examine model effectiveness. To start off, one copy of both the Process & Decision models were sent to an Architectural design consultants firm* based in Thailand for their use and assessment**.

The models were sent in late March 2007 and feedback was received towards the end of April 2007. This feedback came in the form of a written statement from the firm, as an overview of the opinions of many of their Architects regarding the feasibility of both models. It should be noted at this point that both models were not fully used by the Architects due to the lengthy process time it takes to implement the use of the models, and the short assessment time of this analysis. A summary of this feedback statement is presented below;

In evaluation of both models, it was discovered that not everyone at the Architectural firm was keen to use a Decision model as they may see it as a relatively time consuming exercise rather than a measurement tool. However, it was also relayed that the Architects were keener to use the Process model because it shows the selection process from a broader perspective and visualizes “the big picture” in technology selection. They had commented that the Process model in itself portrayed an effective selection technique which, given more time, they would like to use on their projects.

In regards to the Decision model, some positive comments were made about the model as portraying a clear view of the selection process, similar to the Process model. However, other comments relayed that the technology selection chart used a rather crude method of assigning values, and there were suggestions of using a more precise numerical rating method, such as Fuzzy sets. Nonetheless, it was stated in the objectives of this study that the chart would portray a simple calculation method that everyone would understand.

It was also discovered that the lead & response time from Building services contractor in reviewing and selecting appropriate suppliers was taking too much time, and may cause minor delays in the long run of using the models. However the firm also stressed that it is Building services contractors who were more qualified to select these suppliers as they had or would have to work with them in inspecting, installing and commissioning all building technology products

One final piece of information that was conveyed during this final analysis from the Architectural firm was that in the Building technology industry, hindsight had led them to believe that the one method that Architects and Engineers use the most to select their technology products is their experience with past products and suppliers. This is because they had successfully used technology in past projects and feel that they can rely on this same technology or suppliers for use in their new projects. The firm assumed that people involved in the selection process would be unwilling to try new technology products that are released into the market as there is a high risk involved, from not knowing if the new product can be successful in new projects or not.

*: This Architectural firm reserved the right to remain anonymous during this final analysis.
**: A similar copy of both models was sent to an M&E engineering consultants firm in Thailand as well, however no feedback was received in time to convey a final assessment from their point of view. Therefore their inclusion in this evaluation had to be voided under these circumstances.

Discussion

The models proposed in this Research study are basically attempts to simplify and organize the Technology product & Supplier selection process. It matches considerations which are important to decision makers who need to make selection decisions. Since decision makers should be directly involved with the selection process at each of its stages, support tools (either manual or computer based) may be essential to implement any single technique used, and the models leaves the choice of components or parameters to be used in any of these techniques up to the decision makers. This generic approach also allows each component or parameter chosen to be integrated into a decision support system which provides far better and more acceptable selections than those which can be generated by any single technique discussed throughout this Research study. Because of the concept of using “stages”, it is possible to eliminate certain stages if the model user finds it more efficient to do so. It is suggested to users that after their first application of the models, strategy development and component or parameter selection need only be reviewed as required, and not every time a new technology system is re-considered. Also, Technology screening is discretionary since it is used only to reduce the number of Products in the selection stage. This may not be needed if the number of Products is small or if there are interdependencies among all the Products being considered.

Conclusion

This research study addressed the current problems facing Architects and Engineers in the selection of suitable Building Technology products for any Construction project, and attempts to suggest many solutions to alleviate these problems. These solutions initially come in the form of 2 generic models based on current technology components & parameters used in the industry. However, in the end the choice of Technology product ultimately rests with the client, being the governing body that is investing in a project, therefore they dictate how their money is spent. The only thing that Architects and Engineers can really do regarding Technology selection is advise the clients and make potable suggestions as best as they could.

But this does not mean that the process of Technology selection should be taken for granted. As shown throughout this research study, technology selection techniques are essential in providing the most efficient measurement & awareness tool to get the most suitable machines and equipment there is for a building project. Current issues surrounding technology selection such as energy saving, sustainability and alternative energy sources are being addressed at the economic global level, and will affect the way a supplier designs and manufactures their product. It is hoped that the research and solutions presented in this study will help all parties involved in making the right choice in technology selection, both now and in the future.

His thesis abstract is copied and posted.

ABSTRACT

This Research Study aimed to examine the impact of Supplier selection on Building technology selection in a Construction project, and the outcome of comparing one technology product against another to assist Architects and Engineers in making the correct choices in the selection and decision making process. In doing so, its main objective was to design potent models which could be applied to the technology selection process and used accordingly.

In this Research study, details regarding the current industry practices of the UK and Thailand were analyzed to form models of the current techniques being used today. A survey of Architects and Engineers was also conducted to gather more information and data straight from design professionals in the field of Building technology. This survey took the form of interview and questionnaires with professionals in the UK and Thailand.
Analysis of all these data resulted in extracting components and parameters for use in the design process of a Supplier selection and Technology comparison model as mentioned above. These models were then supplied to an Architectural firm for their use and assessment of its feasibility as an efficient measurement tool.

Professional Masters in Project Management and CEIM Graduation Photo

Dear All


MPM2 Vung Tau, MPM2 HCM, MPM1 Hanoi and PETRAIT and CEIM programs finally received their degree in December 2009 in AIT Main Campus Thailand.

Everybody look very happy in the photo.

Congratulations!

The name of the graduants and project case study topic:

Name - Thesis or Project Case Study Title

Nguyen Van Tam - Claims in Building Project in Public Sector ; Case Study in Mekong Area, Vietnam.

Karma Gyamtsho - Collaboratie Strategy Between Stakeholders of Hydropower and Power Intensive Industry in Bhutan.

Sonam Tobgay - Construction Claim Types and Causes: A Study of Tala Hydroelectric Project, Bhutan.

Willy Sanjaya - The Characteristics of Innovative Construction Project: A Study in Thailand Construction Industry.

Andi Sanjaya - Strategy in Working Capital Management under Adverse Economic Condition: A Case Study of Indoesia Construction SMEs.

Dang Dinh Lam - Design Management for Architectual Project: A Case Study of PVMTC-Petrovietnam Building Project.

Phan Vu - The delay factors in building construction stage - a case study of office builing in HCMC., Vietnam

Tran Thi Nguyen Cat - THE COMMUNICATION IN DESIGN PROCESS BETWEEN THE EMPLOYERS AND CONSULTANTS

Phan Hong Hoan - Factors causing delay in construction project - a case study of commercial construction project in HCM city

Le Hoai Viet - APPLICATION OF PROJECT MANAGEMENT FUNCTIONS IN SMALL CONSTRUCTION COMPANIES: CASE STUDY OF SMALL CONTRACTORS IN HOCHIMINH CITY

Nguyen Canh Toan - COMMUNICATION MANAGEMENT WITHIN CONSTRUCTION PROJECT TEAM: A CASE STUDY OF CONDOMINIUM PROJECT IN HO CHI MINH CITY

Le Khac Bao - The Construction Logistic for pre engineering building (PEB) construction

Bui Van Cuong - PRACTICES OF CONTRACTOR OF SCHEDULE/COST PLANNING AND CONTROL - A CASE STUDY OF RESETTLEMENT HIGH-RISE BUILDING PROJECT IN HO CHI MINH CITY

Nguyen Phong - Matrix structure in small scale & fast track construction project - A case study of fitting out & interior project

Bui Giang Nam - Focus on Fabrication and Erection of Steel Structure

Tran Hong Quan - Project Owner’s Quality Management System – A case study of Estella Residential Development Building Construction Project

Nguyen An Khe - SOME CASE STUDIES COMPARING THE ROLE OF ENGINEER BETWEEN VIETNAMESE AND FIDIC CONTRACT

Hoang Ngoc Anh Focus on Risk in New Urban Infrastructure Development Project

Nguyen Thi Thanh Truc CLAIM MANAGEMENT AND ANALYSIS CASE STUDY OF HYDROPOWER PLANT

Nguyen Hoang Anh Chuong In New Residential Development Project ; Focus on Cost and Financial Management

Nguyen Huynh Trung Hai GREEN BUILDING : ISSUES, APPROACHES AND IMPLEMENTATION.

Nguyen Duc Hung Project delay in machenical factory construction project

Nguyen Huu Phuc Project Materials Management for Telecom steel Towers erected project in Vietnam

Hoang Don Dung Safety and Quality Management for Construction Temporary Structure with Reference of Construction Regulation and Contract in Vietnam.

Pham Thi Ngoc Hien Cash flow projection management in small – medium sized Vietnamese Contractor

Nguyen Anh Kiet QUALITY MANAGEMENT IN DESIGN PHASE OF CONSTRUCTION PROJECT

Mr.Truong Quang Dien Delays in construction project in Vietnam, causes and effects

Mr. Hoang Huu Cam A case study of delay in commissioning actitvity of Phu My Gas Distribution Center Project, Vietnam

Mr. Tran Dang Thuyet Owner’s EPCI Contract Management for Oil and Gas Development Projects – A Case Study of Vietnam Oil and Gas Project

Mr. Pham Xuan Thinh Some main factors affecting quality of construction projects- A case study of Expanding phase III port – Petroleum technical service base in Vung Tau, Vietnam

Mr. Le Van Thong Quality management in construction project

Mr. Do Van Hanh Contract management-how owner can responsible to change order in Oil and gas project management

Ms. Pham Thi Thuy Giang Subcontractor management of pipeline construction project

Mr. Phan Tuong Liem Engineering, procurement, construction (Epc)contract management- Case study: epc contract management for rang dong full field development block 15-2 offshore vietnam

Mr. Tran Tuan Binh Quality Management and soil improvement of PVMPC

Mr. Nguyen Sinh Khang Owner's Project cost management approach: A Case study of underground oil storage cavern project in Vietnam.

Mr. Dang Viet Cuong "FACTORS INFLUENCING TO BENEFIT OF PROJECT
A CASE STUDY OF PETROVIETNAM HOTEL
COMPLEX PROJECT"

Ms. Pham Minh Nga "Integration of Gas Gathering System in Oil Field Development Project
A solution for Offshore Oil Field Early Development - CASE STUDY: GAS PIPELINE SYSTEM FOR BLOCK 16-1 TGT FIELD &
15-2/1 HST – HSD FIELD DEVELOPMENT


"

Mr. Nguyen Dinh Duong DELAYING CAUSES IN SUB-PROJECTS OF THE HO CHI MINH NATIONAL HIGHWAY CONSTRUCTION PROJECT

Mr. Tran Dang Manh Customer-driven strategy and KPIs using CRM approach- a case study of construction enterprises in Vietnam

Mr. Bui Tien Dung "CONTRACT CLAUSES IN EPC thermal power PROJECTS - A CASE STUDY OF Hai phong thermal power PROJECT
"

Mr. Pham Quoc Hung QUALITY MANAGEMENT SYSTEM FOR MANUFACTURER AND CONTRACTOR OF PRE-CAST PILE FOUNDATION

Ms. Nguyen Thi Thu Huong DELAY CAUSES IN THE CONSTRUCTION OF THE REFINERY PROJECTS IN VIETNAM– A CASE STUDY ON THE DUNG QUAT REFINERY PROJECT.

Mr. Vu Dinh Duy "CONTRACT CLAUSES IN EPC CONTRACT - A CASE STUDY OF DINH VU POLYESTER PROJECT, HAI PHONG, VIETNAM
"

Mr. Le Tu Anh "MARINE FACILITY DESIGN AND ITS IMPACT TO PROJECT COST IN
REFINERY PROJECT -A CASE STUDY OF NGHI SON REFINERY AND PETROCHEMICAL COMPLEX PROJECT
"

Mr. Dinh Van Ngu "MANAGING THE PRECOMMISSIONING AND
COMMISSIONING PHASE IN EPC CONTRACT
A CASE STUDY OF DUNG QUAT REFINERY PROJECT, QUANG NGAI, Vietnam
"




Regards
Hadikusumo

Analysis Of The Dynamic Behavior Of Office Building Demand And Supply

The 2000’s have claimed as the most fluctuated decade of the Thailand’s real estate economic as well as overall economic. Before 1997, the Capital Companies go abroad to do the road show exhibition and bring back a lot of money to the country. This situation created the economic that the academician called “Bubble Economy” (The economic that speculates the profit is more than the fundamental economic). This Bubble Economy encouraged the Real Estate Market to have highest growth, the land and stock price went up also with the loan interest rate. Thai people expended money more than usual (Thai people expend money around 10% of GDP).

From GDP graph the Bubble Economy can stay for a while. So in the early 1996 the problems of the economic happen, the GDP (Gross Domestic Product) of the country reduce 8.2% because of the principal’s enlargement. Institutional Investor Magazine, Standard & Poor's, Fitch And Moody's reduce the credit rank of Thailand from A to Ba1 that make untruth to the foreign investors. The foreign investors withdraw the capital from Thailand (call the loan back to their country) that effect to the Real Estate Economic. So in the late 1996, the foreign companies didn’t give any loan to Thailand that made the Financial Institution be illiquid. Finally, 1997 the Bubble Economy was broken and the real estate market was dead end. Thailand came to the economic crisis and the economic went to down turn.
(Source: Institutional Investor Magazine, Standard & Poor's, Fitch And Moody's, 1997)

In 2000 the government tried to recover the economic by using the public finance strategy to stimulate the economic. The strategy effect on the interest rate of the loan because the government wanted to reduce the interest to activate the economic and reduce the debt responsibility of the government. The interest rate reduce from 15.25 - 15.50% to 11.50 - 12.00% in the end of 1999 and 8.25 - 8.50% and 8.00 - 8.50% in March 2000. Because of the low interest rate of loan the investors tried to invest in the economic again and help the economic went up. When the economic went up the real estate economic was come to the up turn also. But the up turn didn’t take a long time.
In 2006, the Government Housing bank does the research “The model to predict the trend of the real estate in Thailand”. That research indicate that the demand of the people who live in Thailand in any kind and prize of the real estate is 257,130 units in 2003 and has trend to increase to 294,966 in 2007. The supply of the real estate in 2003 is 207,575 units. So in 2000-2005, the real estate market is stay at up turn. Although the demand is going up but the research indicates that after 2006 the real estate market will be saturated because of the problem in the overall economic again due to the oil prize and the political aspects.
(Source: Government Housing Bank, 2006)

From the information we can see that the real estate in 2000’s decade was fluctuated and hardly to predict combined with the rarely system analysis of the overall office market in the past researches. In order to understand and predict the trend of the Real Estate and office market Economic, it is important to develop the factor and economic model of the real estate economic. The model is in the form of a computer simulation which employs the conceptual framework and methodology of “System Dynamics,” developed by Jay W. Forrester in the 1960’s at the Sloan School of management at the Massachusetts Institute of Technology. The model can be used as a forecasting tool in various assumption and factor such as, interest rate, political and macroeconomic.

Mr. Apinun Tantiviriyapan made a research which aim was to solve the problems. His objectives were as follows: (1) to identify the factors that affect the office market; (2) to identify the relationship between those factors and between factors to the office market economic and generate causal loop diagram; and (3) to develop the System Dynamic Model of the Office market Economic

Conclusions

The objective of this modeling exercise was firstly to understand the mechanism of various endogenous and exogenous parameters affecting the change of Gross Domestic Product, Demand of Office Building and Supply of Office Building. Gross Domestic Product, Demand of Office Building, Supply of Office Building, Inflation Rate, Interest Rate, Exchange Rate, Consumption Expenditure, Investment, Net Export, Cost of Material, Cost of Labor and Rental Prize are the primary focused variables within the economic boundary. Secondly, to identify the relationship between those factors and between factors to the office market economic and generate causal loop diagram. From the relation historical data was use to develop relative equation at each main component.

Change Gross Domestic Product is affected by Demand of Office Building, Supply of Office Building and Net Export. Demand of Office Building affects Gross Domestic Product in positive way same as Supply of Office Building and Net Export.

Change in Demand of Office Building is affected by Investment, Consumption Expenditure and Government Spending – Tax. Investment, Consumption Expenditure and Government Spending – Tax have positive relation to Change in Demand of Office Building.

Change in Supply of Office Building is affected by Cost of Labor, Cost of Material and Rental Prize. Rental Prize plays a positive relation to Change in Supply of Office Building but Cost of Labor and Cost of Material play a negative relation to Change in Supply of Office Building.

Economic Condition is measure in term of historical data index. This model structure is based on the literature reviews and the information gathered from the interview conducted with the different parties namely Office Development and Contractor Companies and Academic Institution.

Finally, a dynamic simulation mode was build to represent the perceived mode was built by using the system dynamic methodology. Simulation describes the current behavior and the inferred future. From the result of the simulation, we can develop the pattern of main components and conduct several test to ensure the result.

Several tests such as Unit Consistency Test, Boundary Test and Sensibility test was brought to develop the confidence of the result compare to the real world. The model was applied to the investigation for various components affecting office economic. The simulation trend will give guild line for the investors, developers and contractors to understand the behavior of Office Build Market. This guild line also help in decision making process to make better decision.

His thesis abstract is copied and posted.

ABSTRACT

To understand the office economic behavior, Demand, Supply and Gross Domestic Product are main components that should be defined the trend. There are a lot of factors and variables that affect the trend of main components. This research investigates the impact of various components on the Gross Domestic Produce, Demand of Office Building and Supply of Office Building

The objective of this modeling exercise was firstly to understand the mechanism of various endogenous and exogenous parameters affecting the change of Gross Domestic Product, Demand of Office Building and Supply of Office Building. Secondly, to identify the relationship between those factors and between factors to the office market economic and generate causal loop diagram. Finally, a dynamic simulation mode was build to represent the perceived mode was built by using the system dynamic methodology.

From the result of the simulation, we can develop the pattern of main components that can use as a guild line for the investors, developers and contractors to understand the behavior of Office Building Market. This guideline also helps in decision making process to make better decision.

Safety Program Performance In The Thai Construction Industry

The construction industry has always been recognized as a hazardous industry because there are a large number of work-related accidents and fatalities (Abdelhamid and Everett, 2000; Mohamed, 2002; Tam et al., 2004). For each year from 1997 to 2002, statistics reported by the Department of Labour Protection and Welfare of Thailand revealed that up to 100 construction workers lost their lives on construction sites, and this is the highest rate of all industries. In other countries, the accident rate in the construction industry remains at a higher level than in other industries despite a downward movement in recent years (Jaselski and Suazo, 1994; and Suraji et al., 2001).

In Thailand, early attempts were made by the government in 1996 to encourage the utilization of safety programs in the construction sector by legally requiring the main contractors of construction projects to establish and implement safety programs and to be accountable for all expenses associated with their implementation. To fulfill the safety legislation, in 2002, comprehensive guidelines for safety program implementation were developed by the National Institute for the Improvement of Working Conditions and Environment (NICE). The purpose of these guidelines was to assist contractors in managing workplace safety by incorporating safety programs into their business management systems. It was proposed that the following key safety programs must be integrated into day-to-day operations on every construction site: safety policy, safety organization and responsibility, administrative laws and regulations related to safety, safety induction and training, hazard control programs, safety inspections, in-house safety rules, safety control for sub-contractors, safety audits, accident investigations, safety-related promotions, first aid services, emergency preparedness planning, and safety recordkeeping. This provision provided specific guidelines on how construction firms organize and manage their projects to provide high safety standards for their employees as well as the public.

However, according to Siriruttanapruk and Anantagulnathi (2004), improving construction site safety in Thailand still remains a formidable problem due to a limited amount of resources available to governmental and non-governmental safety institutions to carry out inspections and to give advice and guidance for implementing safety programs adequately. Additionally, they point out that safety program implementation is often neglected on construction sites and rarely managed correctly. The use of safety programs is often discussed in management meetings as a priority, but instead it is given a low priority for management commitment and resource allocation. Michaud (1995) stated that safety programs should be fully integrated in a company’s injury prevention efforts because successful companies throughout the world all have outstanding safety and health programs. Furthermore, Findley et al. (2004) showed that there is no absolute model of safety program to follow but safety programs can be successful if they contain the appropriate elements that fit with working environments.

Mr. Thanet Aksorn made a research which general objective focused on comprehensive exploration of specific aspects of safety program implementation. His was to assess the relative performance of various safety programs implemented in the Thai construction industry. To achieve the broad objective, his study had two specific objectives such as follows:
· To investigate the effectiveness and efficiency of safety program implementation in the Thai construction industry.
· To identify critical factors of successful safety program implementation.

Conclusions

Conclusions of Safety Performance Measurement
Both proactive and reactive measurements of safety performance were conducted in this study. By taking a measure of reactive indicators, it was found that, overall, approximately 77 accidents happen on construction sites every million working hours. The averages of accident rates of large-scale and medium-scale projects were 45.15 and 107.73 per one million man-hours worked respectively.

Furthermore, field observations for unsafe acts and unsafe conditions were carried out as a proactive safety measurement. Firstly, it was found that that approximately 30% of all observed working practices of Thai construction workers were unsafe. Secondly, field observations showed that nearly 37% of all observed working conditions of Thai construction projects departed from an acceptable standard. This would be partially responsible for serious accidents, injuries or even deaths of workers at construction sites. More particularly, it was found that averages of unsafe condition indices of large-scale and medium-scale projects were 35.08% and 37.53% respectively.

Elements of an Effective Safety Program for Construction Safety Performance Improvement
The results show overall that five safety programs, namely safety record keeping, safety inductions, control of subcontractors, safety committees and safety training, have very high mean scores. It was implied that these five programs have been given the highest attention within construction projects.

However, more emphasis needs to be placed on those factors with an unsatisfactory status. It can be seen that five factors, namely job hazard analysis, emergency preparedness planning, first aid programs, safety incentive schemes, and selection of employees, have the least mean scores. It was therefore suggested that management should pay greater attention to improve these five programs’ standards.

Elements of an Efficiency Safety Program for Construction Safety Performance Improvement
In light of this study, construction managers can use these quantitative results to effectively and efficiently implement their safety programs in achieving improved construction site safety performance. The table below provides a summary of the key safety programs which were found to be effective and efficient in reducing accidents, minimizing unsafe acts, and eliminating unsafe conditions.

Critical Success Factors for Safety Program Implementation
The results showed that “appropriate safety education and training” was the best actual status factor among 16 factors. The overall ranking of the 16 CSFs sorted by level of actual status was: (1) appropriate safety education and training, (2) clear and realistic goals, (3) safety equipment acquisition and maintenance, (4) delegation of authority and responsibility, (5) good communication, (6) personal motivation, (7) personal attitude, (8) personal competency, (9) continuing participation of employees, (10) management support, (11) program evaluation, (12) effective enforcement scheme, (13) teamwork, (14) positive group norms, (15) appropriate supervision and (16) sufficient resource allocation. In addition, Spearman’s rank correlation was used to test the relationship between rankings of the two different groups of respondents. It was found that there was a strong conformity in the rankings of actual status of those 16 factors between the two different groups of respondents.

Furthermore, the results also revealed simultaneously that “management support” was the most influential factor for safety program implementation in the Thai construction industry. The overall ranking of the 16 CSFs in the order of the degree of influence was: (1) management support, (2) appropriate safety education and training, (3) teamwork, (4) clear and realistic goals, (5) effective enforcement scheme, (6) personal attitude, (7) program evaluation, (8) personal motivation, (9) delegation of authority and responsibility, (10) appropriate supervision, (11) safety equipment acquisition and maintenance, (12) positive group norms, (13) sufficient resource allocation, (14) continuing participation of employees, (15) good communication, and (16) personal competency. Additionally, there was a strong consensus on the rankings of degree of influence of those 16 factors between the two different groups of respondents as indicated by Spearman’s rank correlation test.

By using a Factor Analysis technique, the identified CSFs were grouped into four major dimensions labeled as (1) worker involvement, (2) safety prevention and control system, (3) safety arrangement and (4) management commitment. “Worker involvement” referred to creating favorable safety attitudes and motivation of workers which largely depended on constructive norms of the workgroup and their degree of their participation in safety activities. “Safety prevention and control system” required an effective enforcement scheme, appropriate supervision, equipment acquisition and maintenance, appropriate safety education and training, program evaluation, and staffing by qualified persons in order to successfully implement a safety program. “Safety arrangement” involved setting up proper mechanisms to disseminate information to all people concerned, assigning clear authorities and responsibilities to everyone at all levels, and allocating adequate resources to safely carry out activities. “Management commitment” consolidated the safety program implementation through visible support of the highest ranking members of management, which also included encouraging all employees to achieve success through team spirit and setting realistic and achievable safety goals which could be accomplished.

Furthermore, to prove whether or not those 16 CSFs have a positive impact on safety standard, three construction projects were selected as case studies. The results proved that on construction projects where all CSFs, and not just one or a few, were given proper attention, a higher standard of safety performance can be achieved.

Gap analysis was further carried out to determine how to improve safety programs. This analysis suggested that larger gaps between degree of influence and actual status of success indicate more unsatisfactory practices. Thus, correcting the factors which have large gaps must be emphasized more strongly. This study also found that the first five critical problems of safety program implementation are management support, appropriate supervision, sufficient resource allocation, teamwork, and effective enforcement scheme. These five priority factors should be given more attention in order to achieve a satisfactory level. Meanwhile, there are five factors, namely ‘delegation of authority and responsibility’, ‘good communication’, ‘clear and realistic goals’, ‘appropriate safety education and training’, and ‘safety equipment acquisition and maintenance’, showing satisfactory practices as characterized by very small gaps.

Practical Implications for the Industry
This study proposed a self-regulatory safety management approach, where the implementation of safety programs is demanded, for managing construction site safety. Indeed, successful safety programs do not need extensive elements, but should at least include the critical elements (Tam and Fung, 1998; Poon et al., 2000; Goldenhar et al., 2001; Hinze and Gambatese, 2003; and Findley et al., 2004). A total of 17 safety programs were identified and evaluated extensively to discover which are the key safety programs for achieving improved safety performance. In the light of this research, construction companies where the need for improving safety performance is obvious should take the following practical recommendations into further consideration.

A close examination of the results of effectiveness and efficiency studies showed that some of the programs are uniquely identifiable as different form others and some overlap. By integrating the results of the study, the following safety programs are proven to be the most effective and efficient practices in reducing the possibility of accidents, occurrences of unsafe acts, and unsafe conditions.

1. Accident investigations: all cases of accidents, even near-misses, should be thoroughly investigated, documented and statistically analyzed to some extent.
2. Safety inspections: safety inspections should be conducted at regular intervals or as appropriate to discover hazardous conditions and unsafe practices before such hazards cause accidents.
3. Control of subcontractors: subcontractor safety requirements should be adequately defined and enforced.
4. Safety incentives: a mix of financial and non-financial incentives should be invested to raise safety awareness, reinforce safe behaviors and counteract unsafe behaviors of the workers for the purpose of eliminating undesired events.
5. Safety committees: the safety committee is a diverse group of representatives of management and employees working together in a non-adversarial, cooperative endeavor to create and maintain a high level of safety at job site. More specifically, a safety committee is created to perform workplace inspections, review accident and injury records, and make recommendations for safety improvement.
6. Safety record keeping: a good recordkeeping system enables the root causes of work-related accidents to be identified correctly; therefore, effective corrective actions can be provided. All of the safety records as required by Thai OS&H standards must be kept and maintained.
7. Job hazard analysis: all construction-related activities should be identified and listed in order to identify any potential hazards associated with them. Job hazard analysis should be made with input from job-involved workers.
8. Safety orientation: prior to authorizing new employees to perform their assigned jobs, safety orientation should be carried out to create safety awareness as well as to alert newcomers to work in a safe manner, and to report any unsafe conditions or other hazards encountered at work.
9. Safety auditing: a safety audit is an effective means of identifying deviations from general standards; analyzing events leading to such deviations, and highlighting good practices, which in turn can serve as feedback to the company for providing corrective actions.
10. In-house safety rules: a company’s safety policy is generally translated into safety rules. Safety rules are designed to provide basic guidance for safe operating practices and procedures (Hale and Swuste, 1998). All rules must be strictly enforced for all employees without exception.

Construction projects could have an outstanding safety performance if all suggested safety programs are implemented in a quality manner. However, to ensure the attainment of the safety success, there are critical activities that should receive constant and careful attention from management. Given that, the implementation of safety programs may perhaps fail catastrophically if careful consideration is not given to the following important prerequisites:

1. Management commitment: management cannot just say that the implementation of safety programs will occur on site. Management must demonstrate strong commitment by identifying and devoting the needed resources to each program so that they are carried out in a quality manner.
2. Worker involvement: successful safety programs largely depend on employee involvement as workers tend to support the activities that they themselves help to create. Workers should therefore be given the opportunities to provide input into the design and implementation of safety programs, such as being a member of the safety committee, reporting hazards and unsafe practices to supervisors, identifying training needs, investigating accidents, etc
3. Safety prevention and control system: in construction, workers are prone to different hazards and risks every workday due to the unique nature of the construction industry. An effective prevention and control system with elements such as an effective enforcement system, supervision, safety-related equipment acquisition and maintenance, appropriate safety education and training, personal evaluation, and program evaluation should be established and fully adopted.
4. Safety arrangement: the effectiveness of a safety program depends largely on the level of resources allocated, including sufficient staff, time, money, information, methods used to work safely, facilities, tools, machines, etc. To successfully implement safety programs, it has been suggested that the lines of communications between management and the workforce should be clearly established.

In light of this study, it was found that safety performance at construction projects could be improved if the above-listed safety programs are implemented in a quality manner. Nevertheless, to achieve the ultimate goals and objectives of safety program implementation, there are key activities or known as “Critical Success Factors (CSFs)” that should receive major concerns from management. Given that, the implementation of safety programs may perhaps fail catastrophically if the following key activities are not performed well: (a) clear and realistic goals, (b) good communication, (c) delegation of authority and responsibility, (d) sufficient resource allocation, (e) management support, (f) program evaluation, (g) continuing participation of employees, (h) personal motivation, (i) personal competency, (j) teamwork, (k) positive group norms, (l) personal attitude, (m) effective enforcement scheme, (n) safety equipment acquisition and maintenance, (o) appropriate supervision, and (p) appropriate safety education and training.

At this point, for successful safety program implementation, the missions of those key activities must be simultaneously accomplished. A construction project where all critical success factors are given appropriate attention at satisfactory level will almost certainly have excellent safety performance.

His thesis abstract is copied and posted.

ABSTRACT

The construction industry has been globally regarded as a relatively hazardous industry. It has always been reported that fatal accidents and injuries in construction remain consistently at a very high level despite a significant downward trend in recent years. Similarly, in Thailand, the construction industry has faced a wide range of challenges, one of which is the frequent occurrences of accidents at the workplace. Safety programs are now considered to be one of the most important approaches to eliminating work-related accidents and injuries. An effective safety program can substantially reduce accidents because it can help management build up safer ways to operate and create safe working environments for the workers.

The Thai Government has taken significant steps to improve safety in the construction industry by promoting the establishment of safety programs at the enterprise level. It has been suggested that the following 17 safety programs should be implemented as business core functions: safety policies, safety committees, safety inductions, safety training, safety inspections, accident investigations, first aid programs, in-house safety rules, safety incentive schemes, control of subcontractors, selection of employees, personal protection programs, emergency preparedness planning, safety-related promotions, safety auditing, safety record keeping, and job hazard analysis. However, the accident occurrence rate in the construction industry still remains at unacceptable levels. This shows that the industry suffers from an inability to implement safety programs which achieve improved safety performance.

To help the industry, therefore, it is worthwhile to conduct research focused on investigating effective and efficient safety programs, and identifying the key factors influencing the success of safety programs. The findings therefore can be used as a guideline by construction sites to implement safety programs successfully.

This study was conducted with 35 medium and 35 large-scale construction projects taking part. To assess safety programs, an evaluation tool was developed by using scientific methods based upon Thai safety regulations and standards, and which was validated by a panel of safety experts. Multiple regression analysis was used to create models that reflect a set of the most effective and efficient safety programs for safety performance improvement.

The effectiveness of safety programs was evaluated by studying the relationship between their actual status and associated site safety performance. It was found that 4 of the 17 safety programs, namely accident investigations, safety inspections, control of subcontractors, and safety incentives, are the most effective in reducing accident rates at construction sites. The most effective safety programs in minimizing the occurrence of unsafe acts at construction sites are safety inspections, accident investigations, control of subcontractors, and safety incentives. And lastly, accident investigations, safety inspections, job hazard analysis, safety inductions, and safety auditing were the most effective factors in eliminating unsafe conditions at construction sites.

To evaluate the efficiency of safety programs, this study quantified amounts of staff time and budget allocated for safety program implementation based upon the perception-based survey and correlated them with safety performance. Multiple regression analysis yielded models which showed that 5 of the 17 safety programs, namely accident investigations, control of subcontractors, safety incentives, safety inspections, and safety auditing were the most efficient in improving accident rates. The most efficient safety programs in preventing the occurrence of unsafe acts were accident investigations, job hazard analysis, in-house safety rules, safety inspections, safety committees, and safety incentives. Lastly, safety committees, safety incentives, accident investigations, safety auditing, and safety inspections were found as the most efficient factors in controlling unsafe conditions on the sites.

Furthermore, this research also investigated critical success factors (CSFs) for safety programs. These CSFs are important to guide contractors to implement safety programs successfully. The CSFs are regarded as the limited number of activities in which results, if they are satisfactory, will ensure successful implementation of safety programs. Therefore, the final output of this study will enable contractors to choose effective and efficient safety programs and to implement them by understanding the CSFs. This study showed that management support, appropriate safety education and training, teamwork, clear and realistic goals, and an effective enforcement scheme were perceived by the respondents as the most significant factors that need considerable attention in order to ensure successful safety programs. However, this study found the current problems which may lead to failure of safety programs were lack of management support, lack of appropriate supervision, lack of sufficient resource allocation, lack of teamwork, and lack of effective enforcement. Improving these priority factors to satisfactory levels would lead to successful safety programs, thereby minimizing accidents.

In conclusion, in light of this research, a package of comprehensive strategies for achieving improved construction safety performance was provided. In other words, the study gave a set of the most effective and efficient safety programs for implementation on construction sites as well as critical activities or known as critical success factors (CSFs) that can ensure the successful implementation of the safety programs.

Application Of Neuro-Fuzzy Networks To Forecast Cost And Duration Variance For Building Projects In Vietnam

Since Vietnam implemented its policy of reform and opening to the outside world, and with the continuous development of its national economy, the Vietnamese building enterprises have been growing steadily in quantity, and the building industry has been increasing its total output value. With Vietnam going to entry into the World Trade Organization (WTO), the process of opening the Vietnamese construction market to the outside world will be accelerated. Moreover, because of economic development, infrastructure has to be improved to adapt with the changing. Many office buildings, apartments, bridges, roads… have been built. However, Vietnam is still undergoing reform of its system, from a planned economy to a market economy. Laws, regulations, market and government management models and systems are still not stable. National market is still controlled by government. All are obstacles preventing contractors from fully understanding the entire situation and risk in the Vietnamese construction market, especially international contractors. Therefore, identify and analyze risk factors in Vietnam construction market is necessary.

Construction projects involve hundreds or even thousands of interacting activities, each with cost, time, quality, and sequencing problem. The costs and durations are uncertain and one response, still surprisingly common, is to shy away from uncertainty and hope for the best. Another is to apply expert judgment, experience, and gut feel to the problem (Roger Flanagan & George Norman, 1993). Construction projects are unique arenas in which highly complex, uncertain and creative projects have to be realized (Hartman, 1998). However, construction project risks are often ignored by most owners and contractors. As a result, unnecessary long and disruptive delays turn an otherwise profitable project into a financially ruinous undertaking (WONG, 2006).

Obviously, there are some overlaps between these risks. Edwards and Bowen (2005) used a source system-based approach to classify risks under two primary categories: natural systems and human systems. The sub-category of natural risks includes events originating in weather, geological, biological, physiological, ecological and extraterrestrial systems. The sub-categories of human risks comprise social, political, cultural, health, legal, economic, financial, technical and managerial systems. Edwards (1999) used the same risk sources as a primary means of categorization to minimize confusion.

Conventional risk analysis techniques, such as Monte Carlo analysis, provide tools to help practitioners to assess impacts of uncertainties, to support the determination or the assessment of the risk level of a project, and to allocate a contingency associated with the possibility of success. Unfortunately, the effectiveness of using this technique is heavily dependent upon experts' opinions and judgments (Xiaoying Liu,1998).

Neuron-Fuzzy is an approach that is free of mathematical models. It requires less expert opinion and judgments than do other techniques. It represents an attempt to simulate the human brain's learning process through massive training. It is able to learn from samples. Knowledge learned is stored within the network. This technology provides a powerful and robust means to assess uncertainty through learning and capturing general patterns in available data. NF integrates both neural networks and fuzzy inference systems. These model frameworks possess both the learning capability of neural networks and the structured knowledge representation employed in fuzzy inference systems (Jyh-Shing Roger Jang, 1992).

On time and within budget are two main outputs of successful project. However, there are risk factors affecting the construction projects’ time and cost. In order to achieve two major project outputs, management team needs to access and analyze those risk factors as a proactive plan. NF is considered as the advantage method to help practitioners who are either not much experience or expert develop a proactive plan to modify threats which possible impact on project performance.

Mr. Pham Hiep Luc made a research on “Application Of Neuro-Fuzzy Networks To Forecast Cost And Duration Variance For Building Projects In Vietnam” which major objectives were to: (1) identify main risk factors which affect the duration and cost variance of building projects in Vietnam; (2) develop a Neuron-Fuzzy model to predict project cost and time variances; and (3) compare Neuron-Fuzzy model with conventional method.

CONCLUSION

Significant risk factors impacting cost and time variances of building projects in Vietnam were identified in this study. Manager experience, construction method, type of clients, client changes, project complexity and market price fluctuation were identified by respondents as having high correlations with time and cost variances. Factors related with client were given high marks by respondents. However, when choosing the factors which had high correlations with time and cost variance by forward regression technique, the results was quite different from the respondent’s perception. Client type, project priority, vagueness in scope and construction method had strong correlation with time variance. Project function, location, contract type, project complexity, market price fluctuation and project priority had strong correlation with cost variance.

The goal of this result was to apply the Neuro-Fuzzy to risk analysis. Most traditional techniques are heavily dependent upon expert judgment and experience. In complex situations, these techniques are difficult to use because no mathematical model can be applied and the correlations between risk factors are not easy to identify. The weaknesses require the researchers to find out a new technique to approach better the complicated situations in project time and cost risks.

An attempt has been made to apply neuro-fuzzy network in the assessment of risks at the early stage of a project. The relationships among risks, project characteristics, decisions, and outcomes were captured by neuron fuzzy networks. Intelligent models were then developed and tested. They can be used to predict project cost and time variations.

The research results showed that the neuro-fuzzy networks outperform conventional techniques such as multiple linear regression analysis. The practical application of neuro-fuzzy network technology in project risk analysis is promising, especially in the front end stage.

Neuro-fuzzy network (NFN) model is able to capture the risk patterns of projects by learning from historical project samples and to generate a reasonable prediction of project cost and time variances. It is superior to conventional techniques as multi-regression technique and neuron network technique.

Neuro-fuzzy network model with forward stepwise regression analysis provides more accurate estimates of project cost and time variations than NFN with variables ranking by respondents. It also significantly reduces the training time and increases the training efficiency of the networks.

Neuro-fuzzy network model is superior to neural network because, neural network is difficult to determinate its configuration.

This research built a rational base for developing a decision support system to assist project managers (decision makers) in better decision making.

Overall, projects will have a greater chance of success, in terms of “within budget” and “on time”, when project managers direct more effort into managing the identified important factors during project planning at the front end phases and NFN is the useful technique to support decision making process.

His thesis abstract is copied and posted.

Abstract

The importance of decision making in time and cost estimation for investment processes points to a need for an estimation tool for owners, designers and project managers. This research is aimed to explore the applications of neuron-fuzzy network technology in project risk analysis and to develop models to predict cost and time variances at the front end stage of building projects.

Seventy finished building projects in Vietnam replied by the respondents were used for training and testing the model. Important risk factors at the front end stage are determined by respondents’ ranking. To develop the neuro-fuzzy network model, forward stepwise selection technique was used to identify input sets. Different number of data was being used to train the model. The results of neuro-fuzzy network models were superior to conventional technique (such as multiple linear regression) and neural network models in the prediction of project cost and time variations. Moreover, the result showed that using forward stepwise technique to determine the input set for the model is better than respondent’s perception. One proposed program written by Visual Basic Macro language was conducted in order try to interpret the results with practitioners.